- Inflation and high prices are the main factors negatively impacting the businesses of Micro,Small and Medium Enterprises (MSMEs) in Africa according to the latest data from GeoPoll.
- The report indicates that the next biggest impacts include lingering effects of the pandemic.
- To cope with the impacts of inflation, 36 percent of businesses owners had to chip in their personal savings to support their business.
Inflation and high prices are the main factors negatively impacting the businesses of Micro, Small and Medium Enterprises (MSMEs) in Africa according to the latest data from GeoPoll.
The data dubbed Africa MSME Pulse Survey conducted in partnership with Africa 118 and The African Talent Company indicates that the next biggest impacts include lingering effects of the pandemic, rising exchange rates and political uncertainty. However, in Ethiopia, the tension in Tigray is creating political uncertainty more than any other factor.
“To cope with the impacts of inflation, 36 percent of business owners had to chip in their personal savings to support their business, while 32 percent reduced business activity. Almost 1 in 4 (23 percent) tried to make ends meet by reducing employees or cutting wages,” the report states.
The largest segment of businesses are financed solely through the founders’ own funds (41 percent), with some additional funds from family and friends (29 percent). Eleven percent of businesses say they have received bank loans and 7 percent have received government funds.
“Digging into individual countries, Ethiopia seems more communal, with the majority (62%) saying family and friends funded them. Bank loans do not look like a popular source of business funds generally. Kenya has the highest percentage (27%) that say they have received a bank loan at some point in running their business,” the report explains.
Access to formal credit for small businesses remains a challenge, with only Kenya having a sizeable number of businesses that have accessed bank loans (26 percent) and organized savings co-operations – SACCOs (24%). For the most part, businesses rely on friends and family for informal loans. Twenty-three percent overall say they have been denied a loan in the past. That figure rises to 34 percent in Nigeria. Of course, many that say they have not been denied a loan, may not have asked for a loan in the first place.
MSMEs in Africa continue to expand their use of technology, with 62% saying their reliance on technology and online tools has increased in the past two years. There is a decent usage in mobile phone apps for business functions, primarily for marketing/advertising, finance eCommerce, and operations.
“Many MSMEs have identified the opportunity in taking their business online. More than 1 in 4 say they plan to invest in e-commerce and/or their website in the next few months, while another 18% plan to invest in hardware.
Overall, the largest segment of small businesses (45%) is using SaaS products in some way or form, particularly in accounting and website services. The biggest barriers to SaaS adoption remain the high cost of license fees, limited local support, and limited setup knowledge,” the report reads.
Overall, 1 in 4 businesses (24 percent) say it is difficult to find qualified staff. Ethiopian businesses consider it the most challenging, with more half (52 percent) finding it “very difficult.” The largest segments in Nigeria (28 percent), Kenya (24 percent) and South Africa (24 percent) find it “easy.”
Looking ahead, outlook is guarded, with more than a third of businesses (34 percent) saying they are neither optimistic nor pessimistic about conditions improving in the next three months. Despite battling some of the highest inflation rates in the world, businesses in South Africa (43 percent) and Nigeria (31 percent) stand out for being primarily “extremely optimistic” about the situation improving.
