Policies with a Purpose: Government policies that support entrepreneurship in Africa

Being an entrepreneur is pretty tough. The challenges that you face are either internal, external and in some cases, they are forces that you have no influence over and cannot control. When you start your entrepreneurial journey, you have to believe in yourself and find the motivation to go off on your own. Then, sometimes, you have to convince the bank to give you a loan, convince customers that you are selling them the best product, all while leading an organisation of employees who believe in the business.  All day, you are convincing various stakeholders that your business is worth supporting and investing in. All these stakeholders that can either support or derail your business exist within the entrepreneurship ecosystem as shown in the figure below.

Entrepreneurs are always looking for opportunities within the system that can give them an advantage. One of these systems is local government. As one of the key players in the entrepreneurship ecosystem, policy makers enforce laws that make it difficult or possible for entrepreneurs to thrive. This article will focus on government policy and give examples of policies and government structures that positively impact entrepreneurship. The article will further reinforce the positive impact of these policies by giving examples of countries that have a high rate of successful entrepreneurs which can, in part, be attributed to their policies. We hope that understanding the policies that exist across Africa will help young entrepreneurs have a broader understanding of external forces that exist to either encourage or inhibit their entrepreneurial goals.

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Government policies that encourage entrepreneurship

Government policies and principles are important for entrepreneurship to succeed in any country. These are the regulations that make it possible for young businesses to exist within parameters that are not restrictive to their growth. Governments that support entrepreneurs typically develop and implement growth oriented structures that allow enterprise development. Below is a list of examples of the types of government policies that allow for growth:

1. Intellectual Property Rights

The protection of intellectual property is important to promote innovation by protecting ideas. If innovators are not protected legally then they are least likely to share their ideas or give them the opportunity to grow. Entrepreneurs will not be willing to take the risk of allowing their solutions/innovations/ideas to develop if they fear that they will be appropriated.

2. Inclusion of entrepreneurship within school curricula

Government should create policies that encourage the incorporation of entrepreneurship curricula within various levels of education. Promoting entrepreneurship at the educational level will create a culture of innovative, solution-orientated individuals who will grow to start their own businesses and contribute to the economy.

3. Reduced burden on business formation

It is easier for entrepreneurs to start their businesses in environments that do not have burdensome barriers of entry. Entrepreneurship thrives when entrepreneurs are able to start their businesses without steep requirements for their businesses to operate. These steep requirements can range from operational taxes to registration processes. Government can ensure that business entry requirements are attainable at multiple levels to support both formal and informal business.

4. Access to funding for SME’s and Start-ups

A major challenge that entrepreneurs face is the access to capital and investment. Governments can assist in this area by encouraging local banks to work with start-ups and small business by providing loans or investment. Government can offer state loans that target small-business, start-ups or female entrepreneurs. These are incentives that encourage entrepreneurship within the ecosystem.

5. Incentivised Tax Laws

It is important for governments to continually reform their tax policies so that they promote small business growth. A country’s tax code can be key in promoting small business. Reducing corporate tax or reforming tax laws to benefit small business can have a positive ripple effect on the economy by increasing the likelihood of new venture start-ups.

Examples of countries that promote entrepreneurship within their policies

Countries that have policies that support small businesses have evidence to of successful entrepreneurs and small businesses that contribute to the countries GDP. Two examples of countries that are thriving in the entrepreneurship space are Kenya and Nigeria. Kenya is considered to have one of Africa’s most successful entrepreneurship communities. According to the Review of Government Policies for the Promotion of Micro and Smallscale Enterprises by Eric Ronge, Lydia Ndirangu and Hezron Nyangito which was published in 2002, Kenya has a long history of creating government policies that favour small-scale businesses and enterprises. Read more here. Nigeria is also considered to have favourable policies that support entrepreneurship. According to Government Initiatives Toward Entrepreneurship Development in Nigeria by Sam B.A. Tende, Nasarawa State University and Keffi which was published in 2014, the Federal Government has adopted several strategies and policies towards entrepreneurial development in Nigeria, by establishing Institutions and Agencies, which provide support services to entrepreneurs.

If local governments wish to promote entrepreneurship, it is important for them to implement policies that allow entrepreneurs to grow with minimal restrictions. Policy makers should include the best interest of entrepreneurs within their policy making strategies. It is also important for young entrepreneurs to be aware of the environment in which they are developing their businesses. This will allow them to make better informed decisions and advocate for policies that will be beneficial to them.