Monday, January 15, 2007

Tiwantiwa: Success Stories.

I found this article, Africa can be built by entrepreneurs, on Timbuktu Chronicles, a journal listing hundreds of African Businesses.


t said...

Why are there so few Black-owned firms in Africa? Preliminary results from enterprise survey data. by Vijaya Ramachandran and Manju Kedia Shah.

In this paper, the authors "analyze the constraints faced by domestic firms in Kenya, Tanzania, Uganda, Senegal and Benin. They find that indigenous firms start smaller and grow more slowly than minority-owned firms; however their rate of growth is positively influenced by whether the owner-entrepreneur has a university degree. They do not find overwhelming evidence that credit is the binding constraint but that indigenous firms do receive less access to trade credit than firms owned by minority entrepreneurs. Finally, they offer policy solutions that might enable indigenous entrepreneurs to enter and survive in a vibrant, multi-ethnic private sector, including building networks among indigenous entrepreneurs and increasing university education among business professionals."

Read the full paper here.

umc said...

Nice article and interesting list of African Businesses; but they seem not to be moving across boarders; most of the ideas in some of those countries can work in others.

Benin "Mwangi" said...

I am a new fan of your site. Thanks to your recent guestbook comment. Which was really nice, by the way. Let's do this more often, ok?

I am familiar with that paper. Does the information in it seem to be a little bit skewed (as far as there being so few black firms)? Do they mean large black firms? I've only been to two of these countries but I saw too many entrepreneurs to count... In fact if there was an imbalance, at the time of my visit my thoughts were that there were too many entrepreneurs and not enough formal and gainful employment. This was several years ago... Now, it makes a lot more sense to me that this would be the case. The question seems like it should be "why are so many entrepreneurs doing so informally?"zrmzx

t said...

The paper: Here's a link that works; I just noticed that the direct pdf link doesn't work.

The study is of a "sample" of firms in the "formal" private sector. Among the formal (probably requiring a legal incorporation, and only considering those with 10+ workers), they find that on average (using the random sample of a few hundred businesses) the black-owned (indigenous) firms are smaller, and even less formal (less formal borrowing) than minority-owned.

Not sure why so informal. We'll see what the research finds. I'm glad that such research exists...

Why so informal?
In Nigeria, almost everyone did a little business on the side.
Cheesy question: what real advantages are there to incorporating / going formal with a business? Maybe it helps get a loan?

What if the loan question is irrelevant for many business people for some of the reasons in the survey, such reasons as "collateral" or "interest rate" too high, loan "process" percived as too difficult, just don't need or like debt) , what then is the advantage of incorporating?

Believe in Finance
The authors further examine "access" to credit and loans. Quick note on borrowing: I'm learning from a little economics book about how the ability to borrow is like magic - it opens up all kinds of possibilities for a business to improve its position. The theory is there. It's for real. Believing it is not easy, though. Who doesn't want to have clean books?

Let me formally welcome Benin to Money Talk/upnaira. We love fan mail, and we really dig new Moneytalkers!

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