Part 1: Trust
I recently joined a training program for African diaspora investors, which trains African diasporans to team up, organize their resources, and invest in African startups. The biggest problem all entrepreneurs in and from emerging markets face is the structured or unstructured lack of trust and financial support. Our entrepreneurial ventures are doomed to fail because of these two fundamental commodities: trust and finance.
I emphasize the entrepreneurs from emerging markets because my ventures and those of my African co-entrepreneurs have proven these problems take time to manage. For instance, securing a loan from a local bank can be a daunting task due to the lack of collateral or credit history. A hurdle to overcome, coupled with the fact that an African entrepreneur has to contend with a foreign entrepreneur who enters the African market with trust and access to local governments, protection from their institutions, trust and financial support from their home countries, experienced mentors and a bunch of well-wishers cheering for them.
Trust: the soft currency
It needs to be evident how African entrepreneurs can escape the misfortunes of mistrust. Sub-Saharan Africans are already stigmatized, and sometimes, it seems like an oxymoronic construct in building relationships. Privileged partners can withhold their currency of trust and construct a biased, unconstructive mistrust so that you can come off as untrustworthy. It can be as simple as denying someone the opportunity to take ownership of a project and thereby blaming them for not taking ownership. With that said, let’s look at the other side of the coin; the most significant issue of trust in emerging markets is that there is a lack of institutions that can objectively defend the rights of people, and on the other hand, the consensus is that you can’t trust the people. So, how does one develop a trustworthy relationship as an entrepreneur? How can an investor be sure that the money they are investing in your idea or project will do exactly that and that their returns, if any, will not be denied?
In developed countries, people do not necessarily trust in people but trust in the institutions and customs that they operate in to enforce the laws of contract no matter the status of the position of the parties involved. In our emerging markets, such institutions may exist. Still, they might not function as required or are in the making, so reliance on regulatory supervision, enforcement of the law, and protection from the government is zero or is only reserved for a few with enough resources.
Tarun Khanna, a professor at Harvard Business School, outlines some of the strategies entrepreneurs in emerging economies can employ to build their web of trust in his book Trust: Creating the Foundation for Entrepreneurship in Developing Countries. One of the initial ideas that stood out for me was a quote from Adam Smith’s theory of moral sentiments, which he phrases as follows: “We trust the man who seems willing to trust us.” I have had my share of struggles to build trust with others, and the lesson I have learned from these struggles affirms this idea; I am open to the frankness and openness of others who display the same honesty and transparency. Another idea is that living in a trustworthy society simplifies our daily lives and enables us to collaborate even more to create new possibilities. Living in a society where you can’t entrust your health to physicians, security to security personnel, and defense to regulatory bodies is cumbersome and troublesome. And somewhat to the context of most parts of Africa, we need to do better marketing, and there is enough room for improvement. We will go as far as to admonition upcoming African entrepreneurs to not only develop their web of trust but to demand trust from their communities by first showing that they are trustworthy by being transparent, reliable and displaying a strong sense of purposing collective wellbeing for the communities in which they conduct their businesses.
On the other hand, investors and funders can extend their hand first, giving entrepreneurs from the continent a chance to solve some of their problems. It is much easier to creatively and artistically double up on a local entrepreneur’s idea, organize your financial resources, and send your executioners from your countries who can take systems and methods and turn ideas into profit. However, you could also help these local entrepreneurs succeed by lending them your trust in the first place.
Building trust is undoubtedly a crucial aspect for African entrepreneurs. By being transparent, reliable, and purpose-driven, they can establish a strong sense of trustworthiness within their communities and attract support for their ventures. Furthermore, extending trust and support to local entrepreneurs from investors and funders can also significantly aid in overcoming the challenges they face. Now, let’s explore how investment and funding can further empower African entrepreneurs and contribute to the growth of their ventures.
Africa Thinkers 