Samuel Insull was only 14 years old when he got a job with the European office of Thomas Edison in London. After working with Edison for 8 years, he had performed so well that he was transferred to America in 1881, on the recommendation of the company’s chief engineer, to work with Mr. Edison himself.
Back then, the only way to bill people for the electricity they used was by selling bulbs to them and then charging them per bulb. But in 1894, during a visit to Brighton in England, he stumbled on a storekeeper who had invented a meter to measure consumption of electricity and charging based on usage. He immediately identified the potential of the invention and took it back to America. By this time, he had left Edison and was running his own electricity company in Chicago and he used that as a platform to build a business model that we take for granted today – paying for electricity using a meter. He also invented the idea of a regulated monopoly. That is, where a company provides a service to customers from a monopoly position, there is a good case for a regulatory body to act as the referee in that relationship.
The model Mr. Insull invented remains with us till this day almost in the same form, more than 100 years after.
Most Nigerians know what to expect when they hear ‘fund’, especially one backed by the government. Indeed, there is probably a graveyard somewhere where various Nigerian government funds go to die.
Usually, the funds are set up to address a particular problem. Companies or entrepreneurs in that space are then able to access to loans to setup or expand their businesses. Given how eye watering interest rates on loans can be in Nigeria, the loans are usually disbursed at concessionary rates. Nothing is guaranteed in life so all you can do at this point is to hope for the best.
The LSETF has its work cut out to avoid falling into the graveyard of Nigerian funds. It will be hard to meet the demand of everyone who wants to get funding from the LSETF. Given the complicated relationship Nigerians have with ‘government property’, getting them to repay what they borrow (so the funds can be recycled to other users) will be another challenge.
The LSETF is a fund as the name implies. This means it will do all the things people expect it to do including disbursing loans to businesses at concessionary rates. But there is something even more interesting about its mandate – employment.
Given that this is a fund, it is tempting to assume that the main (or only) channel through which it will aid job creation is simply by giving loans to businesses who will then employ people. There is however more than one way to skin a cat as they say.
Consider this quote from a recent book called ‘Made in Africa: Learning to Compete in Industry’
The surveys show that transfers of capabilities are often manifested in terms of spin-offs by former employees of FDI firms and in labour movements from foreign to domestic companies. One-third of of multinationals interviewed for the L2C project reported employees leaving their company to set up local enterprises directly connected to the multinational. These linked domestic entrepreneurs often became either customers of or suppliers to the multinational. Moreover, over one-fourth of these linked domestic firms reported that they hired employees initially trained by multinational companies.
Entrepreneurship is often seen as something people are either born with or they just do. But as the above quote illustrates, employment is also a very important route to entrepreneurship. A lot of businesses have been launched after someone worked in that industry and was able to spot some gaps to fill. Working for someone else also gives you a certain amount of discipline and rigour, as well as confidence, to go out there and try it on your own.
This is the reason for the story of Samuel Insull at the beginning of this piece. A man who began his career as Thomas Edison’s secretary was able to work his way up the company until he spotted a way to fundamentally revolutionize the electricity industry. He did not begin as an entrepreneur but he ended up as one. From his vantage point as an insider in the industry, he had first hand knowledge of all the pain points to the extent that the moment he spotted the meter in a quiet corner of Brighton, he was able to immediately realise its potential.
If I can be presumptuous enough to call myself a friend of the LSETF, I can say that this part of their mandate gives me a lot of reasons to be hopeful for the fund’s success. Beyond giving loans to businesses and would be entrepreneurs, the LSETF will also exercise its mandate to help people become more employable. In this regard, you can think of the LSETF as a matchmaker. What do businesses want in employees? Where are current jobseekers falling short in terms of the skills required by employers? How can the LSETF step in to bridge that gap? This question can be answered in a number of interesting ways.
If we can get more people into decent jobs in extant companies, we can somewhat guarantee a future supply of entrepreneurs who will start their own businesses and repeat the trick. A virtuous cycle can thus be created where today’s employees become tomorrow’s employers.
If you’re looking for work in Lagos but think you could do with some added skills and training to boost your confidence and aid your job search, the LSETF is also for you.
The point of all this is to say that the LSETF is not one thing; it is a number of things with employment as its overarching principle. And in thinking of it as a fund, it should not be thought of as just a disburser of funds. It exists to get people into jobs either by making them more employable or funding businesses to hire them.
Creating the Samuel Insulls of tomorrow is a long game. The current LSETF board will probably be long gone when this strategy starts to bear fruit.
But just because something is difficult does not excuse it from being done. I wish the LSETF all the good fortune in the world.