Using tech to unlock markets for Africa SMEs

14th October, 2018 – African spending is projected to reach $6.7 trillion by 2030, with some reports indicating a $2.1 trillion consumer spending projection by 2025. While it is exciting to share the continent’s potential, it still faces many hurdles: spotty development, poverty, limited regional trade, widening infrastructure deficits, and weak institutions.

If the continent’s growing spending power translates into economic development, there is an obvious imperative for bold, large-scale initiatives. So, will the new African Continental Free Trade Agreement (AfCFTA) play this role?

What advantages does technology present? And do these allow for unlocking innovation, growth and productivity on the continent – especially for its SME segment?

Despite the challenges above, African countries trade internally and externally, but a deeper look at the split is revelaing: Research from the United Nation’s UNCTAD indicates that intra-African trade was just 10.2 per cent of the continent’s total trade in 2010.

An updated report from UNCTAD compares intra-continental import percentages, demonstrating that intra-Africa exports come in at least 40 percentage points lower than Europe and Asia.

Turning inwards for growth

The introduction of the African Continental Free Trade Area (AfCFTA) is the continent’s response. It aims to harmonise the liberalisation of trade among member countries, creating a single market based on free movement of people, goods and services.

But AfCFTA is not a panacea for all of Africa’s economic woes. Firstly, there are legitimate worries that the benefits will be unevenly distributed. Plus, there is the loss of tariffs – estimated to contribute $4.1 billion a year to state incomes.

The UNCTAD research, however, counters that removing these would ultimately create an annual welfare gain of $16.1 billion. Critics also caution that it places too much emphasis on cutting tariffs without considering the disparate production capacities of countries, arguing that it will favour Africa’s more developed economies.

Technology could mitigate some of these risks. Two examples are digital commerce platforms and advances in fields like data analytics, artificial intelligence, and blockchain technology.

The ascendance of digital platforms and the adoption of mobile technology are positive trends, acting as effective conduits for the exchange of value. This is strengthened when we consider that 95 per cent of firms in sub-Saharan Africa are SMEs.

By aggregating demand across the continent, these platforms give small and medium businesses opportunity to access new markets

Beyond the many levers that are key to its success, the strategic deployment of technology on the continent will be essential to its success. Digital transformation must be a keystone of the vision for a more integrated African economy.

Written by Business Daily

https://www.businessdailyafrica.com/analysis/columnists/Using-tech-to-unlock-markets-for-Africa-SMEs/4259356-4805560-c3dlk2/index.html