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New Models Of Business In Africa

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VENTURES AFRICA – Business in Africa is exciting, and this is more of fact than sentiment. But, in the 21st century, change is the new normal and stability is the exception. Today’s world has seen more shifts than one can reliably count, and these shifts cover everything from gadgets to business models; Africa has not been left out of the very real impact that innovation is having on today’s world, and the result has been newer ways of doing business on the continent.

The old story of business, which was heavily themed around capitalism, is fast changing. In years past, business was primarily about economics, making money and profits. Hitherto, the only constituency that mattered were shareholders, and there was little concern for the environment or for anything socio-economic for that matter.

The story is different today; business is no longer about just economics and money. While each business must necessarily make money, business today gets its meaning from being a part of society, from creating value for customers and bettering their lives. Newer models of business are evolving all over the world where business is both a part of and a solution to the problems of society.

Businesses, today, must consider all stakeholders including customers, employees, suppliers, shareholders, communities and even competitors. This is the most sustainable path to creating shareholder value, and this line of thinking is validated by a statement from renowned management guru, Jack Welch, in his quote; “Shareholder value is the dumbest idea in the world, shareholder value is a result, not a strategy, your main constituencies are your employees, customers and products.”

The engine of capitalism is now value creation, and this evolution has resulted in the following innovative ways of doing business in Africa.

  • The Corporate Philanthropy Model. The central tenet of this model requires businesses and wealthy individuals to view themselves as stewards or caretakers of their wealth; this understanding is derived from the Christian Bible and is the driving force behind charities and certain non-profits. Globally, corporate giving has exceeded $100m since 2001 according to Prof Edward Freeman of the University of Virginia in the US. In Africa, Aliko Dangote, Jim Ovia, Strive Masiyiwa and Tony Elumelu rank very high on the list of corporate philanthropists.
  • The Corporate Social Responsibility Model. Here, a business has two types of products, the commercial products and services it offers to customers but also specific social projects undertaken to service the community it operates in. Most businesses in Africa today undertake projects that protect the environment, increase financial inclusion, build schools and generally invest in the social lot of the community. The United Nations (UN) Global Compact asserts that businesses should promote greater environmental responsibility, work against corruption and extortion while ensuring they are not complicit in human rights violation.
  • The Environmentalism Model. The very real threat of climate change and global warming has necessitated a renewed focus on caring for and preserving the environment. More companies incorporate greener ways of doing business into their operational schedule and today, green collar jobs even exist.
  • Stakeholder/Social Entrepreneurship: This is a model that has emerged in the course of the past decade. Social entrepreneurs are business people who are primarily concerned with doing good, not just making money. Their profit is impact and growth for them is based on how many more people and communities they are able to reach out to year-on-year. A stakeholder entrepreneur is very similar, someone who starts or improves a business organization by making it more responsive to the needs of stakeholders or a set of these needs. These entrepreneurs recognize that their organizations are set in society, meaning they must have a business model that satisfies stakeholders and guarantee self-sustaining funds. This hybridizes both traditional entrepreneurship and social entrepreneurship, making the world better and making enough money to sustain the enterprise that causes the transformation.

So, overall the new ways of doing business in Africa demand that businesses go beyond the traditional to actually hitting a social impact milestone in the various communities that they operate in. More entrepreneurs are adopting this business philosophy and the result has been such innovations as the Mara Mentor Initiative and Mara Foundation initiated by young African billionaire Ashish Thakkar, the Tony Elumelu Foundation and Entrepreneurship Fund which recently provided $100 million worth of financing to aspiring entrepreneurs, the Dangote-BOI fund that recently provided $27.3 million (5 billion naira) for small and medium enterprises (SMEs) in Nigeria and a host of other strategic alliances that are creating immense value for Africans.

With incubators springing up in different places on the continent, there is a ready support system for creative business ideas and potential sources of funding, so Africa is taking a whole new unprecedented shape and positioning to be the next silicon valley. There has never been a better time to launch an enterprise in Africa, the challenges are real but the rewards are rather compelling with the right business model.

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