Professor David Lingelbach returned recently from Senegal in West Africa. Unlike other countries in the region plagued by disease, terrorism, and authoritarian government, Senegal is relatively stable, peaceful, and democratic.
Like other sub-Saharan African economies, Senegal has much higher levels of entrepreneurship than in the United States, Europe, or Japan. According to one recent study, an average of 28% of the labor force in Africa is in the process of starting or has just started a new business.
Traveling across Senegal, Professor Lingelbach found that entrepreneurship was the norm in economic activity, not the exception. The following are seven vignettes of entrepreneurship that illustrate how this phenomenon is both similar to and different than observed elsewhere in the world:
This young man was selling his peanuts under a highway bridge in the Ouakam neighborhood in Dakar, Senegal’s capital and largest city. Peanuts are one of Senegal’s largest agricultural exports. He sells one bag for approximately 4 cents. Many of these young street vendors are also talibé (students) of Islamic maribout (teachers). Some are subject to abuse, including forced labor such as street begging.
Moudou is one of the thousands of independent sept-place (seven seat) shared taxi drivers that are an integral part of Senegal’s transport system. The government has made limited investment in public transport, so sept-place drivers operate on fixed or semi-fixed routes without a schedule: they depart when the car is full.
Moudou has begun establishing a niche by focusing on Dakar’s foreign community. He charges $133 to make the round trip journey from Dakar to St. Louis (five hours each way). Along the way, he and other drivers rely on one another to borrow parts if their vehicles break down, which is common.
Almost every neighborhood in Dakar has a tailor, who transforms brilliantly colored fabric (originally locally made, but increasingly imported from China) into custom-made clothing for both women and men. Doudou and his son operate their shop in the Mermoz neighborhood, which is relatively affluent by Senegalese standards. Still, their prices are very, very reasonable. Five pieces (two dresses, two shirts, and one pants) cost $30, and Doudou often delivers his work with 1-2 days after the initial order. Customers bring their fabric to Doudou, which they purchase in the local markets. While Doudou does not have a web presence to advertise his services, his son is active on social media, friending customers on Facebook wherever possible.
Senegal has a potential competitive advantage in fashion-related industries. However, many local entrepreneurs find it difficult to scale into international markets. One frequently heard reason: owners are reluctant to give up control in exchange for access to capital or partnership with others that bring complementary human resources.
In 2003 a Frenchman sold his apartment in Paris, split the proceeds with his children, and moved to St. Louis, Senegal’s first capital and the oldest French settlement in Africa. There he bought a dilapidated house from a Moroccan family for €100,000, invested another €250,000 in repairs and renovations, and launched Senegal’s first world-class guesthouse. Guests (mainly foreigners) pay €99/night for one of Yves’ four rooms.
While business has been strong recently, the Ebola outbreak in Sierra Leone, Liberia, and Guinea has severely reduced foreign tourist arrivals in Senegal. Local competition is relatively strong, and Yves and his wife are now about to open a restaurant in response. Like many tourism-related businesses, Yves’ business is very seasonal: the St. Louis International Jazz Festival brings visitors from around the world, but only lasts for a week or so. Yves and other local tourism entrepreneurs are exploring ways to boost business, including introducing air service from the Canary Islands (two hours away by airplane).
Down this quiet side street in Dakar can be found the headquarters of two private equity funds. Private equity funds provide expansion or buyout capital to established, cash-flow positive businesses. These funds are an increasingly powerful presence in the global capital markets.
One of these funds invests exclusively in African companies and has now fully invested its first fund. It is seeking to raise a second, even larger fund to continue its efforts. While the investments that such funds make can be very lucrative, they are also quite risky. One of the biggest risks: selling their investments in the local capital markets.
Some private equity investors would like to invest in younger companies in Senegal. However, there are very few growth-oriented new ventures there. Why? Rigid labor laws make it difficult for new ventures to hire and fire employees. The policy environment does not generally support startup activity. Supporting organizations, such as incubators and angel investors, are hard to find and, when they exist, not as impressive as they could be.
Markets are ubiquitous across sub-Saharan Africa and many other developing and emerging economies. Bargaining is friendly but fierce, competing products are placed side by side, and (at least in this market) the emphasis is on freshness and quality.
We still know relatively little about whether such unfettered free enterprise leads to economic development. Subsistence: yes. Employment for marginalized populations: often. Growth: not so much. Yet, as scholars in the critical tradition remind us, maybe growth and development are not what these entrepreneurs are seeking. One recent study found that women entrepreneurs in rural Senegal were more interested in repaying their loans to micro-lenders than they were in the survival of their business. Preserving relationships was more important than business. Such an orientation was very much on display in Senegalese markets. Often, traders are more interested in their relationships with each other than they are in meeting customer needs.
Canaletto could have painted the scene. Senegal is an Atlantic country and has an active fishing industry. Most of the industry players operate single pirogues, long narrow boats with a small crew. The work is hard and dangerous, even though the local fish—thiof and lotte—are plentiful at present. Competition from illegal international fishing within Senegal’s 12 mile fishing zone has led to recent armed confrontations between the Senegalese navy and Russian trawlers.
Some photos courtesy of Jenny Lingelbach (all rights reserved).