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The world should look to small businesses as the solution to sustainable growth and development in Africa. Several economic analysts and financial sector experts have identified Africa as the next frontier for growth and development.
The continent has the youngest population in the world, with a median age of 18.8 years in 2022 and this, coupled with the fact that several of its markets are nearing maturity, signifies a golden opportunity for businesses to take the lead in stimulating economic growth.
“Powered by this momentum, African small businesses are the key to provide solutions to address some of the continent’s most pressing challenges,” says Matthew Cumming, regional investment manager for East Africa at small and medium-sized enterprises (SME) financier firm, Business Partners Limited.
He believes that Africa’s SME sector is one of the vital cogs with the potential to drive the engine of economic growth and bring about innovation on the continent. “SMEs offer great value in terms of their ability to bring about much-needed socioeconomic transformation and help set Africa up as a serious contender on the global playing field.”
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Cumming says one of the key reasons why the development of the SME sector is vital for the future of the continent include that the sector’s job creation capability is one of its most valuable contributions.
“Small businesses represent far more than a healthy gross domestic product (GDP) as they represent the promise of a viable livelihood. In African countries, where families are typically larger than in other regions, a single job could sustain many people.”
According to the most recent estimates, African small businesses are responsible for up to 80% of jobs across the continent. Considering that Africa’s population is set to double by 2050, to an estimated 2.4 billion, the demand for jobs is imminent.
Cumming says for many Africans, employment at a small business represents a path out of poverty, while for others, who make up the one of the highest constituents of aspiring entrepreneurs, Africa is a chance to make their mark on a growing sector.
He points out that Africa also presents unique solutions to unique problems and the African SME sector offers countless opportunities to solve several unique problems. “Small businesses have become associated with a drive towards innovation, with many becoming thriving hubs for new, creative solutions that can speak directly to the needs of the African populace.”
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In Cairo, the automotive market is dominated by independent dealers who rely heavily on traditional classified advertisements. Recently launched startup, Sylndr has succeeded in simultaneously addressing the demand for second-hand vehicles due to price-sensitivity, as well as the need for a tech-enabled e-commerce car marketplace. Sylndr is a key example of a startup whose impact would simply not be as effective or useful in more developed economic environments.
Tala is another example, Cumming says. Tala is a digital financial services startup based in Kenya that provides a way for the country’s large, under-served population of unbanked individuals to borrow, save and grow their money. In Africa, where greater financial inclusion is a relatively unmet need, businesses like Tala offer an innovation solution to a real problem.
Innovation in Africa is also a sign of global competitiveness and Cumming says examples like these also demonstrate the potential of African entrepreneurs to push innovation on the continent, for the continent. This could play a pivotal role in setting Africa up in the global arena as one of the world’s fastest growing hubs for innovation and creativity.
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Cummings points out that innovation is a driving force of economic growth that is particularly important given Africa’s inherent abundance in agricultural and mineral resources. For the continent to harness its full potential, these natural resources must be translated into shared wealth.
An estimate of the domestic gas market’s growth potential by independent research firm, Brookings, forecasts that by capitalising on several unexplored, high-potential regions, the market could grow by 9% year-on-year over the next two years. By 2025, due to the large, unfulfilled demand for energy, African could use almost 70% of its own gas.
Rooted in the success of its small business sector, a boost for local production could therefore materialise in sustained economic development, which is arguably the continent’s most important goal, Cumming says.
“There has never been a better time for small businesses to rise to the challenge of driving social and economic transformation in Africa. As we stand on the cusp of what will undoubtedly become a history-making era for the continent, we need to do everything we can to encourage foreign and local investment into small businesses as major players in the next step for Africa.”
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