Strategic Opportunities for African SMEs in the Post-Corona Economy

The covid-19 pandemic is having an adverse impact on the global economy which has caused an enormous concern among all world leaders. According to the recent World Bank study, the cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around USD 9 trillion, greater than the economies of Japan and Germany, combined. Global oil prices also estimated to decline by 42% in comparison to the 2019 average price. 

The African economy is no different; sectors like tourism, transport and oil industry are among those which will be highly affected by the pandemic. The African continent will experience the exogenous effects due to the remittance decline from African Diaspora significant decrease on the foreign direct investment inflows, development assistance and illegal financing flows. On the other hand, it will experience endogenous effects as a result of the rapid wide spread of the virus throughout the continent; the possibility of  huge morbidity and mortality rates that highly affects the local economic activities and lessen general demand and inevitably government tax revenues. In Africa, more than 85% of the workforce is in the informal sector, a demographic which will be highly susceptible to the external shocks despite high government expenditure on health at the moment and the deliberate support of domestic economic activities. Despite these signals, real impacts of the pandemic on economy remain to an extent uncertain. 

The pandemic highlights the policy gaps in our current system that impeded the vital conditions for well-being and resilience. The situation further exposes the global inequality and the highly fragile health care system even in the developed countries. The situation therefore provides an eye opening moment for the world leaders and policy makers on adjusting their priorities and re-shaping the development. Particularly, it is a chance to shift towards creating a more inclusive and sustainable markets system. The post covid-19 leaders will be expected to significantly change the global supply chain. Already in the light of the pandemic, US and Europe are re-thinking ways of how to diversify their supply chain and there’s a hope that Africa will be the next China in the global eco-system. 

An overhaul or shift creates an enormous market opportunities for African Small and Medium Enterprises. It will also be an opportunity to fill the huge demand gap that will be created in the African continent following the African Continental Free Trade Agreement. The negative impact of China’s lockdown on its ability to supply the world highlighted a flaw in China’s dominance further illustrating the problem with modern global supply chains. Thus, the post Covid-19 times will mark a shift by major global in their supply chain, relying less on China and diversifying the supply chain into Vietnam, Mexico, India and Africa. In the coming years, there’ll be a highly decentralized manufacturing trend, where companies will be looking for new, smart and diverse production places. The transition of supply chain will be highly backed by the digitization of the paper work that accompanies global trade. Despite the fast advancement of technology, the relationship between buyers and sellers still remains predominantly on paper. This pandemic will shape the future which will be highly dependent on the technology. Creating a smart and technology based supply chain is the ultimate way to build a sustainable production system.

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What are the Post Covid Opportunities for African Small and Medium Enterprises?

African SMES should be smart in identifying new opportunities that could emerge in their countries as a result of the pandemic. There is a bunch of opportunities for one to study and tap into, the emerging opportunities include; education, transportation, telemedicine, M-health event catering, E-commerce and delivery services. 

Education  

During the pandemic, majority of the government leaders passed stay at home orders for the education sector in order to protect the possible wide spread of the disease among students and only online learning was left in place. However, most African countries could not put in place an efficient on-line learning system. With the continent’s 46% connectivity gap, it’s unrealistic to think of digital learning. Therefore a business that innovates on solving the connectivity barrier throughout primary, secondary and tertiary education can earn a huge profit while parallelly providing an e-learning platform which can serve tens of millions of Africans at a minimal cost. This can awaken education policy makers in Africa to find alternatives of the traditional learning, as a matter of fact the Small and medium enterprises in Africa can leverage such an opportunity. 

E-Commerce

Another huge and untapped opportunity lies on the on the e-commerce and delivery services as there will be a customers’ behavioral change, especially in the African middle class economy. Despite the current infant stage of the sector due to the logistic and supply chain challenges, the post-covid dynamics will bring an enormous demand fueled by change in the customers’ behavior that will highly demand the e-commerce services. During the pandemic e-commerce industry is already booming even after the lifting of most lockdown measures, this implies the need for this service.

In the light of African Continental Free trade agreement (ACFTA), the slightly longer recovery time of Chinese manufacturing, a strong commitment by the African leaders to the Treaty and the looming shift of the global supply chain to Africa holds a promising future for African SMEs. The AfCFTA will allow African SME’s to enter new markets, expand their customer base and innovate new products and delivery models. The African Development Bank approves a $4.8million grant to accelerate the African Continental Free Trade Agreement and each AU member state is showing the support needed to create a conducive business environment for ACFTA by placing policy and enabling business environment. Post Covid might result a significant decrement in the FDI inflow into the continent, this can be both a threat and an opportunity for the Continent. 

In conclusion, African Small and Medium Enterprises need to use the strategic opportunities presented to them as a result of the pandemic and be ready to serve the high demand gap which shall be created globally. Wise strategy on how to enter into the markets in the above listed business sectors will determine the success of African SMEs post-Covid.

Goodluck to African SME’s!