Africa's thirst for knowledge
Peter Van der Merwe
Published: 01-APR-04

Don't ask an African about the relevance of business schools in today's economy. On a continent where freedom, and free markets, are the keys to development and democracy, developing business skills in Africa, for Africa, is being pursued with an almost messianic fervour.Peter Van der Merwe speaks to Proffessor Adele Thomas.

It's all part of the Nepad-inspired drive towards making the continent competitive in the global economy - and the business schools themselves are coming to the party in a significant way.

Over the past few years, most major business schools in South Africa - and indeed, the African continent - have been reinventing themselves, becoming more customer-oriented and better connected to their business communities. Their curricula have become more relevant, their faculties less isolated.

Will this new-found relevance continue? The answer, says Wits Business School director Professor Adele Thomas, lies in the vital importance of close ties and an accountability relationship between business schools and their business communities.

"Business training, whoever delivers it and however it's done, is an issue that affects all of us," says Prof Thomas. "It's a vital part of creating a broader African prosperity. How do we learn if we want to make our classrooms relevant? That's the question we're continually asking ourselves."

If running a traditional business is like conducting an orchestra, this process of ongoing self-appraisal being undertaken by South Africa's top business schools is more akin to leading a jazz band: dynamic, vibrant and ready to change tack quickly to suit the mood of the audience.

There is certainly no question that the continent needs business skills for now. Writing in Johannesburg's Business Day newspaper earlier this year, John Orford and Eric Wood highlighted the results of the latest Global Entrepreneurship Monitor (GEM), which showed a disturbing drop in new business formation in South Africa in the past year.

According to the research, South Africa's rate of new business formation fell last year, which means the country has lost considerable ground in the global rankings of entrepreneurial activity. And if the trend is this clear in the continent's biggest economy, it is not an encouraging portent for other developing countries in Africa.

The survey is an annual study that involved 31 countries last year. South Africa has taken part in the research for three years, making it possible to chart the country's declining entrepreneurial fortunes. This decline is most evident when one looks at the country's rate of total entrepreneurial activity, which estimates the percentage of adults involved in starting and operating businesses up to 42 months old. In 2001, South Africa's total entrepreneurial activity was 9,5 percent In 2002 it slipped to 6,5 percent and last year it reached a record low of 4,3 percent.

This could spell trouble for economic growth prospects in the years ahead, for several reasons. For one, new firms have a significant capacity to generate employment. On average, said Orford and Wood, new firms in SA employed 3,1 people according to the survey data for last year.

"This suggests that doubling or even tripling new firm rates could have a major influence on employment creation. From this perspective alone it would seem to be important to encourage entrepreneurial activity," wrote Orford and Wood.

Part of the problem is that South Africa's low total entrepreneurial activity is not offset by relatively higher rates of entrepreneurship among established firms. Not only are fewer South Africans involved in new business formation, but it now appears that the population of established businesses is less likely to be innovative and growth oriented.

"The combination of these two factors has negative implications for economic growth and employment creation," warn Orford and Wood. "It may well be part of the explanation of why SA has historically had lower rates of economic growth than many developing countries."

Accepting that entrepreneurship is an important factor in economic growth, the next challenge is to figure out how to turn the situation around. The clear implication for policy is that much greater attention must be paid to building a foundation for an entrepreneurial society.

GEM research has identified two priorities. First, changes in the school education system are required to raise entrepreneurial awareness and create a good grounding in basic financial and business skills. Second, effective training in specific financial administration skills is required on a fairly large scale among existing entrepreneurs.

Enter the business schools, where, says Prof Thomas, there has been much development in this area over the past two years. The Wits Business School, for one, is running joint programmes with its illustrious Harvard counterpart as part of a greater thrust into Africa.

This greater awareness of the need for business training has even seen non-profit organisations like Planned Parenthood running corporate governance workshops for its staff in Ghana and South Africa. Walk through the leafy Parktown campus of the WBS, and you'll be struck by the diversity of the student body, with a variety of African countries well represented.

Prof Thomas is far too polite to roll her eyes at when asked whether an MBA is still relevant in today's business environment, particularly within the African context. The one subtext of the question is whether its cost justifies its benefits. But the fact is that while much focus is put on the high profile MBA, the deeper issues of relevance are applicable to all business schools, degree programs, and their constituents.

In a challenging environment, the question still remains: what is the essence of a high value business school education? "The broader challenge is to get Africa to compete," says Prof Thomas. "Nepad is all about moving from the ideological to the practical, and developing a sense of unity in Africa. Unity's great, but there has to be something behind that: we must get people to notice the African continent, particularly against a backdrop of other developing continents also becoming more competitive."

In South Africa, certainly, there has been a concerted drive by the higher education quality committee to reaccredit all MBA programmes in a rapidly expanding marketplace which was starting to see a diluting of the MBA brand. Employers, too, are becoming more intent on asking candidates where they got their degree before throwing golden handcuffs at them.

More than relevance, though, an issue which is currently threatening to dominate the African business debate is the old chestnut of corruption and poor governance. Prof Thomas believes we have only seen the tip of the iceberg, which leaves governments across the continent with huge challenges.

"We're seeing more and more research that shows how investors are paying a premium to invest in well-governed companies," says Prof Thomas. "The issue of sustainability and capacity-building are critical here. Given the twin problems of poverty and a poor economy, how do we effect something that causes growth and not dependency?"

It's not as if there's no guidance available. South Africa's own King II code on corporate governance is widely regarded as among the best in the world, but developing a culture of governance and integrity in an organisation is more difficult than circulating a few copies of King II.

Prof Thomas thinks more companies should subject themselves to a through governance review. It was one of the first things she did when taking the reins at the WBS, and setting an example in areas like leadership, ethics and governance remains one of the cornerstones of her tenure.

"The review taught us important lessons - but we were reminded of much that we already knew. We must account reliably, understand our customers, produce enough of what they want at prices they are willing to pay. We must manage risk wisely, lead inspiringly, innovatively, strategically, ethically. We must study and use technology to gain competitive advantage. We must build credible knowledge. There is still much business schools have to teach and much for our students to learn from us," says Prof Thomas.

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