By Musa Adamu Alkassim
It is no news that the economic growth and sustainability of emerging markets as well as economies rest on the effective development of the Small and Medium Scale Businesses (SMEs) sector.
The African continent has an estimated population of over 1.3 billion people with an annual growth rate that is projected to be at least 2 per cent.
Statistics show that more than 50 per cent of the population in most African countries fall within the age bracket of 18-25 years. Just like every other population in the world, this population has a growing need for essential goods and services of locally based SMEs owned by individuals of different professions. SME owners could be electricians, bakers, tailors, teachers or professionals in different fields of life.
The definition and classification of SMEs vary depending on the country. In some countries, the criteria for the classification is based on capital while in other countries, the number of employees is the determining factor.
The SME sector is the blood that sustains most developing economies whilst serving as an important contributor to employment, economic growth and export.
For instance, according to the PWC Nigeria SME survey conducted in Nigeria, SMEs contribute a whopping 48 per cent of the national Gross Domestic Product (GDP). The SMEs provide employment for over 70 per cent of the Nigerian population. Likewise, in South Africa, SMEs account for 91 per cent of the existing businesses, 60 per cent of the employed population and 52 per cent of the country’s total GDP.
Despite the significance of SMEs to the growth of the African economy, the SME sector is still entangled in a web of challenges. These challenges have acted as bumps slowing down the sector on its way to unleashing its full potentials in terms of growth and contribution to the development of the economy.
According to the International Monetary Funds (IMF), in 2035 the number of Africans joining the working-age population will exceed that of the rest of the world combined. This calls for an urgent need to revamp and prepare the labour market to accommodate the growing population.
One way to address this is to improve or provide support to the SME sector that employs a large percentage of the population and has the potential to provide employment for more Africans.
Research has shown that the problem of lack of finance that the SMEs face is as a result of two major factors. Firstly, the provision of finance for Africa is rated as riskier compared to other regions of the world due to factors such as poor government policies, complex bureaucratic application processes, corruption, unfavourable business ecosystem and political instability.
Secondly, the global provision of finance is considered to be riskier for small and medium scale firms. This is attributed to the fact that some small and medium business owners take out their profits to purchase personal assets instead of reinvesting in their businesses. As a result of this, they are unable to expand or sustain their businesses. SMEs need to plan so that they can build some financial reserves to be able to survive in the market. To achieve this goal, all small and medium scale businesses need investment planning, a service provided by business consulting firms such as 4ITAFRICA.
4ITAFRICA is a business consulting firm with expertise in investment funding and planning. The firm has top-notch experience in helping SMEs plan and it specializes in ensuring businesses achieve their financial goals through proper financial planning.
The government should try to provide easy access to financing for SMEs and also provide a favourable business environment. For instance, the Central Bank of Nigeria helps entrepreneurs with initiatives like the Agric Small and Medium Enterprises Scheme (AGSMEIS).
Another major problem leading to the death of many SMEs is the lack of access to business consultants. In the scramble for making money, many entrepreneurs overlook the significance of financial management in the sustainability of their business, especially in periods of economic crises like the COVID-19 pandemic. It is advisable for entrepreneurs, and SMEs to follow the footsteps of accomplished businesses through the services of financial planners.
With the aid of business consulting services offered by 4ITAFRICA, SMEs have achieved their financial goals. 4ITAFRICA assists these SME owners by helping them to figure out where they are in business, where they want to be, and how they can get there by planning and investment. A proper investment plan helps secure the future of your business financially.
The high cost of running a business has flushed many businesses and business ideas down the drain because not all entrepreneurs can afford the costs of starting or sustaining a business.
Therefore, there is a need to support the SMEs and potential entrepreneurs by improving the regulations that control the business environment, enhancing the institutional support system and promoting technological innovations thus bringing about greater productivity in business.
Despite all the myriads of challenges that face African SMEs, there have been predictions that in the coming decades, Africa will become a major force to reckon within the global economy. These predictions seem impossible, but certain factors such as Africa’s enormous untapped natural resources and mineral wealth, an increase in the number of educated youths, vast arable land coupled with a booming population growth make the predictions more likely to transform into reality.
Even though this transformation is still decades away, it is still coming and Africa’s SMEs are already paving way for the future of growth in Africa. This future may be blurry and indefinite but it would at the same time be myopic to wager against it: Africa’s future and the growth of SMEs in the continent is bright.