Improving African SMEs competitiveness and Performance in the present era of renewed globalization: issues, drivers and prospects

Africa to be the next nest of world economic development and growth

African economies displayed impressive resilience to the covid 19 crisis eruption and ignites fueled hope and great future in the aftermath of post covid 19. The African Development Bank reports a 3.7% rise in real GDP in 2024, placing the continent among the fasted growing economies behind developing Asia[1].

Many specialists and experts, believe and claim the rise up of Africa as the future world nest of economic development and transformation.The UN Trade and Development foresees the continent as the next supply value chain destination in Automobile industry, Health care industry, Renewable energy technologies, Mobile telephones, and Mining industry[2], while countries such as Niger, Senegal, Libya, Rwanda, Côte d’Ivoire, Djibouti, Ethiopia, the Gambia, and Benin, are place among the 20th fast-growing world economies..

17 African countries were already reported and singled out in 2010 by Radelet et Al (2010) as leading the way before the uprise of the COVID 19 global crisis, on matters of economic growth, poverty reduction, infrastructure development, etc[3].

Africa is recognized to be home of 1,211,190,000 inhabitants[4], out of which 60% are less than 25 years old. Africa is also home of numerous vital raw materials for the world economy, including gold (40% of world mines), chromium and platinium (90% of the mines production). It has the larges reserves of cobalt, diamonts, platinium and uranium.

Indications show however that Africa could play an even more outstanding role in the world economy if it was able to take advantage of its demographic dividend, implement effective structural economic transformation to capture part of the raw materials value chain benefits, foster inclusive economic growth, develop rightful productive infrastructure, improves access to health, finance, etc.

SMEs potential role in boosting the African economic growth and driving sustainable development

SMEs are strong engines for growth and inclusive development in many countries where they are the driving forces for industrialisation, innovation, job creation, wealth generation, value chain development and localisation of SDGs achievement. They usually allow the rapid transition from agricultural led economy to industrial led economy.

SMEs are the backbone of all developed countries. Their contribution to the economy is such that they benefit from strong Gouvernment attention and support. In China, SMEs contributes to 40% of GDP, while they represent  99.7% of the firms in the US.

In Africa, SMEs represent 80% of employment in key sectors such agriculture, fishing, mining, technology, manufacturing and services. They are in the heart of the structural economic transformation of Africa and contribute to 50% of GDP[5]. Their role could increase even more with the advent of the African Continental Free Trade Area (AfCFTA), a unified market of 54 countries in Africa and the liberalization of free trade in the continent.

This would however mean that the main challenges facing the SMEs in Africa, like the lack of conducive business environment, the limited access to capacity building, financing and to technology, be addressed to fulfill the hope invested into them.

The majority of the SMEs in Africa are reported to be in the informal sector (Benzing & Chu, 2012). This prevents them with the opportunities to access to funding and scale up their businesses. Governents needs to be aware of removing hindrance on licencing and registration by creating incentives to formalising in a fast tracking and less costly manner.

Signing leaders of The Common Africa Position (CAP) on the 2015 Post Development Agenda, long expressed in 2014 their commitment and willingness to enabling longlasting and impactful structural economic transformation and inclusive growth that would benefit to “decent and productive employment that rapidly reduces inequality; nurtures sustainable social protection programmes; facilitates economic diversification; strengthens resilience to external shocks; and fosters rapid inclusive, resilient and sustainable socio-economic development leading to eradication of poverty”.

Iti is believed that with proper support and attention, SMEs could leverage new ventures, innovations, and lay on their agility and entrepreneuship to boost demand for good, enhance economic opportunies, recruit talented staff and expand. SMEs are the prefered entry point of many youth who seek to turn their inventive ideas and creativy into businesses, through incubation, acceleration and internationalisation.

In many African countries, SMEs though only contribute to 20% to GDP compared to 60% in developed countries (Arinaitwe, 2002). This is due to the lack or limited competitiveness they face with the too many challenges and hurdles that impede or refrain their performance.

Many SMEs die indeed their first year. Adcorp (2014) identified a mortality of five out of seven new businesses in their first year in Africa. SMEs advertly bear in Africa the cost of non conducive business environment, including lack of electricity supply, limited access to financing, poor infrastructures, hostile legal requirements, high custom taxes, corruption, but also poor management, capacity, competencies, asymetric technological information, lack of Government support, etc.,.

More internal capacity building, coherent industrial national strategies and adequate policies, can however reverse the situation and put the SMEs on the lead to put Africa on the map.

Strategies and effective measures to harness the competitiveness of African SMEs to play the leading role

Africa share in the global trade remains a subsequent challenge for its global and regional integration. Despite the recent encouraging dynamics and trends, the Africa share in the global represents less than 3% of $30 trillion, mainly driven by fluctuating commodities.

The desired structural economic transformation propeled by its leaders requires Africans to reimagine and reinvent their global position from raw materials supply to value chain supplier, by transforming locally their raw materials to create value and capture a significant portion of the benefit.

This assumes that conditions be created locally to increase investment capabilities and competitiveness to allow local SMEs to benefit from a level playing field and become market competitors and leaders.

Africa must in that regard attract more Foreigner Direct Investments, facilitate access to technology, promote resilient enterprises and develop its private sector base. Joint venture can be fostered subject to adequate to oncreasing attractivity through state of the art infrastructures, human capital development, property securisation, and access to credit.

Competitivity shall be improved for local SMEs and foreigner enterprises by enabling manufacturing and service compagnies to achieve high quality products and services at low cost. Africa suffers form high interest rate applied by the banking sector, impeding long terme investments. Capital markets must be promoted to help shift from indeptedness economy to capitalistic economy.

Access to Risk Capital prodive an edge to African economies, as money invested is contionned to technical capacity building, corporate governance assistance and institutional strengthening. This usually fills the gaps of capacity observed among the SMEs which benefit form seasoned expertise in planning, management and marketing.

Strengthening the managerial and governance capacity of the SMEs opens rooms for many key improvements including process engineering, quality products and services development, and professional certifications.

Better equipped and capacited, SMEs can tap on opportunity brought out by new technologies to improve productivity, access to global market and yield more revenue and increase market share. They can promote their products and services across the world at low fees and at maximum impact.

Governments shall be aware of the necessity to run continue policy dialogue with the SMEs representative to identify the hurdles and constraints facing the SMEs in their endeavour to put Africa on the map, and ensure that they be in the position to surf on the renewed globalisation spured by the increased surge of technology and revival appetite of FDIs in Africa, in the context of revitalising the global value chain and getting closer to the market and to existing raw materials.

By

Abdoul Anziz Said Attoumane, Economist, Entrepreneur and Financial Expert  

References :

[1] AFRICAN ECONOMIC OUTLOOK 2024

[2] ECONOMIC DEVELOPMENT IN AFRICA REPORT

[3] Emerging Africa : How 17 Countries Are Leading the Way

[4]World Bank Open Data

[5] Ecobank

anziz2004@yahoo.fr

Mr Abdoul Anziz Said Attoumane is an Economist, entrepreneur and Financial Expert. He enjoys 25 years of experience as manager, technical assistant, policy adviser and consultant for financial sector development, SME funding and broad-base economic development. He is a lecturer at the University of Comoros on Banking, Finance, and SMEs creation and development. He presently works with the United Nations Industrial Development Organization as Project Manager in support to coaching and business development of small scale industries in agroprocessing, cosmetics and circular economy, and to Enterprise Support Organizations. He is the CEO of Fahari Development and Consulting Group, a company that aims at creating value in the financial and SMEs sector, and increase financial flow to Comoros, his home country.

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