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Opportunity Cost of Doing Business for SMEs in Africa

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Cost of Doing Business for SMEs

By Josephine Wawira

The African economy has gathered momentum over the years, with an estimated increase of 3.8% of the real output growth in 2017. As the largest economies gradually strengthen, the 2018/2019 performance should reach 4.1% according to the African Development Bank. This economic growth and sustainable development has largely been contributed by Small and Medium Enterprises (SMEs). In Kenya for instance, SMEs contribute approximately 40% to the GDP and employ over half of the country’s workforce.

Yet, becoming a profitable SME in the continent is never a smooth sail for many. There’s the presence of stringent government regulations in several countries, though the flexibility of doing business in others is a force to be reckoned with.

The World Bank has recognized Kenya as having implemented the most reforms in the region between June 2016 and June 2017. These include the reduction of the number of procedures required to register a business, as well as utilizing a single window system to reduce the time for import documentary compliance.

Then there’s the implementation of iTax, an online platform that allows Kenyans to easily register their businesses, fill and pay corporate income tax among others.

Moreover, access to credit remains one of the biggest hindrances for SMEs in Africa to thrive. The major banks are mainly huddled in big cities, making it difficult for a predominant section of businesses in the rural areas to access formal financial services.

Besides, there exist rigorous risk assessment requirements by financial institutions that tend to limit the number of businesses that can access credit. These requirements include but are not limited to collateral, which often proves cumbersome to acquire even when trying to access short term credit or simply, is non-existent.

According to Juan Seco, the Chief Operating Officer of JumiaPay, “Non-collateral loans are on the other hand quite expensive for most SMEs in Africa, with an Annual Percentage Rate (APR) that can go as high as 300% in Kenya and 240% in Nigeria.” The Central Bank of Nigeria records about 69 percent of SMEs who wanted to apply for loans but failed, due to fear of application rejection related to collateral requirements and other associated conditions attached to the loan approval processes such as bad scores.

Notably, the entry of Fintechs (Financial Technology) companies into the banking market in Africa, is gradually improving the process of accessing credit for SMEs. Jumia is one of the companies revolutionizing the sector with its Jumia Lending service, an initiative that provides working capital financing for short-term borrowers. These are vendors selling on the online ecommerce platform for at least six months, seeking to expand and grow their online business. The program aims at boosting financial inclusion in the continent, not only by providing sellers with an online visibility and a vast customer base; but also, with access to affordable working capital to boost their commerce.

Juan Seco notes that, “we understand the challenges faced by our vendors and SMEs in general, to access working capital financing. We have therefore, also partnered with some of the best institutions where we try to bridge the gap for sellers seeking long term credit facilities. With Jumia being in the middle, our lending partners have the security that the data of our sellers on Jumia, such as sales or customer ratings is accurate. In addition, we give them first lien on the sales on Jumia, so even though these are not collateralized loans, they are highly de-risked as we give them some control over the sellers’ cash flows. For our sellers, we understand they cannot afford to spend hours in traffic and at the branch, so we digitize the onboarding process, so they can keep running their shops and not lose valuable income”.

Currently applicable in Kenya and Nigeria, and soon to be launched in other countries where Jumia has operations, the Lending Program involves a quick online registration process with feedback provided within 72 hours. Vendor applicants benefit from low interest rates of as low as 12% per annum, on the non-collateral loans with flexible repayment plans of between 1- 6 months.

“I am on the second loan and the process of paying back is quite efficient and flexible since you get to plan your instalment deposits and manage it by yourself. I have managed to grow my business capital and gotten higher returns. When I lost funds and communicated the same to the lending team, they gave me a grace period to recover; a benefit that is not available on other lending facilities,” says Nauri Mwei, a vendor on Jumia.

The impression fintechs such as Jumia Lending are leaving on credit consumers and especially SMEs in Africa, is that of value add to their businesses. They are bridging a long existing gap in financial inclusion in relations to credit access, by providing a more transparent and seamless way of availing financial services to a wider range of consumers in the continent.

Modupe Gbadeyanka is a fast-rising journalist with Business Post Nigeria. Her passion for journalism is amazing. She is willing to learn more with a view to becoming one of the best pen-pushers in Nigeria. Her role models are the duo of CNN's Richard Quest and Christiane Amanpour.

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Money, Society, Development and Economics

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By Nneka Okumazie

For some people, all they will ever become is what money can make them.

For them, the power of everything money can do makes everything about money.

They often measure to money and measure for money. They talk for it and ensure it is what is seen about them.

Many of these people have money above all culture in some of the countries the people there have described as unbearable.

In most of these countries, the same reason government does not work is the same thing outsiders are about, bringing the country to a contiguous halt.

Government is all about who can grab for self and interests, around power, resources and money.

This same reason is why many organized crimes exist and several kinds of harmful practices across the private sector.

Money will never develop any country. Though some continue to say money is what is lacking.

Money will never change anything about anyone because if there are real changes at any point, money may have enhanced it but was never cause.

Things that look like changes that money made does not change; they are just more of how money keeps itself important.

For many things done because there was money to do it, they are many times purposeless. There are also others that should be been important, but because money was more important in that project, it also became purposeless.

If in some developing country, someone lives in a nice apartment or drives a cool vehicle, making that individual seem important, the importance of the individual is to whom, and what purpose does it serve, and for what it serves, what does it change, affect or improve?

The comfort that is lived in many of these places is a false peak.

It keeps them there and there is rarely much else to find meaning for.

Money continues to dictate how to be seen to have it, going around in circles, absent of progress, but ensuring participants are unaware.

Money, for what it can, makes people become a sunset. Money stays important using people as tools to itself.

[Ecclesiastes 6:7, All the labour of man is for his mouth, and yet the appetite is not filled.]

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5 Tips for Tackling Imposter Syndrome

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Aisha Pandor CEO SweepSouth Imposter Syndrome

By Aisha Pandor

Imposter syndrome is something that most of us have felt at one time or another. Even if you know you have all the right qualifications and experience to be in a position, it can be all too easy to feel like you don’t belong.

Whether it’s someone dismissing your work or even just casually telling you about something you’ve never heard of as if it’s common knowledge, it can be an incredibly difficult space to climb out of.

Imposter syndrome can be especially insidious among entrepreneurs, who already have to deal with ecstatic highs and crippling lows. In fact, a 2020 study found that 84% of entrepreneurs and small business owners experience imposter syndrome. Many also worry that they’ll be “found out” for their lack of knowledge and ability.

That chimes with my own experiences as an entrepreneur and investor. When Alen (my husband) and I first started SweepSouth back in 2013, I had no experience as an entrepreneur. I’d come from an academic background and everyone at the various startup events and pitching competitions we attended seemed so much calmer and more confident. I couldn’t help wondering what I was doing there and why I’d sacrificed a potentially comfortable life for something I was certain everyone else was doing better at.

While that feeling occasionally rears its head again, I’ve learned a number of strategies over the years to effectively tackle it. Here are five of them.

Remember that your journey is your own

For entrepreneurs especially, imposter syndrome can be fuelled by comparing yourself to others. It can strike when a business that started at the same time as you gets a batch of great write-ups in the press or when they raise a massive funding round. At times like that, it’s important to remember that you’re on your own business journey, no one else’s. By trying to match someone else’s success because it makes you feel inadequate, you’re setting yourself up for failure.

Remember, if you’re making progress, you’re doing the right thing. Many of the entrepreneurs who seemed so confident at the early events I went to have seen their businesses not perform as well as they’d hoped. The same is true of those who raised headline-grabbing early funding rounds. If I’d let comparisons to them cause me to waiver from my focus, SweepSouth would be in a very different place today.

Address your weaknesses

Sometimes the feelings associated with imposter syndrome come about because someone brings up a legitimate issue that your business needs to address. It might, for instance, be something that a potential investor brings up. The trick is not to take it as a sign that you don’t belong, but as something fixable that you can address. Every person and every business has weaknesses. That doesn’t mean they don’t belong or shouldn’t exist.

Remember your accomplishments

Write them down if you have to. Chances are you’ve had to overcome a lot of obstacles to get where you are. This is especially important if you don’t look like everyone else in the room. If you’re a woman, for instance, nothing about your male peers’ maleness makes them any more suited to their jobs or running a business.

Have a support network

Remember that stat from the beginning of the article about 84% of entrepreneurs suffering from imposter syndrome? That’s not an indictment on entrepreneurs but an opportunity. By joining a local, regional, or even international entrepreneurs’ organisation, you expose yourself to people who’ve been through the same things as you (including imposter syndrome) and who can guide you through any issues you might face.

Turn it on its head

Finally, remember that real imposters are unlikely to feel imposter syndrome. Being a successful imposter depends on outsized levels of confidence. So, if you’re feeling like an imposter, you can take it as a sign that you’re probably on the right track.

Aisha Pandor is the CEO of SweepSouth

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Reminiscing on the Loss of a Friend, Dreams Deferred, and Bold New Beginnings

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Chris Ihidero loss of a friend

By Chris Ihidero

One evening some eight years ago, my good friend Steve Babaeko walked into a mutual friend’s office looking a little less than his usual uber-confident self.

You won’t find many people who can claim to have seen Steve looking any less than assured: He consistently cuts the picture of a supremely confident man and his achievements are a testament to how that confidence has been well earned. But that evening in 2012, Steve had just put in his resignation as Creative Director of 141 Worldwide, the advertising agency he helped build from scratch and made a market leader. He would have to start all over again and the future held no guarantees. We broke out a bottle of cognac and toasted to new possibilities. As our mutual friend said that evening, “What’s the worst that can happen? You may fail, but at least you would have tried.”

When Amaka Igwe passed on in 2014 just as we were about to launch the TV channel we had been working on for about four years, it soon became clear to me that if I was going to have any shot at realizing the dream we shared, I would have to say goodbye to Amaka Igwe Studios. AIS was my home for eight years. I started out as an apprentice TV director and rose to become Chief Operating Officer. It was the place that built me. On the day I made the decision to leave, I stood in the building we had just furnished for the TV station, gazed at the transmission equipment we had installed and knew I was walking away to start all over again. Walking into a future with no guarantees.

Like Steve that evening, I was a lot less assured.

It’s been seven years since that decision and I have had an incredible run. It hasn’t been a sunset stroll in the park but I’m grateful for my contributions to the TV and film industry in Africa so far. While I worked for different TV networks, wrote, produced, directed and consulted on many film projects (and continue to do so), I started quietly building PinPoint Media. I knew what had to come next. I knew what I wanted to do with my life was to build a content delivery machinery that delivered excellence repeatedly.

In September 2019 we cranked on the content machinery we had been working on for a year and hit the set to deliver the first product off our production line, season one of Man Pikin, a family comedy series. Man Pikin is my nod to Fuji House of Commotion, Nigeria’s longest running and highly popular family comedy series I was privileged to direct for five years.

Man Pikin is the story of a man’s daily struggles with raising his kids after his wife’s passing. We shot 26 episodes for a first season and recently, IROKO TV acquired the rights for broadcast on their ROK Channels, as well as a french version for francophone Africa on NollywoodTV. It premieres on the 12th and 20th of December respectively.

In Q3 2021, we shot season two, another 26 episodes, and that’s not all we’re working on. But for COVID-19 actually, we would have rounded off the first year of our PinPoint Content Fund execution with 104 episodes of TV series in the bag. That target will now be met in 2022, starting with season three of Man Pikin and season one of a new series. Three feature films will also be shot in 2022, and we will also deliver a digital TV channel. Yeah, we have been very busy!

As I watched final edits of the episodes of Man Pikin before shipping off to our distributors in France recently, I reminisced on the loss of a friend and dreams deferred. This propels me forward as I focus on polishing and further knocking our content machinery into shape in order to deliver a five-year plan that culminates in the production of five thousand hours of content yearly from five production centres across Nigeria and Africa.

Scary, right? Well, that was the dream I once shared with an amazing woman and now I must trudge on scared, but confident that we will deliver the reference point for TV/film content excellence, whatever the challenges we will face, because, like the original soundtrack for Man Pikin says “Every day we keep moving forward ooh ooh ooh, ‘cos someday our dreams will come true ooh ohh ooh, man pikin go fall but will stand up ooh oooh ohhhh, for together we are strong and we’ll always have each other, ah ah.”

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