Photo by Jeff Griffith on Unsplash
Africa for SMEs: Opportunity and how to remove uncertainty
May 25, 2023
With smaller companies looking for new markets, many African nations offer strong opportunities.
- Mining & Agriculture Materials;
- Population growth often average age under 30 years of age;
- Telecoms infrastructure use grew from 52 percent to 75 percent in just four years;
- World Bank, Sub-Saharan Africa growth despite cost increase in fuel and food.
If you’re a Small to Medium Sized Business with Technology or Equipment for Projects, or an importer of commodities such as coffee, nuts or fruits, the economic landscape is attractive. Perceived risks can create a barrier some SMEs find it hard to break through. We can help you structure your transaction and be protected from default and non-payment.
Why is doing business in Africa more challenging for SMEs?
- No or low global lines of credit;
- Few or no experts and infrastructure on the ground;
- Unknown territory without the balance sheet to absorb any hiccups along the road.
For an SME providing equipment, services or expertise as part of one of these major projects to the tune of anything from £100,000 to £10 million, the size of the risk relative to their own business is far greater.
What might an SME need to consider when doing business in Africa? Political and Trade uncertainties that can put SMEs off.
- Political and Economic instability.;
- On average, over the last four decades, there have been around four military coups each year;
- Local and ethnic political tensions, which can affect business;
- Inflation and central government reduction in funds;
- Project could be cancelled or delayed or not paid.
Riots in South Africa in July 2021 led to small companies losing equipment when warehouses in Durban were burnt to the ground.
How can SMEs reduce risks?
Trade and Political Risk insurance can cover SMEs for most risks
Holtarka is an Authorised Representative of Lloyds Broker Bellwood Prestbury with access to the Global Specialist Insurers. We are working together to help SMEs organise protection for finance, goods and services – with bankable solutions for cargo insurance and cover for people and assets, anywhere in Africa.
What would your advice be for an SME starting out in Africa?
“Going into any business with your eyes wide open. Yes there may be additional risks associated with doing business on the continent. But managed properly, they can all be mitigated, leaving SMEs with exciting new market opportunities.” Call us for help.
For more articles https://www.bellwoodprestbury.com/insights/issue-6/