Africa is a continent with vast opportunities. From a continent once described in 2001 by the Economist magazine as a “dark continent” Africa has progressed tremendously to the point where the same economist magazine in 2011 issued a retraction of its words and instead described Africa as “lions on the move.” During this time the continent had experienced unprecedented growth overall.
By 2017 the African economy had tripled in size from where it was in 2000. African countries consistently documented the list of the world’s fastest-growing economies.
The COVID-19 pandemic of 2020 slowed down this pace of growth, with most countries slipping into recession due to the impact of the health crises and the lockdowns. However the rate of slow down in Africa is far less than most other countries, and it’s believed that by 2021, growth will pick up again.
At this rate, it is believed that by 2035, Sub-Saharan Africa will be the main source of new entrants into the global workforce. In essence, Africa is the new China.
Africa continued to grow even in the midst of the global recession. This growth can be attributed to mainly its small and medium enterprises (SME). These SMEs creating about 80% of employment on the continent, which results in the establishing of a new and growing middle class on the continent, fuelling demand for goods and services.
However one of the biggest challenges facing African SMEs is access to funding. Over the last decade, there has been an upsurge in microfinance lending to African micro-enterprises. However, it has mostly been observed that micro-enterprises solve the basic problem of poverty alleviation, but are unable to empower the creation of enterprises with growth potential.
Micro enterprises provide a means of income for the individual beneficiary, who runs a micro business. Such enterprises lack growth capacity and do not create more than one job in most cases.
SME’s on the other hand are able to grow and create jobs.
Where micro-companies meet several assisting financial measures, there seems to exist a lack of instruments supporting the more established, yet still vulnerable SMEs. This phenomenon has been labeled the missing middle. Lack of SME funding means a continent unable to achieve its growth requirements as SMEs are the key potential driver of growth.
Thus funding for SMEs is crucial for the development of the economy of the continent.
In addition, SME owners need empowerment in developing the skills required to successfully grow a business. Funding models need to be unique.
Investors, funders, and business developers need to think out of the box to find more solutions that can bypass the typically high costs of such operations.
These models need to be harnessed to church out millions of successful business enterprises, reducing failure rates, increasing the rates of growth and stability.
The growth of successful SMEs in Africa offers a multi-trillion-dollar opportunity. With the right systems in place, African business owners and their local and global business partners are in for a tremendous rise which will lead to meeting growth requirements to eradicate poverty and in the process creating tremendous volumes of wealth for all invested parties.
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