By Seleman Yusuph Kitenge

According to AfDB, Africa is estimated to have nearly 420 million youth aged 15-35. However, one-third of this population is still unemployed. Taking into account the effects of the plight for Africa’s prosperity, MSMEs seems to offer an enormous solution to reduce the socio-economic risks of unemployment and address the problem completely if proper mechanisms and efforts are put in place.

The Economic Commission for Africa (ECA), point out that  80% of African economies are SMEs, 70% are in the informal sector. This means, if Africa can empower and formalise such businesses and move them into the formal sector, they are likely to contribute to the government income growth through the collection of taxes and most importantly create more jobs for the majority of unemployed youth across the continent. However, the government role to collect taxes from these MSMEs which are currently facing difficulties resulted from COVID-19 should come with its obligation to ensure there is a conducive environment for them to prosper and survive the aftermath of this global crisis.

The International Finance Corporation estimates that 65 million firms, or 40% of formal micro, small and medium enterprises (MSMEs) in developing countries, have an unmet financing need of $5.2 trillion every year, which is equivalent to 1.4 times the current level of the global MSME lending. In such a case, with the current outbreak of the COVID-19 pandemic, most MSMEs have been massively affected and probably increase the rate of youth who are jobless if deliberate actions to save them and the continent’s economy are not adopted.

Notably, since the COVID-19 pandemic started, most MSMEs faced many challenges which led to the decline of their revenues, failure to pay salaries for workers, retrenchment of many workers, and even inability to pay their suppliers which resulted in a cut of supply of goods and inability in servicing their financial debt. That is why, it is essential that banks negotiate repayments on all existing loans granted to MSMEs, repayment holidays on loan repayment for critically businesses, waiving charges on digital banking platforms and providing working capital to MSMEs throughout the COVID-19 pandemic. These approaches may temporarily impact the income of the banks but in a long run save the businesses from bankruptcy, protect customers for the banking services, protect jobs,   and the economy at large. Moreover, prevent MSMEs from opting to alternative lending channels with higher interest rates such as Microfinance institutions and access to supplier credit to meet the financing gap they are experiencing which may create more repercussions than helping the businesses from falling to the ground.

Subsequently, AUDA-NEPAD has seen such loophole that can help to build back better Africa’s economy by ensuring that MSMEs are empowered to facilitate the continent recovery process. In that case, the agency has taken the effort to save MSMEs from crumbling and losing more jobs for the youth in Africa by coming together with EcoBank Group to introduce AUDA-NEPAD MSME Initiative. This initiative includes a series of modules such as MSME Academy, MSME Marketplace, and MSME Financing Support Programme. These modules target to provide a package of financial and non-financial support through the identification of opportunities and innovative ways to furnish and protect MSMEs as well as creating employment opportunities for the youth in Africa. The way promising this programme is for the MSMEs in Africa, African countries must take full advantage of its inception or implement similar programmes to safeguard MSMEs for the betterment of socio-economic development.

Mind you, it is initiatives such as these implemented by AUDA-NEPAD, governments and other development partners that will fast track Africa’s socio-economic recovery.  If MSMEs are well guarded against facing the wrath of COVID-19 impacts, then the hope for the continent to protect its economy and meet its continental and global development commitments will still be there. Therefore, as the severe hit of COVID-19 on the economy is predicted to lead to a global economic downturn and depression in the very long term, the empowerment of MSMEs will be Africa’s backdoor to building back better.