Africa – A Continent with Huge Potential for Social Innovation

The following interview with Patricia Jumi, Managing Director and Co-Founder of GrowthAfrica, occurred as a follow-up to the ‘Innovative Financing for Social Entrepreneurs‘ round table discussions in Cairo.


SIEMENS STIFTUNG: Patricia, with your unique long-term view, what would you say is the next big action item that ecosystems for entrepreneurs in emerging economies need?

PATRICIA: Over the last years, we have seen a lot of technology adoption, and high rates of digital penetration in terms of solutions, including financial tech (fintech) solutions that are coming to market. I think Africa is the next frontier here; it is meant to do that because there are so many needs that are still to be met and technology can help to address them in a sophisticated way. You will still have the traditional types of entrepreneurs, like shop owners, but on top of that, we see innovative inventions in terms of how you can apply technology and innovation to distribution chains. This also applies to the production of a product, using innovation here and there to create more efficiency and effectiveness.

 

Patricia in the midst of a conversation with her peers at Table 3 where patient capital was the focus.

SIEMENS STIFTUNG: Are fintech solutions also feasible for social entrepreneurship, particularly when they are developed to improve the relationship between entrepreneurs and investors? A strong argument discussed at the events in Cairo was that technology cannot solve the problem if the relationship in itself is not really working. What is your opinion on that?

PATRICIA: Yes, fintech solutions are sometimes failing to fulfill their objectives. What we have seen in terms of well-functioning projects are innovations like alternative credit scoring to give farmers an identity that is based on how much they purchase, how much they sell, their supply timeliness, etc. These types of innovations are very useful. But then, we have also seen some technologies, that have been pushed and everybody thought that thousands of lives would be improved through an app, but then the adoption sometimes fails, because not so many people sign up perhaps because they have a different way of doing what they are doing. That happens, for example, with fintech in the area of insurance. The adoption of micro-insurances is very low because people in Africa only want to pay if something happens, and what if nothing happens to me the whole year? Where does my money go then? Maybe these products work for high and middle-income classes, but not really for people on the bottom of the pyramid.

SIEMENS STIFTUNG: During the round table discussion you mentioned the need for a new valuation model for impact entrepreneurs. What would such a validation model look like, how could this idea be realized?

PATRICIA: Yes, the idea was part of our brainstorming discussion. We actually thought that some of the issues we are facing could be solved through a different valuation model that helps entrepreneurs look at things differently. Because when you are a social enterprise, you are often doing things you cannot compare to anything. Trying to assign value or evaluate in a “normal” way is difficult in such a context because the obstacles are much larger than the experience. There are different ways to look at impact and there are initiatives out there. But, in our round table, no one has really found them very suitable, so the frustration potential is high. One notion could pan out as such: Investors look at things differently. If an idea has the potential to create this much impact, what are the different parameters we should look at other than the financial return on investment. We were really just brainstorming on that, and did not go into detail, but it would be worthwhile to continue this discussion.

Following the round table meeting, Patricia and a few of her expert peers took to a Q&A session.

SIEMENS STIFTUNG: One of the biggest topics was the mismatch between investors and entrepreneurs. Based on your experience as an intermediary between the two, what is the most common misunderstanding between high-impact entrepreneurs and investors?

PATRICIA: I think the most common misunderstanding relates to what it means to be investment ready. Investors have their own criteria of what they mean by investment readiness, but sometimes I do not think they communicate that clearly; both parties need to know: are they following their criteria in terms of the risk, how big the problem is locally and worldwide, how big the market is, etc.

It almost feels like it is based on some hidden criteria which is probably more based on gut feel. This causes confusion between the investors and the entrepreneurs. With that said, typically we have seen that many entrepreneurs are not good in presenting their business. They are not able to clearly describe the problem, their plans to address it, or what they will need and what kind of impact they want to create. Also, what is impact to an investor vis-a-vis what is impact to the entrepreneur? Is it more impactful to deal with small-scale farmers or operate at a large scale? It is so hard to understand the context, so you find a lot of deals getting rejected because of contextual misunderstandings. Expat entrepreneurs running a business have a clear advantage in Africa because they are clearly able to communicate this context given they often share the same cultural background as investors, and they are able to explain that context in ways that the investor understands.

SIEMENS STIFTUNG: Where are the limits of entrepreneurship as a path to development in terms of sectors, topics or even countries? Where do you see limits?

PATRICIA: Of course there are limits. Regardless of what we think about governments in Africa, there are some things that government is better positioned to do and there are things that corporations are better positioned to do. If you are thinking of policy change and regulation, that can only come from corporations and governments because they have the manpower. From what we have seen in terms of entrepreneurship, I think it is in a different context; from my perspective, of course we want to grow Africa and our vision is to exponentially increase the rate and scope of success of businesses in Africa. So, what we wake up for every day is to see how we can change the statistic that every year, 80% of the companies in Africa are shutting down. Of course, it is my personal belief that entrepreneurship can solve everything, but we really should think about it from an African perspective. If we do skills training with people and empower them to be employable, where are they going to get those jobs? Where are the jobs and who can create them? Who can raise incomes and initiate original opportunities?


SIEMENS STIFTUNG: Thank you very much for these valuable insights, Patricia.

Patricia Jumi

Patricia Jumi has been holding the position Managing Director and Co-Founder of GrowthAfrica for the past 11 years. She is advising and assisting early stage entrepreneurs to accelerate and grow their businesses through provision of seed capital. Herein she acts as a mentor, supporting the development of scalable business models. Patricia built her professional experience working as a Business Facilitator at GrowthAfrica and as an executive Consultant for Metrocomi.

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