Small and medium enterprises (SMEs) and start-ups across Africa must be able to upscale and grow to transcend the limitations of an emerging economy. To do that they need the know-how and networks to access markets and funding to unlock growth opportunities. Therefore, it’s critical that Africa’s entrepreneurs learn to pitch to potential investors.
Small businesses hold the key to Africa’s continued economic expansion. SMEs create 80% of all jobs — a fundamental engine for growth. Developing SMEs means developing opportunities for the continent’s people.
Clearly recognising this, the African Continental Free Trade Agreement (AfCFTA) aims to reduce the barriers to doing business within the continent and enabling growth for its SMEs. Collaborative support by the public and private sectors is a vital part of building and uplifting communities. When we empower one entrepreneur we are creating a positive ripple effect, creating jobs and growing the economy.
However, there is much work to be done to achieve this. The SME story in Africa is one of high mortality.
It’s been reported that in Africa the average start-up failure rate is 54% while almost 80% of SMEs close within their first year. Among the reasons advanced for such failures is a lack of investment.
This is not a problem unique to Africa — start-up funding has fallen across the world due to a combination of factors, including rising inflation and economic uncertainty.
However, African start-ups attract only a fraction of global venture capital. In the tech space its total venture-capital funding was estimated at around $5.4bn (about R98bn) in 2022. This represents barely more than 1% of the $445bn global venture-capital funding.
African small businesses are off the global radar, confined to their local markets or forced to make do with scraps. African tech start-ups consistently cite their inability to raise investment funding as an obstacle to growth.
For example, a recent PWC survey of the Nigerian SME sector identified a funding gap of N617bn (about R24bn), with less than 5% of SMEs being able to access enough finance for working capital and business growth. Despite this, they still contributed 50% to the country’s GDP.
The potential is clear, as are the limitations. However, securing funding for small businesses has practical and cultural obstacles to overcome.
It means convincing a potential investor the enterprise is a viable concept, is well run and will generate returns.
Everyone agrees on the need to develop the SME sector. But investors need to be convinced that the business is bankable. Without that the investment will not be forthcoming.
Therefore, there is a need to help small business founders “speak the language” of venture capital and global finance. They need to know not just how to run their own business but to understand the needs of investors and sell the benefits of that business to investors.
As part of our efforts to develop these skills the MultiChoice Group has launched the MultiChoice Africa Accelerator programme, an initiative that takes founder-led small businesses from across Africa through a rigorous training and mentoring programme.
The programme is aimed at established small businesses operating in specific technology-driven fields — healthtech, agritech, fintech, edutech, the circular economy and the creative industries. These are not simply growth sectors in the financial sense but promise to help solve Africa’s most pressing human challenges.
The goal is to develop a new cohort of tech-savvy African start-ups and to then scale these businesses with the help of global investors to unlock opportunities for all stakeholders.
We partnered with Dubai-based business training and enterprise development specialists Companies Creating Change (C3) to design a pitching skills programme. We’ve also partnered with EOH and its ICT business, iOCO. EOH and iOCO are tech services companies that have brought their expertise to the table in terms of tech advisory, development sprint and technical support.
The culmination of the programme sees the most promising start-ups getting the chance to pitch to a group of serious investors. So far six SMEs that joined the programme in 2021 have managed to raise more than $16m in funding. This year, the programme is bigger and includes SMEs from Ivory Coast, Senegal, Nigeria, Ghana, Kenya, South Africa, Zambia, Angola and Ethiopia.
All of the founders will be empowered with a set of skills that will serve them throughout their business carrers.
The initiative is part of a long-term commitment by MultiChoice to growing and multiplying Africa’s vast potential in technology sectors, which will be critical to the continent’s growth.
Developing SMEs with a tech focus is especially useful. Thanks to the opportunities of the digital economy, Africa has a chance to leapfrog competitors and bridge the development gap within a matter of decades.
Digital is already booming on the continent. A recent report by Endeavor Africa estimated the size of Africa’s digital economy at $115bn and projected it will grow to $712bn by 2050.
Digital connectivity will bring millions more digitally savvy young people into the economy. The UN Population Division projects that by 2050 Africa will be home to around 2.5-billion people – a quarter of the world’s population.
This presents an entire world of digital opportunities for African start-ups.
It’s therefore critical for the growth of our continent to equip Africa’s digital entrepreneurs with the business networks to secure opportunities and the pitching skills to convert them.
• Badugela is CEO of MultiChoice Africa Holdings
