A lot has been said about the Nigerian business environment, yet young courageous entrepreneurs continuously battle with these conditions, as that they keep making great strides despite minimal government support.
Still, this state of things must not continue. If government is truly serious about economic growth, it must ease the conditions in which businesses engage.
Recently, the government of Tunisia demonstrated to other African governments what it means to be really interested in creating an enabling business environment by passing into law the Tunisian Startup Act.
This move by the government of a country trying to revive its economy has been lauded by the tech community all over the world, and rightly so.
What is the Tunisian Startup Act?
The Tunisia Startup Act (PDF in Arabic) as the name suggests, is a law made to ease starting and running of businesses in Tunisia. While the law is not limited to tech startups, the law provides that all new businesses wishing to benefit from the law must be innovative and utilise a great amount of technology.
The law also classifies businesses that can be labelled startups as businesses that can show the following;
- That the company has not existed for eight years or more;
- The number of its employees is not more than 100;
- That more than two-thirds of its shareholders be founders, angel or hedge fund investors;
- Have an innovative business model, preferably technologically-based;
- That its activities significantly contribute to economic growth.
What are the benefits of this law?
This law, if well implemented, will create huge opportunities and ease doing business for entrepreneurs in Tunisia. Some of the major perks provided for by the Act include:
Tax exemption for up to 8 years
Yes! That’s right. Imagine starting a business in Nigeria, with the assurance of exemption from all corporate taxes for 8 years, that would be nice right?
It is important to state here that there is no equivalent of this provision under Nigerian law. Although there are tax relief programmes under Nigerian law, the conditions for granting tax exemptions are neither simple nor conducive to small businesses.
To be candid, most of these exemptions are at the discretion of the President, they are more often than not given on a man-know-man basis.
Exemption from Capital Gain Tax on investment made in startups
Not only are the startups protected, the Tunisian Startup Act attempts to protect the interest of investors in these startups and make investments more attractive.
Salary for up to 3 founders
Now, this is huge! Not because the tax holiday isn’t cool enough, the government will also pay founders of these startups steady salary.
With this in place founders can focus on long term goals, and find freedom to experiment with new products and models. This provision takes founders immediately above the base of Maslow’s pyramid making them able to focus on considerations other than survival.
In Nigeria, some startups have been known to close shop because of the sparse revenue or profit in the early days of business.
Up to a year leave is granted to private or public employees
Many of us have met individuals who have good ideas, but do not want to take the risk, thinking what if the venture fails, “what do I do?” So they hold on to their 9-to-5, abandoning dreams and innovations.
This law guarantees job security, by giving an employee an off period of up to one year, meaning such a person (where for example the business collapses) is still considered a staff of the employer, and may return to employment within that period.
Government assistance and fast-tracking of international patents
This law clearly takes into consideration all aspect of the business, and the Intellectual Property protection is also a priority. Advising Nigerian startups on the legal terrain of Intellectual Property protection in Nigeria is usually a painful experience.
The law also makes provisions for government funding programmes for startups — not just from investors, or venture capitalists, but through government funds and grants.
We need not gainsay the immense benefits of such a law for the growth, creation and sustainability of startups in Nigeria. Nigerian startups have already done a lot with so little.
Yet, we must state that we will not get this type of law in Nigeria by merely wishing it. We also must not leave all in the hands of our representatives in the National Assembly. In fact, it took two years of engagement with stakeholders in the Tunisian startup community before the law was passed.
It was drafted by the International Partnership of Tunisian Startups who campaigned and ensured that their draft became law.
It is time for all startup players in Nigeria to engage the National Assembly to pass into law our own Startup Act, taking into consideration the peculiarities of the Nigerian environment.
Nigerian startups cannot afford to trudge on Rambo-like through the unhealthy conditions they face, ignoring the relevance of government policies to business growth and economic development.
Let us begin to show the government the type of laws and policies we desire for our businesses to thrive, rather than content ourselves with bearing the brunt of old laws and a toxic business environment.
A Nigerian Startup Act is long overdue, we call on all stakeholders to act now.
Listen to a full analysis of the Tunisian Startup Act on the BTLP Podcast.
About the Author
Enyioma Madubuike is a legal consultant with experience in providing support to companies in Africa, Europe and the Middle East. While Team Lead at LEGITNG, he also co-hosts the BTLP Podcast where he discusses issues around business, technology, law, and policy in Nigeria and Africa.
Nigerian startups raised $17.6m in Q1 2019, 8.5% higher than they did in Q1 2018. Find out more in the latest quarterly edition of the Nigerian Startup Funding Report here.