Author: Judah Mphela, Head of Absa Business Banking, Africa Regional Operations
If Small and Medium Sized Enterprises (SMEs) are the growth engine of the African economy, what is the appropriate mix of financial and non-financial support that needs to be extended to help the sector thrive?
This is a question we are often challenged with in an environment where there is limited early-stage SME funding, and the cost of capital remains a constraint. As one of the leading Pan-African banking groups, our short answer is unequivocal: “Banks have a critical role in both financial and non-financial support when it comes to developing a healthy SME ecosystem.”
The longer answer requires further unpacking.
Often the relationship between an entrepreneur and their bank is defined by where in their business life cycle the entrepreneur is operating. To highlight this point, we can look no further than the annual trade finance gap (funding shortfall for businesses who have secured work from clients and now need capital to execute on these projects), which is between $80bn and $120bn in Africa. If there is such a significant funding gap for established businesses, you can appreciate the funding challenge for early-stage entrepreneurs.
Despite these challenges, we continue to seek out ways to support SMEs beyond just financing. A good example of this is our headline sponsorship support of the Made in Africa Conference held in March 2024, which is the biggest online gathering of African businesses, purchasing decision-makers, investors, and policymakers on the continent. Over the past three years, the Made in Africa Conference witnessed a substantial turnout, showcasing the growing enthusiasm and passion among Africans to not only expand their businesses, but also to foster intra-continental trade. Through the sponsorship, access-to-market opportunities are opened to entrepreneurs, ultimately providing the cheapest form of funding – which is clients.
Through strategic initiatives, such as the Made in Africa Conference, SMEs are assisted with a variety of benefits including:
- Active participation in local and global supply chains generating revenue, contributing significantly to economic growth.
- Linking supply chains to long-term economic growth, through addressing environmental, social, and economic impacts, while promoting good governance practices.
- Identifying potential in investing in renewable energy, infrastructure, technology, and financing – thereby unlocking Africa’s supply chain potential, creating jobs, and fostering overall economic development.
Recognising that SMEs are the backbone of the African economy, and pivotal drivers of growth and prosperity in local communities, there is a need to focus on empowering these smaller enterprises to uplift Africa. Governments across the continent are increasingly embracing the trend of localising supply chains, providing preferential funding to local businesses, and creating environments where SMEs can thrive. By bridging procurement supply chains with businesses, Absa facilitates access to markets, allowing businesses to identify sourcing needs, while suppliers understand the requirements of larger enterprises, fostering a mutually beneficial relationship.
Absa’s overarching objective is to foster a sustainable cycle that connects Africans, thereby contributing to the growth of the continent’s economy. Far from signalling a detachment from international trade, this strategic approach signifies a dedicated commitment to “glocalisation” – building a resilient Africa capable of serving the global market.
As part of our ongoing commitment, we have several initiatives and strategic partnerships in place. In partnership with the Mastercard Foundation, Absa Bank Ghana has been able to offer a game-changing SME financing solution at 10% in a market where interest rates are typically over 30%. Such initiatives allow us to bring early-stage funding to entrepreneurs.
Ongoing programs like the Business Clubs run in various Absa markets play a pivotal role by actively connecting customers through seminars, talks, and skill exchanges throughout the year. At the end of 2023, Absa Bank Kenya arranged a trip for 30 Kenyan customers from the agribusiness sector to Cape Town, South Africa, exposing them to diverse facets of agribusiness operations.
The women in business propositions, operational in Kenya, Ghana, Botswana, Zambia, and Tanzania with plans for expansion to other markets, tailors’ solutions for women-led enterprises. These initiatives facilitate crucial access to funding and markets, contributing to the resilience and growth of women-led businesses.
At Absa, we are actively involved in nurturing and propelling SMEs to unprecedented heights. This approach harmonises seamlessly with the bank’s vision of cultivating a prosperous and self-sufficient Africa that stands prominently on the global stage. Rooted in this commitment is our corporate purpose of Empowering Africa’s tomorrow, together one story at a time. This initiative emphasises our profound dedication to the growth and triumph of our clients, aspiring for their narratives to unfold as stories of success. Our steadfast support guarantees that their journey is marked by accomplishments and prosperity.
#Cultivating #Growth #Commitment #SME #Empowerment #IntraAfrica #Trade
