It’s getting easier for SMEs to do business in Africa – and technology is playing a key role

Microsoft 4Afrika

The annual World Bank Doing Business report was released last week, and shows the overall business climate in sub-Saharan Africa is steadily improving. Looking at the ease of starting and maintaining a business, Mauritius and Rwanda rank among the top 20 countries globally, while Nigeria and Togo are among the top global improvers. By Soromfe Uzomah, Head of Strategic Partnerships at Microsoft 4Afrika

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 still remains 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 unreliable electricity, registering property, paying taxes and managing debt. But one trend is clear: As internet access, technology adoption and digital innovation improves, so do many of these challenges.

Technology the enabler

The use of online systems for tax filing, for instance, improved business climates 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, contributing to its improved score. It’s noteworthy that, globally, markets that scored the highest in the report all have widespread use of electronic platforms.

By digitising and automating administrative services, SMEs are able to go to market faster and operate more efficiently, getting precious time and money back to focus on doing 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 platform to help SMEs register intellectual property, registrations increased by 100 percent. And the knock-on effect of registering and protecting IP 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. In South Africa, one study found that 78 percent of small businesses choose accounting software to manage their financial records.

Foundations of access needed

But the accessibility and success of these platforms hinge on reliable access to electricity and the internet. Many African countries are still below the 20 percent critical mass necessary to achieve improved efficiencies and information flows for economic growth and innovation. In South Africa, more than half of SMEs list internet access as their principle obstacle to adopting technology.

Investments into more stable infrastructure are needed to improve business climates. But while infrastructure catches up, private-sector 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 also 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 WiFi hotspots and solar-powered base stations, connecting some 600 SMEs in Nanyuki to high-speed, low-cost internet.

An ecosystem for growth and development

While governments play a leading role in building supportive business climates for SMEs, the responsibility doesn’t, and shouldn’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, for example, 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 more.

Africa’s market for digital solutions targeting SMEs is growing. In East Africa, Africa 118 provides online directory and marketing services, and Popote Payments supports digital budgeting, expenditure tracking and accounting. In West Africa, SpacePointe helps SMEs build affordable online marketplaces and ecommerce strategies. FirstBank has also partnered with Microsoft to offer a discounted package of technology and educational resources. Historically, these solutions have been financially-backed by the private-sector. But imagine how much more could be achieved with additional public-sector support, similar to the UK?

The shared benefits of supporting SMEs 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, however, will be involving SMEs very much in the innovation and policy-making process – ensuring their needs are meaningfully heard, and met.

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