MSMEs, Key divers to inclusive and sustainable development for emerging markets in Africa
Micro, Small, and Medium-sized Enterprises (MSMEs) play outsized roles in African economies, contributing an estimated 80% of the continent’s workforce in both formal and informal sectors. The economic growth and long-term sustainability for emerging markets lie in the development of MSMEs. The onset of the COVID-19 pandemic and ensuing containment measures not only affected large corporate entities but also MSMEs which experienced even greater challenges accessing finance. The African Union Development Agency (AUDA-NEPAD) with GIZ technical advisory support to the Continental Business Network (CBN) responded to the needs of MSMEs. AUDA-NEPAD collaborated with GIZ to launch the Call for Proposals – COVID-19: Economic Recovery Through Infrastructure Service Delivery. The intended objective of the initiative was to support small-scale infrastructure projects by providing technical advisory support to MSMEs through CBN.AUDA-NEPAD called upon MSMEs and Non-Governmental Organizations (NGOs) from the AU Members States to submit infrastructure project proposals for further technical advisory and market packaging to facilitate access to finance.
Sixty-one MSMEs project applications were received through the call for proposal. All sixty-one MSMEs projects were screened for eligibility then assessed for commercial viability to access the support offered by AUDA-NEPAD. Fifteen (15) businesses were shortlisted for verbal pitch presentations. Of these, four MSMEs were selected for business development support via GIZ/AUDA-NEPAD across three out of the four target sectors, renewable energy, water/sanitation, and ICT.
The four selected MSMEs projects, namely Aquaethanol, Cool Lion, Tripesa, and Water Compass, were offered support in business plan development, financial modeling, and pitch deck development. The MSMEs were granted a platform framed under the CBN to present business plans to potential private sector investors. Two MSMEs projects out of the four selected projects secured financial access from private sector investors. Those two MSMEs projects are Cool Lion and Water Compass.Cool Lion, an Ivorian renewable energy & energy efficiency manufacturer mobilized the following: USD 25.000 grant (IFT Foundation), EUR 264.000 (~USD 304.141) grant (ACP-EU Agri DI Programme). Water Compass, an Ugandan solar water pump installer, and operator mobilized USD 100.000 grant (Edward H Butler Foundation).
The success of this initiative addressed fifteen Sustainable Development Goals (SDGs) including No Poverty, Zero Hunger, Good Health & Wellbeing, and Quality Education. This is part of the reason GIZ continues to support MSMEs in infrastructure project development. The role of MSMEs proved to be effective in contributing to socio-economic development, which is why AUDA-NEPAD and GIZ draw lessons learned from the Call for proposal. The institutions learned that digitalization is a key strategy in building MSME and community resilience. Early-stage MSMEs require support to develop viable business models but also to attract financing to pilot projects to prove concept and leverage funding later. The main concerns facing MSMEs include access to capital (challenges relating to accessing credit/debt, start-up capital working, and short-term capital and long-term capital) and technical advice (challenges relating to financial modeling, strategy, contract structuring, and specialist technical requirements).
The support to MSMEs continues with AUDA-NEPAD and GIZ Green Infrastructure Corridors for the Intra-Africa Trade (support to PIDA) program. The focus is on assisting MSMEs to access capital through sound technical advice with a focus on commercial viability, regulatory, procurement compliance, and trade readiness. GIZ support to AUDA-NEPAD will focus on digital solutions within the green infrastructure and trade domains. The second call for proposals will be opened by mid-2022 to early-stage and established MSME where the aim is to develop viable business models to attract financing to pilot projects and later stage MSMEs for expansion.