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SMEs central to economic growth in Africa

28th Jan, 2016

When the story of Africa’s economic expansion journey in the current century is finally written, 2015 will feature prominently as a turning point. The continent has this year alone hosted several global game-changing summits—the major ones being this week’s 10th World Trade Organization (WTO) Ministerial Conference and the July 2015 Global Entrepreneurship Summit—which have further elevated Africa’s clout in global trade and geo-politics. Kenya has been lucky to play host to the two conferences, affirming the country’s, and by extension East Africa’s, growing influence in the global arena.

Africa is at the centre of a major transformation in the way it relates with the global economy, explaining the need for it to be present at the table of international trade decision making. Personally, I believe the next phase of growth for the global economy will be determined by Africa’s trajectory and how the Continent integrates trade-wise with her trade partners, internationally. This will further be buttressed by the emergence and rise of small businesses in Africa and beyond to drive growth.

Those of us who have been in Africa over the past decade have witnessed the region become the world’s most exciting economic frontier, transforming nations and offering hope to a new generation of accomplished and engaged youth. Africa’s economic expansion is nothing short of remarkable. There is undoubtedly something unique about what is happening on the continent now.

This time, the heart of the story is the boom in Small and Medium-sized Enterprises (SMEs). Today, these small and growing businesses create around 80% of the region’s employment, establishing a new middle class and fueling demand for new goods and services.

SMEs in Africa are talked about a lot in the framework of growing unemployment and high population rates as the region rushes past the billionth person population.

Day in day out studies have focused on developing Africa’s SME sector. The focus has mostly been on SMEs as vehicles to employment and job creation and SMEs as a key to the region’s entrepreneurial environment needs.

But what else are they? What else needs to be further highlighted? What can those who seek to support their growth do better? We all agree that SMEs, just like big businesses, start with a vision or an idea. But fundamentally, SMEs play a critical role in nation building, nation advancement, and a nation’s innovativeness. Development in Africa cannot happen without them; growth cannot happen without them; socio-economic paradigm shifts cannot happen without them; and poverty cannot be reduced without them.

This week, Kenya will be hosting the 10th WTO Ministerial Conference. The conference, whose aim is to bring about a wind of change, could not have come at a better time than this. Hopefully, it will strike a deal that will have governments, the private sector and international investors consider and commit to Africa’s young people, and have SMEs as the central pillar in ensuring the stability of the world’s economy.

One of the greater challenges however is access to finance, which remains a hurdle for many SMEs in Africa. The WTO conference is an opportunity to engage and position ourselves to discuss the challenges and how we can make financial access a priority to grow this gigantic industry.

My question to those participating in the WTO conference is how do we support small business opportunities in terms of their financing avenues and their growth agenda? Today’s smaller businesses are the large organizations of tomorrow. Africa will only be built by focusing on these smaller businesses which are the majority across the continent.

For Kenya, this is quite a historic moment being the first time that we are hosting the WTO conference. Kenya’s stature is growing in terms of global and regional trade; and remains a country that represents what the possibilities for Africa can be in terms of trade. We have been viewed as a cornerstone that enables businesses across the region. By selecting Kenya and Africa, the world is saying that they are starting to recognize the opportunities Africa has to increase the next level of trade across the world. Africa is attracting increasing interest from the international financial community. The spotlight is now on our continent and Africa must rise to the occasion. We cannot afford to fail. This is our chance and we need to seize it.

At the end of this conference, expectations are high that the experts will come up with a framework to empower small businesses, push governments, private sectors and investors to solve common challenges that face SMEs. This includes lack of opportunities for training, retraining, retooling, upgrading, or reinventing an SME business; need for a sound business plan, and 2-4 year goals; good accounting practices; establishing networks with institutions that can help conceptualize and transform skills to entrepreneurship; and access to financing channels (as there are for some big business); so look for low cost loans, government-backed programs, and supplement incomes.

For Africa, Kenya is a case in point. Its government and associated bodies have launched many initiatives over recent years to support entrepreneurs and the SME sector. The conference offers a significant opportunity for big corporations like KCB to showcase entrepreneurship in Kenya and by extension, the African continent. For KCB, the biggest financial services firm in the region by assets, this is a platform for the bank to demonstrate its strong impact and heritage in Africa and its future commitment to the Continent.

Since inception, the Bank has invested more than US$1Billion (KSh100 billion) in socio-economic developments across the region, effectively boosting entrepreneurship. We are committed to the African Agenda, we are optimistic about the continent’s future potential in the area of entrepreneurship, innovation and we continue supporting regional legacy projects to drive national development and economic prosperity.

In the last few years, Africa has been growing tremendously in terms of population. We have a younger demographic and democracy in a lot of African countries is strengthening. Africa’s young population is well over 500 million across more than 50 countries. We are a big continent blessed with raw materials such as natural resources, agriculture, skills and knowledge.

Young people in Kenya and on the continent at large are more upbeat about their ability to become entrepreneurs than their peers in any other region and therefore the need for the government, the private sector and investors to pat their backs by either making access to finances for startups easy or by offering mentorship programmes and supporting their business growth.

Africa’s time has come, but it is up to Africa to work towards achieving global economic success. Its leaders, private sectors and corporates need to stand together with a new mindset, and rise to the challenge of creating continental economic development. Economic and social connectivity is essential. Differences need to be put aside and everyone needs to be ‘African’ for Africa’s sake.

By: Joshua Oigara

The writer is the Group Chief Executive Officer, KCB and The Chairman of the Kenya Bankers Association.

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