Role of Government in Entrepreneurship

Published on 25th July 2017

Africa is a very profitable place to do business. Rates of return here are higher than anywhere in the world, but it can be very challenging. However, the opportunities are immense enough to justify the effort. Some people think Africa is a country. My American friends will say, ‘I just came back from Africa last month.’ But Africa can indeed be a country, with people networking and building companies and businesses, we may end up with one African country of entrepreneurs.

In ten years, with 10,000 entrepreneurs, even if the success rate is 10 percent, it means we’re going to have 1,000 businesses in Africa, employing millions of people.

Entrepreneurs can choose to see problems and impediments, or they can embrace these as opportunities and possibilities. And here I’ll tell you a story, because some 16 years ago, I was appointed the Director General of the Bureau of Public Enterprises. The Bureau of Public Enterprises is the federal agency in Nigeria in charge of privatization. One of our flagship transactions was to privatize the then national telecoms monopoly called NITEL.

NITEL had sucked about $7 billion of government investment to provide Nigerians with less than half a million working telephone lines. Nigeria had the most expensive phone network in the entire world and perhaps the most inefficient. We were determined to privatize NITEL as well as open up the sector for private sector competition. I remember when we prepared the information memorandum for the sale of NITEL, the forecast of the size of the mobile phone market in Nigeria was 5 million subscribers in 3 years. As much as I tried to convince our investment bankers that that estimate was way too low, they were convinced based on the statistics that Nigerians could not afford GSM lines. And if all worked well based on our GDP per capita, in three years 5 million Nigerians would have phone lines. I was sure they were wrong.

We invited many big companies from Vodafone to AT & T to come to Nigeria to bid for NITEL, or to bid for GSM licences and they declined. A South African company called MTN which was not even the market leader in South Africa took the plunge. Today, MTN is the largest telecom company in Africa and is in a position to buy Vodafone and AT & T. Why? Because they invested in Nigeria. 70 percent of MTN’s growth and revenue comes from Nigeria and just to put things in perspective, we got 5 million lines in less than 6 months and today we have over 150 million lines. I’m saying this to encourage you and to also tell you, as you pursue your ideas, when someone says this is impossible, reply with two sentences. One, nothing is impossible. Two, impossible only takes longer; and pursue your dream.

We have advantages over your Independence-era fore-bearers. We  have more exposure and we live at a time when entrepreneurship is seen positively. When I graduated from university, my parents wanted me to go straight into a government job or work with a construction company. I graduated as a quantity surveyor. When I decided six months after my youth service to start my own business, everybody said I was going to starve. Because this was 1981, the national mood then was not for entrepreneurship. It did not encourage people to go out and start their businesses. But today because of the successes of Bill Gates, Tony Elumelu, the young man who is the founder of Facebook – I can’t remember his name, he’s young; he’s younger than my oldest child – the mood has changed. So we’re going to be encouraged not only by our parents but also by society. So nothing should stop us.

What can we do as government, to make life easier for entrepreneurs? Because believe me, the quality of your government can either make you  succeed or kill you. My favourite story here is the first chapter of a book call Why Nations Fail. In the first chapter of that book, a story was told of two towns or villages called Nogales; one in Arizona and across a dividing wall, one in Mexico. Two towns with the same name, but that’s the only thing they have in common.

Nogales in Arizona is a widely successful town, per capita income in the range of $20,000 dollars while that of Nogales in Mexico is $300 and people are trying to jump over the fence to go to Nogales, Arizona. Why? The difference is government. Nothing is possible without a functioning government. Now, when governments work, you take them for granted. You think they’re doing nothing. But, trust me, without a functioning government nothing is possible.

When I graduated from university as a quantity surveyor, there were only thirty quantity surveyors in Nigeria. So before graduation, I had job offers. I could choose which job I wanted, I didn’t need to apply for a job. Of course I joined the private sector. I was doing very well. And I decided that this is the way to go, this is my life. I have no business ever working for the government. After all those that work for the government are lazy, they’re corrupt. Why would I want to work for the government and be seen as lazy and corrupt and on a low pay? And I figured out that if I made enough money I could take care of myself. I could insulate myself from the corruption and inefficiencies of government.

If the electricity supply doesn’t work, I’ll buy my own generator. If the public water supply doesn’t function, I drill my borehole, install my water treatment plant. I believed that strongly and I want to assure you most of us, of my age, around 50, that graduated in the 70s and 80s, had this worldview. Then in 1996 when Sani Abacha was Head of State, I woke up one morning and we had no gasoline. No petrol, in a country that is the ninth largest producer of petroleum in the world. How did that happen? That happened due to the failure of government. And that’s when I realised that no matter how rich you are, without a minimally functioning government, you’re toast.

There are some things you can never do for yourself. You cannot secure yourself completely. You cannot build your own road. You cannot build your refinery. You need a functioning government to either do that or organize it to be done. And that’s when I decided in 1996 that if I had an opportunity to work in the government I’d give it my best shot. And here I am.

Now I’m telling  this story to lay the foundation of what I am about to say and what you will meet as entrepreneurs. You succeed to a large extent because of the power of your vision and your focus but you need a friendly environment that encourages innovation, encourages risk taking and rewards it. And that kind of environment can only be created largely through policy and legislation. Only governments can do that, and this is my point. Governments can help create the environment for entrepreneurs by guaranteeing the rule of law; government can help support the certainty and predictability that entrepreneurs require. For entrepreneurs to thrive, contracts must be enforceable. In my opinion, the purpose of government is to protect persons, property and promises – 3 Ps. Any government that can protect persons, property and promises can be deemed a successful government. We need an impartial judicial system and efficient law enforcement. These are public goods that, like I said, you take for granted when they work. But for many of us in Nigeria in the last few years, we have seen that these are things that you cannot take for granted.

A few days ago, in my state of Kaduna, 25 people died from the work of a suicide bomber. That focuses one’s mind on the importance of security. And what is tragic about that is that we knew that some persons were coming to Kaduna state with a bomb. We were tracking them. They got to Zaria and switched off their phones and they could not be tracked any longer until 7 hours later when the bomb exploded. You can imagine my pain as governor of the state, that I had an inkling this was going to happen but I was helpless because we didn’t have the tools and the capability to nail down these people before they could do it. This is what governments must do better because without security and without protection of property, persons and promises, nothing is possible.

Too many parts of Africa, particularly Nigeria are under-policed. In Nigeria, we have less that 400,000 policemen; 150,000 of them are doing VIP protection duties. We need twice the police force we currently have to adequately police Nigeria. And these are basic things that we must put in place.

There is one other area that government plays a very important role, the role of human capital development because basic education, particularly primary education, must be the responsibility of government. I believe that strongly and I’m not a communist, trust me. Education helps to build a stock of skilled persons who can make contributions in business, and be discerning buyers and consumers themselves. Illiteracy itself is not only a disease, but a restraint of trade; because an illiterate cannot make the choices that an informed person can make. Again, here, I believe that government has a role in ensuring that society is not only literate, but numerate. This is another area in which government must play an important role. This is a compulsory and necessary foundation for the progress of society and only governments can create the enabling environment to do that. And without this foundation, entrepreneurs will not have the tap of human resources to draw upon for the progress of their business.

The third is social capital. In other words, trust. Societies with high levels of social capital encourage and develop entrepreneurs. That is why you find that most entrepreneurs spring out of places like the Unites States, Canada, Europe, and similar countries, because there is a high level of social capital. You can shake hands on a deal, no need to write agreements because even verbal agreements can be enforced. And because of that weight of responsibility, society has come to accept that your word is your bond.

Once upon a time, most of Africa’s societies used to be like that but the after-effects of colonialism and post-independence errors in governance have reduced trust in our societies. The traditional structure of trust had been broken and the modern structures of trust have not been fully entrenched. So we’re in a problem because studies have shown that countries with very low levels of trust can only grow family businesses. That is why most big businesses in places like Korea, you’ll find that they started as family businesses. Whereas in countries with high levels of trust like the US, you’ll find huge companies grow that you don’t even remember who was the founder – like General Electric or AT & T. We still remember Bill Gates as the founder of Microsoft, but in a hundred years, nobody will remember. Only government, through law enforcement, protection of contracts and a sanctions regime can create that level of trust that will encourage entrepreneurs.

And finally, I think, as African governments and leaders, we need to adopt some kind of policy flexibility or policy coherence across the continent. Because when you move from one country to another you meet a completely different policy regime. And if Africa is to make progress, if you are to succeed, the fifty something countries in Africa must operate as one unit with similar trading, investment and policy regimes.

We need, as the largest economy in Africa, and the most populous nation, to take the lead in ensuring that we adopt a pragmatic approach of policy regimes; in trade, investment, all across Africa.

By H.E Mallam Nasir El-rufai,

Governor of Kaduna State.

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