South Africa has declared its readiness to host the much anticipated G20 summit in Johannesburg later this month. This is an international platform that brings together the world’s major economies to coordinate macroeconomic policies, promote global financial stability and address pressing international challenges. G20 members collectively represent around 85% of global GDP, over 75% of global trade and two thirds of the world’s population.
Critical moment for Africa’s SMEs
Small and medium sized enterprises (SMEs) make up 90% of businesses and contribute up to 80% of jobs on the continent. Yet the sector is still marred by trade barriers which pose a threat to their growth prospects. Dominant factors such as compliance matters per African state, political instability, lack of access to markets and digitalisation remain common in the continent.
Randburg Chamber of Commerce and Industry (RCCI) CEO Richard Ntjana says financial accessibility remains the biggest obstacle coupled with other challenges. “Access to finance is the number one obstacle. Traditional financial institutions often view SMMEs as high-risk, making it difficult for SMEs to secure loans, start-up capital, and working capital. And unfortunately this is not the only problem SMEs are facing and I can mention a few which pose a threat to business growth: skills shortages, complex business compliance, poor service delivery in local municipalities: poor transport networks, and lack of suitable business premises hinder productivity and market access. SMEs often struggle to compete with larger firms and access markets beyond their immediate localities”.
Financing remains the biggest barrier. The University of Cambridge Institute for Sustainability Leadership (CISL) estimates that enabling SMEs in the continent to transition will require more than 20 billion USD in financing. The research further indicates that SMEs struggle to access climate finance due to limited collateral, short credit histories and higher perceived risk. For African SMEs, the challenge is even greater.
This is where the G20 and B20 can be catalytic. By unlocking blended finance, climate-linked credit guarantees and concessional lending, this platform can ensure that sustainability is within reach for small businesses.
Trade barriers within the African continent
South Africa’s G20 presidency must prioritise initiatives to boost intra-African trade through infrastructure development and the operationalisation of the African Continental Free Trade Area (AfCFTA). This should be done so as to support the African economic goals. The African Continental Free Trade Area (AfCFTA) has the power to transform the continent’s economic and social landscape. South Africa is in a good place to seek G20’s support for the implementation of the AfCFTA, in particular the adjustment Fund.
Africa is a continent of immense opportunity. With the world’s youngest and fastest-growing population, abundant natural resources and an expanding consumer base, its economic potential is undeniable. The African Continental Free Trade Area (AfCFTA) agreement, which aims to create a single market for goods and services across 54 nations, is a monumental step towards unlocking this potential, promising to boost intra-African trade and strengthen the continent’s position in global value chains. However, realising this vision heavily depends on overcoming a significant hurdle: the infrastructure deficit.
This presidency is set to influence international policy and set out a blueprint for how African SMEs, the real drivers of growth and jobs, can lead the transition to a vibrant, more resilient global economy.