The African Continental Free Commerce Space (AfCFTA), which commenced buying and selling in 2021, represents a historic alternative to unite 1.3 billion folks below a single market with a projected gross home product (GDP) of $3.4 trillion (R61.2trl).
Nonetheless, SMMEs’ means to take part meaningfully on this transformative commerce framework stays constrained by systemic limitations, notably entry to finance, market readiness, and operational scalability.
In keeping with the African Improvement Financial institution (AfDB), Africa’s SMME financing hole stands at a staggering $331 billion yearly, with formal SMMEs receiving lower than 20% of the credit score they want. Non-tech sectors equivalent to agriculture, manufacturing, retail, and companies are disproportionately affected, as investor consideration stays skewed in the direction of scalable technology-driven ventures. With out deliberate interventions to bridge this financing hole, there’s a actual danger that the AfCFTA will deepen current inequalities between massive corporates and small, usually casual, African companies.
A Statista survey revealed that between December 2022 and January 2023, throughout Ethiopia, Kenya, Nigeria, and South Africa 41% of SMMEs relied completely on the founders’ funds, 29% obtained financing from household and buddies, 11% secured financial institution loans, and seven% obtained authorities funds. This over-reliance on self-financing limits the flexibility of companies to develop, or innovate, and ends in them being them weak to market shocks equivalent to the present market downturn.
Past finance, African SMMEs face persistent infrastructure and logistics bottlenecks that inflate working prices and limit entry to regional markets. Excessive transport prices, fragmented provide chains, and underdeveloped commerce corridors make it troublesome for small corporations to compete with massive corporates that profit from economies of scale and extra subtle logistics infrastructure. But, until these infrastructural imbalances are addressed, the advantages will proceed to accrue to massive, export-ready corporations that already function throughout borders, leaving smaller enterprises behind.
Current coverage efforts throughout the continent reveal political will to allow SMME participation. In South Africa, as an illustration, the Division of Commerce, Business, and Competitors launched the Export Advertising and marketing and Funding Help scheme to help SMMEs in accessing new markets. This technique is reiterated by means of bilateral agreements such because the Declaration of Intent signed by South Africa and Algeria in the course of the Ministerial Roundtable on the GEC+Africa in 2024, adopted by the memorandum of understanding signed throughout President Cyril Ramaphosa’s state go to to Algeria in December 2024. These interventions sign a shift towards inclusive industrial coverage and native enterprise improvement.
Nonetheless, coverage ambition usually outpaces implementation. Many SMMEs lack the commerce compliance information, export certification, and logistical planning wanted to qualify for such programmes. Incubation hubs and trade associations can play a catalytic position right here, providing tailor-made capacity-building applications on cross-border commerce rules, digital documentation, and customs processes.
Modern financing fashions are important to bridging Africa’s huge funding hole. Blended finance, revenue-based lending, and credit score assure schemes have proven promise in bettering entry to capital. Platforms like Vivid On Capital and Vula are utilizing fintech to attach SMMEs to produce chains and lenders based mostly on transaction knowledge fairly than conventional collateral necessities. These fashions decrease entry limitations and scale back danger perceptions, notably for casual or thin-file entrepreneurs. Nonetheless, such platforms must scale extra aggressively, and regional improvement finance establishments (DFIs) can co-invest or de-risk these fashions. Public-private partnerships, tied to AfCFTA’s personal Adjustment Facility, might present the required push to mainstream various financing instruments.
The stakes couldn’t be greater. With out deliberate motion, AfCFTA dangers changing into one other chapter in Africa’s historical past of missed alternatives, the place macroeconomic progress bypasses the thousands and thousands of small companies driving native economies. The settlement’s promise lies not in its sheer market measurement however in its potential to empower grassroots entrepreneurs, if supported by affected person capital, focused insurance policies, and ecosystem-wide collaboration.
Ruth Maposa is a programme analyst at 22 On Sloane.
*** The views expressed right here don’t essentially symbolize these of Unbiased Media or IOL.
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