Article originally published by The Broker

Authors: Kiza Magendane, Saskia Kloezeman, Yannicke Goris

Following two articles on how diaspora entrepreneurs living in The Netherlands can be supported to set up a business and how they are playing a role in developing knowledge and capacity in their home countries, the following piece shifts perspective: based on an interview with social entrepreneur Saskia Kloezeman, the following will shed light on the opportunities and challenges for diaspora entrepreneurs in their country of origin – in this case, Ethiopia.

Born and raised in The Netherlands, Saskia Kloezeman has been living and working in Ethiopia for over sixteen years and has come to regard herself as a member of the Dutch diaspora in Ethiopia. After a career in the international aid sector, Saskia decided to apply her extensive knowledge of international development and the Ethiopian context elsewhere and became a consultant for business development in East Africa. Based on the conviction that “if there is a healthy environment, business will always create jobs and contribute to sustainable development” Saskia founded North South Consulting. With this initiative, Saskia helps local and international enterprises and investors to set up businesses in East Africa. “This country, Ethiopia,” Saskia notes, “is such a rich country. It doesn’t need aid, it needs jobs.” Through her consultancy work, Saskia is contributing to the creation of decent jobs in Ethiopia. Over the past ten years, she has supported over 200 small and medium enterprises (SMEs) in boosting their businesses and creating jobs for local communities. She has conducted a multitude of impact assessments for international companies, focusing on community engagement and stakeholder analysis (i.e. evaluating how companies can engage more with the local community).

Diaspora to fill in the gap

Based on her engagement with both international companies and local SMEs, Saskia has observed a remarkable discrepancy in the mindset between the two. While international companies tend to focus on boosting profits to increase the value of shares, local entrepreneurs tend to focus on the survival of their business and the social impact it generates. While the local entrepreneur understands that behind an employee there is a whole family who is being supported by him or her, international companies are more ‘distant players’, usually more interested in numbers and revenues. This also applies to job creation; with international companies having a tendency to focus on the number of jobs they create, rather than the quality of those jobs. In Saskia’s experience, in short, local SMEs tend to conduct business in a way that takes social contexts, local wellbeing and cultural values into account – much more so than international companies.

This discrepancy between the local and international entrepreneurial mindset creates a gap that, according to Saskia, could be filled by diaspora entrepreneurs (and professionals). “Yes, Ethiopia and other emerging markets need international investment, but in order to make sure that this international investment leads to decent jobs and sustainable development, we need to engage the diaspora,” she notes. Entrepreneurs of the African diaspora carry within them the right mix between the local mindset and that of international companies, Saskia believes. She describes them as people with ‘international knowledge and a local heart’. “They have experience with the international financial system and know how to access loans or grants. Usually, that is not the case for local entrepreneurs. Yet, diaspora entrepreneurs differ from international companies in the sense that they are much more sensitive to the local environment and communities. This means that they are usually much more interested in creating secure and decent jobs living up to the ILO standards. Different from international companies, diaspora entrepreneurs also have an emotional connection with their home country. In my experience, their decision to go back is not primarily motivated by financial gains, but by their willingness to generate social impact [in their country of origin],” Saskia explains.

Based on their combining of both the ‘international mind and the local heart’, Saskia argues that the added value of diaspora entrepreneurs not only applies to their role as business owners. When they work as employees within international companies that operate in their country of origin, they can play an important role as well. While international companies tend to bring in expatriates when they do not find local employees with the relevant knowledge and skills, these foreign employees do not always understand the local mindset. In Ethiopia for instance, one cultural aspect to be aware of as an employer, is the fact that the motivation of Ethiopian employees is rarely based on money alone. A friendly relationship with their employer is equally important – and hence, and aspect the employer needs to consciously invest in. When such local sensitivities are not recognised or understood by foreign companies, this can lead to clashes and missed opportunities. “There is still a high rate of foreign investment in Ethiopia. Yet, investors often obtain an investment licence without turning that into a business licence, simply because they fail to understand the local context.”

Saskia started her consultancy in order to bridge the gap between the local and international reality. In this process, she has become more convinced that diaspora professionals have an important role to play in helping international companies take better account of the local context and generate more impact with their investments. Diaspora professionals are different from expatriates; not only because it is relatively easy for them to build a connection with the local population, but also because they are especially motivated to contribute to the development of their home country. This local heart is something that international companies can use to their advantage.

Misconceptions and false expectations

While diaspora professionals might be better equipped to navigate between the international environment and the local context than foreign entrepreneurs or investors, mismatches do still occur. In her work in Ethiopia, Saskia has found that members of the diaspora and local communities often have misconceptions about one another, which be particularly challenging. The diaspora professionals tend to have ideas of local entrepreneurship that are embedded in a foreign framework, while local communities tend to overestimate the financial capacity of the diaspora.

The mismatch between local realities and ideas held by members of the African diaspora is manifested in two ways. In the first place, diaspora entrepreneurs often assume that a support system – offered by the government – exists to facilitate their business activities. This is especially the case for diaspora entrepreneurs coming from a country like The Netherlands, where bureaucratic processes are clearly structured. In Ethiopia and other emerging markets, diaspora entrepreneurs should understand that they need to be resilient and inventive if they want to succeed in their business activities.  “If you want to invest in Ethiopia and work with local communities, there is no government body that is going to say: ‘fill out this form and we will take care of the rest.’ It is really up to yourself,” Saskia explains. The second way in which ideas of diaspora entrepreneurs about the local context can cause a problem lies in the area of attitudes and behaviours. Having left their countries of origin many years ago – or never have lived there at all – members of the diaspora have changed significantly compared to the local communities, sometimes without realising it. “And when they come back, they are confronted with old practices that they have unlearned,” Saskia notes. “This leads to frustration, clashes and, in some cases, a decision to not invest. In those cases, the diaspora professional often expected much more from the local workers and family members that they should have.” Some diaspora entrepreneurs have been so disappointed that they decided to return to their home country and never engage themselves again in business activities in their country of origin.

On the side of the local community, there is a persistent image that members of the diaspora have a lot of financial capital and will boost investment both within their families and the local community. This is a misconception that usually comes with a high price. “Despite the relatively wealthy position in comparison to their family [living in the country of origin], not all members of the diaspora have money to invest in their local communities and families,” Saskia explains. In an attempt to meet the expectations of their families however, members of diaspora not seldom exaggerate about their wealth and success. This not only perpetuates the existing misconception about the wealthy position of the diaspora, it also puts individual diaspora professionals and entrepreneurs into a vulnerable financial position. “You have people living here [in Ethiopia] who expect to receive the newest iPhone because they have a family member living in a rich country. To live up to those expectations, you have members of the diaspora who send such expensive gifts back home. […] In reality, these people have very normal jobs.” Saskia continues: “Some local entrepreneurs in Ethiopia make a higher earning than someone who is working in a slaughtering house in the USA or Europe. Yet because of the persisting image and high pressure, diaspora members do everything to please their local community and family members. It makes me sad. I have seen cases where members of the diaspora have taken out a loan to come visit their family in Ethiopia and hold up the illusion that they are very successful abroad.”

To overcome the mismatch between the diaspora and the local community, Saskia underlines the importance of expectation management on both sides. On the side of the diaspora, it is important that they receive proper information about the institutional context and are prepared for the cultural shock after a long period of residing abroad. “[When] we have a member of the Ethiopian diaspora in front of us, what we see is an Ethiopian, but [we forget] their mind is foreign. This means that we have to support them. Not to go back to the ‘Ethiopian mind’, but to create understanding about the differences and how to deal with those effectively. If you want to successfully run your business in Ethiopia, you have to let go what you are doing in Europe and figure out what you have to do here.” Based on her engagement with diaspora entrepreneurs (such as in the ED4D program), Saskia is convinced that the success of diaspora entrepreneurs depends, to a large extend, on their ability to develop resilience against the cultural shocks and adjust themselves to the local context. Thus, preparing diaspora entrepreneurs beforehand about the local challenges is an effective strategy to overcome disappointments and manage expectations. And when they come prepared, they can instigate positive change in the local communities. “Not by forcing people to change, but through leading by example. When they show the way, people tend to follow,” Saskia argues. Similarly, local communities and family members need to understand that being a member of the diaspora does not equal access to endless financial means. By being transparent about the challenges that they face, diaspora can get rid of the high burden they are now often carrying and avoid unreasonable expectations and disappointments from their family members and local communities.

Conditions for success

In addition to managing expectations about their country of origin, members of the diaspora also need to meet certain conditions in order to successfully engage themselves in business activities. In her experience, Saskia found that diaspora entrepreneurs that were successful had the following traits:

• Entrepreneurial spirit

Saskia notes that members of the diaspora should critically evaluate whether they really want to be an entrepreneur. “If you are not an entrepreneur [and do not want to be] in your country of residence, why should you go and set up a business in Ethiopia?” Saskia asks. If members of the diaspora have idealistic goals but lack the entrepreneurial spirit, it would be better to get involved in charity work or support local (business) actors, Saskia advises.

• Create new value

In addition to having the above-mentioned spirit, for diaspora professionals to become successful entrepreneurs they should also create new value and come up with innovative solutions. If they reproduce what local entrepreneurs are already doing, they will likely not succeed because the local actors are more accustomed to the local conditions. “This means that when a diaspora entrepreneur wants to start producing corn, it should not only be about the corn,” Saskia argues. “They should stand out and focus [for example] on the quality. That is the added value.”

• Design a flexible plan

This means that the business plan of diaspora entrepreneurs should be tailored to the Ethiopian context. “It is not like in The Netherlands where you go to the chamber of commerce and become recognised as an entrepreneur the same day,” Saskia explains In the Ethiopian context, entrepreneurs have to go through a long bureaucratic journey in order to meet the legal requirements before getting a business licence. You may need to be operational already before you can get a business license, a process that can take up to four years depending on the sector. To be able to survive these bureaucratic challenges, Saskia points to the importance of having a starting capital and having a sound idea of a customer base. This will help diaspora entrepreneurs overcome the first challenges and disappointments that will inevitably arise along the way as they gradually establish credibility and expand their production.

• Focus

Saskia found that diaspora professionals tend to engage in multiple business activities at the same time. They are inspired by local entrepreneurs who run multiple businesses successfully, but also by the various opportunities that they observe. Yet, making sure that their first business is running before considering opening another one, is the path that will most likely lead to success. Saskia has seen diaspora entrepreneurs fail because they opened multiple businesses without having a clear focus. Mere opportunity is not a sufficient argument for starting a business, she stresses. “In a workshop that we provided for IOM The Netherlands,” Saskia recalls, “one of the diaspora professionals phrased like this: following opportunities without a focus is like swimming in an ocean without any direction. There is opportunity everywhere, but you have to start focusing, otherwise you will not reach the finish line.”

Towards an enabling environment

Over the past decade, Saskia Kloezeman has become increasingly convinced that if diaspora entrepreneurs get the right information on how to adjust their business ideas to the local context in their country of origin, they can play a pivotal role in contributing to sustainable through job creation. She and her colleagues put this conviction to practice in the aforementioned IOM workshop for members of the African diaspora in The Netherlands. “At the end of the training, diaspora entrepreneurs left with a much more realistic business plan. [We] gave them input on the local context and reflected with them on how they could adjust their plans, rethink decisions and determine what factors could impact their investment,” Saskia explains.

In addition to adequate information, Saskia also stresses the importance of support from both the public and the private sector. To harness the potential of the diaspora for development in Ethiopia and other emerging markets, the public sector could, for example, support training programmes that prepare diaspora entrepreneurs for engaging in business activities in their countries of origin. The private sector, in turn, could make more effort to tap into the pool of existing diaspora professionals who want to work in their country of origin. That is why Saskia encourages the Dutch private sector to make it attractive for diaspora entrepreneurs to work for them if they operate in emerging markets. By strategically recruiting and engaging more diaspora professionals in managerial positions in their countries of origin, the private sector can create a foundation through which their business will generate social impact. “There are a lot of people who are educated in the Netherlands who are members of various diaspora communities. I wish that multinationals such as Heineken would recruit more diaspora in the Netherlands and let them work in their countries of origin.  Not only because these members of the diaspora have the necessary skills, but also because they bridge the gap of knowledge between these multinationals and local and cultural context,” Saskia shares. “At the same time, these members of the diaspora can be role models and a source of inspiration. Their presence in the high ranks of international companies can inspire local Ethiopians, showing them that they too can reach such high positions in multinationals.”