The Impact of COVID-19 on SME Financing in Africa

Africa has the world’s most exciting economic frontier, offering hope to a new generation of accomplished and engaged youth. According to the International Monetary Fund (IMF)[1], by 2035 the number of Africans joining the working-age population will exceed that of the rest of the world combined. Small and medium-sized enterprises (SMEs) create about 80% of the region’s employment [2,3], thus establishing a new middle class and fueling demand for new goods and services.

The COVID 19 pandemic has had and is predicted to have a strong effect on labour markets worldwide. Especially in developing economies like Africa, where more than 70% of the workforce is in self-employment or works in micro, and small enterprises[4].  This will also disrupt many existing value chains that most likely would, in turn, lead to loss of income and sharp increases in unemployment.[5,6,7]

Most of these SMES especially in the developing countries are often run by women, operate in saturated sectors in the informal economy and most lack social protection. MSMEs will, therefore, be the first to suffer devastating consequences of the economic downturn. Re-starting the economy and creating jobs will be key once the immediate health crisis is over.

The estimated negative growth effect for African economies[8,9,10] for example in early April 2020 was estimated to be between -2% and -8%.

The foundation of any long-lasting investment ventures in the continent is highly dependent on the continuous and sustained empowerment of regional SMEs and young entrepreneurs. Stakeholders including Governments, the private sector[11], and international investors must consider Africa’s young people and SMEs central to the stability of the world’s economy.

Our dialogue thus will focus on key identifying key building blocks, opportunities, and challenges such as access to finance, technology, business formation, business environment & infrastructure.

In this web forum, panelists will discuss;

  1. The real effects on the ground for SME’s.
  2. The plans that are being implemented to curb further negative effects on the market.
  3. Future strategies that organizations can rely on to remain resilient and afloat.
  4. Opportunities and methods of enabling new growth.
  5. Predictions of the paradigm shifts for SME financing.

 

Sources: 1IMF, 2World Bank, 3WEF, 4ILO, 5OECD, 6Oxford Economics, 7WBA, 8BN, 9/10Brookings,  11AFDB

The WebForum is Sponsored by the DCA Digital Academy which provides the tools and skills to foster leadership, entrepreneurship and also connecting youth and women to innovation highways; this way Africa can be part of the foundations of a developed technologically aware society. Learn more about the DCA Digital Academy