Entrepreneurship and small business support: Why SMEs are vital for economic resilience in Western Africa
Small and medium-sized enterprises (SMEs) in Western Africa constitute a large and vital part of the economy, but they also face significant challenges. In this article, the Western Africa Chapter explores the crucial economic role of SMEs in the region, delves into the various challenges these enterprises encounter, and suggests mitigation strategies to boost resilience.
SMEs in Western Africa: an economic driver
SMEs are Western Africa’s main industry driver. Their history can be traced back to the post-agricultural farming era, however as countries became politically independent, SMEs evolved as the main economic force and replaced centuries of subsistent farming. Today, they account for more than 90% of businesses and contribute half of most countries’ Gross National Product (GDP). Chapter leader Tunde Dada says that: “The region will face immense economic disaster without the SMEs” underscoring their unmistakable importance. However, despite their proliferation and importance to the economic prosperity of the region, SMEs face significant challenges, not least that of resilience against adverse events such as extreme weather, cybercrime, and a pressing skills gap.
Challenges faced by SMEs
Access to financial services remains one of the most acute constraints for SMEs as the inadequate availability of capital often leads to the collapse of many businesses, or at least forces them to operate at reduced capacity. Alongside this, the lack of protected markets for local producers puts many SMEs at financial risk of price wars with foreign imports.
Another pressing issue is skill acquisition. Western Africa’s SMEs currently face a shortage of skills, due to limited access to educational resources, economic pressures that limit educational opportunities, and skilled professionals migrating to other countries in search of better opportunities – all of which leaves a gap in the local workforce and threatens business resilience. This skills gap is particularly prevalent in the fast-paced world of technology, leaving small businesses open to cyber-crime.
Climate change has also affected SMEs’ resilience by increasing the costs of running a business. In the future, escalating events like bushfires and flooding are expected to have greater impacts, including damaging premises and infrastructure and driving increased migration worsening the shortage of skilled workers faced by SMEs.
Boosting SME resilience
Governments play a crucial role in supporting the resilience of SMEs through highly subsidised loans, and international organizations also offer support platforms throughout the region, but despite their importance to the country’s economic performance, SMEs can struggle to secure the full amounts needed for their operations as bureaucratic requirements often make them inaccessible. Investment in Western Africa’s ICT infrastructure also aims to improve small business resilience. For example, the Central African Backbone (CAB) project connects landlocked countries to high-speed internet via submarine cables on the coast, aiming to ensure reliable internet connectivity, enable faster and more secure economic transactions, and facilitate wider and easier access to public services.
Alongside these large-scale initiatives, small West African businesses have boosted their resilience in various ways. For example, employing fintech for transactions, which has helped reduce overheads, and sourcing domestic raw materials to reduce reliance on expensive foreign imports, with differing degrees of success. Nevertheless, Tunde said: Despite all the efforts and strides it is very obvious that the SMEs in the region are still facing a lot of challenges.”
The importance of business continuity planning
Many SMEs in Western Africa do not have contingency plans in place, however, ensuring resilience is essential for their long-term success and in turn, that of the West African economy that is heavily reliant on successful SMEs. Small businesses may invest substantial amounts of money, time, and resources to make their ventures successful, but without plans to address adverse events many are left unprepared.
Tunde Dada suggests SMEs can improve their resilience by engaging with resilience principles in their operations such as “embracing digitization concepts and platforms that cater for the shortfall in the availability of skilled labour including the use of AI across their businesses.” and preparing plans to mitigate the effects of current and future weather challenges.
Tunde believes that a platform of engagement with SMEs across the region could be created through cooperative associations or trade delegations. This strategy could help provide trusted links that foster working relationships between SMEs and regional resilience practitioners. SMEs are also invited to join the BCI Western Africa Chapter to engage with experienced resilience practitioners and strengthen their own businesses against challenges and boost their resilience standing. You can join the Chapter here
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BCI Western Africa Chapter
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