Diaspora businesses in the U.S. overcome obstacles

By Gregory Simpkins

Over the past 40+ years working on Diaspora issues, I have had the privilege of working with numerous Black-owned businesses and organizations. Many are determined and innovative, having survived daunting challenges. Perhaps the greatest challenge to Diaspora businesses is what former U.S. President George W. Bush referred to as “the soft bigotry of low expectations” that underestimates what Diaspora businesses and organizations are capable of accomplishing. I use the term Diaspora interchangeably with Black to describe not only those Black people born in Africa, the Caribbean or elsewhere, but also descendants of Africa born in North America. We are all the children of Mother Africa, however distant our connections may be at this point.

At a February 2022, Black History Month event, U.S. Treasury Secretary Janet Yellen said: “From Reconstruction to Jim Crow, to the present day, our economy has never worked fairly for Black Americans – or really for any American of color.”

Access to capital and funding

Racially tilted economics have prevented Diaspora families from building the kind of intergenerational wealth that fuels success, including providing for stable home situations, allowing for comprehensive, effective education and facilitating the starting and maintaining of businesses. In one of my first jobs, my supervisor was a young white man whose family purchased for him and his wife the first home in which they lived. I was blessed to inherit my parents’ home after they passed, and the sale helped my wife and I to buy our first house. But how many Diaspora families live in apartments or rent houses they cannot pass on or use for collateral for loans?

Last fall, the U.S. Census Bureau released the 2021 Annual Business Survey (also covering 2020), revealing an estimated 140,918 Black-owned businesses in the country with employees, earning US$141.1 billion in annual receipts and employing 1.3 million workers. Yet, according to a study by the Brookings Institution, Blacks comprise 14.2 percent of the U.S. population, but only own 2.3 percent of all employer firms.

Additionally, the Census Bureau reported that there are nearly 3 million Black-owned businesses without employees. So, there are in total, approximately 3.12 million Black-owned businesses, generating US$206 billion in annual revenues and employing 3.56 million workers. On average, it costs Black entrepreneurs US$5,000 more to start a business than their non-Black peers (US$21,000 versus US$16,000).

So, if family wealth is less of an available resource for aspiring Diaspora businesses, from where will financing of their commercial dreams come? Goldman Sachs’ 10,000 Small Businesses Voices report about Black small business owners also was released recently and reveals that 37 percent had difficulty accessing new capital and financing – 14 percentage points higher than their non-Black peers. And in the past three months of operation being reported, 45 percent said they had to dip into their personal savings to keep their businesses afloat. An Intuit QuickBooks report shows that 57 percent of Black business owners were denied a bank loan at least once when they started their businesses, compared to 37 percent of non-Black business owners.

Bank of America’s 2022 Women and Minority Business Owner Spotlight reveals similar financial challenges for Black business owners – 46 percent say they have faced issues accessing capital and other challenges, including:

• 39 percent not feeling adequately informed about how to apply for capital,
• 38 percent do not have a relationship with a lender and
• 21 percent don’t know where to apply for capital.

To help Diaspora entrepreneurs discover funding opportunities, including equity, loans, and grants, Bank of America and Seneca Women launched the Access to Capital Directory for Black entrepreneurs. This directory includes such sources of finance as:

• Oakland Black Business Fund, a Black-led grantmaking program that provides capital, technical assistance and growth strategy to Black businesses in Oakland, California. The program was incited by disproportionate rates of closure for Black businesses during the COVID-19 pandemic, further demonstrating vulnerabilities caused by the historic lack of access to capital for Black businesses.
• 2045 Ventures, a fund backed by data that shows that diverse founding teams return more capital to investors. Tech industry leadership positions the fund to find high-potential startups and connect them to resources. 2045 Ventures draws on their experience investing in companies that have raised more than US$500 million from top investors.
• 645 Ventures is an institution founded and led by African Americans who celebrate diversity and equal opportunity. While the fund invests across different markets and remains open to a variety of new businesses, it currently focuses on applications of personalized consumer, Software as a Service for the second wave, the engineering value claim revolution and the rise of citizen professionals. As a firm, a key long-term focus over the years has been supporting broad change in the education, mentorship and training of young people, particularly African American youth.

The directory provides numerous other sources of funding for Diaspora businesses.

The Intuit QuickBooks report also showed that “in addition to the pressures of running a business, Black business owners must navigate racism and biases that threaten their success.” According to the report, 79 percent of Black business owners say they have experienced racism from a customer – with 48 percent reporting they had a racist customer interaction at least once in the past year. Most (86 percent) of the Black business owners surveyed believe their businesses are “judged more critically than non-Black businesses.” In addition, the report says Black business owners “feel the impact of racial disparities” every day. So, to avoid negative racial stereotypes, 82 percent say they behave differently in customer and vendor interactions.

But this serves as a motivating factor as 94 percent surveyed said they “are motivated to succeed by a desire to disprove racial stereotypes.”

Overcoming obstacles

During my years working with and for Diaspora businesses and organizations and in the U.S. government legislative and executive branches, I have repeatedly heard encouraging rhetoric about including Diaspora businesses in national and international commerce. However, the words have not reflected the actions these businesses have experienced. I do believe the U.S. government and organizations such as the Corporate Council on Africa and the U.S. Chamber of Commerce would like to see more international trade by Diaspora businesses, for example, but none of these entities seem to know how to fully achieve this goal. Nevertheless, as Diaspora people in America have done for more than 400 years on this continent, these businesses have thrived despite the difficulties they face to become a formidable economic force ready to be unleashed fully on the international scene.

Success in creating and maintaining Diaspora businesses is not a new phenomenon in the United States. More than a century ago, civil rights leader and entrepreneur Booker T. Washington founded the National Business League, the oldest and largest Diaspora business organization in America with more than 120,000 members. The National Black Chamber of Commerce, now 30 years in existence, is the second largest Diaspora trade group in the United States, itself having many thousands of members across the country.

In collaboration with the World Conference of Mayors, these two Diaspora trade groups are hosting the 123rd annual National Black Business Conference in Atlanta, Georgia, from August 23-27 at the Hyatt Regency Atlanta Hotel. There, participants will meet representatives of established businesses as well as new business owners, ranging from traditional business sectors to innovative companies testing the boundaries of commercial activities. These are the survivors and pioneers who have taken Diaspora commerce into the 21st century.

Despite all the obstacles Diaspora companies must overcome to survive and thrive, most of them now in business have confidence in their future. Goldman Sachs reports that 81 percent of Black business owners are optimistic about the financial trajectory of their businesses versus 68 percent of all small businesses, and 67 percent of Black business owners expect to expand their businesses and create new jobs versus 51 percent of all small business owners.

The African Continental Free Trade Area (AfCFTA) offers a grand market for business linkages between African and foreign businesses. The African Growth and Opportunity Act (AGOA), has been the main facilitator of U.S.-Africa trade for nearly a quarter of a century. The U.S. Prosper Africa initiative, created in 2018, long ago envisioned the Diaspora as the vanguard for enhanced U.S.-Africa trade. That view has been confirmed by the African Union, which sent a delegation to the U.S. in 2019 to arrange for meetings between the AU trade personnel to initiate a process of linking African and Diaspora entrepreneurs.

Unfortunately, COVID-19 and its shutdowns of commerce and trade shortly thereafter halted this movement, but travel restrictions have been lifted, and now is the time to renew the longstanding desire for Africa and its Diaspora to work together to mutually build wealth and prosperity. This is a development long overdue but is now just in time for a period in which the world economic order is evolving. Africans have the opportunity to take their rightful place in global commerce alongside the continent’s other descendants.

Gregory Simpkins, a longtime specialist in African policy development, is the Principal of 21st Century Solutions. He consults with organizations on African policy issues generally, especially in relating to the U.S. Government. He also serves as Managing Director for the Morganthau Stirling consulting firm, where he oversees program development and implementation. He further acts as a consultant to the African Merchants Association, where he advises the Association in its efforts to stimulate an increase in trade between several hundred African Diaspora small and medium enterprises and their African partners.