MSMEs which form a large part of individual economies in Africa have little or no absorption capacity to the effect of the pandemic

The African Union Development Agency and Ecobank Group have announced the key focus areas of their joint initiative to support Africa’s Micro Small and Medium Enterprises

Micro Small and Medium Enterprises – MSMEs are critical to Africa’s economy as they account for almost 85% of all private-sector employment

The African Union Development Agency) and Ecobank Group kick-started their collaboration with a virtual workshop facilitated by McKinsey, which held on May 26, 2020. The workshop provided an opportunity to reinforce the commitment of national, regional and continental institutions to work together to support MSMEs following the COVID-19 pandemic. High-level representatives from the African Union Commission, regional development banks, development financial institutions, international organizations and commercial banks from the continent came together to focus their efforts on supporting the MSMEs segment and protect the livelihoods of millions of Africans. 

MSMEs are critical to the African economy as they account for almost 85% of all private-sector employment. Vulnerable jobs are in 5 sectors in Africa, including Trade, Agriculture, Manufacturing, Construction and Hospitality. Some 25 – 160 million jobs in Africa are vulnerable due to the impact of COVID-19. This presents an opportunity to come together to increase capabilities available to MSMEs across the continent. Leaders acknowledged the need to continue ongoing efforts to support MSMEs while leveraging organizational capabilities for medium and long-term support.

Governments have committed an average $20 billion to support MSMEs recovery, however, access to existing commitments will likely be limited to registered medium enterprises due to criteria outlined by governments and the reducing appetite of commercial banks to loan to small scale enterprises. The funds allocated for MSMEs are insufficient in most countries, leaving the biggest gaps in micro to small unregistered businesses. Based on this estimated financing gap, only 6 out of 20 countries have made commitments that can cover the MSMEs labour costs, including South Africa, Egypt, Cote d’Ivoire, Gabon, Chad and Cape Verde. For this reason, partnerships such as that being co-led by Ecobank Group and AUDA-NEPAD are vital.

AUDA-NEPAD Chief Executive Officer Dr Ibrahim Assane Mayaki emphasized that the success of this initiative will depend on the number of partners and of the quality of the partnerships. He commended all the attendees for their interest and called their respective organizations to join as partners to drive this mission together.

Ade Ayeyemi, Ecobank Group CEO remarked, this initiative is focused on empowering MSMEs, restarting and growing Africa’s economies with the knowledge that a significant number of jobs will be lost and businesses incapacitated. The workshop provided a platform for stakeholders from East, West, Central, North and Southern Africa, to identify priority areas and strengthen our collective approach to safeguarding this sector, especially the micro-enterprises. We believe that a multilateral approach which includes organizations, private sectors and governments, will be beneficial and imperative for a successful implementation of support for Africa’s MSMEs.