Gilles Ajavon is an IT consultant by day, offering his clients in Senegal bespoke solutions on a host of issues. Yet when he gets home in the evening his workday continues. Mr Ajavon also runs a cloud-computing start-up firm called Bosanda, which connects artisans and fashion designers in Senegal to local and international buyers.

Bosanda, which means altitude in the Congolese language Lingala, showcases handcrafted wooden carvings and Senegalese fashion garments to audiences around the world through a crowd-sourcing online platform and a mobile phone app.

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Although Mr Ajavon found the response to Bosanda overwhelmingly positive, he says access to finance is still an obstacle for some of the most promising enterprises in sub-Saharan Africa.

“Encouraging innovation has been adopted as an imperative by African governments, yet government support for start-up firms in west and French-speaking Africa is nowhere near what you see in the UK and US,” says Mr Ajavon. “Even in north and east Africa, governments there took the lead in supporting start-ups years ago.”

The innovation imperative

But the situation is improving, says Mr Ajavon, pointing to initiatives such as CTIC Dakar, an IT incubator project funded by the Senegalese government, the International Finance Corporation (IFC) and a consortium of Senegalese companies. Bosanda was one of a select group of start-ups that attracted CTIC Dakar’s support.

“In the past two years, a noticeable boost of start-up support in the whole region has been evident, and there has been an increase in incubators and technology hubs in capital cities,” says Mr Ajavon.

CTIC Dakar offers an incubator service for start-ups and small and medium-sized enterprises in Senegal’s capital Dakar. Services range from a pre-incubation support centre for entrepreneurs in the process of developing their business model, to incubation services that offer start-up firms capital, support and access to a business network. Mr Ajavon says the support has been invaluable.

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Jobless growth

Efforts to encourage entrepreneurship in sub-Saharan Africa have intensified in recent years. Although the region’s GDP growth is among the fastest in the world – the International Monetary Fund predicts that sub-Saharan Africa will grow by 6% this year – a common criticism is that this growth has been ‘jobless’.

According to the Population Reference Bureau, 43% of men between 18 and 24 years old in sub-Saharan Africa are unemployed, while 51% of women the same age are without employment. Yet, with SMEs employing more than 45% of the region’s population, according to estimates from the African Development Bank, start-ups and SMEs offer viable alternatives for employment.

Although African governments have done much in terms of creating policy frameworks to foster start-ups, Mr Ajavon says the bulk of support has come from the private sector. He says foreign investor support has been critical in providing finance, as well as encouraging technology transfer and know-how to local entrepreneurs.

Mr Ajavon gives the example of UK telecoms firm Vodafone, which launched its Technology Hub in Ghana’s Kwame Nkrumah University of Science and Technology (Knust) in 2012. The hub covers a wide range of platforms including servers, computers and smartphones, and has already spawned innovations.

The mFriday mobile web laboratory, a platform for designing and testing commercially viable mobile web applications, was created in the Technology Hub. Projects such as this have been significant in encouraging young entrepreneurs to see start-up enterprises as a viable career.

“Private firms such as Vodafone in Ghana have been very active in aiding entrepreneurship,” says Mr Ajavon. “The Knust [Technology Hub], which is sponsored by [Vodafone], was significant as the mFriday concept was born there, and now Ghana also hosts a major start-up weekend [at the venue]. Elsewhere, in Togo, Benin and Côte d'Ivoire, telecommunications companies such as Moov, Togocel, MTN and Orange have been actively giving awards to the most promising entrepreneurs.”

Africa’s Amazon

The rapid ascent of Jumia, a Nigerian online retailer, illustrates the impact that access to capital and a supportive network can have on start-up companies. Jumia went from a start-up firm in 2012 to attracting $26m in investments just a year later. Beginning operations in a Nigerian incubator owned by Germany-based Rocket Internet, Jumia took full advantage of the incubator’s facilities to quickly grow its consumer base.

Today Jumia sells clothing, electronics, furniture, books, baby products, cosmetics and home appliances in Nigeria, Egypt and Morocco using a similar business model to US firm Amazon. “Rocket Internet helped us from the beginning when we started in June 2012,” says Nicolas Martin, joint chief executive of Jumia Nigeria. “Since our inception, Rocket Internet has offered advisory services and funding along with [mobile phone operator] Millicom and more recently MTN Group, which is Africa's leading telecommunications company.”

Operating in an environment notorious for its fragmented infrastructure, Mr Martin says the firm had to invest heavily in its logistics network to guarantee safe, prompt deliveries. And the firm also had to be innovative with its payments system to overcome customer reluctance to buy online because of Nigeria’s high rate of online fraud.

“At inception we understood the challenges of the country's postal system, infrastructure, and the [lack of] trust in buying online,” says Mr Martin. “To succeed we had to set up our own things. We also developed the concept of cash on delivery, which lets the customer pay directly at their doorstep when he or she receives the goods.”

Rocky road ahead

Although initiatives supporting sub-Saharan Africa’s start-ups and SMEs have been considerable, widespread access to capital and formalised support programmes remain sparse. The IFC estimates that up to 84% of SMEs in Africa are underserved and the shortfall in sufficient credit financing stands at $170bn.

Another challenge is that traditional sectors such as real estate and agriculture are perceived as viable investments by banks, venture capitalists, angel investors and large corporations, but start-up enterprises are not. The predominant forms of financing for enterprises is credit cards, loan associations and investments from family and friends, all of which remain in short supply, according to the IFC.

“Accessing finance is difficult,” says Mr Ajavon. “Building a start-up here with the thought of getting seed funding from investors is not an advisable move. Investors are still mainly interested in agriculture, banking or real-estate development.”

Critics also say governments have not done enough to reduce the bureaucratic barriers to starting a business and many countries in the region, including Nigeria and Senegal, continue to score low as places to do business. “Tax policies [in Senegal] have been an obstacle,” concedes Mr Ajavon. “Last year we began a dialogue with some government representatives regarding this and we hope the outcome will be positive.”

While the relatively low start-up costs of establishing an online business has led several entrepreneurs to move into technology-based ventures, Mr Martin maintains that the success of start-ups such as Jumia will do much to encourage government support for small start-up firms and SMEs in the near term.

“Reliable electricity supply, fast internet speed and good roads are a concern, and we have made a lot of progress [in all these areas],” says Mr Martin. “The Central Bank of Nigeria introduced a cashless policy to support the online industry and more changes are happening day by day. I believe that we are moving in the right direction.”

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