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How Africa can adapt to global financial changes
Thursday March 21 2024
The Longest Vessel to dock at the Mombasa Port MV Kotka Loa, a Monrovia Liberia Container Ship of 318 Meters belonging to Mediterranean Shipping Company (MSC) February 29, 2024. PHOTO | KEVIN ODIT | NMG
A wave of entrepreneurial vitality is sweeping across the African continent, with more people establishing enterprises within the continent. The African Development Bank has previously indicated that 22 percent of working-age people in Africa start a new business, more than anywhere else — the highest rate of entrepreneurship globally. These firms are also innovative, with 20 percent of new African entrepreneurs introducing a new product or service.
At the same time, funding for startups and African businesses has witnessed growth in the last decade, albeit more muted in the wake of Covid-19. Still, this intra-Africa entrepreneurship is playing a pivotal role in creating jobs and spurring growth.
As a unit, Africa could emerge as one of the world’s largest economies by 2050. Fostering its entrepreneurial spirit could be catalytic in propelling us toward this milestone. The scale of this potential is, however, hampered by recurring challenges.
One of the main hurdles is inaccess to reliable funding, given the ebbs and flows of international financial markets. Second only to March 2023, January 2024 has so far been the slowest month for fundraising in the last six years. This poses a direct threat to the momentum generated by the entrepreneurial wave.
Also read: Cotu pushes for end to ‘tough’ IMF-backed economic reforms
There is a lack of coordinated effort among nations which is prioritising intra-Africa trade but instead, placing less emphasis on intra-Africa entrepreneurship. Third, cross-border financial infrastructure remains an issue.
African businesses also face challenges in accessing banking services and conducting cross-border deals efficiently, limiting their reach across the continent, even if successful in their subregion.
All of these hurdles raise crucial questions about the strategies African governments, corporates and entrepreneurs can adopt to finance long-term growth projects, develop local businesses, and expand seamlessly across African markets.
However, strengthening local capital markets is pivotal for powering intra-Africa entrepreneurship. Robust financial markets are the backbone for efficient capital allocation, enabling firms to thrive.
Deepening local financing solutions also involves prioritising homegrown private credit and capable financial institutions that deploy private equity funds in local currency.
Read: African countries face steep costs in global credit market
As Africa leans into its entrepreneurial spirit, let us be sure we are fostering an ecosystem where financial empowerment becomes a shared reality. Let us also commit to creating avenues for African businesses to flourish, for investors to find opportunities aligned with their aspirations, and for the collective vision of a continent to materialise in the form of sustainable economic growth.
Jubril Enakele is the founder and CEO, of Iron Capital.
