Focus on youth and small business in greatest need
EDFI High Level Event on Private Sector in Africa
Strengthening corporate governance to ensure sustainable economic activities, putting more trust and money directly into the hand of African entrepreneurs, especially SMEs, developing focused and scalable business models as well as creating adequate finance products and structures for Africans rapidly growing and creative young entrepreneurs – these were key demands and messages resulting out of the EDFI´s High Level Event on “Africa – Towards a sustainable recovery for the private sector” at the Finance in Common Summit, the first global gathering of 450 Public Development Banks (PDBs) and Development Financing Institutions (DFIs), 11-12th November 2020.
In his opening remarks, EDFI Chair Bruno Wenn stressed the key role of the private sector in Africa – in particular micro, small and medium-sized enterprises, MSMEs. According to World Bank Statistics they account for 90 percent of all businesses in sub-Saharan Africa and for 40 percent of the national income in these countries. To effectively use and further enhance this enormous potential, MSMEs need an appropriate environment, training and access to sustainable finance, as Wenn pointed out. These messages were very much echoed in the video interventions made by two major investors, Sergio Pimenta, VP Middle & Africa at the International Finance Corporation (IFC) and Aziz Mebarek, founding partner and co-founder of Africinvest. EDFI and a broader coalition of international PDBs and DFIs take their responsibility by providing inclusive financial solutions, technical assistance and dedicating at least 4 bn US Dollars by the end of 2021 to smaller businesses in Africa, as announced during the summit.
Ifeyinwa Ugochukwu, CEO of the Tony Elumelu Foundation in Lagos, Nigeria, identified capacity building and access to capital as the two main critical issues for entrepreneurs in Africa. “We have our fingers on the pulse”, Ugochukwu said. While very much appreciating the announced coalition for supporting private sector in Africa and the engagement of the DFIs, she also pointed out that more needs to be done to “put money directly in the hands of entrepreneurs”. According to her, there is a certain “aversion” to trust African entrepreneurs. In order to overcome this, Africans, including governments, have to create an enabling environment for business, on one hand. On the other hand, it is crucial to focus on these entrepreneurs who really need it and not only on those companies, that are already well established and have big turnovers. Ugochukwu added: “Nobody is playing at the bottom of the pyramid.” In fact, this is where immense potential for growth and job creation resides.
Diane Karusisi, CEO of the Bank of Kigali, agreed to the demand to put money in the hands of entrepreneurs, “and that is what we and other banks are doing. It is our job.” As an example, Bank of Kigali, created a Working Capital Window to provide money at low costs, “to keep the lights on in these challenging times, as we say in Rwanda.” This includes strong collaboration with microfinance institutions. Nevertheless, corporate governance in many cases needs to be improved, in order to ensure access to capital and ensure sustainability, Karusisi said. Finally, products and structures to finance the growing community of “creative and brilliant” young African entrepreneurs are needed.
Kola Masha, Managing Director and Co-Founder of Babban Gona, a Nigerian agricultural franchise, also asked for a different and fresh approach to support MSMEs in the future. According to him, small enterprises struggle with a lack of access to knowledge, capital, supply chains and markets. That is why hyper-focused and scalable business models are needed – and the work of Babban Gona, “West-Africa’s single largest maize entity”, could be taken as a role model. Masha: “With our financing initiatives, realized with several partners, we make well over 1 million jobs impact.” In order to make such models work, it would be crucial that large amounts of capital are also provided to low-margin economic activities, which is often the case in the agricultural sector.
Marjeta Jager, Deputy Director General for International Cooperation and Development at the European Commission, closed the event by sharing an update on the ambitious response the EU has provided to the developing economies since the beginning of the Covid-19 crisis, with EUR36bn mobilised by Team Europe for immediate response to the pandemic. Support to private sector, and especially MSMEs, is at the core of the External Investment Plan, that was launched in 2017, and which will be continued under the next EU budgeting period starting in 2021.
Financing the smaller businesses, addressing the needs across the whole life of companies from start-up phase to IPOs, the need for policy dialogue and capacity building and education are key solutions according to all speakers. As an overall demand, they also agreed, that African entrepreneurship should be much more visible on the global agenda as well as on the one of African governments.