The global impact occasioned by the Covid-19 pandemic not only on public health but on business, cannot be underestimated.
Due to their size and lack of resources, small and medium businesses (SMEs) are often the most vulnerable to unforeseen events and threats and often do not have a plan in place to deal with supply chain disruptions. Yet, in Africa, SMEs are important drivers of economic growth, accounting for up to 90 per cent of businesses in sub-Saharan Africa, the International Finance Corporation reports.
Regrettably, one thing clearly emerging from the pandemic is that SMEs’ supply chains from hub regions across the globe have been severely disrupted on an unprecedented level. SMEs are unable to continue with business as usual because of trade disruptions. So, the question we must ask is, how do these SMEs make their supply chain anti-fragile?
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Digital commerce platforms and advances in fields like digital analytics and artificial intelligence can significantly help to mitigate the risks of supply chain fragility. Flexible cloud computing solutions, data collection and analysis and automation software can all contribute to the success of SMEs in the digital era. Cloud computing also gives businesses the ability to scale, cost-effectively, to new markets. This is particularly beneficial for SMEs, who often lacked the resources or infrastructure to expand before. Partnerships with companies like Jumia in Kenya and Nigeria has, for instance, made Microsoft products available to SMEs in local currency.
The challenge now is to establish new supply chain avenues within Africa. The African Continental Free Trade Agreement (AfCFTA) can unlock innovation, growth and productivity on the continent, especially for its SME segment, by translating spending power into economic development.
To date, intra-African trade is relatively limited; UNCTAD, the main UN body dealing with trade, said it made up only 10.2 per cent of the continent’s total trade in 2010. Between 2010 and 2015, fuels represented more than half of Africa’s exports to non-African countries, while manufactured goods made up only 18 per cent of exports to the rest of the world.
By creating a single continental market for goods and services, the member states of the African Union hope to boost trade between African countries. Some studies have shown that intra-Africa trade could increase by about 52 per cent by 2022, although this will likely be revised downwards due to the pandemic. Regardless, better market access creates economies of scale.
Digital platforms and the adoption of mobile technology act as effective conduits for the exchange of value, and by aggregating demand across the continent, these platforms give small and medium businesses opportunities to access new markets, and to offer or identify goods and services previously limited by location constraints and marketing costs. These platforms create a diversification effect that boosts the robustness of supply chains.
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Start-ups like CoinAfrique, which is based in Dakar, Senegal provide access to markets for SMEs through their free classifieds platform for new and used products, which allows users to make money selling what they do not use and find bargains. Other platforms, including Biz4Afrika, provide entrepreneurs and SMEs alike with access to valuable business information and resources, finance and markets.
Cash flow is always a challenge for SMEs, no more so than when trade is constrained due to external factors. Many fintech start-ups across Africa aim to promote access for SMEs to financing options that were previously not available to them, which also opens opportunities for trade on a larger scale than was previously possible. As an example, Microsoft 4Afrika has partnered with African fintech start-ups, including Flutterwave in Nigeria and the MoVAS Group in East Africa, to open access to financing for SMEs.
Diversifying and strengthening supply chains is crucial for SMEs to survive and flourish. When we consider that the IMF forecasts that by 2035, Africa will have added more working age people to our workforce than the rest of the world’s regions combined, it’s essential that we have a thriving SME sector to absorb these workers and help grow economies across the continent.
- The writer is the head of strategic partnerships at Microsoft 4Africa Initiative