"The OECD Entrepreneurship Model: A Capacity Building Framework for Poverty Reduction in Africa."

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“The OECD Entrepreneurship Model: A Capacity Building Framework for Poverty Reduction in Africa.”

By

AKUHWA, PAUL TAVERSHIMA, MSc., MBA, MDA.

E-Mail: [email protected].

Interational Conference of the Faculty of Administration, Ahmadu Bello University, Zaria.

Conference Theme:

“GLOBAL FINANCIAL CRISIS AND AFRICA’S QUEST FOR DEVELOPMENT.”

20th – 22nd July, 2010.

The author is currently a CEO of Gongillama Projects Limited in Abuja, FCT, Nigeria.

Abstract

Poverty reduction in Africa has occupied top policy decisions in the last three decades. So much

theory has been advanced about how poverty reduction in Africa could be achieved. Various

poverty reduction programs have been designed and implemented at different African States

contingent with their respective state policies without much positive results in effect.

Entrepreneurship, which is a vehicle for poverty reduction have been well embraced by Africa over

the past three decades but without encouraging results. Whilst the contribution to GDP of SMEs in

the OECD states is averaged at 50%, that of Africa is less than 8% showing capacity divide

between the two continental economies. In so much as SME entrepreneurship remain the most

efficient, effective and prudent vehicle for poverty eradication, the nature and contribution of same

in Africa tells volumes of the very high poverty and unemployment in the continent. Thus, it is

only common wisdom and knowledge to benchmark success, which this paper intends to discuss,

and advice policy maker-practitioners, scholar-practitioners and business practitioners both real and

potential, the advantages that underlie appropriating the OECD Entrepreneurship Model as a

capacity building framework for poverty reduction in Africa. As Africa charts a course out of

global financial crisis of the present, successful and gainful SMEs, properly modeled and

appropriated, shall be a viable capacity building vehicle for the journey. The paper shall be in five

sections. The first section is the problem introduction and the second section follows with a brief

theoretical review. Section three discusses the methodology of the study and the adopted OECD

entrepreneurship model. Sections four and five discuss findings and way forward for Africa

respectively. Finally, it is advised that the OECD model of entrepreneurship be better appropriated

by Africa‘s SMEs for capacity building and poverty reduction shall result in the long run.

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Introduction.

Capacity building has crept into the development lexicon in the past decades. But, is it more

of jargons or can it be a useful development concept? However, the terms ‗capacity building‘ is

thoroughly enshrined in ‗poverty eradication‘ and so have received wide supporting ovation as a

result (Green and Battock, 2003). Other economies of the world especially the west regard this

concepts as benefits of the recent globalization, internationalization, and liberalization of trade–

though with a wide growing debate (Green and Battock, 2003). But, the truth of the matter is that,

capacity building impacts benefit variables toward sustainable development of the individual,

organization, state and society in general. These are all functional variables that under controlled

conditions can eradicate poverty through the sum total of wealth creation, especially for Africa,

now that the world is under the financial trauma of ―the global financial crisis.‖ Therefore, taking a

broader perspective, capacity building process encompasses organizations or institutions,

individuals and communities in poor countries. In this context, it is a far broader developmental

approach, thus; ―Capacity building can involve strengthening people‘s understanding of their own

needs, entitlements and rights. This may entail building up people‘s understanding and knowledge

in critical and important areas of intervention, and then, enabling them to organize themselves to

respond to this new understanding and knowledge‖ (Green and Battock, 2003).

As it is clearly apparent, capacity building is not something that happens overnight. It is not

a quick fix. To be meaningful in the long term, capacity building is best done as part of a process,

rather than as an end in itself, carried out in partnership, and not as a condition of funding or as

something which is imposed on organizations in developing countries by those in the developed

world (Murphy and Barrier, 2002; World Bank, 2002).

A model is an abstraction of the real world that explains the real situation by concentrating

on the dominant variables which control the behavior (i.e. theory) of the real system. Thus, a model

is expressed in an amenable manner the mathematical function that represents behavior of the

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assumed real world (Taha, 2008). Also, a ‗model‘ is a simplified version of something complex

used in analysing and solving problems or making predictions (Microsoft® Encarta® 2009).

Therefore, the Organization for Economic Co-operation and Development (OECD), its Euro stat

model for entrepreneurship is a framework that can be used for analyzing and solving poverty

problems due to its consideration of and leaning on most theories that expressly define

entrepreneurship multifaceted concept. This model highlights three stages. The first stage

comprises various determinants which policy can affect and which in turn influence performance,

or the amount and type of entrepreneurial activities that take place. The final stage is the impact of

entrepreneurship on higher level goals such as economic growth, job creation and/or poverty

reduction. Within each of the three stages of this model several sub-categories are identified to

flesh out the overall framework and guide the selection of indicators. While the entrepreneurship

framework is presented here in a linear fashion, it is explicitly recognized that there are complex

relationship among the different main components and the sub components (OECD, 2008).

The global financial crisis on the other hand presents a ―double-edged‖ phenomenon. On

one edge is the downsizing of corporations and thereby throwing out of the teaming skillful and

trained human resource back into the labor market. Examples of this among others are the

downsizing of commercial banks, Dunlop and other companies in Nigeria that are left to

entrepreneurship SME as the only survival alternative. This is a push factor variable into

entrepreneurship (Inegbenebor, 2008). Also, it has become very difficult for Nigeria‘s public

service to create jobs that could eradicate or reduce poverty. More so, the purchasing power of naira

and other African currencies have so depleted and lost in value to a level that the scourge of poverty

is expanding. Manufacturers are no longer able to cope with the unit production costs, while

customers are not able to cope with product market prices and etc (Banjoko, 2008). These

developments thereby erode competition, which is a pointer toward entrepreneurial capacity

building for poverty reduction. The other side of the ―double-edged‖ phenomenon is the ―survival

of the fittest,‖ where only competencies, capabilities and competitive advantage that drive the

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competition, could develop entrepreneurial building capacities for eradication of poverty through

value creation. This attracts entrepreneurship development and SME business venturing. On this

side, self-assessments, learning, skills development for competencies and capabilities, information

and communication technology and competitive corporation vide bio-corporate networks prevail

for wealth creation (Leibord, Probst, and Gilbert, 2002). This is the pull factor variable for

entrepreneurship (Inegbenebor, 2008). It is therefore, expected that entrepreneurship shall be

boosted and wealth created from innovations, creativities, employment and the value added for

poverty reduction.

However, the realistic situation reveals that African economies are facing a lot of

challenges coping with the ambers of global financial crisis and Nigeria especially is operating at

the bottom low in GDP with SMEs (the engine of growth and development) contributing about 1%

to GDP (Mainoma and Aruwa, 2008). Thus, the pangs of poverty still grips African economies and

Africa‘s quest for development still remain a Mount Everest challenge. It is therefore against this

background that this paper intends to appropriate the OECD entrepreneurship model as a capacity

building framework for poverty reduction. The paper intends to show how the determinants,

entrepreneurial activities would be dynamically synchronized to pay rents in economic growth,

employment and provide synergy for poverty reduction in Africa. And also the role African SMEs

would play in appropriating these framework synergies for business venturing cum poverty

eradication. A cross-sectional survey method of scientific research shall be adopted using

descriptive analysis of secondary data.

Statement of Problem.

Entrepreneurship SME businesses relate to socio-economic development of economies to a

positive correlation that even retracts development history of so many economies. Several models

have been used for entrepreneurship. These are; the Japanese model, the Chinese model, Thurik and

Wennekers Model, and the OECD model among others. Studies have shown that economies use

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entrepreneurship models and have obtained monumental growth in their GDPs. Thailand, Indonesia

and India have SMEs contribution of 40% to their GDPs respectively, whereas, the EU and USA

with 65% and 53% of SME business share respectively also a contribution of 50% to their

respective country‘s GDPs (Mainoma and Aruwa, 2008). In Nigeria, just like other African

economies (with the exception of South Africa), the SMEs represents and inhibits the highest share

of employment generation, wealth creation and poverty reduction with about 90% sector

dominance, yet a contribution of 1.0 % to the country‘s GDP. This bottom low GDP of 1.0%

contribution is a direct indicator of and relationship to abject poverty in Nigeria and other African

economies. And this dismal performance of entrepreneurship in Africa may likely be as a result of

lack of ‗critical and necessary‘ business capacities of Africa‘s SMEs. Or, even if they possess

certain capacities, these are not properly and optimally directed in marketwise mix proportions that

could give rents to performance effectiveness. This may likely be as a result of none appropriation

of any effective entrepreneurship model. Or maybe, the none appropriation of especially, the

OEDC model, that is causing the mere absence of critical and necessary capacity building among

African entrepreneurs and the attendant dismal performances.

Study Objectives.

The overarching objective of this study is to appropriate the OECD entrepreneurship model

for building of critical and necessary capacities of African SMEs. This would boost their

performance effectiveness that leads to adequate GDP contribution and put their economies back on

the right path of development. Other objectives to be proved by this study are:

1) To identify through this study, the real and potential determinants for entrepreneurial

capacity building that appropriating the OECD model will aid African SMEs to

performance effectiveness.

2) To identify the entrepreneurial performance at all level of analyses (country, firm,

individual and social group or community). The performance that results from

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entrepreneurial capacity building and that would lead expressly to employment,

economic growth and poverty reduction and eradication.

3) To suggest through this study the possible areas of intervention by national

governments to aid appropriation of OECD entrepreneurship model for poverty

reduction and eradication.

4) To find out if there are any difficulties involved in appropriating the OECD

entrepreneurship model by SMEs in Africa and suggest the way forward.

Review of related literature.

Africa's overarching objective remains fundamentally one of accelerating economic growth

and reducing widespread poverty. To effectively reduce poverty, the pattern of economic growth

would need to be broad-based so as to bring about social development and improvements in the

welfare of African peoples. To this end, priority should be accorded to investing in physical as well

as human capital, especially with respect to access to education, health and nutrition. It is also

important to promote private-sector led growth and international trade. Furthermore, efforts would

be needed to attend to cross-cutting issues such as environmental management. In a nutshell,

Africa's quest for sustainable development should be based on the pursuit of the intertwined goals

of accelerating the pace of economic growth, while also spreading the benefits widely among the

population so as to make significant strides in poverty reduction (Oshikoya and Hussain, 2003). All

of these are funded in the capacity building phenomenon and the OECD entrepreneurship model as

shall be discussed.

Capacity building.

‗Capacity‘ is ―a measure of the amount that can be held or contained by something. It is also

the maximum amount of output or productivity, or the mental and physical ability for something or

to do something. And, it is also an official position that somebody has‖ (Microsoft® Encarta®

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2009). ‗Building‘ on the other hand means, ―to develop according to a systematic plan, by a definite

process, or on a particular base. And also, it is to progress toward a peak and in extent‖ (Merriam-

Webster, 2009). Therefore, from the foregoing, capacity building can be taken as, ―the sum total

development of productive, mental and physical abilities or measures through a deliberate, definite

and systematic plan process on a new or particular base (substructure) progressively to a required

pattern of extent and peak of capabilities and competencies.‖ This definition cut across all the

levels and dimensions of analyses: country, organization (business firm), individual, and

community groups cum behaviour, culture and other social variables. This will agree with

Indonesian intellectual, Soedjatmoko, when he posited that; ―looking back over the years, it was

clear that, in their preoccupation with growth and its stages and with the provision of capital and

skill, development theorists have paid insufficient attention to institutional and structural problems

and to the power of historical, cultural, and religious forces in the development process‖ (Todaro

and Smith, 2003:9).

Any useful approach to capacity building has to take into account the political, social,

cultural, technical and financial, behavioural and managerial to make it holistic and all

encompassing. An enabling environment, which provides appropriate incentives, is essential in

mobilizing and utilising capacities. Many contemporaries referred it to governance issues in

general, others to specific policies and/or laws, or resource endowments. Yet, some others referred

it to behavioural norms and attitudes, and to the impact of donor interventions. These factors can

both promote effective ‗capacity building‘ and ‗capacity utilization‘ or result in ‗capacity erosion‘

at worst (Abdala, 1997). There are many approaches to capacity building, such as institutional

approach, organizational and environmental approach, and human development management

approach. These approaches have to be systematic and synergic in order to achieve the desired

capacity building results.

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Abdala took an institutional approach and defines ‗capacity‘ as been more of an outcome or

condition to be achieved, whereas, ‗capacity building,‘ he defines as ―a process by which capacities

are acquired.‖ And also, that, capacity can be said to depend on the presence of: viable institutions;

leadership and vision; financial and material resources; skilled human resources; and effective work

practices with appropriate systems, procedures and incentives. On contextual factors, Abdala

highlights that these factors take on different degrees of importance depending on the country‘s

context and the areas of capacity building to be addressed. But on the whole, capacity is likely to be

influenced by a combination of different but interrelated factors, which may result in capacity being

sufficient or insufficient, or under-utilized. Being clear on causes and symptoms provides the basis

on which to determine an appropriate response, such as; skill enhancement, addressing incentives,

reforming the public service, changing attitudes, adapting donor practices, providing hardware –

material and physical infrastructure (Abdala, 1997).

Furthermore, building alliances and networks can benefit SMEs is in the area of technical

change. Rapid technological changes in the form of new products, along with new production

processes and management systems threaten to engulf most African SMEs. Developments in

transport, agriculture, manufacturing and finance are likely to erode further the competitiveness of

African SMEs-even in areas where Africa traditionally held a comparative advantage. For example,

a recent World Bank Investment Climate Assessment (ICA) Study identifies top constraints for

African SMEs as the electricity shortage, low access to finance and poor transportation network in

order of importance (ICA, 2008). If African firms are to respond effectively to changing customer

needs and take advantage of changing production incentives, it will be imperative that they improve

their technological capabilities. To this end, African SMEs will have to source information

technology which provides them with access to state-of-the art technology (Oshikoya and Hussain,

2003).

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On the institutional front also, upgrading technological capabilities requires the

establishment of information-intensive institutions that can provide extensive extension services on

a wide scale and deliver comprehensive packages of assistance comprising technical know-how,

finance, management skills, training and sales information. In South East Asia which has been

successful in this respect, institutions such as Productivity Councils (Hong Kong); Productivity

Centre (China) and; Medium and Small Business Administration (Taiwan) have different names but

serve similar objectives. These productivity centres are usually entrusted with many tasks including

(i) identification of problems facing enterprises and devising appropriate remedies and training

packages; at subsidized rates; (ii) acting as major technology transfer and development agents; (iii)

provision of specialized technical services for new industries such as computer aided industrial

designs and inventory management systems; (iv) provision of credit, technology, management,

accounting and marketing assistance; (v), transferring "production-ready technology" that the

government has imported and adapted to local firms; and (vi) provision of information on

international standards (Lall 1996 in Oshikoya and Hussain, 2003). Information technology has the

potential not only to establish and promote such productivity centres at the national level, but more

importantly for resource pooling and information sharing at the regional level.

Organizational and environmental approach to capacity building views organization‘s

capacity as its ability to influence its life and progress toward desired results. Murphy and Thomas

(2002) said that organizations and environment is complex, so the definition of organizational

capacity tends to get complex. And in this light posits capacity building to be about the following,

either stands alone or in combination:

Innovative and optimistic – It is based on belief that is possible to create and maintain

a better community and aligns with the aim of business to search for constructive and

creative solution.

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Diversity – It is based on belief in the worth of all individuals and a respect for their

differences.

Quality and progress – It improves the quality of life and contributes to sustainable

human progress in communities.

Economy and business – Contributes to the generation of economic activities and

mutual beneficial businesses to communities.

Value based – Applies its values, skills and experience in a wide range of

circumstances and considers the respect for the natural environment.

Sustainable – Is underpinned by the principles of sustainability, sharing experiences

and best practices.

Capabilities – Increases the professional capabilities, personal development and

company pride of staff and contributes to the creation of more versatile and capable

workforce for the firm or organization.

Organizational capacity is contingent. To some extent capacity will be defined differently

from one organization to another. On the other hand organization share a family resemblance with

similar task, environment, and cultural context tend to have similar attributes. Thus, there is more to

organizational capacity than technical, financial, and managerial skill (Murphy and Thomas, 2002).

Capacity building, seeks to improve the performance of work units, departments, and the whole

organization. Organizational capacity building is a system-wide, planned effort to increase

organizational performance through purposeful reflection, planning and action. In particular,

capacity building looks in depth at where an organization stands in comparison to where it hopes to

be in the future, and develops the skills and resources to get there (Gareth and Jenifer, 2007).

Furthermore, Harvard Business Schools identified seven key factors of organizational effectiveness,

the central point of organizational capacity building. What was known as the 7- S framework

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proposed that effective organizational change is a relationship between structure, strategy, style,

skills, staff, and shared values (Murphy and Thomas, 2002). Regardless of the type of business, an

organization is thought to have self-renewing capabilities when all seven elements are aligned to

achieve purpose congruence. This is a provocative model based on the assumption that multiple

variables affect organizational capacity building and effectiveness (Mintzberg , Lampel , Quinn,

and Ghoshal, 2003; Lynch, 1997).

Therefore, organizational capacity building strategy is synonymous with learning

organisation and/or organizational learning. Organizational learning (OL) is adaptive and proactive

learning. Adaptive learning deals with changes that have been reacting to alter environmental

conditions. Whereas, proactive learning, is that organizational change that have been made on a

more wilful and planned basis. Then learning organization is defined on the other hand as, ―a

commitment to openness to new ideas, to generating new knowledge, and to spreading information

and knowledge… they seek high level of collaboration among people from different business

disciplines‖ (Gareth and George, 2007; Bateman and Snell, 1999). Thus learning organization is

―one that is proactively creates, acquires, and transfers knowledge on the basis of knowledge and

insight‖ (Robins and Judge, 2008; Krietner, Kinicki and Beulens, 1999). Thus, organizational

capacity expands when learning goes beyond solving a specific problem to gaining skills and

knowledge to solve future problems.

Finally, the human development management (HDM) approach to capacity building is a

thinking that relates to the quality of human labour as the most crucial factor of production. The

human factor controls, allocates and channels other factors; land, capital, entrepreneurship and

information into the production process. All other factors are fixed and stagnant with the exception

of the human factor which is fragile, mobile, communicates and etc. therefore, capacity building

directed to individual humans is very necessary as it‘s the human factor that regulates and designs

both institutional and organizational capacity building. In other words, without the human factor,

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capacity building will definitely be null and void. The three major strategies of the HDM approach

to capacity building are the human resource development strategy (HRDS), human capital

development strategy (HCDS), and the all-encompassing human development strategy (HDS). The

most recent subscription on development horizon is that ―individual humans are the economic and

central factor in the sustainable development discourse of any nation‖ (Uwatt, 2002). Corollary,

human resource – not fixed capital, income or material resource – are the basis for the wealth of

nations (Chete and Adeoye, 2002).

The United nations Economic Commission for Africa (UNECA), describes human resource

as, ― the knowledge, skills, attitudes, physical and managerial efforts required to manipulate capital,

technology, and land among other things, to produce goods and services for human consumption‖

(UNECA, 1990). In other words, HR is the totality of human potentials (knowledge, skills,

attitudes, energy, and technology) inherent within a nations HR stock and whose efforts if properly

developed and harnessed (through capacity building), would yield high productivity (Obikaonu,

2002; Armstrong, 2009). This view was earlier captured by Salleh, as he succinctly posits, ―it is the

HR that develops the nation, and the nation‘s development in return develops the HR (Salleh,

1992). This is symbiosis. Undoubtedly, human beings are the active agents who accumulate capital,

exploits natural resources; builds social, economic and political organizations to advance national

development (Chete and Adeoye, 2002). The HR of any nation can be developed through capacity

building vide formal training in school and informal training through non-school experiences and

self-development through the work place. Yesufu (2000) agrees with this view and opines that ―the

essence of HR development becomes one of ensuring that the workforce is continuously adapted

for, and upgraded to meet, the new challenges of its total development.‖ This is because the

economy is a dynamic entity, which is constantly changing in response to various stimuli such as,

introduction and discoveries of new products or techniques of production. Therefore, it can be

generalized that, the nation‘s HR require retraining, re-orientation and re-adaptation (i.e. re-

everything) for required capacities to meet those new challenges.

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On the human capital development (HCD) strategy front, human capital (HC) is the key input

to the research and development (R&D) sector, which generates the new products, or ideas that

underlie technological progress. HDC is so important to capacity building that the Khartoum

Declaration of 1988 asserted that, ―…the human dimension is the sine qua non of economic

recovery…no SAP or economic recovery programme should be formulated without having its heart

detailed social and human priorities. There can be no real structural adjustment or economic

recovery in the absence of human imperative‖ (Adedeji, 1990).

Adamu (2002) supports Adedeji on the HCD and posits that it is a continuum. One end of the

HCD continuum is the childhood when there is a lot of drive for capacity building and

development. On the other end of the HCD continuum is the adult/maturity age, where maximum

capacity utilization is epitomized. Therefore, the concept of capacity human capital refers to the

abilities, skills, talents and capabilities of the human resource of a country, organizations and

groups (Armstrong, 2009). While the human capital formation or development refers to the process

of acquiring, training and increasing the number of persons to possess the education, skills, talents

and experience that are critical and bearing on economic growth and political development of firms,

country and groups (Armstrong, 2009; Okojie, 1995). Thus, investment in human capital at any

level is an indispensible component of the capacity building and national development process that

can be used as a vehicle for tackling poverty and expediting overall economic growth (Chete,

2002). In this vein, the World Bank (1995) assessment of 192 countries of the world posited that,

human capital, on the average, accounted for 64% of the total wealth while physical and natural

capital accounted for 16% respectively. Thus, it can be generalised that, HCD when properly

directed in the capacity building process on entrepreneurs and SMEs, the results could be poverty

eradication and economic growth as shown by the OEDC model. Finally, the HCD seek to build the

capacity of individuals for a full life of skills and critical thinking. And critical thinking in this

regard is the ability to perceive relationship among ideas. It is also regarded as focused and

organized thinking. The greatest thinkers, scientists, inventors, have often taken information that

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was readily available and put it together to produce new insights. Therefore, critical thinking is

―focused, organized thinking about such things as the logical relationships among ideas, soundness

of evidence, and the difference between facts and opinions‖ (Lucas, 1998). This thinking reflects

the knowledge, wisdom, skills, talents and competencies and capabilities embodied in human for

that represent optimum capacity building for poverty reduction and economic growth of African

Nations to be framed in the OEDC model.

The human development strategy (HDS) approach to capacity building for poverty reduction

bequeaths a process of expanding human choices by enabling people to enjoy long, healthy and

creative lives (HDR, 1998). Human development is not only an expansive concept; it is seen as a

―work in progress.‖ It also has implications on human rights, the main theme of HDR 2000 and for

democracy, and the main theme of HDR 2002; and HDR 2003 with a major theme on Millennium

Development Goal: A compact among nations to end poverty.

However, for quantitative purposes, human development is measured with Human

Development Index (HDI). The HDI is a composite statistics measuring life expectancy at birth,

knowledge – proxy on education of adult literacy rate; decent standard of living –proxy by

Purchasing Power Parity (PPP) adjusted per capita income. The composite indices of human

development (HD) in Nigeria and Africa are poverty eradication and reduction, employment

generation, requisite education level and critical knowledge/skills, life expectancy improvement,

health management and improvement, and optimal spatial distribution of population avoiding

explosive urbanization (Umo, 2002). But it is disheartening to note that according to the HDI

statistics of 2007, Tunisia, the best in Africa with 0.769 HDI ranks 98th out of 182 countries listed,

Gabon with 0.755 HDI ranks 103rd

and South Africa with 0.683 ranks 129th, Nigeria and Niger

ranking 158th

and 182 with HDIs of 0.511 and 0.340 respectively. Thus Africa with medium and

low HDI cannot stand the least of OECD countries with 0.942 and ranking between 1st and 42

nd

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(HDR, 2009). In this light, Todara and Smith (2003) posited that the HD composite indices should

enhance the realization of core economic development objectives, such as:

1) To increase the availability and widening the distribution of basic life – sustaining

goods such as food, shelter, health and protection.

2) To raise the level of living including in addition to higher incomes, provision of

more jobs, better education, and greater attention to cultural and human values. All of

which will serve not only to enhance material well-being, but also to generate greater

individual self-esteem.

3) To expand the range of economic and social choices available to individuals and

nations by freeing them from servitude and dependence not only in relation to other

people and nation-states but also the forces of ignorance and human misery.

Therefore, it can be generalized that HD is a broad and comprehensive concept. It is a

process concerned with economic growth as well as with its distribution, as with human needs as

with its variety of human assumptions, as with the distress of the rich countries and as with the

human deprivation of the poor ones (Jhingan, 2003). Thus, this is the capacity building and

development epitome that unleashes capacities, capabilities, talents, wisdom and knowledge as the

new capital and strategic resource for poverty reduction and economic growth (Armstrong, 2009;

Laudon and Laudon, 2007; Drucker, 2002). This is in line and congruence with the global

entrepreneurial culture that was posited by Susan Davis. She said, ―Entrepreneurial culture globally

is figuring out the best ways to unleash the potentials of people to innovate, create, catalyse,

synthesize, and be resourceful, in order to solve problems and take advantage of opportunities while

been ethical.‖ Also, creating an entrepreneurial culture is a multi-faceted and organic phenomenon.

As culture is highly dynamic, synthetic web of factors and expressions, cultural shifts occur when a

tipping point is reached. This is a point of shift, paradigm shift in entrepreneurial capacity building.

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Therefore, ―to move from a culture that undervalues entrepreneurship to the one that does, involves

shifts in attitudes, expectations and perceptions among people of all ages‖ (Davis, 2002).

Furthermore, Progress along this dimension of Science and Technology capacity building is

commonly measured by such indicators as the share of gross domestic product (GDP) devoted to

R&D, the number of patents registered in U.S. and European patent offices, the number of articles

published in prestigious, refereed journals, the number of grants obtained from such international

science funding sources as the National Science Foundation and European Union Framework

Program, and the number and value of research projects conducted in partnership with local and

international research institutes (World Bank, 2008). Thus, according to this report, a country

would be seen to be making progress toward developing its National Innovation System (NIS),

building STI capacity, and becoming more ―competitive‖ when its scores on the variables listed

above begin to increase and eventually approach levels found in innovative Organisation for

Economic Co-operation and Development (OECD) countries. Government policy is frequently

oriented toward moving these indicators in the desired direction. This dimension of Science,

Technology and Innovation (STI) capacity building draws most of its inspiration from the

challenges facing OECD countries and ongoing efforts to benchmark those countries against each

other (World Bank, 2008).

But why is STI capacity building so important to the poverty reduction agenda? The Word

Bank STI report of 2008 explains that; first, although much is still not understood about what

makes development work, and what makes some countries succeed and others not, there is no

question that education—investing in people—is one of the biggest contributors to growth and

poverty reduction. As recently as 40 years ago, the Republic of Korea was regarded by economists

as a hopeless basket case. It had no natural resources, which we have since learned does not matter

that much; it had lots of corruption; and it was burdened with a Confucian ethic that taught that

gentlemen don‘t work, but instead they wear white clothes and grow long finger nails to

demonstrate their contempt for manual labour. Of course, it is now that same Confucian ethic that is

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supposed to explain not just the success of Korea but every other country in East Asia. Korea

systematically educated its population and did not stop at fourth grade. The country did not stop at

middle school. It did not stop at secondary school. Today, 89 per cent of Koreans have some degree

in tertiary education, which would make it the highest percentage of any country in the world.

Korea‘s achievement in education is stunning, and the success of its economy is equally stunning. It

went from being one of the poorest countries in the world, to being the 10th largest economy. The

cause and effect are clear: it is not possible to have a strong education system if it is focused solely

on primary education. While primary education is obviously critical, it is important to have teachers

who inspire children in primary school to go beyond basic education. There needs to be a

continuum, and there needs to be balance in that continuum, but focus cannot just be on the lower

levels of the education system, even if those lower levels are the major concern. Second, much of

STI capacity building is about applied S&T, and that has incredible value for development. Third,

countries can now have access to advanced technology without having to develop it themselves.

But they have to learn how to use it and exploit it for economic development purposes. Ireland, for

example, went from being one of the poorest countries in Europe to one of the most successful by

leapfrogging over older technologies to adopt the newest technologies and incorporate them into its

economy and society. Today‘s developing countries must learn how to emulate Ireland (World

Bank, 2008).

Finally, STI activities are magnets for talent. And this highlights one of the biggest

challenges: reversing the brain drain. Talented people need to stay in developing countries, to be

productive in their countries, and to contribute to their countries. It is not reasonable to say, ―Give

up the intellectual excitement that you found in Cambridge or in Washington, or in Paris or in

London.‖ So a goal of building STI capacities in developing countries is to find a way to capture

some of that intellectual excitement—because while it is nice to get remittances, it is much, much

better to have people come back home to contribute to their country‘s economic development.

Resources are limited. The amount of resources that can be applied by poor countries to S&T is

18

going to be limited. But there needs to be balance. Zero investment in S&T will condemn poor

countries to impoverishment and low levels of development, and that is something we cannot afford

(World Bank, 2008).

However, the problems facing many poorer countries (Africa) are different from those

confronting OECD economies. Examples of significant differences include the following:

1) The baseline levels of technology used in the poor country‘s economy — except for

occasional extractive industry sectors — are typically quite low.

2) The absolute size of the local economy is quite small.

3) Consequently, many poor countries have only modest resources to invest in S&T. Even if

they spent 1 per cent of GDP on science and technology, this would amount to only several

million dollars per country per year. These pales in comparison to the amounts spent in

scientifically advanced countries or even to the amounts spent each week by a single

innovative private enterprise on R&D activities.

Scale effects will have a major impact on how countries allocate their R&D development

budgets. Small countries, with limited existing R&D capacity and budgets will need to decide

whether they should focus on cutting-edge research or on research designed to support the

economy‘s capacity to import and adapt existing technology. In addition, they will need to decide

what capacity can be built internally and what capacity needs to be built on a regional basis, in

partnership with other countries (World Bank, 2008).

The OEDC Model of Entrepreneurship

The OEDC Euro stat model is built on most theories (Cantilon, Marshall, Say, Schumpeters,

Kitzner, Schultz, Kilby, Shane, Venkataraman and etc) that define entrepreneurship. Thus,

entrepreneurship is ―the phenomenon associated with entrepreneurial activity.‖ Whereas,

entrepreneurial activity is ―enterprising human action in pursuit of the generation of value through

the creation or expansion of economic activity, by identifying and exploiting new products,

processes or markets‖ (OECD, 2008).

19

This model highlights three stages: the first stage comprises various entrepreneurial

determinants which policy can affect and which in turn influence entrepreneurial performance,

or the amount and type of entrepreneurship that take place. The final stage is the impact of

entrepreneurship on higher level goals such as economic growth, job creation or poverty

reduction. Within each of the three stages of this model several sub-categories are identified to

flesh out the overall framework and guide the selection of indicators. While the entrepreneurship

framework is presented here in a linear fashion, it is explicitly recognized that there are complex

relationship among the different main components and the sub components (Ahmad and Hoffmann,

2008). For the model, refer to methodology section.

The goal of the Entrepreneurship Indicators Programme was to establish a framework of

relevant indicators for the study of entrepreneurship and to encourage countries to use the

definitions, methodologies and classifications of the framework as much as possible when

producing the data. Given the multifaceted nature of entrepreneurship, the Entrepreneurship

Indicator Programme (EIP) does not propose any single measure as a key to understanding and

comparing the amount and type of entrepreneurship that takes place across countries. Since

entrepreneurship is a very broad phenomenon which encompasses, for example, virtually all new

firm creation, it is extremely important for policy analysts to be able to understand and distinguish

different types of entrepreneurial performance. The rationale for developing entrepreneurship

indicators framework is to help policy makers to understand how the policies they put in place or

adjust will affect entrepreneurship and, eventually, higher-level objectives for the economy and

society. For countries to benefit from the experience of others, it is also essential that the

entrepreneurship indicators allow for comparisons across countries by type of entrepreneurship

(Ahmed and Hoffmann, 2008).

Therefore, being aware of the fact today that SMEs contribution to GDP in the OECDs is

about 50% which impacts high level entrepreneurial performance in employment and poverty

reduction, as compared to Africa‘s less than 8% (and Nigeria with 1%) contribution to GDP; it is

20

only common sense and knowledge for Africa to benchmark this OECDs poverty reduction success

(Oyeyinka, 2008; Mainoma and Aruwa, 2008). Thus, this research proposes this model as an

appropriate capacity building framework for poverty reduction based on its results, simplistic,

integrative and related nature. It‘s also systematic is process, and therefore, synergic for poverty

reduction in Africa if appropriated properly

Source: Ahmad and Hoffmann (2008).

.Methodology.

The methodology of this research is a comparative qualitative approach using desk studies.

The OECD Entrepreneurship model, as shown below, and all its content indicators shall be

carefully analysed, appraised and applied to African situation vis-à-vis capacity building for

poverty reduction using secondary data sources from journals, World Bank reviews, UNDP

reviews, World Internet Stats., and et cetera (as attached in the appendix).

The determinants, as revealed in the model include regulatory framework, R&D technology,

entrepreneurial capabilities, culture, access to finance and market conditions. These determinant

variables are the key success factors, and must be optimally appropriated vide capacity building and

shall effectively lead to entrepreneurial performance at individual, firm, country and social group

levels looking at the processes and value chain synergies with great achievement of performance

and competitive advantage. As such, these determinants are as presented in the appendix. And the

expected performance and growth would lead to the various impacts of job creation and

21

employment opportunities, economic growth and poverty reduction in Africa and growth in overall

GDP.

Results and Discussions.

From the above review and based on data appended from ITU, Internetworldstats and the

OECD entrepreneurship model, the objectives 1 and 2 of the study have been immediately met.

This is because, the real and potential determinants for effective capacity building for poverty

reduction in Africa are as contained in the OECD model: Regulatory framework that takes care of

the institutional and legal environment of SME businesses in Africa, as in case of Nigeria, the CAC

and other regulatory agencies such as SMEDAN, NOA, NAPEP, MAN, NES and etc. Also, R&D

technology is another determinant which affects entrepreneurial performance and other

determinants such as entrepreneurial capabilities and culture. And from the appended data NREN in

Africa is 33% low as compared to Europe (OECD Countries) of 88% as shown in appendix 2.

Internet and telecom usage /penetration which are vehicles for technology and researches also ranks

low in Africa as compared with Europe as shown in appendix 1 and 2. Though over the past decade

there have been serious improvements in ICT in Africa, more efforts are needed to jettison Africa

to a point of flexibility for competition.

Data from appendix 3reveals that access to finance and market conditions determinants

affects capacity building of African States. This is because, Nigeria experiences 53% access

difficulty with 45% cost of finance, while South Africa experiences 10% and 15% access difficulty

and finance costs respectively. A cross country comparison of African states also reveals that South

Africa, ranking best in formal banking and finance exclusiveness at 60% and 25% respectively is

still not very encouraging for Africa SMEs capacity building for poverty reduction. And since

finance is the engine of growth, then a lack and exclusion from it hinders SMEs capacity building.

This is a great problem to Africa requiring policy in this direction.

22

Furthermore, objective 3 is met also from the review that the problems facing many poorer

countries (Africa) are different from those confronting OECD economies. Examples of significant

differences include the following:

1) The baseline levels of technology used in the poor country‘s economy — except for occasional

extractive industry sectors — are typically quite low.

2) The absolute size of the local economy is quite small.

3) Consequently, many poor countries have only modest resources to invest in S&T. Even if they

spent 1 percent of GDP on science and technology, this would amount to only several million

dollars per country per year. These pales in comparison to the amounts spent in scientifically

advanced countries or even to the amounts spent each week by a single innovative private

enterprise on R&D activities.

Finally, Objective 4 is also met by the review which suggests that scale effects will have a

major impact on how countries allocate their R&D development budgets. Small countries, with

limited existing R&D capacity and budgets will need to decide whether they should focus on

cutting-edge research or on research designed to support the economy‘s capacity to import and

adapt existing technology. In addition, they will need to decide what capacity can be built internally

and what capacity needs to be built on a regional basis, in partnership with other countries.

Conclusion and Recommendations.

The OECD entrepreneurship model has been studied and suggested to be

appropriated as a capacity building framework for poverty reduction in Africa. It has been

proved by this study also to be a useful framework to be benchmarked by Africa in its

course out of global financial crisis, with respect to its entrepreneurial determinants and

performance with corresponding output in employment generation and job creation. The

results have indicated powerfully that the development and indeed entrepreneurship

performance of the OECD countries looking at their NREN, HDI, level of STI, market

development and competition and R&D technology, entrepreneurial culture and capabilities

23

is encouraging and competitive. With strong GDP of 53% SME contribution, the study can

conclude that this model have proved to be a dependable framework for their development

and could be benchmarked by African States in building and developing their SME

capacities for poverty reduction.

Finally, the study recommends further studies on the model with regards to

statistical data and characteristic of SMEs the model may not apply, and also how

acceptable database for African SMEs can be developed for policy issues as SMEs are

found as the best and most prudent technique for job creation, employment and poverty

reduction in any economy. Other recommendations requiring policy are as follows:

1) Develop baseline science and technology that are vehicles of innovation and creativity

for full blown R&D technology, entrepreneurial cultural tipping points and key success

factors for SME competitiveness.

2) Entrepreneurship SME regulatory and institutional agencies in African states should

attain synergy and goal congruence by coming together with common voice for SME

development since the whole is greater than sum of individual parts acting separately and

independently. In Nigeria, SMEDAN, MAN, NES, NOA, NDE, SMEEIS, BOI, NEXIM

and etc should have goal congruence, develop efficient MSME databases and push same

MSME governance programmes on common grounds thus, removing role conflicts and

multiplicity.

3) Prioritisation on local content of natural endowment factors in developing and adopting

appropriate biotechnologies in agriculture for food security in African States.

4) Promote SME cutting-age technology networks for best practices to enhance and increase

bio-corporate and global business ecosystem and integration of African SMEs to the global

business landscape in this knowledge regime.

24

Appendix 1: World Internet Usage.

INTERNET USAGE STATISTICS

The Internet Big Picture

World Internet Users and Population Stats

WORLD INTERNET USAGE AND POPULATION STATISTICS

World Regions Population

( 2009 Est.) Internet Users

Dec. 31, 2000 Internet Users

Latest Data Penetration

(% Population) Growth

2000-2009 Users %

of Table

Africa 991,002,342 4,514,400 86,217,900 8.7 % 1,809.8 % 4.8 %

Asia 3,808,070,503 114,304,000 764,435,900 20.1 % 568.8 % 42.4 %

Europe 803,850,858 105,096,093 425,773,571 53.0 % 305.1 % 23.6 %

Middle East 202,687,005 3,284,800 58,309,546 28.8 % 1,675.1 % 3.2 %

North America 340,831,831 108,096,800 259,561,000 76.2 % 140.1 % 14.4 %

Latin America/Caribbean 586,662,468 18,068,919 186,922,050 31.9 % 934.5 % 10.4 %

Oceania / Australia 34,700,201 7,620,480 21,110,490 60.8 % 177.0 % 1.2 %

WORLD TOTAL 6,767,805,208 360,985,492 1,802,330,457 26.6 % 399.3 % 100.0 %

Internet Usage Statistics for Africa

( Africa Internet Usage and Population Stats )

INTERNET USERS AND POPULATION STATISTICS FOR AFRICA

AFRICA REGION

Population

(2009 Est.) Pop. %

in World Internet Users,

Latest Data Penetration

(% Population) Use Growth

(2000-2009) % Users

in World

Total for Africa 991,002,342 14.6 % 86,217,900 8.7 % 1,809.8 % 4.8 %

Rest of World 5,776,802,866 85.4 % 1,716,112,557 29.7 % 381.4 % 95.2 %

WORLD TOTAL 6,767,805,208 100.0 % 1,802,330,457 26.6 % 399.3 % 100.0 %

Internet Usage and Population Statistics for Africa are for December 31, 2009. WWW.Internetworldstats.com

25

.

26

Appendix 2: ITU – International Telecommunication Union.

Tables shown are obtained and developed from World Telecommunication/ ICT Development Report 2010, Mid – Term Review.

Table a: Rural Populations covered by a mobile cellular signal, 2008.

Overall mobile cellular

coverage (%)

Rural Population covered (%)

Population covered (millions)

Rural Population not

covered (millions)

Africa 69 52 253 230 Americas 93 73 136 50

Arab States 94 86 115 18 Asia and Pacific 85 76 1720 533

CIS 94 83 83 17 Europe 99 74 159 3 World 86 74 2466 852

Source: ITU, 2010 (Estimated).

Table b: Proportion of household with television, internet access and mobile

cellular penetration by region, 2009.

TV proportion by household (%)

Internet access by household (%)

Global mobile cellular penetration

(%) Africa 28 2.5 31.5

Asia and Pacific 75 16.8 46.4 Arab States 82 14.3 57.6

Americas 95 39.2 81.0 CIS 97 20.8 106.0

Europe 97 58.1 118.6 Source: ITU, 2010 (Estimated).

Table c: Countries with a national research and education network (NREN), by

region, 2010.

Region NREN (%) No NREN (%) CIS 100

Europe 88 12 Asia and Pacific 64 36

Americas 57 43 Arab States 52 48

Africa 33 67 World 62 38

27

Source: ITU, 2010 (Estimated).

Appendix 3: SMEs Access to Finance

Table a: Cross Country Comparison on Financial Exclusiveness across Selected African Countries.

Nigeria Kenya South Africa Tanzania

Formal Banking

21%

20%

60%

9%

Informal only

24%

35%

11%

35% Other Forms of

Sources

2%

8%

4%

2% Financially Excluded

53%

38%

25%

54%

Source: Extrapolated from EFInA 2008 FinScope Survey.

Table b: Percentage of Firms Reporting Access to Finance and Cost of Debt as a Problem.

Country Finance Access Difficulty Cost of Finance

Nigeria (2006)

53

45

Brazil (2003)

60

82

Indonesia (2003)

19

25

South Africa (2003)

10

15

India (2005)

12

15

China (2006)

25

23 Source: Extrapolated from ICA 2008 Survey.

Box 1: Key Access Figures

74 percent of adults (64 million) have never been banked.

· 21 percent of adults (18million) have bank accounts.

· Men have better access to finance; only 15 percent of women currently have bank

accounts.

· 71 percent (9.6 million) of salaried workers vs. 15 percent (4.3 million) of farm employees

are banked.

· 86 percent of rural adults are currently unbanked.

· 80 percent penetration rate of mobile phones presents excellent opportunity for mobile

banking.

Source: FinScope Nigeria 2008 conducted by EFinA.

28

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