Report: Africa Needs Millions of MSMEs to Create Required Jobs

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By Emma Okonji

A recent report released by Jumia Nigeria has stated that population growth across African countries has been rapid and that the continent was so experiencing rapid urbanisation with rural dwellers moving to the few megacities and placing enormous pressure on infrastructure in cities.

According to the report, Africa’s population growth has created a lot of unemployment, stating that the only solution is for African governments was to begin to encourage more micro, small, and medium scale enterprises (MSMEs) in the continent that will in turn create millions of jobs to provide meaningful work, sustain livelihoods and provide people with a pathway out of poverty.

Analysing the report, which focused on Africa and the negative impact of its large population growth, the Chairwoman, Jumia Nigeria, Juliet Anammah, said due to the impact of COVID-19, GDP in the continent was expected to contract to negative 2.5 per cent in 2020, from 3.4 per cent in 2019, the first recession in 25 years.

According to her, “Jobs in Africa today come from MSMEs. Of the 418 million people employed on the continent, 83 per cent are employed by MSMEs. Africa has 85 – 95 million MSMEs and of these 96 per cent are micro enterprises and half of them are engaged in Trade. “About 87 per cent of African MSMEs are in 10 countries with 77 per cent of the total African GDP, which includes Nigeria, Kenya, Tanzania, Egypt, Morocco, South Africa, Ethiopia, Algeria, Ghana and Angola.”

Anammah, however, said Africa has an advanced digital infrastructure that the continent could tap into and create jobs for Africans.

“Average Internet penetration in Africa is 39.5 per cent, with 525 million people have access to the internet. In six countries like Kenya, Libya, Seychelles, Morocco, Mauritius and Tunisia, will have mobile internet penetration that is above 65 per cent. About 80 per cent of Africans have mobile subscriptions.

“Smartphone adoption is 40 per cent and projected to be 67 per cent by 2025. This digital infrastructure is an asset which Africa can leverage to leapfrog development, create jobs and accelerate economic recovery post-CoVID,” Anammah said.

She explained that facilitating MSME transition from offline into the digital economy would drive economic growth and jobs in Africa

She cited a March 2019, study published by Boston Consulting Group, which projected that digital marketplaces operating in Africa like Jumia could create an additional three million jobs in Africa by 2025, which she said was far more than what manufacturing can achieve.

Given the impact of the COVID-19 pandemic on the African economy, she also cited the World Bank report which projected an increase in the number of people who fall into extreme poverty in 2020. World Bank Group President David Malpass had said: “In order to reverse this serious setback to development progress and poverty reduction, countries will need to prepare for a different economypost-COVID, by allowing capital, labor, skills, and innovation to move into new businesses and sectors” For Africa the digital economy is a critical new business sector to focus on going forward.”

For this to succeed Africa also needs the supporting environment for the digital economy to thrive and these include Policy Framework and the Right Narrative, Anammah said.

For the policy framework, she said the use of fiscal measures to incentivise African trade and MSME trade in particular to shift from largely offline/cash based informal economy to formal and traceable digital platforms, had become necessary, adding that traceability drives better planning, attracts capital and drives growth.

“A good example is rebates or reduced VAT/Sales tax for digital transactions made via mobile money or card payments. Such a shift also expands the taxable base in Africa.”

She further said that digital business models such as e-Commerce has long lead times to break-even.

She said policies could support by ensuring there are no roadblocks such additional taxation that applies to e-Commerce only and no other channels of commerce as well as ensuring that there are no direct/indirect foreign equity caps that impede the ability of resident e-Commerce platforms to attract long term equity to grow.

She further said since a smart phone is part of digital infrastructure that enables digital business models, African countries can remove tariffs on low-end smart phones till countries attain desirable levels of smart phone penetration. The target penetration level could be set at 70 per cent.

In the areas of the Right Narrative, Anammah said African media needed to support the digital economy and companies operating in that space in order to see successful outcomes and achieve the development needed.

This can come in the right narratives that will encourage investment into the sector, she said.