Exploring conditions that enable SMEs to thrive under AfCFTA

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Paper Area/StreamPro-business Sector Public Policy Development
DescriptionThe paper examines SME support interventions started or ongoing in the last two years and how they are helping bridge the gap between the African Continential Free Trade Area (AfCFTA) implementation and SME needs. It also employs a survey of current support needs to evaluate progress, needs and to identify gaps in attention
ObjectiveThe general research is to understand current SME owners’ perceptions, needs, and conditions to factor them into the AfCFTA implementation. The research aims to understand SME support needs and opinions to take advanges of AfCFTA withing the context of maing public and priae) SME Suppor Organisatons more effective forthe purpose
ScopeThe study is descriptive in nature and focused on SME members of the AAE. The research sample is composed of 20 respondents. The primary data gathering used was online questionnaires to determine the validity. This research used opportunistic sampling, otherwise known as convenience sampling. The gathered data were analyzed using frequency distribution and coding.
MetholodologyThe research methodology is stakeholder perception where user needs or preferences (variable) are used to bring to light the areas needing more attention in the implementation of a policy or a business strategy. The variable measures how the SME support interventions (research constant) were helping bridge the gap between the AfCFTA implementation and SME needs for participation. The research can strengthen the activities of SME development support and help promote better conditions for SMEs
AcknowledgementMany thanks to Lisa Samson, Winnifred and Luxuan Xu (members of the AAE Team who facilitated this project) for their contributions.

ABSTRACT

Entrepreneur. The word itself sounds exotic and mysterious. When a person thinks of one, they may think of a person in a far-off land making some kind of deal that will result in a profit. They may never take notice of the small business person in their own community or on their own street trying to do the same, or the individual building a business from nothing somewhere in their own country (Eineman, 2010).

Yet, a modern entrepreneur is more than that. He or she is a risk taker; a person who works, invests, builds, and in essence, creates economic opportunity for themselves and for their employees. In turn, this activity creates jobs, produces tax revenue for the state, produces goods and services for the domestic or international market, stimulates other business activity, and helps develop a country. Governments can’t create prosperity. Non-governmental organizations (NGOs) can’t create prosperity. Entrepreneurs can (Eineman, 2010).

However, this scenario has many problems to overcome. No business person operates in a vacuum. If an entrepreneur is to succeed, capital, markets, trained employees, and a chance for profit are indispensable. They need a business climate that is friendly to their activity. They need schools, roads, a society ruled by law, and a tax policy that doesn’t stifle their activity. This brings to light the role of society in creating and sustaining a favourable business climate for entrepreneurs to thrive.

The African Continental Free Trade Area (AfCFTA) promises an era of free trade encompassing most of Africa. This is an ambitious trade pact to form the world’s largest free trade area by creating a single market for goods and services of almost 1.3 billion people across Africa and deepening the economic integration of Africa. Intra-African trade in the pre-AfCFTA era was characterized by high tariffs and stultifying non-tariff barriers (NTBs). The AfCFTA aims to eliminate over 90% of tariffs. However, the elimination of NTBs will be challenging because of poor development characteristics. Existing barriers encountered by the small business in intra-African trade will not disappear overnight if not comprehensively addressed (Ajibo, 2023).

Understanding the needs of SMEs and factoring them into development policies requires engagement. No matter how well grounded the AfCFTA objectives are, they will remain elusive if this is not encouraged. According to a study by the German Agency for International Cooperationa  (GIZ), SME associations have not been active players in intergovernmental efforts to unify the region through trade under the AfCFTA agreement. A regional study shows that less than 13% of SMEs have knowledge about AfCFTA while the remaining are clueless. The SME sector has been mostly sidelined and have not been endowed the deserved attention. Without the private sector getting deeper knowledge and insight into the AfCFTA, countries will not be able to take full advantage of the free trade agreement.  

SMEs should therefore be at the forefront of AfCFTA if it is to be successfully implemented and beneficial. The participation of SMEs will increase recognition and support for AfCFTA, as well as contribute to its transparency and accountability.

This study examines SME support interventions started or ongoing in the last two years and how they are helping bridge the gap between the AfCFTA implementation and SME needs. Survey results of support needs of SME members of the African Association of Entrepreneurs to participate in AfCFTA attests to this need, evaluates progress made and identifies gaps in attention from Business Support Organizations and other entities. The 20 responses received reflect the question of market/marketing information, which is the most prevalent challenge by a significant margin of 60% of the respondents. The other three challenges, ranked by the number of respondents, are “No website,” “No means to reach customers in other countries,” and “Legal issues or bureaucracy,” accounting for 45%, 40% and 35% of the total respondents, respectively. The least mentioned difficulty is “No means to pay or send payment across borders,” which still represents 25%. This suggests that SME Support Organizations can address the issue of inadequate market/marketing information by taking actions such as developing relevant platforms. Moreover, it underlines the importance of not overlooking any of the other challenges, as even the least mentioned payment issue still affects a significant 25%.

The depth of responses show that, when engaged, SMEs can present a good reflection of what government and SME support organizations can do to improve the conditions that enable SME owners to thrive under AfCFTA.

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cnartey

Permanent Volunteer of Association of African Entrepreneurs. Over 20 years experience in the business development support space.

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