NAME:

ANNE WANJIKU KIONGO

ID NO.

649416

COURSE: BUS1010
INSTRUCTOR: DR. CHRISTOPHER MAIRURA
ASSIGNMENT ONE: THE IMPORTANCE OF ENTREPRENEURSHIP IN SUB
SAHARA AFRICA
SEMESTER

SPRING SEMESTER 2016

WHAT IS ENTERPRENEURSHIP?
The capacity and willingness to develop, organize and manage a business venture along with any
of its risks in order to make a profit.
The most obvious example of entrepreneurship is the starting of new businesses.
In economics, entrepreneurship combined with land, labor, natural resources and capital can
produce profit. Entrepreneurial spirit is characterized by innovation and risk-taking, and is an
essential part of a nation's ability to succeed in an ever changing and increasingly competitive
global marketplace.
Entrepreneurship in sub-Saharan Africa is about recognizing the key role entrepreneurs play in
fostering wealth and wellbeing for ordinary Africans. Entrepreneurs are enablers of growth who
help break down economic barriers and social constraints.
Entrepreneurship and local private enterprise are critical components of African economic
development. This is because entrepreneurs innovate and assume risks hire and manage labor
forces open up markets [and] find new combinations of materials, processes, and products.
They initiate change and facilitate adjustment in dynamic economies.
The entrepreneurial landscape in Africa is multi-faceted. It includes informal and formal sector,
traditional and modern, as well as local and foreign-owned enterprises, all of which are
geographically dispersed across rural and urban areas. It ranges from small enterprises
(providing employment for a single individual) to large corporations (employing hundreds).
Small and Medium-sized Enterprises (SMEs), however, are the dominant form of entrepreneurial
activity in sub-Saharan Africa. SMEs constitute around 90% of sub-Saharan African business
operations and create over 50% of employment and GDP. SMEs tap into domestic and global
markets, engaging in activities from retail to telecommunications. They help to fill a growing
demand in the goods and services sector, as consumer demand and discretionary income within
Africa rises. Finally, SMEs act as incubators of specialization and innovation within an economy,
allowing the country to diversify and industrialise.
Indeed, entrepreneurial activity of this type has played an important role in the period of
sustained and relatively high economic growth that Sub-Saharan Africa has experienced over the

last decade. Increased foreign direct investment, rising basic commodities prices, and the growth
of export-led industries have all continued to aid economic development. More importantly,
however, are the liberal economic reforms and reductions in government expenditures that have
helped to foster a new entrepreneurial culture, allowing SMEs to drive new growth in the region.
The importance of entrepreneurship as an engine for innovation, economic growth, job
creation and wealth especially in the context of Sub-Saharan Africa cannot be overemphasized.
Entrepreneurship in Sub-Saharan Africa examines the socio-cultural, global, economic, financial,
political, infrastructure and organizational contexts of entrepreneurship in Sub-Saharan Africa.
Second, the book presents a strategic management approach for the management of
entrepreneurial and small business ventures in the region.
Entrepreneurship promotes capital formation by mobilising the idle saving of the public.
2. It provides immediate large-scale employment. Thus, it helps reduce the unemployment
problem in the country, i.e., the root of all socio-economic problems.
3. It promotes balanced regional development.
4. It helps reduce the concentration of economic power.
5. It stimulates the equitable redistribution of wealth, income and even political power in the
interest of the country.
6. It encourages effective resource mobilisation of capital and skill which might otherwise
remain unutilized and idle.
7. It also induces backward and forward linkages which stimulate the process of economic
development in the country.
8. Last but no means the least, it also promotes countrys export trade i.e., an important
ingredient to economic development.

(1) Promotes Capital Formation:

Entrepreneurs promote capital formation by mobilising the idle savings of public. They employ
their own as well as borrowed resources for setting up their enterprises. Such type of
entrepreneurial activities lead to value addition and creation of wealth, which is very essential for
the industrial and economic development of the country.
(2) Creates Large-Scale Employment Opportunities:
Entrepreneurs provide immediate large-scale employment to the unemployed which is a chronic
problem of underdeveloped nations. With the setting up.of more and more units by
entrepreneurs, both on small and large-scale numerous job opportunities are created for others.
As time passes, these enterprises grow, providing direct and indirect employment opportunities
to many more. In this way, entrepreneurs play an effective role in reducing the problem of
unemployment in the country which in turn clears the path towards economic development of the
nation.
(3) Promotes Balanced Regional Development:
Entrepreneurs help to remove regional disparities through setting up of industries in less
developed and backward areas. The growth of industries and business in these areas lead to a
large number of public benefits like road transport, health, education, entertainment, etc. Setting
up of more industries lead to more development of backward regions and thereby promotes
balanced regional development.
(4) Reduces Concentration of Economic Power:
Economic power is the natural outcome of industrial and business activity. Industrial
development normally lead to concentration of economic power in the hands of a few individuals
which results in the growth of monopolies. In order to redress this problem a large number of
entrepreneurs need to be developed, which will help reduce the concentration of economic power
amongst the population.
(5) Wealth Creation and Distribution:

It stimulates equitable redistribution of wealth and income in the interest of the country to more
people and geographic areas, thus giving benefit to larger sections of the society. Entrepreneurial
activities also generate more activities and give a multiplier effect in the economy.
(6) Increasing Gross National Product and Per Capita Income:
Entrepreneurs are always on the look out for opportunities. They explore and exploit
opportunities,, encourage effective resource mobilisation of capital and skill, bring in new
products and services and develops markets for growth of the economy. In this way, they help
increasing gross national product as well as per capita income of the people in a country.
Increase in gross national product and per capita income of the people in a country, is a sign of
economic growth.
(6) Improvement in the Standard of Living:
Increase in the standard of living of the people is a characteristic feature of economic
development of the country. Entrepreneurs play a key role in increasing the standard of living of
the people by adopting latest innovations in the production of wide variety of goods and services
in large scale that too at a lower cost. This enables the people to avail better quality goods at
lower prices which results in the improvement of their standard of living.
(7) Promotes Country's Export Trade:
Entrepreneurs help in promoting a country's export-trade, which is an important ingredient of
economic development. They produce goods and services in large scale for the purpose earning
huge amount of foreign exchange from export in order to combat the import dues requirement.
Hence import substitution and export promotion ensure economic independence and
development.
(8) Induces Backward and Forward Linkages:
Entrepreneurs like to work in an environment of change and try to maximise profits by
innovation. When an enterprise is established in accordance with the changing technology, it

induces backward and forward linkages which stimulate the process of economic development in
the country.
(9) Facilitates Overall Development:
Entrepreneurs act as catalytic agent for change which results in chain reaction. Once an
enterprise is established, the process of industrialisation is set in motion. This unit will generate
demand for various types of units required by it and there will be so many other units which
require the output of this unit. This leads to overall development of an area due to increase in
demand and setting up of more and more units. In this way, the entrepreneurs multiply their
entrepreneurial activities, thus creating an environment of enthusiasm and conveying an impetus
for overall development of the area.

Most countries in sub-Saharan Africa find themselves in the bottom 30 of the 110 countries that
are included in the Index. Despite this, all but three countries saw improvements in 2011 in the
Entrepreneurship & Opportunity sub-index. These improvements have been achieved through
factors like lower start-up costs, better information and communication technology, and
improving optimism about entrepreneurship.
Sustaining these improvements in the Entrepreneurship & Opportunity sub-index will be
important for sub-Saharan African countries to raise their overall level of prosperity. This report
offers three insights into the state of entrepreneurship in the region and what challenges and
opportunities might lie ahead:
Freeing the entrepreneurial spirit of Africa
Throughout sub-Saharan Africa, citizens hold a strong belief that hard work will get them ahead
and that where they live is a good place to start a business. This entrepreneurial optimism should
be a resource for entrepreneurs in the region. However, the region still possesses certain barriers
that will need to be overcome to allow this optimism to fully flourish, such as relatively poor
information and technology infrastructure and high transport costs.

Improving governance can help entrepreneurs

Innovation is important not only for economic growth, but also to reduce the costs of goods and
services and to improve accessibility to markets and information. Entrepreneurs are the driving
force behind innovation and often take risks to realise their goals. Good institutions, such as the
rule of law, can protect property rights, enforce contracts and patents, reduce potential risks and
stimulate innovative activities. Sub-Saharan African countries, although having relatively poor
rule of law, are showing positive signs of improvement.
Despite improving health, an educational deficit could pose a challenge to entrepreneurs
The entrepreneurs of today and tomorrow will depend on workers who are both healthy and
educated. Although the region is seeing improvements in health, performance on education is
deteriorating, limiting the availability of skilled labour. Moreover, those who are educated, and
most likely to be the entrepreneurs of the future, are emigrating at levels greater than the global
average.

Read more:
http://www.businessdictionary.com/definition/entrepreneurship.html#ixzz3z6o8h1X2
Citation

Ramachandran, Vijaya; Shah, Manju Kedia. 1999. Entrepreneurship and Firm Performance in
Sub-Saharan Africa. World Bank, Washington, DC. World Bank.
https://www.openknowledge.worldbank.org/handle/10986/9853 License: CC BY 3.0 Unported.