Nigeria and Ghana cited entrepreneurship as their chosen path towards accumulating their first $1 million.
By contrast only 71 chose an executive career while a further 51 made use of the family business as a viable path towards wealth creation.
Even when asked how they continued creating wealth beyond their first $1 million, entrepreneurship stood head and shoulders above alternatives such as an executive career (47) or family-owned business (41).
Further highlighting the theme of self-reliance, less than 10% of respondents indicated that they had inherited their wealth.
Although every individual’s path to business success is as unique as they are, the fact is that the nature of the market in which one operates has an inordinate influence on the way that wealth is accumulated.
In less developed economies, there simply aren’t enough established companies and senior corporate positions available to enable individuals to accumulate substantial wealth via
a traditional executive career.
Yet the ability of people to nevertheless still acquire considerable wealth in such markets suggests that real economic transformation and progress can be achieved when entrepreneurship is allowed to flourish.
Of the five countries surveyed, respondents from Nigeria, Ghana and Kenya were far more likely to cite entrepreneurship as the main driver of wealth creation.
By contrast espondents from South Africa and Mauritius, with their more developed and sophisticated financial systems, were more likely to have opted for a traditional corporate career as a path towards achieving financial freedom.
The report found that entrepreneurship is often constrained in the continent’s comparatively wealthier markets like South
Africa and Mauritius, where the dominant perception is that the formal sector is the smoothest route to both employment and wealth.
The difference in the fortunes of entrepreneurs in the various countries surveyed also brought some important issues to light.
A limited formal sector means entrepreneurship is often the only viable route to wealth for many.
This suggests that much can be achieved if entrepreneurs are given the space to solve problems directly, supported by an enabling business and policy environment.
Although more developed markets, with their sophisticated financial and professional services infrastructure, can be a strong source of support for entrepreneurs, they can also act as barriers to entry impeding the development of entrepreneurship that is abundant in economies with less formal means of enterprise.
The high number of executive careers and the professions of South African respondents also highlight a critical shortcoming of the nation’s economy – an over-reliance on the established formal sector and not enough disruptive entrepreneurial activity.
This implies that the continent’s richest country can learn much from the entrepreneurial experiences of its northern counterparts.
To counter the inadvertent barriers
to entry created in larger economies with more established formal sectors, entrepreneurs in countries like South Africa need better and more innovative financial support; greater access to markets and supply chains; as well
as targeted training and mentoring programmes from both the public and private sector supply chains.
Risk-taking Versus Hard Work
While economies like Nigeria and Ghana have comparatively smaller formal sectors, their greater number of vibrant small businesses which account for the bulk of employment, means that entrepreneurship is a popular route to wealth creation
in these markets.
The relative shortage of formal sector positions that offer a viable path towards wealth accumulation through formal executive careers means that people in these markets are more likely to use entrepreneurship as an alternative means of building wealth.
The differences in these two paths to wealth are perhaps best summed up in the words of the survey participants themselves.
One South African respondent attributed his wealth to “qualifications and hard work” while his Kenyan compatriot cited “guts, resilience, intensity, tenacity”.
In essence, both of these responses highlight the respective qualities required to get ahead in the corporate world versus those required in a more entrepreneurial environment.
Equally, it illustrates the age-old adage that necessity is the mother of all invention.
Where formal sector employment prospects are slim, Africa’s wealthy tend to innovate and hustle in order to not only make ends meet, but to build substantial wealth as well.
Africa’s people are resourceful, inventive, creative and above all, tenacious.
Entrepreneurs can also benefit
from less developed tax systems. One Nigerian interviewee said of his country:
“The tax systems are less developed, so the proportion of your income that you are able to reinvest is significantly higher than in other [countries] where you sometimes have to remit 40% of your income.”
However, this does not imply that there is a lack of tax compliance in less developed markets.
A Kenyan respondent indicated that tax compliance is still important to ensure that your wealth remains secure.
“If you do not pay your taxes, whatever you have is not yours. The authorities can come and take it.
So, you really need to be on the right side of taxation.
You need to be able to tax plan for your business In markets where the formal sector is seen as a preferred path to wealth and employment, the talented and ambitious tend to spurn entrepreneurship for a number of reasons ranging from the perceived status and prestige of formal sector employment, as well as perceptions of risk.
Nigerian academic Kalu Ojah,
a professor of finance at South Africa’s Wits Business School, states that the findings of the African Wealth Report 2020 validate academic research that looked at entrepreneurs’ transitioning rates through stages of the entrepreneurship process or business life cycle in Nigeria and South Africa.
“We found they tend to progress through these stages better in Nigeria than in South Africa.
We also found preliminary evidence that differences in personality traits between the sets of entrepreneurs in the two countries explain the differential rates of success across entrepreneurship stages