Universities should lead the battle against poverty through entrepreneurship

Professor Michael Morris (right), leader in the field of Entrepreneurship and Social Innovation at the University of Notre Dame in Indiana in the United States, gave a talk at the Entrepreneurship Development in Higher Education (EDHE) Lekgotla that focused on new ways of thinking about concepts as a way of finding solutions to world problems.

Titled Education, Entrepreneurship and Poverty in the Global Context, his talk formed the first part of the lekgotla's session on Global Entrepreneurship in the Context of the Pandemic.

Regarded as a pioneer in entrepreneurship education, Professor Morris leads the annual Entrepreneurship and Empowerment in South Africa (EESA). A partnership between four US universities and the University of the Western Cape, it is a six-week programme in which American students work with previously disadvantaged entrepreneurs in Cape Town.

Professor Michael Morris

He began his presentation by stressing how important it is to start viewing entrepreneurship as empowerment and transformation, especially in the context of poverty. The conventional definition of entrepreneurship centres on venture creation, recognition of pursuit, and creating value through ways of exploiting opportunity.

In the context of South Africa but also globally, it is critical to think about it differently, he said. This means thinking of entrepreneurship as empowerment, in the sense of creating -- and here he intentionally used the feminine pronoun - her own job, her own identity, her own future wealth, and her own ability to give back; and transformation in the sense that these entrepreneurs are transforming markets, business practices and industries but also transforming themselves, their families and their communities.

It is also important to rethink the concept of poverty; it is not the characteristic of a person but their situation. Twenty-two percent of the world's population lives in poverty, a third of the urban population live in slums, and with COVID-19, poverty rates will go up. Although poverty has decreased in developing countries over the last 20 years, we can now expect a reversal.

He said governments spend trillions of dollars each year on poverty alleviation. Yet poverty rates are still unacceptably high, and the gap between the poor and the rest of society continues to grow.

EESA student with a client
Morris - South Africa
Professor Morris has facilitated empowerment initiatives in the Western Cape long enough to be recognised as an authority in this field.
Here we see him and his visiting students at work with local clients.
EESA students meeting with client
EESA-team and client

It is time to re-imagine new ways of alleviating poverty

He urged a change in the way we think about poverty, which is actually a multi-dimensional phenomenon. He defined poverty as not just a lack of resources. "It's less education. It's much more serious literacy gaps. It's an experience of crime, of high teen birth rates, of single parent households. It's lack of jobs, it's chronic health problems. It's economic discrimination. It's a group of society that are less socially integrated into society and so have more limited networks," he said.

How does this affect low-income people starting a business? He outlined four problems:

  • literacy gaps - not just reading, writing and numeracy but also financial literacy, technological literacy, economic literacy and business literacy;
  • a scarcity mindset - living in a condition of scarcity leads to short-term decision-making: "do I pay the medical bill or the rent this month?" - and being accustomed to short-term decisions makes it seem ridiculous to write a three-year business plan;
  • Intense non-business pressures - trying to start a business while worrying about chronic illness in the family, crime, being kicked out of one's home; and
  • the lack of a safety net – everything is in the business and there's nothing to fall back on.

All this makes it difficult to see the opportunities that many others see, what he referred to as a "much reduced opportunity horizon". This can have a profound effect on someone trying to start a venture, more so when combined with things such as problems accessing entrepreneurial ecosystems (they tend not to serve the poor).

The advantages of entrepreneurial ventures started by low-income people

While some dismiss enterprises started by the poor as being inefficient and unproductive, they have both immediate and long-term benefits because they:

  • serve market niches not being addressed by higher-growth startups or incumbent firms;
  • enhance competition;
  • eventually pay taxes;
  • stabilise neighborhoods; and
  • are immersed in the fabric of the community.

They also provide a valuable developmental experience for the entrepreneur. And in South Africa, these businesses are a huge component of the real Gross Domestic Product, said Prof Morris.

The effect is even broader. "Evidence is emerging that not only does entrepreneurship bring down aggregate poverty rates, but that it directly represents a pathway out of poverty for millions of people around the world," he said.

What do entrepreneurs create?

Although he felt many universities were preoccupied with creating the next Uber or Facebook, rapid growth firms make up less than 1% of startups.

In reality, 85% of startups are survival and lifestyle ventures, that is, aiming to sustain a certain level of lifestyle and income rather than making a profit.

The poor disproportionately start these types of businesses. Then they cannot be competitive because they have low volumes, are buying at retail not wholesale, are labour intensive and don't use technology.

How can universities help?

For Morris, universities have a clear role: "I have a profound belief that universities should be on the front lines of the battle against poverty through entrepreneurship". The SPODER model was a useful way to intervene with the poor through entrepreneurship by breaking down each step of this cycle, where:

  • S = supportive infrastructure;
  • P = preparing entrepreneurs;
  • O = expanding opportunity horizons
  • D = differentiation – finding ways to differentiate their enterprises;
  • E = enhanced economic model so that the business makes money; and
  • R = resource leveraging – finding clever ways when you're not going to get funding from traditional sources.

In the US, universities had started poverty and entrepreneurship programmes in South Bend, Indiana near the University of Notre Dame, and four other cities. The 12-month interventions included mentoring and micro funding. They cost very little and the potential is huge. "Our vision is hundreds of new ventures each year, started by people living in poverty."

Prof Morris invited people to join the Global Partnership for Poverty and Entrepreneurship, an online platform for sharing resources related to venture creation by the poor.

He answered questions after his presentation and later in the session. Dr Therina Theron, Senior Director for Research and Innovation at Stellenbosch, who chaired the session, asked all the questions.

How can transdisciplinary research in a university enhance entrepreneurship and innovation?

Dr Theron based this question on what Prof Ahmed Bawa, CEO of Universities South Africa, had said during the opening session of the lekgotla.

Professor Morris responded that entrepreneurship research is inherently transdisciplinary, and heavily reliant on economics, psychology, sociology, anthropology and engineering.

South Africa needs transdisciplinary research to answer basic questions such as how many survival and how many lifestyle ventures were started in the country in the last 12 months, what are their failure rates, and do they survive longer than conventional businesses because of the resilience of the poor? We don't know these answers and academics tend to look down on this type of research, he said.

How has social innovation changed during the pandemic?

Professor Morris said all adversity tended to give rise to more innovation and the real effect of COVID on the social sphere is still emerging. But what excited him even more than the increase in social innovation is its potential to look for ways to capitalise on market principles to effect change.

Can entrepreneurship be taught?

He said scientists inherently look for things to converge towards some average but in reality entrepreneurs are remarkably diverse. "The characteristics of somebody who starts a survival or lifestyle business, a managed growth business or an aggressive growth business are going to be different," he said.

He added that there is a power of poverty. The poor are inherently resilient, are used to dealing with constant setbacks and overcoming them, and are clever in finding ways to get things done with absent resources.

"They're hungry, and I don't just mean for food, but to get ahead. If we can find ways to channel some of the characteristics of the poverty circumstance, actually parallel what it takes to succeed in entrepreneurship, then we've struck magic,'' he said.

The author, Gillian Anstey, is an independent writer commissioned by Universities South Africa

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