Sub-Saharan Africa is home to the largest number of people in extreme poverty — about 400 million, more than the rest of the world combined. The region also has more conflict-affected countries than any other. Nevertheless, it is a fruitful environment for entrepreneurs.
Yet it is a continent of vast opportunity for businesses, according to Shaping the Future of Africa, a new IFC report. By 2030, 100 million people are expected to join Africa’s middle- and high-income groups, boosting the total to more than 160 million. Household consumption and business spending are growing rapidly — and could total $5.6 trillion by 2025.
Sub-Saharan Africa needs to create a large number of jobs
That means the private sector has a crucial interest in addressing the region’s most urgent development challenges — its inadequate infrastructure, its rapid urbanization, and its need for jobs that can lift people out of poverty. A few investment companies are helping businesses improve productivity and establish links to broader markets. They expand financial and social inclusion, and boost prosperity in ways that help limit conflict. Sub-Saharan Africa needs to create a large number of jobs to keep up with its rapid population growth — a challenge small and medium enterprises are best suited to address.
If you believe in the potential of Small and medium-sized enterprises (SMEs) as the driver of economic growth, then you know that they need to rely on long-term patient capital, and the right human capital. Unfortunately, SMEs have extremely limited access to all forms of capital. They are at the bottom of the list for commercial loans from banks, and there are very few funds that target the small investment opportunities that are accessible to small, growing businesses.
Platform to promote African entrepreneurs
I spent the summer in a fund that focuses on supporting SMEs in the agricultural sector of West Africa. During this fulfilling experience, I witnessed first-hand the difficulties finding financing sources for early stage ventures. This gap slows the private sector development in many countries. There is a real need to create the conditions that favor homegrown innovation. Despite the challenges, institutions such as the Jacobs Foundation have facilitated the financing and support of early stage ventures in West Africa through several impact investing initiatives the Transforming Education in Cocoa Communities (TRECC) provides. Other international institutions such as the AFD (Agence Française de developpement) have announced an investment vehicle that will aim at providing a platform to promote African entrepreneurs, through encouraging collaboration and knowledge sharing. These initiatives are more than ever needed to enable and sustain innovation on the African continent and drive growth.