Covid-19 has hit small businesses hardest and around the world, many are either still struggling or they have already shut down almost two years after the pandemic started.
The pandemic has caused large-scale loss of life and severe human suffering globally and as the largest public health crisis in our time, the pandemic has also generated a major economic crisis. 2020 saw a halt in production in affected countries, a collapse in consumption and confidence, and stock exchanges responding negatively to heightened uncertainties.
In Africa, things are no different and despite the hit by the pandemic, a June 2021 African Development Bank (AfDB) White Paper, Entrepreneurship and Free Trade: Africa’s Catalysts for a New Era of Economic Prosperity, states that entrepreneurship must be at the heart of efforts to transform Africa’s economic prospects.
The Covid-19 crisis has triggered shifts that open up prospects for enhancing resilience and economic growth on the continent. And as African economies begin rebounding from the crisis, the continent stands at an inflection point. A number of trends that could bring about more inclusive economic growth are beginning to take hold, according to the report. These include digitalization and the emergence of business opportunities linked to greening economies.
With this in mind, the right interventions now could open the door for the continent’s young and dynamic entrepreneurs and help build linkages with the large firms that are the key drivers of supply chains to create jobs and revenues to help scale-up businesses.
Entrepreneurship and free trade
Many of Africa’s current development challenges will transform into bankable business opportunities for youth and women and which they can capitalize on over the next decade.
Among the key drivers in this process are climate change, digitalization of the economy, and the greening of the economy. Coupled with a growing consumer market, a pandemic-induced recognition by policymakers will strengthen the continent’s resilience and generate greater value-addition.
With the African Continental Free Trade Area (AfCFTA), African entrepreneurs have a great opportunity to increase the total available market for their ventures. This, in turn, strengthens their business case to investors concerning revenue growth and profit forecasts. The complexities of navigating the local business environment present a first-mover advantage for African entrepreneurs in this context, according to the White Paper.
What is undoubtable is that Africa’s entrepreneurial landscape is rich.
Some of the continent’s wealthiest individuals have generated their wealth as trailblazing entrepreneurs in highly successful family businesses. The entrepreneurs who have walked the narrow path of integrity in their investments have paved the way for future African entrepreneurs.
In many instances, they are also actively investing in the next generation of African talent.
What remains factual is that small scale entrepreneurs and businesses form the backbone of most economic activity across the continent.
The Alliance for Entrepreneurship in Africa is positioning itself to tap into the entrepreneur landscape. In this case, the Alliance will mobilize financial and technical resources from partners to develop Africa’s private sector, with a focus on micro, small and medium enterprises.
In addition, there will be coordination for more effective financial and non-financial support to young entrepreneurs through African youth entrepreneurship investment banks.
Intelligence, creativity, knowledge and technological skills of young entrepreneurs will be central to harnessing the Fourth Industrial Revolution (4IR) in and for Africa for the first time to meet the continent’s development objectives of a sustainable and more equal future.
Africa has nearly 650 tech hubs which include accelerators, incubators, university-linked start-up support labs, maker parks, and even co-working sites.
While Egypt, Nigeria, Kenya and South Africa account for more than a third of these, most countries and regions have tech hubs in one form or another.
The hubs are on the supply side of investment in entrepreneurial activity across Africa and while this represents great progress, a more robust ecosystem and network must evolve to reach smaller, less developed economies.
On the demand side, entrepreneurs and investors may need to scale back expectations in terms of financing and revenue. By adjusting expectations, the paper notes that there is a better chance of increasing the roll-out of ecosystem development and for more start-ups to access financing through stages that would have been inconceivable before 2015.
The African landscape will experience transformative change even though it will not occur overnight. Systems, digital connectivity and infrastructure, together with improved human capital and access to services, will be critical for success and sustainability since innovation and digital apps alone will not lead Africans to wealth and stability.
While most of the technology that is needed to leapfrog Africa is available, the ecosystems to support African entrepreneurs—particularly small and medium firms—must be tailored to the African context.
This means that stakeholders should work with entrepreneurs along the entire growth path, rather than through a fragmented approach.
As mentioned earlier, trade can be another catalyst for entrepreneurship especially with the AfCFTA becoming operational in early 2021.
For the entrepreneurs, the AfCFTA will work if they will forge new value chains and exploit opportunities to scale up via increased trade in regional markets.
While the final terms of the trade agreement will be negotiated over the coming decade, stakeholders need to take proactive steps now to advance intra-African trade and private sector involvement. Some of these steps include accelerating support for innovation hubs; partnerships with business associations to support trade-enabling information platforms; and automated one-stop border processing.
Since integration, connectivity, information dissemination, and scale are important to trade, stakeholders have to ensure that they are working to streamline operations along with these factors.
As it is, intra-African trade remains low, at about 14-16 per cent.
The AfCFTA, however, is expected to alter these traditional patterns as tariff and non-tariff barriers come down in the next three years, and as operational efficiency increases. Prior to the FTA, the trade blocs have generally enabled trade and investment growth contributing to GDP and income growth.
To make the case for SMEs, an ILO SCORE Programme survey indicates that micro-, small, and medium-sized enterprises (MSMEs) matter more now than ever. These economic enablers cannot be ignored and solutions are needed to support them in order to survive and continue contributing to the African economy.