The growth of industries and business in these areas leads to infrastructure improvements like better roads and rail links, airports, stable electricity and water supply, schools, hospitals, shopping malls and other public and private services that would not otherwise be available. Every new business that locates in a less developed area will create both direct and indirect jobs, helping lift regional economies in many different ways.
The combined spending by all the new employees of the new businesses and the supporting jobs in other businesses adds to the local and regional economic output. Both central and state governments promote this kind of regional development by providing registered MSME businesses various benefits and concessions. Each new addition to these 36 million units makes use of even more resources like land, labor and capital to develop products and services that add to the national income, national product and per capita income of the country.
This growth in GDP and per capita income is again one of the essential goals of economic development. I ncrease in the standard of living of people in a community is yet another key goal of economic development. Entrepreneurs again play a key role in increasing the standard of living in a community. They do this not just by creating jobs, but also by developing and adopting innovations that lead to improvements in the quality of life of their employees, customers, and other stakeholders in the community. For example, automation that reduces production costs and enables faster production will make a business unit more productive, while also providing its customers with the same goods at lower prices.
Any growing business will eventually want to get started with exports to expand their business to foreign markets. This is an important ingredient of economic development since it provides access to bigger markets, and leads to currency inflows and access to the latest cutting-edge technologies and processes being used in more developed foreign markets. Another key benefit is that this expansion that leads to more stable business revenue during economic downturns in the local economy.
Entrepreneurship and Economic Growth: Does Entrepreneurship Bolster Economic Expansion in Africa?
Community development requires infrastructure for education and training, healthcare, and other public services. For example, you need highly educated and skilled workers in a community to attract new businesses. If there are educational institutions, technical training schools and internship opportunities, that will help build the pool of educated and skilled workers. A good example of how this kind of community development can be promoted is Azim Hashim Premji, Chairman of Wipro Limited, who donated Rs.
This foundation works with more than , schools in eight states across India. So, there is a very important role for entrepreneurs to spark economic development by starting new businesses , creating jobs, and contributing to improvement in various key goals such as GDP, exports, standard of living, skills development and community development. There are four principal predictions in the literature relating to the impact of inflation on output and growth [ 45 ]. The first prediction, credited to Sidrauski [ 46 ], forecasts that inflation has no effect on growth money is super-neutral.
The second prediction, attributed to Tobin [ 47 ], is that money is a substitute for capital, causing inflation to have a positive effect on long-run growth. The third prediction cashin- advance model propounded by Stockman [ 48 ], sees money as complementary to capital, predicting that inflation should have a negative impact on long-run growth.
The models posit that financial market efficiency is influenced by various informational asymmetries. For instance, high rates of inflation typically exacerbate financial market frictions, obstruct the efficiency of the financial system and thus undermine economic growth. Indeed, inflation is identified as one of the most important determinants of growth [ 50 ]. The literature emphasizes the value of openness to international trade, both as a means of affecting the transfer of technical progress and as an engine of growth [ 51 , 52 ].
Trade, either in the form of exports or imports represents growth-enhancing interactions specialization, exchange of ideas through exports or acquiring foreign technology through quality imports among countries acting as a channel for knowledge dissemination; thus, more open economies should chalk higher growth rates [ 53 ]. Anyanwu and Yameogo [ 54 ] report that trade openness has a positive relationship with foreign direct investment FDI inflows in Central, North, Southern, and West Africa.
The neoclassical growth theory posits that a rise in investment level increases the steady-state level of output per worker and, therefore, increases the growth rate of output. On the other hand, the endogenous growth theory uses economies of scale and spillover effects to support the way improved investment promotes growth [ 53 ]. In short, the two theories predict a significant impact of investment level on economic growth.
Entrepreneurship and Economic Growth: Does Entrepreneurship Bolster Economic Expansion in Africa?
Government spending is known to influence economic growth. On the other hand, unproductive government spending could undermine growth [ 56 ].
Widespread poverty had been a prolonged challenge in Sub-Sahara Africa Country. Generally, in examining poverty in sub- Africa, we consider of all sub-sharia African country. According to Global development, nearly half all children in sub-Saharan Africa are in extreme poverty.
This data shows that Nigeria is rated with the highest number of poverty of 86 million seconded by Democratic Republic Congo which accounts for about Considering the poverty in Sub-sharia Africa as stated according to World Bank, around half of those living in extreme poverty by will hail from hard-to-reach fragile and conflict-affected states, moreover, Sub- Saharan Africa accounts for half of the global poor [ 58 ]. Across the planet, the number of people living in extreme poverty has dropped by more than half since , China is one of the remarkable success stories in poverty reduction.
China cut down the level of the poverty line to Having gained her sustainable economic prosperity development, Sub-Saharan African need to adopt China development model as a template for own economic emergency. This call for a better impact for sub-Sahara Africa nations. The stories of failure are illustrated with hydro dams that never function, crops that never grew and roads that went nowhere. Entrepreneurs, however, are changing the world.
Since , an estimated half-billion people or more have been raised out of poverty, mainly by small business, trade liberalization and gains in productivity. In China, Pakistan, Indonesia, and Nigeria, booming local economies, oblivious to the latest schemes of aid programs, are creating millions of jobs.
The Brookings Institution recently predicted even more dramatic gains ahead: The creativity that led to this dramatic progress in the fight against world poverty was the grudging realization by donors that aid planners do not create jobs- small business does. Entrepreneurship is crucial to economic development because of her demography dividend at the same time it large population which creates a huge market. Entrepreneur paves the way to industrialization; industrialization strategies could better target high-potential entrepreneurial activities to accelerate industrialization.
Entrepreneurs play an essential role in bringing innovation to an economy, notably innovative technologies and production methods. New innovative firms put pressure on older firms to innovate. Entrepreneurship encourages diversification into new economic sectors and adapts foreign technologies to local markets for its growth.
Landes express that entrepreneur serves as a solution provider where government failed to function, it is often seen as a mechanize that provides public service left by the governments. High-potential entrepreneurs also experiment with new products in local markets. They offer fresh ideas and exchange information with other local producers, potentially increasing competitiveness by shifting resources to higher-productivity activities. However, scientific facts on the relationship between economic growth and entrepreneurship is conflicting Van Stel et al.
Entrepreneurship contributes to economic growth and diversification. It drives structural transformation and industrialization leading to inclusive and sustainable socio-economic development. These will result in the promotion of full and productive employment and descent work for all. Sub-Saharan governments should embrace this goal as it advocates for policies promoting job creation and full and productive employment and entrepreneurship can be used as a solution. Over the last four decades, the level of government interest in entrepreneurship and small business development as potential solutions to flagging economic growth and rising unemployment has increased.
It helped to spawn a new field of academic study and research. Innovation is the key to modern theories of development and growth [ 60 ]. It is evident that with factors such as technological product, costs, and process, innovations have graduated to become one of the keys to competitiveness and business success [ 60 ]. Competition in the global economy has now become knowledge-based and this is what countries in Sub-Saharan Africa need to adapt to grow their economic sectors. Most countries in the Sub-Saharan are known of traditional economic sectors such as textiles, leather, and food processing [ 60 ], such sectors need innovation and technological advancement for them to support modern entrepreneurship that will bolster economic growth.
Governments need to support entrepreneurship and innovation as a way of removing people from poverty because innovative entrepreneurship act about changes in the structure of the economy, technological upgrading in production, and moving higher value performing global value chains [ 60 ] and this is what impoverished Sub-Saharan African countries needs for development.
Quarterly Journal of Austrian Economics
If the governments can adapt to technological change that embraces the new modern use of machinery and equipment and modern generation of tech-literate educated workers, the region can experience a shift in their economies and will not need handouts from developed countries. Meanwhile, about 44 percent of African entrepreneurs start businesses to utilize the chances in the market, although about 33 percent adopt this as a means of surviving because of the level of unemployment in Africa. Unemployment is one of the highly proven challenges that are viewed to have a lot of effect on the Sub-Saharan African countries with a high number of the affected populations being the under 25 youth who are unemployed.
Entrepreneurship stimulates employment growth by generating new jobs when entrepreneurs enter the market [ 61 ]. Research has shown that many Sub-Saharan economies are experiencing slow growth. They are exacerbated by the fiscal crisis; unemployment persists in developing labour markets. And despite sweeping government stimulus packages directed at large institutions entrepreneurship has emerged as one of a few sources of economic activity that can successfully contradict these trends [ 62 ]. Taking the United States as an example of how efficient entrepreneurship can create employment and reduce poverty.
For Africa countries to be committed to promoting sustainable job creation, they must foster entrepreneurship. Sub-Saharan African countries remain most demographical populous continent, which accounts for more than half of her population under age of 25 years and youth unemployment is the largest in absolute terms when comparing other parts of the world. Job creation for the younger generation is still lingered to be a bottle neck and it is the most critical issue for the future.
According to the World Bank [ 63 ], million Jobs are required in the next one and half decades in other for catching up with the growing global workforce majorly among mainly in Asia and Sub-Saharan Africa, however, most of these formal jobs in developing economies are created within the arms of entrepreneur which also employees 4 out of 5 new positions [ 64 ]. This shows that there is a significant relationship between Entrepreneur growth and economic prosperity.
Meanwhile regional country has not significantly reduced poverty among youth without experiencing unemployment. In reducing poverty in sub-Sahara, development economic and economic history have previously given series of meaning to poverty and its solution such as [ 65 , 66 ] Strengthen economic prosperity and poverty reduction.
Journal of Socialomics
Scientific scholars have often geared attention on scale and scope economies and maximizing output [ 67 ]. Although scholars in the field of management and economists constantly observed that entrepreneurship may generate a substantial part of Sub- Saharan Africa solution to poverty due to her unemployment rates. Entrepreneurship helps in poverty reduction when it is creating employment through the establishment of new entrepreneurship or the developing of existing ones which increase economic wealth by creating new markets, new industries, innovative technology, new institutional forms, new jobs and net increases in real productivity, increases income which pick higher standards of living for the population.
This simply implies that the more the number of entrepreneurs in each country the poverty line will automatically be at a minimal rate [ 68 ]. In order for Sub-sharia Africa countries to get out of poverty, there is the need for entrepreneurial development through new jobs creation and provide income for the people [ 69 ].
The strategic significance of entrepreneurial in national economic development is widely recognized [ 68 , 70 ]. Considering Gambian, where Entrepreneurship business employee 60 percent of its population ranging from 15 to 64 years age and also contributed about 20 percent of GDP [ 72 ]. The report also shows and confirms that 70 percent of her citizens are self-employed. A recent study in Ghana and South Africa also showed the same result. Small and medium sized enterprises contributed to 52 percent to 57 percent of GDP and around 61 percent of employment in South Africa, and 85 percent of manufacturing employment and 70 percent of GDP in Ghana.
Currently, in Nigeria, more than university and colleges are offering entrepreneurship and small business management program when comparing to the number in the college offering the course in the s.
Also, 86 percent of the youth are looking forward to becoming entrepreneurs and this shows the positive view by following Nigerians. According to Governments, n. Generally, in Africa Continent, 80 percent believe that the entrepreneurial culture is animated and Entrepreneurship has been viewed as a good career opportunity [ 73 ].
Presently in the entire world, the continent has the highest share in the world of adults starting or running new businesses. The effect of entrepreneur gives extra weight when considering the strength of the market it can operate; Sub-Saharan is dominated by large powerful natural resource sectors and deep-pocketed multinational companies but is forced to contend with series of infrastructure issues. According to the principal, Country Economist at the Africa Development Bank explores furthermore about Mozambique, their economic growth with foreign investment into capital investment but with a lower employment project.
Nigerians, on the other hand, appreciate entrepreneurs more as the drivers of the new economy and as indicators of the positive shift away from dependence on the oil sector. Challenges of internal capacity building constraint: Every start-up firms globally faced that challenges of finding experienced managerial talent to complement a technical team. Just because someone is a remarkable engineer or developer does not mean they can make a good CEO or manager [ 74 ].
With little incentive or financing for prospective employees, beginners frequently lose out on the best talent, who get snatched up by larger, well-established companies like as banks and telecoms. According to report, the limited pool of skilled managerial talent is in most situation connected to the education system. The existence or dearth thereof of entrepreneurship training in the education system plays a significant role in this debate.
In Africa, entrepreneurs require education and training to permit them to succeed in opening or growing a business. Additionally, entrepreneurs need a skilled workforce to meet their business targets. Additionally, in Africa, the slow headway of adapting to the novel and emerging technologies influence productivity and growth. This scenario has contributed to local economies void of a competitive advantage as well as making these firms lagging those of other industrialized nations.
Environmental challenges for entrepreneurship: The literature considers the effect of environmental conditions on entrepreneurs [ 75 ]. In a study that contrasted motivations and environment with the rate of firm start-ups, Dubini [ 76 ] identified three types of environments that have ramifications for the rate of new venture creation: Many African entrepreneurs operate in the sparse environment. This section considers the following specific challenges: Challenges of business climate to entrepreneurship: It takes almost a year to complete the licensing processes in Benin and DRC, compared to 40 days in the U.
The costs of obtaining licenses are almost percent in Niger; percent in the DRC; and about percent in Mali, but just A World Bank study ranked countries on ease of doing business Table 1. Countries are ranked from 1 the highest, the lowest. A high ease of doing business ranking means the regulatory environment is conducive to starting and operating a local firm. The table shows comparative rankings of five African and five other countries.
First, the table shows an aggregate score for each country as well as rankings for eight sub-categories. Singapore ranks the highest 1 out of countries on ease of doing business. As the table also shows, except South Africa 43 and Ghana 70 , the other three African countries rank in three digits. In fact, much of African countries are at the bottom of the list. No African country compares to the Republic of South Korea 5 , Mexico 39 , and Peru 35 on the aggregate ease of doing business index. This suggests that business environments in many African countries are not conducive to entrepreneurship and MSME development.
Challenges of access to funding: Finding access to funding when it comes to starting a business is problematic; the challenge is one of the biggest concerns influencing potential entrepreneurs globally [ 80 ]. In some developing markets, institutional funding for entrepreneurs remains limited in countries studied. Over 45 percent of entrepreneurs mentioned that funding came from either their own savings or family loans, while over 71 percent of entrepreneur mentioned that the cost of accessing equity capital, debt or loans is prohibitively expensive [ 74 ].
Financiers, nevertheless, claim that most ventures simply are not fundable or do not seem viable. Venture capitals especially cite a dearth of a good business plan, quality and feasibility of the business idea, and perceived commitment of the entrepreneur as reasons for the slow deal flow. Given the significant role that entrepreneurship is believed to play in the process of creative destruction and hence economic expansion, it is not surprising that attempts to reduce funding constraints for would-be entrepreneurs is a significant goal for policymakers globally [ 80 ].
Therefore, monetary assistance is also high on the agenda in the European Union and OECD, where member states are urged to foster the availability of risk capital funding for entrepreneurs. Challenges of access to credit and entrepreneurship: Sustained entrepreneurship requires supportive and accessible financial institutions, such as commercial banks, development finance institutions, microfinance banks, credit bureaus, and money deposit banks. In most African countries, financial institutions are underdeveloped, and access to credit is limited.
Data from the World Bank Enterprise Surveys indicate that one of the key impediments to firms in Africa is a lack of access to credit [ 81 ]. Financial institutions demand outrageous collaterals as a condition sine qua non for extending investment loans. Figure 2 shows that compared to developing countries in other regions, African countries rank poorly with regards to accessibility of entrepreneurs to credit. In Ghana, collateral is percent of the value of the loan amount. However, collateral requirements vary from micro enterprises to large firms: Nigeria had an aggregate of percent, while collateral required for micro enterprises, small, medium, and large firms are percent, percent, percent, and Developed and efficient financial systems minimize the dependence of entrepreneurs on internal funds or personal and informal sources, such as family and friends.
Excessive dependence on internal funds for investment is an indication of potentially inefficient financial intermediation [ 81 ]. Due to underdeveloped and inefficient financial markets to serve the needs of MSMEs, entrepreneurs commonly resort to internal or personal funds for investment. In Nigeria, 53 percent of firms depend on internal funds for investment, while it is 76 percent in Ghana, 61 percent in Kenya, 85 percent in Tanzania, and 72 percent in Senegal [ 81 ]. Weak financial institutions hamper business operations and expansion, stifle the ability of entrepreneurs to take advantage of potential market opportunities, and discourage start-ups.
Challenges of physical infrastructure and entrepreneurship: In some countries like Kenya, a high-speed fibre optics backbone has enabled an ecosystem of ICT entrepreneurs to build apps and the web and mobile services, in other connections are dismal and a dearth of physical infrastructure presents a huge barrier [ 74 ]. Looking at the significant impact on the cost of doing business, infrastructure is highlighted as having a significant influence on the success and growth of the entrepreneurs.
This is because over 52 percent of respondents in Tanzania believe that new and growing companies cannot afford the costs of physical infrastructure. Across the continent of Africa, only 38 percent of entrepreneurs agree that infrastructure offers adequate backing for novel and growing companies, and only 23 percent believe that novel and growing companies could afford the costs of using infrastructure. A strong national physical infrastructure is critical to the competitiveness of economy [ 63 ].
Agboli and Ukaegbu [ 82 ] emphasized the critical nature of physical infrastructure for Nigerian entrepreneurs. Physical infrastructure includes transportation roads and highways, seaports, airports, and railroads , telecommunications, and electric power generation. The presence of infrastructure helps to create an environment not only conducive to locating a business, but also supportive of start-ups, growth, and expansion.
Physical and efficient infrastructure, such as transportation, helps to link MSMEs to their customers, suppliers, and markets. In virtually all African countries, deficient infrastructure remains the bane of new venture start-ups, growth, and expansion. Most African nations face weak communications, inferior quality and limited breadth of rail network and road. The critical nature of logistics for MSMEs lies in creating value for customers and suppliers. As Hamisi [ 83 ] pointed out, the value in logistics is expressed in time and place: Compared to other developing countries, African countries fared poorly on the Global Competitiveness rankings of countries on the infrastructure.
On the quality of overall infrastructure, the leading high performers were Namibia, 40; South Africa, 58; Botswana, 64; and Zambia, These stood in sharp contrast to Ethiopia, ; Uganda, ; Malawi, ; Nigeria, ; and Angola, [ 85 ]. Compared to other developing countries with higher scores, such as South Korea 21 , Malaysia 25 , and Taiwan 19 , only eight African countries rank among the first countries, ranging from South Africa 34 to Ghana For most entrepreneurs, the greatest obstacle when it comes to running a successful business is the dearth of electricity; most African nations faced unreliable power supply.
In sub- Saharan Africa, the cost to get electricity as a percentage of income per capita is 4, percent, compared to 1, percent in South Asia [ 85 ]. Unreliable power situation adds to start-up and production costs. A survey by Manufacturing Association of Nigeria found that the costs of generating power accounted for about 36 percent of the production costs [ 87 ]. Based on the World Bank Surveys, the Global Entrepreneurship report indicates that, among countries captured, the rankings for the quality of electricity for certain African countries are: Inferior quality power supply affects labour productivity and output.
A study found that inferior quality electricity supply is the infrastructure element that has the strongest negative impact on firm productivity, especially in poor African countries [ 88 ]. As Africa increasingly becomes a dumping ground for individual power generating plants, the severity of noise and air pollutions has intensified.
Overcoming the challenges of infrastructure in Africa would significantly enhance the level of entrepreneurship and improve productivity. Enhanced infrastructure will foster the prospects of MSME viability and success. For example, the Manufacturing Association of Nigeria attributed the closure of manufacturing companies in the country between and and of a further in alone to the inflated costs of infrastructure [ 89 , 90 ].
Besides being critical to entrepreneurs, improved infrastructure will help make economies of African countries more competitive and attractive for foreign investment. When it comes to entrepreneurs in Africa, it could appear hopeless, or at least rather depressing. Irrespective of all these challenges faced by entrepreneurs in Africa, one would disagree that entrepreneurs are still succeeding. Out of the ten fastest growing economy in the world, six of the countries are in Africa; if active stakeholders NGOs, Universities, and government could find a solution to what is not working, one can only imagine the potential.
Inadequate and undependable physical infrastructure features prominently as an obstacle to the fruitful establishment and expansion of business ventures. Poor power supply, poor communications, mediocre quality and limited breadth of rail networks and road infrastructure are highlighted as having a vital influence on the cost of doing business in African nations. The poor infrastructure situation is the most notable constraint highlighted by respondents, with electricity supply emerging as the most important obstacles faced by African entrepreneurs.
This research revealed that entrepreneurs play a huge and significant role in Sub-Saharan Africa by creating jobs and stimulating both competition and innovation. It also informed us that the sub-Saharan Africa entrepreneur is the key player toward poverty elevation and employment. As a key driver of employment growth, the government and all other stakeholders must do everything they can to aid entrepreneurs and enhance economic prosperity.
Hence, most importantly, entrepreneurship creates regional blocks, inter-firm linkage. This creates development towards economic leading to poverty reduction; stimulating employment as well as fast-tracking poverty reduction within the regions. Finally, we found that innovation, entrepreneurship curriculum training and education, individual entrepreneurial characteristics, the participation of micro, small and medium enterprises, youth empowerment, the collaboration of government-university-industry are the key tool for entrepreneurship development which is stimulating employment are eventually alleviating poverty.
Maximizing and capitalizing on SMEs is essential for Sub-Saharan Africa because of all the factors relating to economic growth that if ignored might be fatal for its rising economy. With a very young population and not enough jobs to offer, SMEs are the only solution for the regions. In addition, network programs and mentorship should be instituted in their various high institution where experienced executives presently or previous employed can give backing to businesses for limited periods by working alongside and training staff on major projects.
African government should lessen bureaucracy linked with opening a business and fight corruption. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. Select your language of interest to view the total content in your interested language.
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Entrepreneurship and Economic Growth
Guidelines Upcoming Special Issues. Sep 20, Abstract Entrepreneurship , with its focus on opportunities, is often seen as one of the cornerstones of poverty alleviation in sub-Saharan Africa SSA. Entrepreneurship-growth relationship According to Audretsch et al. Other determinants of economic growth One determinant of economic growth that has galvanized a lot of empirical attention is financial development. Entrepreneurship as an intervention strategy to poverty alleviation Widespread poverty had been a prolonged challenge in Sub-Sahara Africa Country. Entrepreneurship as a catalyst for economic prosperity not aid Aid is ineffective.
Entrepreneurship introduce innovations that induce economic growth Over the last four decades, the level of government interest in entrepreneurship and small business development as potential solutions to flagging economic growth and rising unemployment has increased.
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