It’s often said that there is no shortage of talent in Africa. The approximately 44 million small, medium and micro enterprises (SMMEs) in sub-Saharan Africa are testament to this. Across the continent, entrepreneur support programmes provide capacity building, mentoring and funding to develop businesses with growth potential. Yet many of these programmes face challenges as they attempt to empower entrepreneurs at various stages of their business journey.
During an interactive workshop at the Motse Collective Impact Entrepreneurship Ecosystem Gathering 2023, hosted by Allan & Gill Gray Philanthropy South Africa in partnership with the African Institute for Entrepreneurship and the Hasso Plattner d-school Afrika at the University of Cape Town, Managing Director of AMI Impact Solutions at African Management Institute, Andrea Warriner, unpacked these challenges as well as the opportunities surrounding entrepreneur support programmes. Warriner focused on the Argidius by Porticus SCALE model, which outlines five fundamental considerations (acronymised as SCALE: Select, Charging, Address Problems, Learn and Example).
A central theme was diverging from a one-size-fits-all approach and advocating for a segmentation framework as outlined in the Collaborative for Frontier Finance’s (CFF) report titled ‘The Missing Middles: Segmenting Enterprises to Better Understand Their Financial Needs’. This framework emphasises the importance of selecting the most suitable enterprises for specific programmes, considering factors such as market growth potential, product or service innovation and the entrepreneur’s behavioural attributes. “It’s not exhaustive, it’s not the only framework and it’s not perfect for every purpose but it does help us think beyond the size of the business and dig deeper as we select businesses for programmes,” Warriner explained.
The Four Families of Growing Businesses
Commercially viable businesses with five to 250 employees that demonstrate significant potential for growth are defined as small and growing businesses (SGBs). These businesses contribute to positive social change by providing underserved populations with access to goods and services, specifically in emerging economies. It’s also these businesses that face formidable challenges, especially when it comes to accessing finance. Referred to as the ‘missing middle’, Chris Jurgens, writing for the Omidyar Network, says they are “too big for microfinance, too small or risky for traditional bank lending, and lack the growth, return, and exit potential sought by venture capitalists”. The CFF report segments these ‘missing middle’ businesses into four families:
Livelihood-sustaining enterprises
Family-run businesses driven by opportunity are usually classified as livelihood-sustaining enterprises. They may be formal or informal and operate on a small scale, focused primarily on day-to-day operations and catering to highly localised markets.
Dynamic enterprises
Businesses within this segment operate within very traditional industries that deploy existing products. They have proven business models with moderate potential to scale.
Niche ventures
These businesses are characterised by innovative products or services. Artisans and companies working in the creative economy fall within this segment. They may have limited growth potential as they serve particular, targeted needs.
High-growth ventures
Led by ambitious entrepreneurs, these businesses can be identified by their disruptive models, such as start-up tech ventures. They require tailored support, often to market access, skills development and financial guidance.
Motivating Participation
For many entrepreneurs, participation in a programme can be likened to a necessary obligation to access funding. Warriner highlighted that high dropout rates are a key concern for many entrepreneur support programmes as participants lose interest in course materials or leave when they feel a programme does not address their needs. To motivate individuals to willingly partake in entrepreneur support programmes for more than just funding, tailored support is highly recommended although “[this type of support] is very costly for this level of business,” added Warriner. Additionally, programme convenors should contemplate the following areas that may be important to both the entrepreneur and the programme:
Value proposition
Tailored coaching is one approach to value creation, however, programmes must also consider peer-to-peer learning and access to critical resources. The backbone of this type of programme will lie in high-quality, relevant support and materials.
Alignment with business needs
Programmes that directly address the challenges and growth aspirations of specific segments are more likely to see higher participant engagement.
Cost considerations
Most entrepreneur support programmes are provided for free and while this may seem appealing, charging a fee can enhance the perceived value and encourage greater commitment from entrepreneurs. Warriner cited the example of African Management Insititute’s own graded model of fees, where entrepreneurs at a certain level in their business pay a fee for the support programme. Alternative models such as this one, as well as co-payment structures, can positively affect graduation from programmes.
Effective Support Delivery
Segmenting and motivating entrepreneurs are the first steps to enrolling participants in a programme. Once there, programme convenors must empower participant success through comprehensive support. Key strategies for successful programme delivery include:
Individual support
While business success is at the core of entrepreneur support programmes, addressing entrepreneurs’ individual needs by providing psychological support and coaching is crucial. Particularly for businesses in the earlier stages of development, programmes must build individual’s self-belief and resilience to help them stay motivated and committed to seeing their business thrive.
Tailored learning
People learn in different ways so providing a blend of synchronous and asynchronous learning opportunities allows participants to take the knowledge they receive and implement it in their businesses over time. According to Warriner, at the African Management Institute, for example, concepts and theories are foregone in favour of practical business and management tools and peer-to-peer support where group sessions are used for knowledge sharing and peer assistance.
Purposeful data collection
It is essential to collect data effectively to measure the impact of a programme, however, this can prove challenging when engaging with multiple entrepreneurs focused on running their businesses. Framing data collection as a valuable exercise that benefits the entrepreneur goes a long way. “Data enumerators can feel very transactional for entrepreneurs,” said Warriner. “So, for us at AMI, having the programme guide — the person who shepherded that entrepreneur through the programme — call them for data fosters trust and transparency.”
Alumni communities
Building alumni communities where anonymised data sharing is used also builds trust and allows participants to unlock access to further support, both within the community and from the programme.
Entrepreneur support programmes are essential to reap tangible impacts within businesses, driving job creation and economic growth. By carefully selecting participants, offering a compelling value proposition and delivering effective support, programmes can empower entrepreneurs to remain committed, navigate challenges, achieve growth and contribute meaningfully to the economy.
The Argidius by Porticus SCALE model provides entrepreneur support programmes and other funders with guidance on how to implement elements of SCALE to boost SGB revenues and job creation. Download the Argidius by Porticus SCALE toolkit here.
––
This article is based on a masterclass on finding innovation solutions for entrepreneur support programmes presented by Andrea Warriner, Managing Director of AMI Impact Solutions at African Management Institute, at the Motse Collective Impact Entrepreneurship Ecosystem Gathering 2023, hosted by Allan & Gill Gray Philanthropy South Africa in partnership with the African Institute for Entrepreneurship and the Hasso Plattner d-school Afrika at the University of Cape Town. The inaugural two-day gathering provided a space for ecosystem builders, policymakers and entrepreneurs to collectively reflect on the state of entrepreneurship and the actions required to enable an equitable society in South Africa.
Sources:
MCI EE Gathering 2023 Break-away Session 2 (video)
MCI EE Gathering 2023 Masterclass #2 transcript (rough)
Medium — There’s More Than One Missing Middle
How to Fulfil the Potential of Business Development Services using SCALE
