To Achieve The Goals of Agenda 2063, Look to Small Businesses to Make a Big Contribution.

In 2013, the African Union created a strategic framework for what the socio-economic transformation of the African continent should resemble within 50 years. 

As a strategic blueprint, the Agenda is based on seven primary objectives, the first of which I, in my career in asset management of many years, take particular interest in the prosperity created through inclusive growth and sustainable development. 

Ambitious? Absolutely. But if Africa is to achieve prosperity, one significant area of interest that requires closer scrutiny needs to be how institutions invest in enterprises that create wealth with the associated macroeconomic multiplier effect. 

One sector that is largely overlooked is the SMME market. No doubt, it’s the result of the perceived risks associated with small businesses: the lack of collateral, stability, and sophistication on the part of the business owners, as well as a lack of knowledge regarding small enterprises on the part of financial institutions.

Yet, when one looks at the statistics, SMMEs make a hefty contribution to the economies of African nations. In South Africa, for instance, these small and medium-sized enterprises are responsible for over 34% of the national GDP and employ 60% of the national workforce. 

In Kenya, SMMEs contribute 33.8% to that country’s GDP. In Nigeria, the figure grows to 48%. In fact, according to a survey conducted by the Washington DC-based International Finance Corporation (FIC), SMMEs in sub-Saharan countries average between 20 and 50% of the GDP in their respective countries.

The potential benefits of job creation and overall economic development created by SMMEs are massive. 

There is abundant evidence that SMMEs create jobs faster than large enterprises, especially in marginalised communities and economically depressed rural areas. All of this leads to poverty reduction and political stability, inevitably leading to reduced conflicts that have plagued our continent for decades.  

One financial institution at the vanguard of supporting small, medium and micro enterprises is Togo-based Ecobank. Operating in 33 African countries, plus the UK, UAE, France, and China, Ecobank is a pan-African banking conglomerate that serves wholesale and retail clients. 

It’s a bank that first caught my eye in 2012. As the then Chief Investment Officer of the PIC, my colleagues and I recognised Ecobank’s potential to grow into an African champion that would drive growth throughout the continent. This led to the PIC investing in the bank. 

Ecobank has created a particular niche as a bank that assists smaller enterprises by extending credit in myriad ways: loans, grants, overdraft facilities, equity investments, invoice discounting and trade finance. 

The bank has also tailored a range of simplified digital and mobile banking products, making it easier for these businesses to manage their finances better. 

Capacity building is another essential element that Ecobank has brought into the mix. It includes training programmes that develop business owners’ skills and knowledge to grow their enterprises.

The bank’s efforts have also been strengthened through strategic partnerships with several organisations, such as the aforementioned FIC, with complimentary advisory services and financing opportunities for SMEs. 

One of the most exciting developments is an initiative called Ecobank Marketplace, an online platform that connects businesses with potential customers and suppliers. The platform also supports entrepreneurs with various business services, including logistical support, online marketing, and e-commerce. 

From Cape Town to Cairo, Monrovia to Mogadishu, entrepreneurship is lauded with unabashed enthusiasm throughout Africa. According to a survey conducted by Global Entrepreneurship Monitor, sub-Saharan Africa has the world’s largest population of nascent entrepreneurs and social entrepreneurs. As many as 60% of 18- to 34-year-olds believe they have the skills and the knowledge to start a business. However, 90% need capital to get their ventures off the ground.

Moreover, according to the global media company Forbes, it is estimated that as much as 70% of African start-ups lack access to talent and capital to grow their businesses.

In 2021, investment flows into Africa reached a record $83 billion. However, very little of that trickled down to the hundreds of thousands of small, medium, and micro enterprises, which could quickly become the backbone of the continent’s economy. 

To reach the goals in Agenda 2063 for a prosperous Africa through inclusive growth and sustainable development, our financial institutions need to follow Ecobank’s lead. And they can begin by thinking small!