The European Business Council for Africa

The African Union 2nd Annual Micro, Small and Medium sized Enterprises (MSMEs) Forum has concluded adopting pathways to enhance support towards the MSMEs ecosystem with practical policies and adequate resources. The forum focused on Start-up Acts as instrument to Foster Development and Innovation in Africa, recognizing the importance of legislation in creating an enabling environment for the emergence and growth of start-ups across the continent. Start-ups are major contributors to innovative socio-economic solutions in Africa and continue to generate high rates of growth and job creation particularly for the youth, advancing inclusive growth and sustainable development in Africa.

The development and implementation of Start-up legislative Acts expand the avenues for governments and investors to adequately extend hard and soft support mechanisms for capacity building in areas of product development, access to finance and markets, supporting infrastructure, accounting, and marketing, among others.

Led by the African Union Commission, Department of Economic Development, Trade, Tourism, Industry, and Minerals, over the five-day period the participants, that included policymakers, entrepreneurs, and development partners reviewed the effectiveness of existing pathways and implementation of commitments in various thematic areas and made recommendations on how to advance action that centre MSMEs in the industrial development agenda. The discussions focused on innovative Financing models for African Start-ups and navigating the Seed Funding process; avenues for MSMES to leverage on the African Continental Free Trade Area (AfCFTA); strengthening partnerships and policies to advance the sustainable development of women and youth-led MSMEs; leveraging technology for enhanced business performance; branding and marketing concepts for MSMEs; and understanding the industrialization financing landscape in Africa.

At the forum, training and masterclasses were offered to participants on various thematic areas. Entrepreneurs from across the continent exhibited their goods and services attracting investors and customers alike. The forum outcomes were among others, identifying priorities for African countries in the World Trade Organization (WTO) Ministerial discussions on MSME issues; consideration of the Terms of Reference Establishing the Technical Working Group on Financing Industrialization; and drafting Terms of reference to Conduct a Feasibility study for the Establishment of an African Industrialization Fund (AIF) and Strategy for Resource Mobilization.

H.E Amb. Albert Muchanga, Commissioner for Economic Development, Trade, Tourism, Industry, and Minerals, observed that access to finance remains the most cited obstacle facing SMEs to grow their businesses. “According to the AUDA-NEPAD, MSMEs are mostly challenged by their capacity to afford loan instruments because of the high bank interest rates varying between 20% and 25%. Other financial providers such as microfinance organizations would normally charge even higher interest rates, ranging between 40% to 50%. Such high interest rates are a huge hinderance to the growth of MSMEs on the continent and we need to work together to find solutions for MSMEs. One of the possible sources would be African governments, in their Start-up Acts to provide interest free loans. This is what has spurred start-up growth and development in many countries of the world.”

According to the World Bank’s estimate, 600 million jobs will be needed by 2030 to absorb the growing global workforce, which makes SME development a high priority for many governments around the world. In emerging markets, most formal jobs are generated by SMEs, which create 7 out of 10 jobs.

Amb. Kheswar Jankee, President of World Association for Small and Medium Enterprises (WASME), emphasized the crucial role that startups are playing in advancing economic development in Africa and discussed the regulatory frameworks for an environment that is favorable to startups. “Startups are playing a key role today in adopting a sustainable, inclusive and innovative culture, and it is up to both governments and private sector representatives to setup the framework which adequately complements regulations with ensuring that startups have a competitive edge”.  

MSMEs are the backbone of many economies, particularly in developing nations, and play a critical role in eradicating poverty and promoting inclusive development, stressed Dr. Amany Asfour, President of AfBC. Dr. Asfour further emphasized the significance of governments and stakeholders offering MSMEs the necessary resources and support, including access to capital, technology, and capacity-building initiatives.

Speaking on the significant role MSMEs play in the economic environment, Mr. Patrick Dupont, Head of Political Section, European Union Delegation to the African Union, emphasized on job creation and sustainable development. “These significant economic contributors were constrained by a lack of access to capital and other resources, knowledge of the market, a suitable regulatory environment, and the requirement for public sector assistance to seize opportunities when they arose. The EU is focusing on enhancing the capacity and success of Micro, Small, and Medium Enterprises (MSMEs) in Africa to contribute to economic growth and sustainable development. This includes fostering job creation and decent jobs for young people, providing necessary frameworks for start-ups, and promoting the growth of MSMEs.”

The 2nd AU MSME Forum aimed to promote, upskill, and strategize for a better, more inclusive African SME sector to realize Africa’s industrialization in the context of the integrated market economy. The forum brought together key stakeholders from across the continent to discuss innovative solutions, share best practices, and explore opportunities for collaboration to drive sustainable growth and development in the MSME sector.

The 2nd AU MSME Forum featured a pitching session on startups, where entrepreneurs had the opportunity to present their innovative ideas and business models to a panel of industry experts, potential investors, and private sectors. This session provided a platform for networking and collaboration, fostering connections between aspiring startups and established players in the MSME sector. Over 50 MSMEs participated in the pitching session including entrepreneurs from various industries such as technology, manufacturing, and retail. The Pitching session concluded with an announcement of the top three MSMEs that would be moving forward to the next stage.

The African Union Commission will facilitate the start-up pitch winners' participation in the upcoming Intra-African Trade Fair (IATF), which is scheduled to take place in Cairo, Egypt, in November 2023. This initiative aims to support and promote African startups by providing them with the opportunity to showcase their products and services on a global platform.

The Forum was organized in close collaboration with AUDA-NEPAD, ARSO, ImpactHer, International Trade Center (ITC), All African Association of SMEs (AAASME), United Nations Industrial Development Organization (UNIDO), and the Pan African Chamber of Commerce and Industry (PACCI)

The Ministerial Declaration of Algiers on Start-ups in Africa seeks to establish an African Startup Fund and supports the second pillar of the African Union Small and Medium Enterprises Strategy, which focuses on start-ups, growth-oriented businesses, technology, and innovation. Numerous suggestions in other African nations that reflect the growing interest in enhancing the enabling environment for start-ups and investors have been made possible by the enactment of Start-up Acts in Tunisia and Senegal, in 2018 and 2019, respectively. Start-up Acts are a collection of regulations created to strengthen the incentives for young people to launch businesses, investors to participate in promising startups, and other ecosystem actors to provide support where it is needed.

Source: African Union