Though West Africa is one of the most economically promising regions in the world, SMEs have challenges they need to hurdle to become successful. Learn about them here!
West Africa is one of the most economically promising regions in the World, both because of its demography and the natural resources that the continent contains. According to the 2018 Report on the West African Economic Outlook from the African Development Bank (AfDB), the average GDP growth of the region is expected to reach 3.9% in 2019.
This economic growth in the region is primarily driven by SMEs, which represent the largest part of the region's economic fabric. It is therefore clear that good financial health in this area goes hand in hand with an economic environment conducive to the development of SMEs. However, SMEs in West Africa are limited in their development by several challenges. This article will focus on the five main ones.
Access to Public Procurements and Corruption
Firstly, access to public procurements. As we know, these are very lucrative opportunities that can constitute the annual turnover of an SME operating in construction and public works for example. These are very competitive Calls for tender that attract large multinational companies as well as SMEs. Those large firms have the technical know-how and financial resources that SMEs can't afford to spend, reducing their chances of winning those public procurements. Corruption and bribery actions also contribute to distorting competition. This pushes out SMEs even more, as many do not have the liquid capital needed to participate in these practices. Examples are everywhere, and the many trials demonstrate it.
Access to Financing
Some SMEs have the required technical skills that are almost similar to those of large multinational companies. The financial constraint remains because of the difficulty of accessing finance for SMEs. However, thanks to the development of initiatives such as the AMADE Pro Invest project funded by the EU, some SMEs manage to succeed, but they remain a minority.
Another challenge to be taken by SMEs in the region arises from the ineffectiveness of sub-regional integration (ECOWAS and WAEMU). Even if this integration is effective theoretically, that does not mean it will be as effective in action. Obstacles to the free movement of goods, services, and people remain. For an SME, entering a neighboring market other than its local one is a tough obstacle course.
Finally, the political instability of the West African countries considerably limits investment in SMEs. During election periods, the economic activity moves at idle and in such a context, it is difficult to make investments and to make reliable forecasts.
Those challenges should absolutely be taken by both local Governments and SMEs to take a step to the next level.
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