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Economic impacts and post-pandemic opportunities for African SMEs

The COVID-19 is having an adverse impact on the global economy; it caused an enormous concern among all world leaders. According to the recent World Bank study, the cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around USD nine trillion, greater than the economies of Japan and Germany, combined. Global oil prices also estimated to decline by 42 percent in comparison to the 2019 average price.

African economy is no different; sectors like Tourism, Transport and the oil industry are among which will be highly affected by the pandemic. Although the impacts have will be felt in the years to come. The African continent will experience the exogenous effects due to the remittance decline from Africans in the diaspora significant decrease on the foreign direct investment inflow, development assistant and illegal financing flows. On the other hand, it will experience endogenous effects as a result of a rapid widespread of the virus throughout the continent which interlinked with huge morbidity and mortality rates which highly affects the local economic activities  which also lessen a demand and government tax revenues.

In Africa, more than 85 percent of the workforce is in the informal sector which will be highly susceptible to the external shocks. On the contrary there’s a high government expenditure on health and supporting the domestic economic activities.  Still the real impact of the economy remains uncertain. The pandemic spotlights the policy gaps in our current system that impeded the vital conditions for well-being and resiliency. Furthermore, it exposes the global inequality and the highly fragile healthcare system even in the developed countries.

Nevertheless, it can be used as an eye opening moment for the world leaders and policymakers on adjusting their priorities and re-shaping the development. It is a chance to shift towards on creating a more inclusive and sustainable markets. The post-COVID-19 will expected to significantly change the global supply chain, in the light of the pandemic US and Europe are re-thinking to diversify their supply chain and there’s a hope that Africa will be the next china. This market shift creates an enormous market opportunities for African Small and Medium Enterprises.

It’ll also be an opportunity to fill the huge demand gap that’ll be created in the African continent in the light of African Continental free trade agreement. The negative impact of China’s lockdown and its dominance in majority of manufacturing have further implies the problem with modern global supply chains. The post-COVID-19 will mark on the major global Firms shift on their supply chain, relying less on china and diversifying the supply chain into Vietnam, Mexico, India and Africa.

More than ever the post-OVID-19 world desperately needs smarter, stronger and more diverse supply chains. In the coming years there’ll be a highly decentralized manufacturing capacity, where companies are looking for new production places. This transition of supply chain will be highly backed up with the digitization of the paperwork that accompanies global trade. Despite the highly advancement of technology, the relationship between buyers and sellers still remain predominantly on paper.

This pandemic will shape the future which will be highly dependent on the technology. Creating a smart and technology based supply chain is the ultimate way to build a sustainable supply chain

What are the Post Covid Opportunities for African Small and Medium Enterprises?

African SMES should be smart on identifying new opportunities that could emerge in their countries as a result of the pandemic. There’re a bunch of opportunities for one to look on and tap the emerging opportunities one of them is the Education, Transportation, Telemedicine, M-health, Event Catering, E-commerce and Delivery Services.

During the pandemic majority of the government leaders’ passes stay at home order in order to protect the possible wide spread of the disease, on condition of the norm changes into online class Nevertheless, most African Countries can’t place an on-line learning, with the continent’s 46 percent connectivity gap it’s unrealistic to think of digital learning. Therefore a business that innovates on solving the connectivity barrier throughout primary, secondary and tertiary education can earn a huge profit while simultaneously providing an e-learning platform which can serve tens and millions of Africans at a minimal cost.

This can awaken education policy makers in Africa to find alternatives of the traditional learning, as a matter of fact the Small and medium enterprises in Africa can leverage this opportunity. Another huge and untapped opportunities lies on the on the e-commerce and delivery services as there’ll be a customer’s behavioral change, especially in the African Middle class economy despite the current infant stage of the sector due to the logistic and supply chain challenges, however the post-COVID-19 will bring an enormous change on the customer’s behavior that will highly demand the e-commerce services what’ll be having a high business opportunities in the light of ACFTA. During the pandemic the customers of the E-commerce are booming even after the lifting of the lockdown rules this implies the need for this service.

In light of African Continental Free trade Agreement

The slightly longer recovery time of Chinese Manufacturing’s, a strong commitment showed by the African leaders for this ACFTA treaty and the shift of the global supply chain to Africa holds a promising future for African SMEs. The ACFTA will allow African SME’s to enter new markets, expand their customer, innovating new products and delivery modes. The African Development Bank approves a USD 4.8million grant to accelerate the African Continental Free Trade Agreement and each AU member states are showing a support to create a conducive business environment to the success of ACFTA by placing policy and enabling business environment.

Post-COVID-19 might result a significant decrease in the FDI inflow in the continent, this can be both a threat and an opportunity for the continent. African Small and Medium Enterprises can use the opportunities and be ready to serve the high demand gap which can be created globally and strategize wisely on how to entering into the market on the above listed business sectors.

Best of luck African SMEs.

Ed.’s Note: The views expressed in this article do not necessarily reflect the views of The Reporter. The writer can be reached at [email protected].

 Contributed by Lidiya Kehale