This week AVCA joined AVCA member, EY, and the Business Council for Africa (BCA) for a open-floor forum on 'Funding and Growing SMEs in Africa', a challenge that is central to all of the participants' missions, and key to supporting sustainable economic growth.
AVCA's research analyst, Dr Ponmile Osibo, provided the forum with a broad overview of the SME and private equity landscape in Africa, and touched on how private equity provides an alternative and value-add form of financing for SMEs. According to research conducted by the IFC, there are around 4 million SMEs in the formal sector operating in Sub-Saharan Africa, and this grows to around 40 million SMEs when you include microenterprises and the informal sector.
Quoting from AVCA’s proprietary research and 2013 'African Private Equity Deal Dashboard', Dr Osibo stated that while the majority (53%) of private equity deals in Africa that disclosed terms last year involved an SME business, the total investment in SMEs only accounted for US$ 100 million out of the total investment deployed of US$ 3.2 billion - a mere 3% of total investment. He also added that innovative and tailored solutions were required to meet the capital needs of SMEs in Africa.
'Connecting' the capital base with the entrepreneurs continues to be a challenge for Africa, and indeed globally, but a challenge that associations, councils and networks, such as AVCA and the BCA, aim to address.
Dr Osibo was joined by other speakers Dr Ambika Sampat of Acumen, Jon Shepard of EY's Enterprise Growth Services, and Barbara Kong of D. Capital Partners, who each gave their unique perspective on working with, evaluating, and managing, SME businesses.
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