3 lessons South African youth can learn from African countries with thriving SME sectors

This is according to Matthew Cumming, Chief Investment Officer at Business Partners International, who says that one of the unique characteristics of proud African entrepreneurship is its ability to solve problems at the grassroots level. “Nigerian digital bank Kuda, proudly called the ‘Freedom Bank,’ has made phenomenal progress in making banking and financial management more accessible to ordinary Nigerians.

There are many similar examples across the continent, including SafeBoda in Uganda, a start-up that aims to revolutionize the way motorcycle taxi drivers are perceived by the public and earn a living. Far beyond the economic benefits of building a thriving small business community, African SMEs represent a huge potential for impact—changing lives, families, and communities.

“All eyes should now be on Africa, on the small businesses of the future that will have the potential to not only provide the continent with a global presence, but also deliver important solutions to urgent problems,” says Cumming.

Technology can level the playing field

By now, there is much that South African young entrepreneurs can learn from some of Africa’s key small business territories. Kenyan SMEs, for example, are leading the pack in terms of how technology can be used to leapfrog countries in the developed world. In the past, a lack of financial resources and global influence has put African countries on the defensive. However, several Kenyan SMEs have managed to leverage digital technology to overcome these challenges and get their foot in the door.

Kenya’s vibrant startup scene, as well as the relatively large number of tech innovators emerging from the region, have earned it the affectionate nickname: Silicon Savannah. M-Pesa and M-Kopa are just two of the names that stand out as leaders in the Kenyan tech arena.

“What these and other startups have leveraged is the ubiquity of technology—the same technology that is being built for and used by Kenyans can be used by people in other global territories. That gives these types of innovators the ability to scale exponentially,” Cumming says.

Ease of doing business should be a top priority

Rwanda also stands out as an African country with a thriving small business environment – ​​and with good reason. The country is known for its ease of doing business – a factor that can be attributed to the concerted efforts of the Rwandan government to reduce bureaucracy, create a conducive business environment and use statutory instruments to make the startup ecosystem more welcoming to newcomers.

For example, registering a business in Rwanda is relatively hassle-free and streamlined compared to other countries. The fast company registration process is one factor that earned Rwanda the title of second easiest place to do business on the continent, according to the World Bank’s 2020 Doing Business report.

In South Africa, says Cumming, this is one of the key lessons that needs to be applied to the way small businesses get off the ground. “Despite the introduction of the Red Tape Reduction Taskforce and banks offering fast-track business registration, entrepreneurs currently struggle with a certain level of red tape and often struggle to get through the initial stages of turning their idea into a fully-fledged venture. We hope the taskforce will yield more positive results for SMEs in the near future,” he says.

Leapfrog through local production

Mauritius stands out as an African leader in terms of the rapid growth and expansion of its small business base. While its travel and tourism sector has always been one of the main and most recognizable attractions for aspiring businessmen, Mauritius has also managed to diversify its economy.

The country was once known almost exclusively for its agricultural value and sugarcane production. But over the past few decades, the state and private sector have worked hard to expand the country’s production capacity into other sectors, including textiles, clothing, and pharmaceuticals. This has allowed the country to diversify in terms of both revenue and risk.

According to Cumming, South Africa can – and should – follow suit, “especially given that it is a country with rich natural resources. If we can create a more enabling environment for aspiring manufacturing plants and small businesses, we have the potential to outshine other leading African territories and make our country a global manufacturer. Not only will this bring enormous benefits to the economy, but it will also go a long way towards solving serious problems such as unemployment,” Cumming says.