The 2020 World Bank Doing Business report was recently released, and shows the overall business climate in sub-Saharan Africa is steadily improving. Looking at the ease of starting and maintaining a business, the region as a whole improved one percentage point over the last year, with a few standout countries. Mauritius and Rwanda rank among the top 20 countries globally, while Nigeria and Togo are among the top global improvers.
In the last year, countries across the region implemented 73 reforms, removing certain red tapes and obstacles for SMEs. While this is positive development, sub-Saharan Africa is still classified as a weak-performing region overall, with an average ease of doing business score of 51.8 – below the global average of 63.0.
Small businesses continue to battle with challenges including unreliable electricity, property registration, tax payment and debt management. But one trend is clear: As levels of internet access, technology adoption and digital innovation improve, so do many of these challenges.
The enabling power of technology
The use of online systems for tax filing, for instance, improved the ease of doing business scores in Côte d’Ivoire, Kenya, Mauritius and Togo. Nigeria also introduced the e-payment of trade fees, reducing the time to import and export, and an online platform for registering businesses, strengthening its ranking. Globally, markets that scored the highest in the report all have widespread use of electronic platforms.
Digital platforms are able to more quickly process and streamline administrative tasks, giving SMEs back precious time and money to focus on doing, and growing, business. Removing the burden of paperwork and long queues also has an incredible motivating factor. When the Kenya Copyright Board worked with Microsoft to develop an online, automated platform to help SMEs register intellectual property (IP), registrations increased by 100 percent. Additionally, one study found that the knock-on effect of increased IP registration is economies that are 26 percent more competitive and twice as likely to produce and export complex, knowledge-intensive products.
SMEs are eager to adopt these digital services to improve their productivity. In South Africa, The State of Small Business report found that 78 percent of small businesses surveyed choose accounting software to manage their financial records.
Foundations of access needed
But, the same report found that more than half of SMEs list internet access as their principal obstacle to adopting technology. The accessibility and success of these digital platforms depends on reliable access to electricity and the internet. In terms of connectivity, many African countries are still below the 20 percent critical mass necessary to achieve improved efficiencies and information flows for economic growth and innovation.
To tackle this, more investments into reliable infrastructure are needed. However, while infrastructure develops, innovation can help to bridge the gap. In Nigeria, ICE Commercial Power has introduced an off-grid, solar-powered solution to connect 10,000 SMEs to electricity. The solar grids are linked to a Microsoft cloud-computing platform, which enables remote maintenance of the equipment (reducing any downtime) and lets SMEs manage and pay for their electricity use as they go. Similarly, in Kenya, Mawingu Networks has introduced Wi-Fi hotspots run on solar-powered base stations, connecting some 600 SMEs in Nanyuki to high-speed, low-cost internet.
An ecosystem for growth and development
While governments can play a leading role in building supportive business climates for SMEs, the responsibility doesn’t sit solely with them. Public and private sector organisations can collaborate on building an enabling ecosystem, where private-sector innovation and services are backed by public-sector policy to accelerate growth.
Recently, the United Kingdom took regulatory action by forming the Banking Competition Remedies Ltd, which administers funding directly to financial institutions that address SME needs. While this action was specific to the banking industry, it’s a great example of public-private collaboration to learn from. Africa’s market for digital solutions targeting SMEs is vibrant. In East Africa, Africa 118 provides directory and marketing services to SMEs, while Popote Payments supports budgeting, expenditure tracking and accounting. In West Africa, SpacePointe helps SMEs build affordable online marketplaces and ecommerce strategies. Finally, FirstBank, Vodacom (and soon to be Jumia) have all partnered with Microsoft to offer a discounted package of technology and educational resources to their SME customers.
While the private sector has historically taken the lead investing in these kinds of solutions, the United Kingdom example demonstrates ways the public sector can get involved, encouraging innovation that benefits small business growth.
The shared benefits of supporting small businesses are numerous. Governments benefit from boosted economies and job creation. Private-sector businesses attract a large and lucrative consumer base. And SMEs are able to access the resources they need to succeed. Key to this collaboration will be involving SMEs very much in the innovation and policy-making process – ensuring their needs are meaningfully heard and met.
By Soromfe Uzomah, Head of Strategic Partnerships at Microsoft 4Afrika
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