Which African Countries Promote Entrepreneurship Best?

Which countries in Africa provide a healthy environment for entrepreneurship? It is notoriously difficult to collect accurate data. The Global Entrepreneurship Monitor (GEM) reports on 49 countries, but the only African countries included are Morocco and South Africa. 

On the 2023-24 overall GEM National Entrepreneurial Context Index (NECI) score, United Arab Emirates is way out in front with a record score of 7.7, followed by India, Saudi Arabia and Lithuania. Morocco comes 30th with a score of 4.3. South Africa comes a dismal 47th with 3.6, above Venezuela and Iran, and just below Brazil and Guatemala.

Now researchers at the Alan Gray Centre for African Entrepreneurship (AGCAE), a new and ambitious team at Stellenbosch University, have just created the African Entrepreneurial Ecosystem Index (AEEI). This seeks to correct the problem with all such surveys, which is that the quality of data across Africa is generally poor, making it difficult to analyse. AGCAE director, Phumlani Nkontwana describes their goal as being a “data hub of hubs”.

Their website contains the admirably cautious statement that “this is the first public version of this index. Treat the results with caution as we have had a lot of deliberation and discussion on data quality, data availability and data sources. See this version as a conversation starter and a minimum viable product to improve and build on.”

The AEEI consists of seven components, each building on multiple data points: Governance, Culture, Support, Finance, Infrastructure, Market access, and Human capital. They had enough confidence in the data from 27 countries to include them in their inaugural table.

Mauritius tops this list as most friendly to entrepreneurs. South Africans might be surprised to find their country comes second, with a strong financial sector and relatively well-developed infrastructure, but poor support. I need to dig deeper into the data, but I think “support” refers both to the fragmented efforts of entrepreneurial support organisations and to the work government departments do on the ground.

Then come Tunisia, Morocco and Cape Verde. Of the major economies, Egypt is 8th, Nigeria 13th, Kenya 17th, Ethiopia 21st, and Tanzania 22nd, with Uganda and Zimbabwe at the bottom.

I think Kenyans in particular would be surprised and disappointed by that score. Kenyans see themselves as entrepreneurial. Kenya scored particularly poorly in support, market access and finance, and had no areas of special strength. The purpose of the researchers is not just to report, but to learn and encourage ecosystem players to improve the conditions that help create new businesses. I hope this will stimulate honest reviews of the present and courageous ideas for the future.

I was encouraged to hear the AGCAE team talk about data in the context of things needed to encourage business. Too often we tend to collect data only to report, and neglect the essential task of learning from it to improve what we do. This applies as much at the microdata level of firms and agencies as at the macrodata level of economies.

I was also encouraged to hear about getting out into the field to see what it is like to do business on the ground. All statistics can lie, but the lies told out of context by abstract data are difficult to discern until one leaves the office to look and talk to the people actually trying to run businesses on the ground.

A final thought: Start-up indices are useful but I’d also like see a stay-up index. What helps firms stay in business? Everyone knows that new companies create the most jobs; but they are also likely to destroy the most jobs, because so many of them fail. I wonder whether keeping existing firms in business would be a more efficient use of resources than trying to push people into creating new businesses.

Jonathan Cook, a Counselling Psychologist and Chairman of the African Management Institute. If you’d like to read previous columns in this series or ask Jonathan a question please visit https://africanmanagers.com/jonathan-cook