How COVID-19 is impacting SMEs in Africa

The global COVID-19 pandemic has brought unprecedented challenges to businesses across the world, and Africa is no exception. Small and Medium Enterprises (SMEs), which are vital drivers of economic growth in African markets, are facing a tough road ahead as they navigate through the uncertainties brought about by the outbreak. Anu Shah, the CEO of EFI Hub, shared insights on how SMEs can minimize losses and survive during these challenging times in an exclusive interview with CNBC Africa. Shah highlighted the looming challenges faced by startups, emphasizing the need for businesses to brace themselves for turbulence amidst the current crisis. With supply chain disruptions and cashflow concerns, many startups are forced to rethink their strategies to ensure survival. The impact of the pandemic on SMEs in Africa is compounded by the historical context of epidemics on the continent, such as the Ebola outbreak in 2014, which disrupted economies and claimed numerous lives. While the short-term outlook appears daunting, Shah believes that there is hope for the future of African startups. She pointed out that despite the initial setbacks, VC investments in African startups have shown resilience in the past, with notable funding rounds and positive growth trajectories. However, she cautioned that in the immediate future, investors are likely to adopt a cautious approach, leading to tighter investment strategies and slower decision-making processes. To weather the storm, Shah outlined key steps that startups can take to enhance their chances of survival. First and foremost, she emphasized the importance of cash management, advising businesses to focus on reducing expenses and preserving cash reserves. Additionally, downsizing and adjusting to essential operations, including implementing salary cuts, is crucial for sustaining operations in the current climate. Shah also suggested exploring alternative funding sources, such as government grants and non-equity cash raises, to bolster financial stability. Moving beyond the startup ecosystem, the conversation shifted towards the impact of the pandemic on African capital markets. Shah highlighted the interconnected nature of global markets and the ripple effects of the crisis on African economies. With a significant decline in export revenue and economic growth projections, African markets are facing challenges in aligning with the broader global trends. Analyzing historical data from previous disease outbreaks, Shah drew parallels to understand the potential recovery trajectory of capital markets post-COVID-19. While acknowledging the short-term disruptions and market panics, she expressed optimism in the resilience of African markets and their ability to bounce back in the long run. Shah emphasized the importance of macroeconomic factors and geopolitical stability in influencing the recovery process, indicating that a gradual return to equilibrium is plausible. As Africa navigates through these turbulent times, the resilience and adaptability of SMEs and capital markets will play a pivotal role in shaping the post-pandemic landscape. With strategic planning, prudent financial management, and a focus on sustainable growth, businesses in Africa can weather the storm and emerge stronger in the aftermath of COVID-19.