People are the most important asset in a business. Yet many entrepreneurs still think the biggest lever for growth is financial capital. They make their growth prospects contingent on obtaining a loan or tie their aspirations to the facilities, equipment and real estate they envision for the business.
A company’s value is unconditionally created by its people. Whether that value comes from intellectual property, systems or brute force, it’s always generated by people. Even the best facilities and cutting-edge equipment won’t guarantee success if the human capital is insufficient.
This is a very real issue for our SMEs in Africa and the Middle East, who commonly cite lack of human capital as a major challenge. The challenge is not due to a lack of people — the two regions have huge labour forces, including two of the world’s biggest youth populations. While the rest of the world is aging, these regions have a vibrant labour force at their fingertips!
However, the limitation is the people’s production capacity within the business. For example, in Egypt, nearly 20% of SMEs cite an inadequately educated workforce among their top business constraints. Likewise, in Kenya, over 40% of SMEs cite the same problem. In some of the countries where GroFin operates (such as Nigeria, Ghana and Uganda), literacy rates are below 75% and mean years of schooling are relatively low. It may require 2 workers to do the job that 1 more educated worker would do in a more sophisticated market. In some countries, like South Africa, the problem is a mismatch between the skills the workers offer and what businesses actually need. While these statistics may seem dire, importing expat labour is not financially viable in the long-term. For SMEs, like their corporate counterparts, investing in people is the only sustainable solution.
We’ve been helping our investees build staff capacity for 15 years, usually by creating systems and policies, and occasionally by referring external trainers. Fortunately, an increasing array of options appearing to help emerging market SMEs build up their human capital. In Africa and the Middle East, government and NGOs have begun partnering with SMEs to pipeline talent through internship and apprenticeship programs. An example is the BDC’s Maharat program which trains, matches and funnels graduate into SME partners in Jordan. Likewise, local universities have also begun launching SME-specific programming, such as GIBS in South Africa. Additionally, African Management Initiative provides dozens of modules of online and in-person training, aiming to reach 1 million managers across Africa.
In leveraging these resources, entrepreneurs and executives can grow their businesses by building their most important assets: their people.