Africa is known for its abundant natural as well as human resources. Recent years witnessed an acceleration of economic growth in several African countries. Historically, this growth has always been influenced by certain factors that are not on the continent, such as trade partners from Europe and other parts of the world. They usually prioritise their own interests against the needs of the local communities. This time around, the influencer is the COVID-19 outbreak, which may be of great benefit to the African continent, despite all the negative consequences many of its countries have experienced over the past few months.
The greatest of all benefits could be the ability to uncover the true potential of individual nations and the effective utilisation of their resources to build and grow sustainable companies that contribute significantly to the development of their nations and the African continent as a whole. African businessmen and women now have an opportunity to rely on themselves and partner with each other based on mutual benefits. The young population in most African nations is a key element to establishing a solid base for entrepreneurships in various sectors.
For that to be achieved, technology has to be efficiently harnessed. As an initial response to the outbreak, a large number of mobile applications were introduced in many African countries to educate people about the symptoms, offering them an avenue to self-assess their coronavirus risk category, and offer timely updates about the spread of the virus. At a later stage, more applications came into existence to allow vendors to safely sell and deliver goods and services to customers as movement restrictions were enforced across the continent.
African-owned solutions that are adapted to local conditions and create valuable employment opportunities may be the key to mitigating the pandemic’s economic impact.
Furthermore, more sophisticated technologies are being developed by Africa’s smart and highly motivated youths who have been waiting for such an opportunity to prove their abilities. These innovations could support manufacturing industries that would strengthen Africa’s economy and create long-term sustainable businesses offering stable jobs. Some may question the ability of these businesses to secure funding for their operations without relying on foreign investment, but they fail to understand the essence of the opportunity.
To explain, when investors come to Africa, they usually bring their ideas and expertise with them and the only benefit of the host countries are some employment opportunities. This time, it is different. African talents are now developing new inventions that respond to urgent needs, and when investors see the potential of these projects, they show interest to offer funds. This is one of the most important advantages for African businesses out of this situation. Moving forward, the initiatives taken by African young entrepreneurs must be supported by their governments, both financially and regulatory.
According to a recent survey conducted by the Economic Commission for Africa, jointly with International Economics Consulting Ltd, African businesses are shifting towards new technologies, particularly the development of online platforms for e-commerce. While the current share of e-commerce revenues remains relatively small (16%) due to challenges around internet connectivity, payment gateways and logistics, about half (47%) of the surveyed companies are moving or planning to move towards offering innovative, digital solutions through collaborations and partnerships.
While many global institutions already provide capital, local African sources should play a more significant role in supporting the growth of SMEs.
At the national level, several African governments have created COVID-19 funds to fight the disease and have invited philanthropists and businesses to contribute. While most funds will focus on strengthening health-care systems and providing assistance to their societies’ most vulnerable members, some will be designated for job creation and economic recovery. In addition to ensuring access to start-up capital, governments should create a transparent and reliable regulatory environment that facilitates entrepreneurship and encourages investors.
At the continental level, the current endeavours may strengthen trade relationships between African countries to leverage on the agreement that was signed last year aiming at increasing trade between them which, if implemented successfully, they believe could create a single African market of over a billion consumers. Currently, according to the African Development Bank (ADB), intra-Africa exports amount to only 16.6% of total trade. Although the implementation was postponed due to the advent of the pandemic, among other reasons, it could further enhance Africa’s economy in the near future.
No one can deny that there are a number of challenges that African nations will have to overcome, but the fact that its businesses started to realise that they can make a difference is a cornerstone in the future progression of individual countries and for the continent as a whole. For example, poor communication and a lack of adequate transportation infrastructure between African nations hinder the expansion of intra-African trade. Exported goods may have to cross a number of borders before they finally reach their destination, and this causes additional delays.
While African innovative SMEs are anticipating the short-term outlook on revenues to be severe, they are more optimistic over a longer time horizon.
Another challenge that African businesses were able to deal with, besides delivery of products and services, is the payment methods, which had to be improved to match the changes taking place in the overall business model. This improvement will not only help to facilitate transactions between vendors and their customers within a particular country, but it will also enhance intra-African trade activities. Nigerian online platforms have been leading in this regard such as Paystack, which currently processes over 50% of all web payments in Nigeria, as well as payments for over 60,000 organisations, including FedEx and UPS.
To sum up, the lack of external support has forced many African companies to come up with novel ways of conducting business. A number of effective measures have been adopted by businesses to mitigate the effects of operating in this new environment, such as adopting technology, working remotely and using e-commerce. Generally, while those businesses judge the short-term outlook on revenues to be severe, they are more optimistic over a longer time horizon. We can only wait and see what comes out next and how these innovations will transform the prospects of Africa’s economic growth.