By Saul Molobi
In a recent address, Mr Kizito Okechukwu, executive head of 22 on Sloan, highlighted the vital role that startups and small and medium enterprises (SMEs) play in Africa’s economy and workforce development. Speaking at a summit attended by dignitaries, government officials, and key industry players, Okechukwu underscored both the challenges and the immense potential within the continent’s startup landscape.
“SMEs are the foundation of Africa’s economy,” Okechukwu stated, citing that around 90% of businesses in Africa are SMEs, with 70% operating informally. “About 40% of the workforce across the continent relies on these small enterprises for employment,” he added. Despite their critical role, these businesses often lack the resources needed to scale and thrive.
Okechukwu shared insights on the recent downturn in investment, noting a decline in funding for African startups from $6.5 billion in 2022 to $4.1 billion in the current year – a drop of nearly 30%. He attributed this partly to a shortage of “investable startups” in the ecosystem. “There is too much capital chasing too few deals, which inflates valuations and puts undue pressure on these startups,” he explained. This funding mismatch, he added, often leads to the underperformance of investment portfolios, raising concerns about the sustainability of Africa’s emerging businesses.
He also pointed to a cultural aspect often overlooked in discussions about business survival rates. “Startups exist to fail, that’s part of their DNA,” Okechukwu said, referencing a piece by Paul Graham, co-founder of Y Combinator. “The question is not if startups are likely to fail but whether we have the antidotes – support structures, mentors, and centres of excellence – to prevent as many failures as possible.”
One solution lies in creating a robust support ecosystem. “We need capacity-building programs, early-stage funding, and access to market opportunities,” Okechukwu emphasised . “It’s also about integrating these SMEs into larger supply chains, ensuring they have the infrastructure and resources to grow.” In South Africa, SMEs contribute around 50% to the GDP and are responsible for nearly 9 million jobs, yet they face persistent issues like limited access to capital and representation in economic platforms.
Okechukwu cited the National Development Plan (NDP) as a benchmark for job creation, noting that to meet its targets by 2030, South Africa would need to create an additional 3.2 million SMEs, which could provide nearly 12 million jobs. “It’s an ambitious goal, but not entirely out of reach if we collectively work to foster an environment where startups can succeed,” he noted, urging both public and private sectors to collaborate on this front.
Okechukwu concluded with a call to action for policymakers to recognize and support the informal sector. “Our society cannot function without the informal economy,” he argued, echoing sentiments from African leaders. “We must value and support these informal actors instead of treating them as disposable.”
With these remarks, Okechukwu painted a clear picture of Africa’s entrepreneurial landscape: one filled with promise but in dire need of support. “Let’s keep supporting these ventures,” he urged. “Startups exist to try, fail, and sometimes succeed – but every attempt contributes to the continent’s growth.”
In his closing remarks, he emphasised the need to bolster existing efforts. “Canceling support programs only hurts our future economic prospects. Instead, we need to refine and improve the ways we nurture these enterprises,” he said, reaffirming his commitment to fostering Africa’s next generation of successful businesses.