By Albert Byaruhanga
Every crisis offers an opportunity to learn and innovate. The COVID-19 pandemic has been no different. One of the critical learnings from the pandemic has been the need to forge partnerships to build resilience and ultimately, sustainability.
At the heart of partnerships which will stimulate growth and sustain the Micro, Small and Medium Enterprise (MSME) sector so critical to Africa’s economic fortunes, is the role of enterprise supplier development chains.
According to recent economic forecasts, gross domestic product contracted by 1.9% across sub-Saharan Africa in 2020. Added to that, is the expectation that approximately 20 million jobs will be lost in the informal as well as the formal sector across the continent and it is clear Africa faces rough economic conditions for the foreseeable future.
MSMEs have historically played a pivotal role in shaping the economies of many African countries and this will only be amplified by the massive reduction in jobs available in the formal market due to the impact of COVID-19.
But how can enterprise supply chain development be the economic stimulus for MSMEs when the pandemic largely shut down or severely disrupted global supply chains?
Localisation
In various markets in which Absa operates, we have seen a drive towards localisation to the benefit of citizen empowerment as well as the local economy.
The necessary tightening of borders and the long-term disruption to trade activity has meant that many goods and products that had always been available in stores suddenly disappeared at some point. This has forced a change in thinking – including on the part of large corporates – to see if they can source or secure local production of the same or similar item.
The continued uncertainty posed by secondary infection waves means that many supply chains are looking inwards in a bid to source products. There are already several countries, including the likes of Botswana, whose governments are actively encouraging localization programmes.
Government support has come in the form of funding and critically, policy amendments, to drive greater localisation of sourcing in a bid to build resilience and networks and ensure much more economic value and job creation is retained in-country.
Even though the pandemic has been devastating, one of the benefits has been the drive for the need to localize, which ultimately will help build and strengthen local economies in the interim until such time as the environment again allows for meaningful cross border trade and economic growth.
Diversify and be agile
Diversification is undoubtedly one of the keys to surviving shocks such as that caused by the global health pandemic. This applies to big industry, corporates, and every participant of the enterprise supply chain.
PRAU Honors Uganda’s Top Innovators at 9th Excellence AwardsA single or limited product approach is the death knell for any business and COVID-19 has shown how businesses need to be agile and responsive to fast-changing circumstances in order to remain relevant and ultimately successful.
If you are a crop grower supplying local markets or stores, look to expand and vary your offerings to make yourself more indispensable, to showcase your ambitious intent, and also to protect yourself against potential headwinds which may affect a particular crop or product.
Corporates used to be cumbersome and regimented and would frown upon suppliers who showed too much initiative, but the pandemic has altered how everyone views the world. Now disruption, co-creation, partnerships, and diversification are the linkages corporates are looking for.
Seize opportunities
Entrepreneurs are often encouraged to dream big, but they are then stifled by endless red tape and impossible demands to enter formal supply chains and end up becoming purposeful economic players in their own right.
Funding is one of the major constraints for any business and financial institutions are not often geared to understand and interact with MSMEs who approach them, and in the case of money lenders, lending rates are frequently exploitative and not conducive to building a sustainable small business.
The requirement of security or three years’ worth of financial statements mean potential funding discussions are a non-starter in many cases and this is why Absa has moved to become more responsive to the needs of businesses, particularly MSMEs.
We look at MSMEs from a different perspective and work alongside corporate value chain partners to ensure not only the success of the funding application, but the success of the SME itself through ongoing support and mentorship programmes and providing expanded financial advice.
We have partnered successfully with our corporate clients and public sector clients to provide uncollateralised lending to MSME suppliers as well as distributors. This allows corporate clients to increasingly localise their supply chains and for MSMEs to access the capital they require to perform on those performance opportunities.
The African Development Bank (AfDB) has spoken of the need to build linkages and of using supply chains to grow industries, to grow SMEs, to create jobs and opportunities throughout Africa.
The goal is that, as we develop MSMEs through enterprise supply chains, we upskill and upscale small businesses by moving them higher up the value chain of services. If they can execute well on the procurement opportunities that come their way, they can potentially grow their businesses from micro to small to medium-sized businesses, and hopefully, one day, be the new future corporates across Africa.
Albert Byaruhanga is Business Banking Director at Absa Bank Uganda
