Entrepreneurial success beyond the State
Martin Ike-Muonso, a professor of economics with interest in subnational government IGR growth strategies, is managing director/CEO, ValueFronteira Ltd. He can be reached via email at email@example.com
September 9, 2020715 views0 comments
In as much as the State ideally plays a significant role in the survival and growth of industries, the emergence and entrepreneurial success of groups that are into relatively homogenous economic activities without much of the support of government is possible. Factually, the government only plays a post-industry-take-off role involving the creation of level playing ground for entrepreneurial rivalry as well as the enhancement of its fiscal harvests in most instances. Nigeria’s Nollywood industry presents a brilliant example of such. Notwithstanding that it started modestly with the outsourcing of some local television drama series, real business rivalry in the industry became noticeable after the launch in 1991 of the film titled “Living in Bondage” by some amateurs. However, the success of the movie automatically opened the portals for the entry of several players in the movie-making value chain. Nine years later, the industry was fully born with little or no presence of the government. The government’s entry into the industry space came a few years later virtually to censor the contents of the produced movies, as well as to ride on the back of its success to expand on its [governments] employment stimulus agenda.
The failure of government and the market, as well as varieties of globalization undercurrents, constitute the core factors that threaten the creation of prosperity in Africa. The government’s inability to create the right environment for entrepreneurial progress is highly instrumental to the attendant high costs of transacting that cripple business growth. Together with the lack of capacity to act as an entrepreneur results in the failure of government. Acutely insufficient public goods that support the prosperity creating activities of entrepreneurs, deficient governance structures and processes, as well as the lack of pro-market policies and programs, accentuate governments role in frustrating business growth. But it is mostly the responsibility of the government to manage much of these ensuing negative externalities and high transaction costs that constitute failures of the market. The increase in rates of progression and the level of negative externalities hurting businesses have much to do with poor governance conditions on the continent. Similarly, the unequal trade relationships between African countries and most of the developed world are predatory and exploitative of the former. African markets are, therefore, mostly the dumping grounds for most of the products from the economically more robust foreign countries.
In effect, therefore, the government may not necessarily be a critical facilitator of entrepreneurial progress at least at the take-off stages. Even for already established industries and sectors, the government’s failure to substantially act as an entrepreneur or as a stakeholder in entrepreneurial progress will equally lead to sustained market failures. The combination of market and government failures provide fertile grounds for converting African markets into dumping grounds.
Indeed, heightened pro-market policies of the government will significantly facilitate the interest and participation in entrepreneurial activities. However, it is equally valid that most of the successful entrepreneurs are those who are alert to profit-making opportunities. Such opportunities are also the ones created by the failures of governments to make the environment right for business. Prosperity creation through massive entrepreneurship, therefore, does not necessarily hinge on the readiness of the government at least at the take-off stages of most industries. Even governments’ ‘unreadiness’ is a gap advantage for many entrepreneurs. The implication is that prosperity creation through entrepreneurship is primarily a function of the profit incentives or prospects identified by those with the right levels of alertness for it. ‘Alertness’ for profit-making opportunities, in turn, will depend on experiences, level of risk tolerance as well as entrepreneurial greed. Entrepreneurial greed is not a negative term. It only suggests an elevated level of desire to create more income by identifying gaps in demand and supply situations. Therefore, the more a society has increasing numbers of those who are entrepreneurially greedy, the more the opportunity for creating profit-generating platforms for more employment and income. Those who have made some income in the past through a related opportunity window or have knowledge of how similar opportunities can create some income will quickly identify such opportunities even when they are not readily apparent to many others. However, the intensity of this ‘alertness’ is usually amplified by the degree of entrepreneurial greed.
The interaction of both will always result in the emergence of lots of employment creating ventures. The Igbo people of Southeast Nigeria who are primarily known for their entrepreneurial agility, are also highly respected for their entrepreneurial greed. Some other cultures in the country wrongly interpret this aptitude as an untamed love for money. But the reality of this phenomenon is easily seen among the Nnewi people of Southeast Nigeria, which has the highest concentration of billionaires in Africa. Through the Igbo apprenticeship-based education that became the dominant system of rapid and democratized impartation of knowledge, moneymaking awareness and experience became rife. That awareness, combined with the on-the-ground evidence of billionaires emerging through those processes, equally heightened entrepreneurial greed in constituent communities. The consequence is the near-endless birth of multi-billionaires.
Therefore, entrepreneurial alertness, greed and business strategy execution to a considerable extent, explain the power behind the emergence of industries that have very little or no influence by the government. First, profit-focused entrepreneurs must be alert to such opportunities. Secondly, they must be sufficiently thirsty for large income to be incentivized enough to translate the alertness into action. Finally, they must carefully execute those well-tested initiatives that would enable them to harvest the anticipated revenue. Industries, therefore, emerge when there are a considerable number of persons who share these characteristics in a particular economic opportunity area. Certain conditions also make it easier for these characteristics to quickly manifest. They need not have any connection with a government policy or program. For instance, an area with a lot of expatriates working in a high-income sector will most likely witness the emergence of a high number of prostitutes if such place has reasonably large number of females, relatively lower levels of income compared to that of the expatriates. The emergence of prostitute colonies under these conditions will also be fast-tracked if the prevalent culture rarely frowns at such activity. As can be seen, enabling environment for the take-off of the industry has extraordinarily little to do with the government unless there is a subsisting law that prohibits activities that may lead to their [prostitution] there Parker evolution.
What government incentives and facilitation were behind the emergence of Nigeria’s film industry? Very little, if any, at all. The financial success of the film “Living in Bondage,” which appeared to be the very first publicly commercial movie, triggered the rapid entry of many traders in Onitsha market as producers. The traders possessed investable capital for that class of film. To maximize potential revenue in the emerging industry, they also identified persons that were willing to act out the scripts that they unprofessionally put together. That also spurred the emergence of camera operators and video editors. Although the photo quality of those early movies was relatively low, the demand for them was also very high. First, most of the film spoke to the dominant cultural values that quickly connected with the people. It was very much, unlike the English, Chinese and Indian movies that were the only available ones before their emergence. Nollywood movies increased the movie supply options and most importantly connected with the value system, familiar environments, and the society in ways that were conversant with the buyers and viewers. The growth in income incentivized younger people to learn the skills of acting, costume making and scriptwriting. Given the increasing demand for embedded services in the value chain, several film making schools also emerged. The growth of several value chains from the industry attracted the attention of the government, who aside from the legislation of the sector also considered its positioning as an export sector.
The Ikeja computer village in Lagos is another concentration of entrepreneurs that came into existence without government involvement. By mid-1990s some young men with some skills in computer hardware assembly and repair began to rent stalls around the area to support those interested in jumping onto the newly emerging computer era. The sudden spike in demand for assembled computers also quickly gave birth to vendors of computer spares and laptops. A few years from then and with the emergence of mobile telephony, there was no better place to foster the growing complementary demand for laptop PCs and mobile telephones than the computer village. The computer colony boasted of a vast array of value chains in the computer business. There were PC vendors as well as many sellers of spare parts for both PCs and mobile telephones. There were also some hardware and software technicians in every corner of the village willing to make the computing purchase and repair experience very memorable. Ancillary businesses such as printing and photocopying hardware vending and maintenance industries equally sprang up in the village.
Africa is blessed with abundant natural and human resources. These resources, in turn, have numerous economic value chains that can create millions of employment opportunities and the income required for enhancing the well-being and prosperity of its citizens. However, governments failures over the years have also resulted in severe market failures that consequently, present severe obstacles to the emergence of numerous industries that would have further diversified the economies. Even though there is sufficient evidence proving that the role of government in the emergence of many vital sectors were either zero or relatively minimal, the State can play significant roles in creating the conditions necessary for many industries to spring up. That ordinarily should be a much faster approach to seeing many businesses come to life.