Africa Matters is a blog that follows the news and offers analysis of African affairs. Our aim is to delve deeper into the issues of African politics and development. We don’t presume to be experts, and we don’t presume to have all the answers—we are just trying to ask the right questions.

Tuesday, November 25

Recognizing Small Businesses in Africa

As featured in BusinessWeek, Nov. 24 2008

Times are tough for small and midsize businesses. Around the world, consumer spending is down, loans are expensive, raw materials cost more than they did a few years ago, and investors are especially wary of taking chances on unproven enterprises. But for emerging businesses in Africa, the outlook is relatively bright. Entrepreneurs see big opportunities and little competition—notwithstanding the substantial challenges of operating in developing markets and the ripple effects of the financial crisis.

The best upstart businesses are providing the kinds of mainstream services—health insurance, information technology, and media—that are helping Africa move from development-aid recipient to a mainstream economic player.

Some of the best were recognized with $350,000 in cash awards on Nov. 19, a nod to the potential of small and midsize businesses in driving development. Six companies won the Legatum Pioneers of Prosperity Africa Awards from a field of 1,400 entries in 10 countries.

(Here's a slide show profiling the winners and finalists)

Presidents in Attendance

Superflux International, a Nigerian printing company with revenues of $19 million, won the $100,000 grand prize, receiving a check from Kenyan President Mwai Kibaki at a ceremony in Kigali, Rwanda, on Nov. 19 also attended by Rwandan President Paul Kagame. Five other winners—Kenya's AAR Health, Uganda's Safi Cleaning and Africa Polysack Industries, Rwanda's Gahaya Links, and South Africa's Integr8 IT—shared $250,000 to invest in their companies.

"Winners…represent a dynamic new wave of African entrepreneurs shaping the continent's future. Each of them demonstrated the level of excellence, leadership, and vision required to grow their businesses regionally and internationally," said Alan McCormick, Legatum managing director and award judge, in announcing the prizes. "They are an inspiration to anyone in Africa who may be wondering if they can succeed in business. The answer is yes, you can."

Inaugurated last year, the awards are sponsored by Legatum, a Dubai-based investment group; the OTF Group, a global consultancy on business in developing markets; the Social Equity Venture Fund, a nonprofit for social entrepreneurship; and the John Templeton Foundation.

Stock Market Success

Superflux and the other winners represent a new generation of businesses that are helping sub-Saharan Africa enjoy continued economic growth despite the broader global economic slowdown. The International Monetary Fund estimates average growth in the region of 5.5% this year and 5.1% in 2009, down somewhat from 6.8% in 2007. Some countries, including Ghana and Botswana, also boast among the best-performing stock markets in the world this year (, 11/4/08). Though small and relatively illiquid, these exchanges are growing quickly.

Africa has also attracted record amounts of foreign investments in recent years. Some $53 billion was injected in 2007, according to the U.N., providing 31% average investment returns, the highest rate among the world's developing regions. Foreign investment will likely drop next year, and recent declines in commodity and oil prices have hurt many resource-exporting African countries, but the continent's relative distance from world financial markets has shielded it so far from more serious economic damage.

Businesses are thus optimistic, mindful of their role in Africa's future. "Development has always been driven by commerce, by industry, by people themselves," says Rose Kimotho, 52, managing director of Kenyan media company Regional Reach, a prize finalist, who notes that international aid, while well-intentioned, has done little to create sustainable growth in Africa. "We need a change in thinking in Africa for people to realize that it's not the grants or the aid that will develop the continent. It's businesses."