African leaders would help speed up the recovery process in most African economies if they can continue to support the MSMEs.
By
Johnson UcheAfrican
leaders have been enjoined to promote and support policies that would
strategically support the
Micro, Small and Medium-sized Enterprises
(MSMEs) and speed up the recovery process in most African nations.
This was stated in the Foresight Africa 2021 report,
a publication of African Growth Initiatives of the Brookings
Institution, a non-profit organization devoted to independent research
and policy solutions.
According to the report:
- “Policymakers
must continue to support businesses—both smaller enterprises and larger
firms—that have been disrupted by the crisis.
- “Arguably,
the greatest priority must be to bolster the micro-, small-, and
medium-sized enterprises (MSMEs) that are key to African commerce and
account for 83 percent of private-sector employment in Africa.
- “Such
businesses, which number between 85 million to 95 million, are
especially vulnerable to COVID-19 mitigation measures given they are
often characterized by person-to-person contact. By just May 2020, 75
percent saw their revenue decline by over 30 percent.
- Finance
will continue to be one of the greatest needs for African businesses;
indeed, only 5 percent of MSMEs across the continent feel they have
received adequate support from lenders. Provided governments navigate
Africa’s fiscal challenges with skill and determination, they can
continue offering suitable financial support to small enterprises; in
addition to indirect support through value chains and banks, such
assistance might include loans, debt forgiveness, low-interest rates,
assistance with payments to suppliers, and reduction in utility costs.”
Ways Governments can provide financial support to MSMEs
- “There
are several steps that governments can take to provide financial
support to MSMEs. One option is to assist MSMEs through larger firms in
their value chains, which might include upstream suppliers and
downstream buyers.
- “Governments can provide easier
liquidity and working-capital terms to these larger players, and they
can make such support conditional upon these firms’ providing favourable
financial terms to MSMEs.
- “Governments can also
consider providing risk guarantees or first-loss mechanisms while
requiring banks to on-lend under the chosen set of criteria and
guidelines in order to encourage banks to lend to MSMEs.
- “Policymakers
must not lose sight of the region’s informal sector, as 84 percent of
African MSMEs are unregistered. Policymakers can take advantage of the
opportunity created by the crisis to convince larger numbers of informal
enterprises to register, and thus gain better access to finance and
markets. Moreover, to promote registration, governments could shape bold
campaigns and attractive packages, potentially including multi-year tax
holidays and capacity building for MSMEs.”
Why this matters
- Micro,
Small and Medium-sized Enterprises (MSMEs) are widely recognized for
the important contributions they make to sustainable development, in
terms of contributions to economic growth, creation of jobs, provision
of public goods and services, as well as poverty alleviation and reduced
inequality.
- The pandemic has seriously impacted the MSMEs in
all African nations as it has exacerbated economic hardship and may have
pushed more than 40 million Africans into extreme poverty.
- It
is imperative that the African leaders focus on enabling businesses to
respond effectively to these new and unfavourable conditions to which
most MSMEs have been exposed to.
Johnson
is a risk management professional and banker with unbridled passion for
research and writing. He graduated top of the class with B.sc
Statistics from the University of Nigeria and an MBA degree with
specialization in Finance from Ambrose Alli University Ekpoma, with
fellowships from the Association of Enterprise Risk management
Professionals(FERP) and Institute of Credit and Collections management
of Nigeria (FICCM). He is currently pursuing his PhD in Risk management
in one of the top-rated universities in the UK.
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