Can WECS (West, East, Central and Southern) African SMEs thrive sustainably (in internationalization) and conquer the world instead of just surviving in international business as insignificant participants?
Yes they can, so this is not a “fashionable prophecy”. “All things are possible for those who believe’’ and work towards their vision.
Irene Chimoga posed an important question about how African SMEs can survive in the IB competition. My endless fascination with this subject, however, leads me to move the discussion a bit further from mere survival to thriving. Of course, in evolutionary sense, survival is a necessary condition for thriving or future success. But there are various “grubbier” reasons why most WECS African businesses do not flourish internationally (beyond the survival stage) compared to others who are able to penetrate into the African and other markets with a degree of ease.
These include a complex set of endogenous/exogenous, interrelated hidden-in-plain-sight historical, sociological/institutional, ideological and geopolitical factors. Understanding the causes of this underperformance could save future entrepreneurs from falling into the same old trap. Internationalizing essentially refers to expanding beyond the known shores and scaling up into uncharted territories to create more wealth/value with products and services that resonate with a target market (mostly) after success at home. A firm does not need to operate in the EU, Asia or the US in order to be international. Internationalizing across Africa is also internationalization, and there are many fine examples but that is outside the scope of this conversation.
Offering innovative products, identifying niches (opportunity seeking) and having a backup financial support to respond to contingencies (taking risks), joint ventures and alliance formations are all well-known strategies with more or less global application because they are essentially what constitute international entrepreneurship. However, they do not necessarily define the success or failure of African SMEs that are internationalizing. This is because there are specific issues that African businesses must grapple with at a unique level. These are the factors that determine whether they just survive or actually thrive/win/flourish or beat the competition.
Surviving or thriving?
The latter construct (‘survival’) answers a slightly different question while to ‘thrive in success’ seeks to sustainably assemble all socioeconomic, political, creative and intellectual resources in an enabling institutional environment to create novel, unique and superior offerings (that are patentable). The next step is to do exceedingly beyond what other nations have done with their products and services on the world market.
WECS Africa in particular faces quite unique constrains and challenges, and I am afraid some good answers and examples from other continents and countries will still not work perfectly when transposed into the African context for any product or service innovation. This is mainly because of six main issues (simplified below):
(i) The lack of political will to invest massively and aggressively in innovative ventures or create the congenial and supporting socioeconomic, political and techno-scientific institutional environment for homegrown entrepreneurs/talents or diaspora returnees.
(ii) The constant leakages and outflow of natural, human and financial resources from Africa as a result of corruption and capital flight, which could have been used for infrastructural development (especially energy and transport) and innovation via e.g. university-corporate partnerships.
(iii) The unfair trade regulations which mostly favour highly industrialized nations; bilateral and multilateral trade agreements that require WECS Africa to export mostly natural resources undermine diversification. However, exchanging resources for infrastructure is acceptable for the time being.
(iv) The failure of the WECS African educational systems to train specialists instead of generalists as well as the glaring omission of Africa’s medico-techno-scientific geniuses from the literature. How can the youth be inspired?
(v) The complacency with the negative connotations surrounding brand ‘Africa’, as if it were the natural order of things for Africa to be counted first from the bottom, instead of focusing on the countless good innovations Africa has for the world that is ready for Africa. Ignore the pessimists, don’t dignify them.
(vi) Governments are not keeping abreast of the speedily changing times and conditions. Change is visible in Rwanda and Botswana while others buy nice cars instead of building factories.
These points may seem quasi banal and innocuous. However, they are fundamental for our politico-sociological discourse on international entrepreneurship because they require more than one question mark about why they still exist. Surely, Africa will thrive just by reversing the above problems, starting with point No. 1.
Analyses of the current failure in internationalization tied to innovation cannot be conducted ‘ahistorically’. Recognizing this sociological fact will save money and time. Thus, the hierarchy of value of all products and services is encased in a history or what Wherry (2013) calls ‘collective stories’ told about a product’s place of origin, its people and sociopolitical institutions. This partly explains why consumers decide whether or not to buy a product from a particular place. Apart from basic necessities, consumers buy hedonistically, for self-affirmation, status and for pleasure or for a particular need (e.g. health products). Flowers and chocolate from WECS Africa are advertised as “buy this so that a woman in Kenya can take her son to school.” However, that is not how Swiss chocolate is advertised. It is advertised as exclusive. Most rational or emotional consumers do not buy because of solidarity/charity but for quality, price and prestige. So the next big question is: How can WECS African SMEs internationalize outside this paradigm of expectation of false-solidarity-associated-mercantilism with their novel goods and services (innovations)?
I welcome your comments!
The urgency for WECS African SMEs to thrive!
There’s an urgent need to move from ‘survival mentality’ to ‘thriving mentality’ because in the end that is what wealth/value creation through internationalization is about. Not just trying to take part in international trade but actually taking over in particular sectors where one has a competitive advantage.
As an analogy, take the example of African football teams going to the World Cup. It is common to hear African commentators argue as follows: “I’d say it would be nice if we could go beyond the elimination stage”. Even the most ambitious will say it would be great if we could reach the quarter finals or maybe the semi-finals. Listening to the German and Italian (not this year though) commentators reveals a new standard. They are mostly talking about who to beat in order to win the Cup and how they can do it—they don’t accept mediocre performance. Rather, they identify who their competitors are and what is required to beat them with a superior game plan.
That is the difference between surviving and thriving mentality (strategy) in international entrepreneurship. This is because ‘die Mannschaft’, ‘gli Azzuri’ or the Brazilian national team do not speak just to feel good in illusion. There is a political will to set their eyes on the ‘Copa Mondiale’ or ‘Weltmeisterschaft’ or the European Cup throughout the years preceding the tournament via disciplined preparation; strategically, financially, technically, and morally (players are treated respectfully). This is called home work because it is about nation branding.
Thus, going beyond mediocrity and thriving means that one does not just jump into the Olympic swimming pool (even with good intentions) after three months of preparation to compete with those professionals who have been preparing for four years with government’s support. “If you have raced with men on foot and they have tired you out, then how can you compete with horses?” (Jer. 12:5). Those who applaud such theatrics are actually mocking because someone has accepted mediocrity as if it were OK for Africa to be always the last. Learn from mistakes. Most nations will not send an athlete who does not make the mark and who is not taken care of to a competition—why should Africans? Many are too proud (in the right sense) to ridicule themselves on a global platform.
WECS Africa has been dominated over and over again with the same old tricks, because they forget history pretty quickly and it keeps repeating. A flourishing or respected brand in the international arena is earned, not given. Africans are the ones they’ve been waiting for, to paraphrase President Obama. Thriving in international business with new innovations is and has always been about national/global wealth creation as it is about identity and honour, not just about showing up or surviving. New entrepreneurs must do it for the next generation, because they can.
I hope this provokes some forward-looking reactions.
Hi! This is an interesting interchange of good ideas. But please let me emphasize what is the best plan ahead for African countries. By taking stock from Peruvian experience since the 70s, I should say that education of both future entrepreneurs and future public servants is key 1. This should allow to improve long-term-focused legislation favouring both domestic and foreign investment, which are complements for growth. The legislative improvements should for this to happen include charter laws for the creation/improvement of independent primary institutions such as the Treasury, the Central Bank, Tax Collection Office, Customs Office and (if possible), Justice Administration. These institutions will provide the correct economic and social environment for both investment and technology creation from inside the country. Both Peruvian and Chilean experiences also emphasize the importance of long-term domestic savings (key 2), which unfortunately no banking system can develop with the required velocity. Both Chile and Peru created their Privately-Administered Pension System, which means mandatory monthly savings made by the employer on behalf of the any formal employee's individual pension fund (intangible account which can only be received after retirement as a monthly pension payment). Meanwhile, the Private Pension Fund Administrators (a mixture of a "long-term bank" and an insurance company) compete offering yields that improve all individual funds (that is, any employee can decide which administrator will manage her/his required savings). The importance of domestic savings for growth has been recently studied by Horas Djulius. Please (re)search(gate) his paper "Foreign Direct Investment or External Debt and Domestic Saving: Which has Greater Impact on Growth" (February 2018).
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