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SSCG – 19 th February 2015 What are key drivers of SME’s in Africa?

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Presentation on theme: "SSCG – 19 th February 2015 What are key drivers of SME’s in Africa?"— Presentation transcript:

1 SSCG – 19 th February 2015 What are key drivers of SME’s in Africa?

2 Africa is growing

3 It is no longer the ‘ forgotten’ continent

4 Investment is being attracted

5 Africa’s trade is diversifying

6 Africa is joining Global Supply Chains

7 What attracts business to Africa

8 Where might UK SME’s look for business in Africa?  Mobile money and banking  Mobile money platforms have made it possible for anyone with a mobile phone to send and receive money, as well as pay for goods and services. Kenya’s M-Pesa service, operated by Safaricom, has been a leader in this field.  Kenya was the birthplace of mobile banking when M-Pesa was introduced in 2007 It transformed the way business is done. M- Pesa can be used for paying taxis, paying duties on import shipments or paying a friend. It also means people carry less cash, which can lead to a reduction in crime – as such it has boosted enterprise and allowed those with little capital base to enter markets

9 The land line was not only service to be bye-passed  Technology is also transforming the traditional banking in Africa. An example of this is in Uganda. Banks are now differentiating themselves through what they can do in terms of automation. They are constantly encouraging electronic banking and incentivising customers to do so.  A similar trend is playing out in Mozambique where more and more people are banking online. The main game- changer in Mozambique has been the higher penetration of mobile and internet, which has been extended to rural areas over the past two years. Mobile is still the main source of connection to the internet and the world.

10 There is more…  Africa is beginning to like on line shopping. According to McKinsey & Company, e-commerce could account for 10% of retail sales in the continent’s largest economies by By comparison, online retail in the US already accounts for around 9% of total retail sales.  The Uganda community is now more versed in online shopping - DHL we are getting numerous requests to transport goods that have been purchased online

11 Education and Training  Greater internet connectivity in Burkina Faso is transforming education – the emerging middle are now accessing online programmes offered by universities and business schools. Rwanda wants to offer similar levels of IT to all school children as that of France by  The Gambia - the continuous growth of technology has changed the education sector by easing access to high-quality knowledge.  Connect Gambia-Vision 2020 initiative by electronics manufacturer RLG that aims to provide a tablet for every Gambian student from primary to university level.  Look on Face Book at E-Learning in Africa

12 Efficiency and market broadening  Technology is allowing companies to operate more efficiently. For example, in The Gambia, local businesses are benefiting from better productivity, networking and cost management – that access to distance learning programmes and domestic based training organisations have introduced.  The majority of Angolan companies are now connected to the internet - this gives local firms access to global opportunities, the ability to work closer with their customers and the use of tools and applications to improve their businesses.  In some cases greater internet connectivity is driving new industries, such as in Mauritius where undersea communications cables have spawned a thriving business process outsourcing (BPO) sector - a well-developed connectivity network, linked to the world through the South Africa Far East and Lower Indian Ocean Network cables. This has enabled Mauritius to develop its ICT

13 Banks are changing their investment focus  It used to be lucrative for banks to target transnational firms, but the transnational firms have been scaling down their operations in Africa especially in manufacturing. It was felt by some that transnationals were very price sensitive and lacked loyalty to banking relationships. Banks today are now focusing more and more on developing relations with indigenous SME’s and/or their external partners.  SME banking has its own challenges such as information asymmetry and lack of, or inadequate, collateral. That’s why institutions such as the AGF(The African Guarantee Fund) has been launched to assist with financial guarantees and capacity development assistance through which banks could devise alternative and suitable credit appraisal techniques for SMEs

14 AGF  ‘ ’Our partnership with banks will help scale up lending activities to SMEs. As the SMEs benefit and grow, they will create job opportunities and foster economic growth in their countries. This will also solve the problem of youth unemployment in Africa.  Whereas foreign investment is increasing in Africa by virtue of the continent having become the next economic frontier, the types of investments we are seeing are of the labour saving technology type and thus with very minimal ability to create jobs. That is why we should encourage our SMEs to benefit from opportunities associated with Africa being the next frontier, through banks leveraging AGF’s facilities in scaling up their operations in the SME space

15 The case of Liberia – despite Ebola  The IFC (International Finance Corporation – World Bank) has worked with Liberia’s Central Bank and other stakeholders to establish secured transaction laws to support the collateral registry, greatly expanding access to finance in Liberia  It also announced it would help establish a collateral registry system in Liberia, which will allow SMEs to obtain loans using movable assets, such as equipment or vehicles, for collateral.  The recent gains made by Liberia’s smaller businesses do not disguise the fact that challenges remain. Access to power and financing remain especially difficult. The country’s skilled workforce is small. For these reasons, IFC and the World Bank will continue to support private sector improvements in Liberia that lead to job creation, increased opportunity, and economic growth

16 Conclusion  Some of the fastest growing economies on the planet in in Africa  A business friendly climate in being promoted  An increasing number of governments are focusing on collateral support, training programmes, whilst multi-national assistance is being offered to build the infrastructure required to support both an increase in domestic business levels and the expected growth in online exports  Yes, it’s in its initial stages but as you will note from the range of countries selected for this brief overview the number of countries now promoting SME’s is growing – fast!

17 For further details  Please contact me on: – Phone – African Research Associates Thank You


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