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We must dispel the fallacy that entrepreneurs are born

Monday April 10 2017

By BITANGE NDEMO
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Early British economists such Adam Smith and David Ricardo divided factors of production into three categories: land, labour and capital. 

They argued that if there were good “business management,” these resources would form the building blocks of the economy. 

Another British economist, John Stuart Mill, suggested his colleagues had undervalued the importance of entrepreneurship, which he described as the fourth factor of production.

In essence, it was possible that one could have plenty of land and labour but without an entrepreneurial spirit, one would still be gawking at the original three factors of production and wallowing in poverty, even with capital aplenty. 

Mill, who had difficulties explaining this French-origin term in English, thought an entrepreneur required exceptional skills, and he was right. Even today, few people really understand the term that is often mistakenly taken to mean “businessman.” 

Joseph Schumpeter, the Austrian-born American economist, was perhaps the first modern theorist of entrepreneurship and the field owes much to his contributions. His fundamental theories are often referred to as Mark I and Mark II.

In the first, Schumpeter argued that the innovation and technological change of a nation come from the entrepreneurs, or “wild spirits.” 

In the second, Schumpeter argued in his seminal workCapitalism, Socialism and Democracy that the agents that drive innovation and the economy are large companies, which have the capital to invest in research and development of new products and services and to deliver them to customers more cheaply, thus raising their standard of living.

ENTREPRENEURS ARE MISSING

I write about the role of entrepreneurship in economic development because the entrepreneur is the agent of change. My own theory is that entrepreneurs are missing on this continent.

Africa is otherwise inundated with labour and land resources in a sea of poverty. Capital has never been the problem.

Many African countries assumed, fatally, that distributing land to landless people would make them entrepreneurial. 

That didn’t happen. Instead, they created poorly equipped subsistent farmers and an insatiable affinity to land. In spite of this, poverty levels soared.

The African mindset is stuck with land, which today is the principal cause of poverty. In Kenya today, land advertising costs threaten to surpass those of commercial food products. 

People, young and old, are pouring money into speculative land buying, burying millions that could otherwise be used in industrialising the country. Employment has become elusive, since virtually every person with a little money “invests” it in land.

POOR INDIVIDUAL DECISIONS

The government came up with the brilliant idea of a Youth Enterprise Development Fund and a Women Enterprise Fund to foster entrepreneurship, yet if each coin ends up in real estate, the entire resource (capital) will be sucked into a non-productive sector, stifling the scalability of enterprises. 

Lack of scalability means there is no growth, only increased dependence. That is why we often hear such sentiments as “serikali isaidie” (the government should help). The role of government, however, is to create an enabling environment for the entrepreneur to prosper. 

What, then, should we do? I am of the opinion that we make too many assumptions about people and we have no monitoring mechanisms to make changes in time before damage is done. 

Truth be told, the majority of people have no capability to make their own prudent decisions. In the name of individual rights, we continue to watch poor individual decisions that have far-reaching communal implications, yet democracy is for the people, not individuals. 

In a continent where information asymmetry is as wide as the Rift Valley, the poor, particularly, have no chance of making some of the decisions we assume individuals should make. 

That is perhaps why Franklin D. Roosevelt said, “Democracy cannot succeed unless those who express their choice are prepared to choose wisely. The real safeguard of democracy, therefore, is education.”  

A maize farmer in Uasin Gishu is in no position to decide whether or not to plant maize if market conditions aren’t right. Potato farmers in Molo and Nyandarua plant the crop year in year out, even if consumption patterns have been altered by multinational food chains in Nairobi. 

NON-DYNAMIC AFRICAN LANGUAGES

The result is that the farmer is left to deal with market outcomes. It is for this reason that I present the following raft of proposals. 

First, national and county governments should develop entrepreneurial development centres manned by experts to seek opportunities and exploit the same. 

Create research capacity within the centres to conduct market research and aggressively engage with farmers regularly and provide key information on rainfall patterns, soil fertility, market projections and value addition opportunities to reduce waste.

Experts must seek to translate all the proposed activities into Kiswahili and other local languages. Part of Africa’s failure comes out of non-dynamic languages that we use in day-to-day communication that undermine the uptake of technology. 

John-Stuart Mill struggled to explain the French term “entrepreneur” to make his people appreciate the concept.

Similarly, we must make every effort to translate the same concept into local languages to introduce the necessary dynamism into development.

The national government also needs to take international trade to a higher level. Africa presents low-hanging fruit, and the recent request by the president of Seychelles that Kenya export beef and poultry to his island nation demonstrates that local entrepreneurs have not done a good job exploiting such markets. 

It is unbelievable that we have all the dry rangeland in northern Kenya, with aquifers, people, capital, entrepreneurs and markets that walk to our doorstep, but do nothing to exploit the opportunity, create wealth and prosper. God will never forgive us for watching human suffering in the midst of plenty.

SINCERE IGNORANCE

We must dispel the fallacy that entrepreneurs are born. Far too many young people pity themselves, thinking that their cultural background does not predispose them to entrepreneurship.

They create barriers to their creative minds, often thinking that there is one “right” answer to a problem, fearing mistakes and failure and blindly following the rules, without understanding the joy of breaking existing rules so we can find new ways of doing things.

Several successful entrepreneurs were taught to become entrepreneurs. They learnt to tolerate failure, saw problems as challenges, embraced curiosity, and were tenacious. With all these attributes, there will be no need to always depend on government to solve problems in every aspect of our lives.

Martin Luther King Jr said, “Nothing in all the world is more dangerous than sincere ignorance and conscientious stupidity.”  

Echoing the dreams of our founding fathers, we must find the cure for ignorance and perhaps consider a more benevolent dictatorial regime to get us through the current false state of self-importance and free choice, which in the long run will breed more poverty.

The writer is an associate professor at University of Nairobi’s School of Business. Twitter: @bantigito