SMEs will create 80% of Africa’s employment

  The Principal, African Capital Alliance, ACA, Segun Adebanji, has projected that 80 per cent of employment in Africa would be created through small and medium enterprises, SMEs in the next 20 years.

Adebanji, in his paper delivered at the just concluded 39th Annual Conference of the Chartered Institute of Stockbrokers, CIS, held in Lagos, pointed out that the SME sub-sector, although faced with various challenges, had been establishing a new middle class and fueling demand for new goods and services.
Referring to a report published in 2013 by Omidyar Network on the challenges of SMEs in Africa, Adebanji highlighted that the biggest challenges limiting the productivity of many entrepreneurs across the continent included skills and talents, infrastructure as well as inconsistent policies that impacted businesses negatively.
However, despite those challenges, the ACA boss said that the SMEs sub-sector in sub-Saharan Africa had been growing at faster pace than other developed nations. He said: “Albeit slower, Africa is still growing.
The continent is on pace to achieve GDP growth of over 4.5 per cent in 2015 – still faster than most developed economies. “Furthermore, according to the IMF, over the next 20 years sub- Saharan Africa will become the main source of new entrants into the global labor force.
At the heart of this growth are SME’s. “SMEs will create around 80per cent of Africa’s employment, establishing a new middle class and fueling demand for new goods and services.” Meanwhile, Adebanji said that what should be the priority for both the public and private sector is creating an enabling environment for SME’s to succeed.
Speaking further on the financial challenge, Adebanji said that the cost of accessing capital is viewed as prohibitive to the SMEs, while the cost of entry capital as well as cost of debt capital hindered company formation and growth.
Enumerating additional challenges around finance, he noted that SME owners were not familiar with providers of capital, adding that financing providers due diligence requirements were often difficult for entrepreneurs to meet. Suggesting solutions to the identified challenges, he said that the sub-sector required participation from public, private and education sectors.
He also recommended that there was need to reduce bureaucracy for early-stage companies to access government funding in order to provide ‘softer’ sources of financing for less experienced entrepreneurs.
He further charged the government to expand or initiate local angel investing ecosystems to ensure the availability of the most appropriate type of funding for start-ups; provide tax and other incentives to formal, as well as informal (e.g., family and friends), angel investors to make it easier for people who have extra cash to invest in start-up businesses and reduce their risk.
In addition, he canvassed the need for provision of tax and other incentives for large clients of early-stage ventures to provide supplier credit to incentivize and reduce the risks suppliers take when providing generous payment terms and/or stock to new ventures as well as educate entrepreneurs about possible sources of funding outside banking systems.
Specifically on education, Adebanji said there was the need to improve financial literacy by teaching people how to develop business plans.

Source: NationalMirror