Digitization is Essential for African SMEs to Survive Economic Hardship

SME survival is critical to Africa’s socio-economic growth and digitisation is key to building business resilience says Gerald Maithya, Startups Lead, Microsoft Africa Transformation Office.

Africa cannot avoid the impact of global economic hardship. The UN projects global output growth to slow down from an estimated 3.0% in 2022 to 1.9% in 2023, one of the lowest growth rates in recent decades.

A UN report Africa: Economic growth decelerates before full recovery from pandemic-led contraction, speaks to the expected ramifications of higher interest rates in African economies.

Maithya says: “SMEs anchor the economies of countries and contribute to inclusive socio-economic growth. In emerging economies, SMEs account for 40% of GDP and generate at least 90% of new jobs.”

They also play an important role in safeguarding last mile delivery of goods in the supply chain, he points out.

The importance of digital infrastructure cannot be underestimated Maithya explains, especially because statistics show that 80% of SMEs fail in the first five years of operation.

“There is a need to enable tools that SMEs can utilise to collect and manage transactional data which can be used to provide valuable business insights and guide decision-making that can be leveraged to create financial reports,” says Maithya.

Maithya says that while access to the internet is not a new problem in Africa, there are efforts to address this with more sophisticated technology and the arrival of new ISPs.

In December last year Microsoft announced the Airband initiative which aims to provide access to the internet for 100 million Africans by end of 2025.

Maithya continues: “The initiative partners with African start-ups that use TV white space and other innovative last-mile access technologies to overcome challenges to affordable internet access in unconnected communities. Accelerated internet adoption is the precursor to digital enablement.”