2023-10 Paul Egelser on the need for enterprise incubation

Many people come up with business ideas and use those ideas to start enterprises. The benefits of those businesses that succeed are prosperity for the owner, employment through staffing, innovation, and economic growth. Unfortunately, many new businesses fail, creating poverty for the owner and unemployment for the staff.

There is obviously a need to help businesses succeed, and business incubation is one of the most effective ways to achieve this. In an incubator, small businesses and startups, often owned by people with little or no business skills and experience, are supported until they become sustainable. The incubator does this by providing resources, guidance, and mentorship to help new entrepreneurs succeed.

Incubators also offer services such as business development training, affordable office space, mentorship, and networking opportunities. This helps entrepreneurs develop their business models and understand the complexity of running a business.

Once the businesses mature and the entrepreneurs become more confident, they become attractive prospects for debt and equity finance, and can leave the incubator with confidence, knowing that they have sustainable futures ahead of them. The incubation process also helps such small businesses to develop a market and potential clientele through open days and by assisting them with marketing.

Business incubation is so successful that it is now used around the world to grow businesses, and support entrepreneurship and economic growth. Incubation levels in various countries are different and the entry requirements is usually different depending on the sectors of interest. While incubation in some countries might be for smaller businesses, in other countries big startups could be incubated as a country seeks to develop a particular industry.

In the Namibian context, incubation can play a very important role in developing the economy, by empowering businesses with technical know-how. Firstly, it can create jobs and incomes. Secondly, businesses in incubators can source goods and services from other enterprises and in their turn, sell goods and services onwards. In this way, they are multipliers in the economic environment with significant ripple effects

One of the key points of interest for Namibia is the conversion of informal enterprises into formalized microenterprises, and even SMEs. In a recent statement, Finance Minister Iipumbu Shiimi acknowledged that large enterprises can bring in revenue, but microenterprises are more efficient at job creation.

By nurturing, stabilizing and formalizing informal enterprises, Namibia will sustainably grow its economy.

As small businesses grow, they hire local staff, purchase goods and services from nearby suppliers, and generate income for their community. This, in turn, leads to poverty reduction and improved living for the community.

Microenterprises fulfil a further need. Namibia has thrown its weight behind innovation as a further way to grow the economy. Innovation brings efficiency. It also adds new products and services to the business environment. However, innovation is a high-risk activity, and innovative enterprises run the risk of rapid failure as they try to gain toeholds in the market with acceptance of their activities and ideas. Incubation stabilizes innovative microenterprises and improves their sustainability.

An incubation center provides further opportunity for innovation by allowing microenterprises to introduce ideas to fellow enterprises in the center, as well as refine prototyping. Examining the needs of fellow enterprises also allows innovators to come up with new ideas.

The high failure rate of SMEs, and limited creation of new mass employment by larger enterprises points to the need for more incubators in Namibia.

The lesson to draw from the phenomenal success of incubators is that access to finance and mentoring and coaching are not enough on their own.

Many MSMEs and the broader business fraternity believe access to finance is a challenge, yet there are billions available that cannot find ventures to finance. When businesses empower themselves with technical know-how and convince financiers they know their business then funds will naturally flow to finances their ventures.

By stabilizing the microenterprise environment through incubation, Namibia’s economic growth will be enhanced.

…ends