Micro, Small, and Medium-Sized Enterprises (MSMEs) are highly important drivers of economic growth and development and job creation in African economies. According to the International Finance Cooperation, MSMEs account for up to 90% of all businesses in African markets and as such, remain one of the main sources of employment. MSMEs have remained even more resilient after facing unprecedented economic disruptions in the wake of the COVID-19 pandemic, and are optimistic about the growth that lies ahead. Unlocking the region’s growth potential will require bridging the credit gap, strengthening SME value chains, and boosting productivity via digitisation, technology adoption, and adaptation. Lastly, specific training workshops that will have a positive impact on African MSMEs is most desirable.
Recognizing the importance of private sector-led growth in contributing to Africa’s economic development, the 20th Ordinary Session of the African Union (AU) Conference of African Ministers of Industry (CAMI 20) on the theme: ‘’Accelerating Industrialization for Africa within the Post-2015 Development Agenda’’, identified industrialization as the basis for development, with the private sector playing a critical role in supporting sustainable industrialization. To harness the potential for industrialization to contribute to Africa’s economic development, CAMI directed the Member States to create an enabling environment for the creation and operation of Small and Medium-Sized Enterprises (SMEs) and Small and Medium-Sized Industries (SMIs) and Place SMEs and SMIs at the centre of private sector-led development.
It is against this background that the African Union Commission developed an SME Development Strategy and Action Plan” which provides policy guidelines for promoting intra-regional and intra-African trade by integrating African MSMEs into regional and global value chains. The vision of the AU SME Strategy is to “develop competitive, diversified and sustainable economies underpinned by dynamic, entrepreneurial and industrial sectors that generate employment, reduce poverty and foster social inclusion”. The AU SME strategy, adopted in February 2019 is formulated to deliver results in the immediate acceleration of investment in value chains and sectors that present comparative advantages and economic growth will lead to minimising poverty and hunger and significantly create job opportunities across the continent.
Enabling more investments in the African SME sector
The main challenges faced by SMEs are particularly acute for women-owned SMEs which are constrained by several barriers in the business environment and offer limited employment opportunities. Owing to regulatory issues, among others, lack of access to finance, relatively low rates of business education or work experience, risk aversion, confinement of women’s businesses to slower growth sectors, and the burden of household management responsibilities, women-owned enterprises grow slowly when compared with enterprises that are owned by men.
Cognizant of the fact that women should be afforded opportunities, the African Union Assembly of Heads of State and Government convened in February 2020, and as part of its resolutions, declared the years 2020 to 2030 as the Decade of Financial and Economic Inclusion for African Women. In their declaration, African leaders recommitted to scaling up actions for progressive gender inclusion towards sustainable development at the national, regional, and continental levels.
One of the main objectives of this new African Women Decade is the development of market access by enhancing new credit solutions for women, generating access to infrastructure in downstream processing and distribution, as well as training them in agro-industrial technology. For these goals to be realised, African States are required to put in place policies and targeted complementary measures and programs such as entrepreneurship, business management, technology training, financial literacy, financial planning, investment, and capacity building. Emphasis should be on women-led SMEs by supporting them to overcome the constraints of accessing finance, as well as market information and networks.
Small and medium-sized enterprises form the backbone of the African economy, representing more than 90% of businesses and employing about 60% of workers, many of whom are women and youth. Despite the significant role which SMEs play in the development of African economies, they have yet to be fully integrated into the regional value chains system and in turn the continental trading system. This limits the ability of SMEs to grow and scale their business ensuring that they often remain small businesses and informal in their operations, leaving them vulnerable to various shocks that lead to a short business lifespan.
More investments must be enabled in the African SME space. SMEs in Africa can help resolve some of the continent’s most pressing challenges. The World Economic Forum estimates that the global workforce will increase by a staggering 910 million people between 2010 and 2050, of which 830 million will be in Africa. This creates a tremendous need for jobs. Although African SMEs generate about 80% of new jobs, they also account for most lost jobs. Smart investments can help tilt this balance in favour of positive and sufficient net job creation and contribute to solving one of Africa’s greatest socio-economic challenges.
Implementation of the AU Small and Medium enterprises strategy
Recently, several African Union Member States committed to supporting innovation and providing incentives to the business community. Member States are also aspiring to unlock the continent’s vast human capital potential by promoting entrepreneurship in education. To promote entrepreneurship, some AU Member States have formulated and implemented legislation in the form of Small Business Acts (SBAs) and Start-Up Acts. Regarding regulatory framework, Tunisia pioneered the legislation of a comprehensive Start-Up Act in 2018, followed by Senegal in 2019 and many other African countries are now at an advanced stage in adapting their ecosystem to promote start-ups. In addition, the business environment for SMEs has improved considerably in many African countries according to the ‘Africa Doing Business’’ Report 2009 of the World Bank.
Despite all this progress and reforms, the potential of the African private sector has not yet been fully unleashed to contribute to job creation and economic transformation as envisaged in Agenda 2063. The African private sector and especially start-ups are still facing many obstacles including inadequate government regulation, restrictive policies, poor infrastructure (particularly in power and transport), severe skills shortages, and mismatches between employers’ needs and available workers (particularly those just out of school), trade restrictions, tariff and non-tariff barriers to African exports, difficulties in obtaining medium and long-term finance on affordable terms, and a large informal sector.
On the 6th of April 2007, the United Nations General Assembly adopted resolution 71/279, designating the 27th of June as the international commemoration day of MSMEs. This day serves to raise public awareness of the contribution of MSMEs to sustainable development and the global economy. With the recognition of the importance of SMEs in developing competitive, diversified, and sustainable economies, the African Union SME Strategy guides the development of SMEs in the continent.
The Integrated Program Delivery Framework for the Implementation of the AU SME Strategy recommended the inauguration of an Annual African Union SME Forum as an important platform for knowledge exchange on the status of SME development in Africa. In the same vein, in the framework for the SME Strategy, AUC elaborated in 2019 a feasibility study for the establishment of ‘’Enterprise Africa Network” (EAN), a continental platform aiming to facilitate and grow a ‘’Pool of competitive SMEs’’ that are well-positioned within the regional, continental, and international market. Through EAN, SMEs will receive support from a ‘’Pool of accredited Business Development Organisations” (BDOs) to build their capacity of SMEs to be more competitive, the EAN platform will be dedicated to facilitating the connectivity with regional and international markets, and encourage networking, collaboration, alliances, and partnerships between the African and international business communities.
EAN will focus on women and youth entrepreneurs who have developed competitive and innovative products, and who can demonstrate growth potential for their market, with strong employment creation prospects. EAN will execute a thorough due diligence exercise to identify SMEs and start-up champions regarding their strengths, experience, and their capacity to become market leaders at regional or continental levels.
It is in that context that The Department of Economic Development, Trade, Tourism, Industry, and Minerals (ETTIM) of the African Union Commission, is organising the first annual SME Forum in collaboration with the Africa Business Council and All-African Association for SMEs (AAASME) under the Theme “Economic Empowerment of SMEs, Women and Youth Entrepreneurs to Realize Africa’s Industrialization in the context of the integrated market.”
Objectives of the Forum
The main objective of the first Africa SME Annual Forum is to promote, upskill and strategize for a better, more inclusive African SME sector to realize Africa’s Industrialization in the context of the integrated market.
The objectives of the forum are:
- Celebrate the Micro, Small, and Medium-sized Enterprises Day
- Provide SME support by providing training in Quality Infrastructure, Intellectual Property Rights, Access to Finance, and Access to Market especially e-commerce.
- Promote policies for the development and growth of SMEs in Africa;
- Advocate for the domestication and implementation of the AU SME Policies and Strategies;
- Present Enterprise Africa Network.
Expected outcome of the meeting
The Event will have four major outcomes, namely:
- Improve the capacity of SMEs, and Start-ups, on Quality Infrastructure, Intellectual Property Rights, access to finance, and e-commerce;
- Establish a continuous platform for policymakers and high-level participants from the private sector to interact on the technical aspects of the development of SMEs and Start-ups, share knowledge and provide best practices for SME growth and development.
- Establish a regional and continental collaboration between the private sector and public institutions on industrial research, technology, innovation, and improved support to SMEs.
- Present the Enterprise African Network to the SMEs, Start-ups, and all the participants.
The Forum will bring together SMEs, Start-ups, Senior Managers of Tech-Hubs, Incubators, Accelerators, Senior-level Representatives of AU, RECs, Member States, Development Partners Institutions, UN agencies, the private sector, SME associations, and professional associations, Business Leaders, Financial Institutions, Academia, and Civil Society.
Participants are required to register here.
Format of the Forum
This Forum is proposed to be a 5-day event, themed around “Economic Empowerment of SMEs, Women and Youth Entrepreneurs to Realize Africa’s Industrialization in the context of the integrated market”. The activities will involve;
Celebration of the Micro, Small, and Medium-sized Enterprises Day
Two Days Training Sessions for SMEs and Start-ups in Quality Infrastructure, Intellectual Property Rights, Access to Finance, and Access to Market especially e-commerce.
Three days for African Congress for SMEs, Women and Youth Entrepreneurs, and Women Awards Gala.
FOR FURTHER INFORMATION, CONTACT:
Mrs. Ron Osman Omar | Senior Policy Officer Industry, Industry, Innovation, and Minerals Division | Economic Development, Trade, Tourism, Industry and Minerals Department |African Union Commission |E-mail: OmarR@africa-union.org
Ms. Bulelwa Nkosi |Private Sector and Enterprise Development Associate, Industry, Innovation and Minerals Division | Economic Development, Trade, Tourism, Industry and Minerals Department |African Union Commission |E-mail: NkosiB@africa-union.org
Gamal Eldin Ahmed A. Kararr | Information and Communication Directorate | African Union Commission | Tel: +251 115 517 700 | E-mail: GamalK@africa-union.org l | Addis Ababa, Ethiopia