Small business solution for sustainable growth and development in Africa

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The world should look to small businesses as the solution for sustainable growth and development in Africa. Various economic analysts and financial sector experts have identified Africa as the next frontier for growth and development.

The continent has the youngest population in the world, with an average age of 18.8 in 2022, and this, coupled with the fact that several of its markets are about to mature, means a golden opportunity for companies to take the lead in stimulating economic growth.

“Fueled by this momentum, African small businesses hold the key to delivering solutions that address some of the continent’s most pressing challenges,” says Matthew Cumming, regional investment manager for East Africa at small and medium-sized enterprise (SME) finance firm ), Business Partners Limited.

He believes that Africa’s SME sector is one of the vital cogs with the potential to drive the engine of economic growth and spark innovation on the continent. “SMEs offer great value in terms of their ability to deliver much-needed socio-economic transformation and help establish Africa as a serious competitor on the global playing field.”

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Africa can create more jobs

Cumming says that one of the key reasons why the development of the SME sector is vital to the future of the continent is that the job creation capacity of the sector is one of its most valuable contributions.

“Small businesses represent much more than a healthy Gross Domestic Product (GDP), they hold the promise of a viable livelihood. In African countries, where families are often larger than in other regions, a single job could support many people.”

According to the most recent estimates, small African businesses are responsible for up to 80% of jobs across the continent. Considering that the population of Africa will double by 2050, to an estimated 2.4 billion, the demand for jobs is imminent.

Cumming says that for many Africans, employment in a small business represents a pathway out of poverty, while for others, who make up one of the largest components of aspiring entrepreneurs, Africa is an opportunity to make their mark on a growing sector.

He notes that Africa also presents unique solutions to unique problems and the African SME sector offers countless opportunities to solve various unique problems. “Small businesses have been associated with a drive towards innovation, and many have become thriving hubs for new and creative solutions that can directly respond to the needs of the African population.”

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Local solutions for local problems

In Cairo, the auto market is dominated by independent dealers who rely heavily on traditional classified ads. The recently launched startup, Sylndr, has managed to simultaneously address the demand for pre-owned vehicles due to price sensitivity, as well as the need for a technology-enabled e-commerce car marketplace. Sylndr is a prime example of a startup whose impact simply wouldn’t be as effective or useful in more developed economic environments.

Tala is another example, Cumming says. Tala is a Kenya-based digital financial services startup providing a way for the country’s large underserved population of the unbanked to borrow, save and grow their money. In Africa, where greater financial inclusion is a relatively unmet need, companies like Tala offer an innovative solution to a real problem.

Innovation in Africa is also a sign of global competitiveness, and Cumming says examples like these also demonstrate the potential for African entrepreneurs to drive innovation on the continent, for the continent. This could play a pivotal role in establishing Africa on the world stage as one of the world’s fastest growing centers of innovation and creativity.

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Innovation can save Africa

Cummings points out that innovation is a driving force of economic growth that is particularly important given Africa’s inherent abundance of agricultural and mineral resources. For the continent to take advantage of its full potential, these natural resources must be translated into shared wealth.

An estimate of the growth potential of the domestic gas market by independent research firm Brookings forecasts that by capitalizing on several high-potential untapped regions, the market could grow 9% a year over the next two years. By 2025, due to huge unmet demand for energy, African could use almost 70% of its own gas.

Rooted in the success of its small-business sector, a boost to local production could translate into sustained economic development, possibly the continent’s most important goal, Cumming says.

“There has never been a better time for small businesses to rise to the challenge of driving social and economic transformation in Africa. As we stand on the cusp of what will undoubtedly become a historic era for the continent, we must do everything we can to encourage foreign and local investment in small businesses as major players in the next step for Africa.”