- Africa is bracing itself for recession caused by the coronavirus pandemic.
- But the pandemic is also creating a unique opportunity for small and medium-size enterprises.
- Access to start-up capital and a transparent and reliable regulatory environment will facilitate entrepreneurship and encourages investors.
COVID-19 is having a devastating impact on the global economy. Like every continent, Africa has been bracing itself for a sharp economic downturn. Yet, despite the inevitable recession, the pandemic has created a unique opportunity to promote the growth of small and medium-size enterprises (SMEs) on the African continent. Indeed, empowering the continent’s SMEs could limit the pandemic’s long-term economic fallout.
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By creating the right environment for young entrepreneurs and start-ups to scale innovative solutions that are emerging from the crisis, African countries have a chance to stimulate job creation. This is crucial on a continent where youth employment stands at 16%, and 10-12 million young people enter the workforce every year.
Since the beginning of the outbreak, young entrepreneurs and SMEs have been actively involved in developing innovations to combat the potential effects of the virus on African countries. From the “Solar Wash,” a sun-powered, touch-free water dispenser in Ghana, to triage tools in Nigeria and the “DiagnoseMe” COVID-19 remote screening platform in Burkina Faso, young Africans are conceiving ingenious local solutions to help prevent the spread of the disease.
Africa’s SMEs have shown their flexibility and adaptability. For example, in Kenya, a local textile factory was transformed into a surgical mask assembly line within a week. In Senegal, the Institut Pasteur de Dakar developed a prototype for a ten-minute COVID-19 diagnostic test.
If commercialized and scaled up, such innovations could create more employment. One example is in the pharmaceutical field. According to the United Nations Economic Commission for Africa, 16 million jobs are forfeited by importing pharmaceutical products worth $14 billion. The surgical mask factory in Kenya already employs 400 workers, including 320 women, and plans to use the proceeds the sales revenue to open two more facilities. The Institut Pasteur de Dakar has formed a partnership with a British biotech company to obtain international certification. Mass production likely will lead to new hires of young Senegalese men and women.
Properly resourced, these innovations could support manufacturing industries that would strengthen Africa’s defenses against COVID-19 and create long-term sustainable businesses offering stable jobs. In addition to ensuring access to start-up capital, governments should create a transparent and reliable regulatory environment that facilitates entrepreneurship and encourages investors.
Access to capital is probably the most significant challenge for African SMEs. While many global institutions already provide capital, local sources should play a more significant role in supporting SME growth. The Institut Pasteur de Dakar obtained seed funding for its COVID-19 testing kit from the British government and the Bill & Melinda Gates Foundation. DiagnoseMe receives funding from the United Nations Capital Development Fund. But most global partners find it difficult to work with SMEs with more modest needs.
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. One of the best ways to do this is to provide micro-funding to new businesses, thereby enabling SMEs to invest and grow.
To be sure, corporate donors on the continent are answering the call. In South Africa, business owners have contributed close to $150 million to the government’s Solidarity Fund. In Nigeria, CEOs of large companies will fund medical equipment and fully equipped medical tents. But business leaders can do more. Early-stage funding, seed capital, and mentoring workshops for young innovators are other ways to boost entrepreneurship. Similarly, pan-African programs, such as the one run by the Tony Elumelu Foundation, should ramp up their efforts.
Ensuring that the continent’s SMEs have access to the capital and expertise they need is critical to combating COVID-19 effectively. 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. There is even reason to hope that difficult conditions will yield unexpected gems.