Covid- 19: A Call For Support For African SMEs

Covid- 19: A Call For Support For African SMEs

In the wake of the Coronavirus (COVID-19), Africa finds itself at the precipice of an economic crisis. At the sharp end of the pandemic lie the African SMEs who are in danger of extinction. Swift action is required now to aid our entrepreneurs to survive this threat.

In these uncertain times, it is vital for the African entrepreneurship ecosystem to come together. If all the players within the ecosystem perform their respective roles, we can mitigate and reduce the economic effects of this crisis on the African entrepreneurs. They are the future of our economy.

I myself will be using the platforms at my disposal to start conversations surrounding the economic effects of the COVID-19 on the African entrepreneurship ecosystem and to curate and share solutions and interventions for African SMEs to keep their businesses thriving in these times.

This call is to:

  • Share individual African SME Stories highlighting the effects and possible solutions being created across the continent and around the world.
  • Curate and share solutions and interventions for African SMEs in form of Support Packages, Finance & Funding, Trainings and Digital Capacity Building to keep their businesses thriving in these times.
  • Enable African entrepreneurs to engage with their respective governments for support to develop mission critical products and services for Africa’s fight against this pandemic and beyond.
  • Connect African entrepreneurs and the African entrepreneurship ecosystem to Africa’s international development partners on ways in which they can continue to support African SMEs and the African entrepreneurship ecosystem through this crisis.

Africa occupies a unique position in the global economic market. In recent op-ed in the Financial Times, Ethiopia’s PM Abiy Ahmed writes,

“fragile and vulnerable at the best of times, African economies are staring at an abyss”. The economic effects of coronavirus in Africa will be immense. If the virus is not defeated in Africa, it will only bounce back to the rest of the world”.

The Prime Minister further appeal to G20 for an emergency package worth $150 billion saying,

“To boost health spending, shore up foreign reserves and patch up social safety nets. He has called on the World Bank’s investment arm to tide over African companies hit by disruptions to global supply chains, for IMF to increase its lending to poor countries and for existing debt to be rolled over or forgiven.” (Source:  The Economist).

It was inspiring to read this call for action from the African Head of State.

Preliminary Steps African SMEs Should Take: A number of dynamic/high-growth business like Jumia and CCHUB in Africa are already making the necessary changes required to survive COVID-19 (Source: TechCrunch).

The purpose of this call to action is to inform and educate the Small and Medium Business and Social Enterprises (SMEs) in Africa who are at a higher risk of succumbing to this crisis.

A global challenge like this is riddled with uncertainty and as such, it will be difficult to come up with permanent solutions that can cater to every sector. However, here are some preliminary steps and stands that African SMEs need to take.

Adaptability

The global market is in a state of flux and this instability is going to affect African SMEs greatly. As such, small and medium business owners must be prepared to pivot and make necessary changes and concessions.

These changes will vary largely from sector to sector; however, it is generally advisable for SMEs to approach more digitized ways of doing business. For example, a drone company can supply medicine; a fashion designer pivot to producing protective clothing; businesses that do not have an online trading platform should actively work on creating one or join existing platforms; other might have to let go of some stuff while for some businesses, a partial or total pivot in sector and business model might be required to survive this crisis.

No matter the ways that these needs manifest themselves, it is important for business owners to be informed and to be open to change.

Communication

SMEs will need to improve on their communication management strategies— both internally and externally. For in house staff, platforms like WhatsApp, Telegram and Slack are ideal for daily running of businesses. However, it is also important for SMEs to communicate with their external stakeholders, clients and other businesses within their respective sectors.

Collaboration & Networking

Building on the importance of communication, collaboration and networking has never been more vital. It is important for all African SMEs to identify the weaknesses in their business models and operational systems and to find ways to mitigate them. One of such ways will be to collaborate with other businesses that are strong in areas that you are weak. Whether it is via mergers, legal partnerships/contracts or skill exchange; these steps are vital to the survival of African SMEs in these times and cannot be overemphasized.

Background

Isolation, Lockdowns, Quarantines & Travel Bans: This is even more of a devastating reality for African SMEs who require interaction with a physical marketplace to trade, manufacture/sell products and offer services. In a bid to control and contain the spread of this global pandemic, most African counties are on lockdown. While the various measures being put in place are beneficial to global health, they are detrimental to businesses.

The Supply Chain: The effect on the supply chain is already affecting advanced countries in North America and Europe and have begun to affect the African continent.

China is the largest manufacturing country in the world, responsible for 28% of the global manufacturing output as at 2018 (Source: Statista). With specializations like Clothing, Electrical Machinery, Automobile Parts, Furniture and Lighting—to name a few—a shutdown in mass production has caused a ripple effect across all economic sectors. This means two major things for Africa:

  • China’s demand for Africa’s raw materials and commodities has declined drastically.
  • Africa’s access to industrial components and manufactured goods from China has also dropped.

The Coronavirus (COVID-19) has shaken the world to its very core. Globally, the human race has not dealt with an epidemic close to this one in terms of scale since the SARS outbreak 2002-2003. However, while the SARS outbreak infected over 8,000 people and raged for about 9 months; COVID-19 has already infected over 10 times that number in less time.

No health crisis of this magnitude ever exists as an isolated incident. According to Bloomberg, the Economist stated that the 2003 SARS epidemic cost the global economy about $40 billion dollars and COVID-19 is already estimated to cost at least four times more than that.

This means that as much as COVID-19 is a global health crisis, it has spiraled into a global economic crisis that has the potential to cripple the economy of nations if the right steps are not taken.

Now more than ever, Africa must harness its young demographic asset, its young entrepreneurs to develop home grown solutions to respond the pandemic and beyond. By 2050 Africa’s young population, i.e., those aged between 0 and 24 years old, will increase by nearly 50 percent and over 450 million young people are expected to enter the labor market by 2050.

Consumer expenditure is a foundational backbone to the growth of any economy and it’s directly affected by consumer income. What this means is that, when income reduces, consumer expenditure also reduces and this in turn damages the economy. Consumer expenditure on the continent has grown at a compound annual rate of 3.9 percent since 2010 and reached $1.4 trillion in 2015. This figure was expected to reach $2.1 trillion by 2025, and $2.5 trillion by 2030.

To close, I implore you to ruminate on one final quote from Ethiopia’s Prime Minister Abiy Ahmed “If COVID-19 is not beaten in Africa it will return to haunt us all”.

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