COMESA Business Council on the cost of digitizing SMEs

In the wake of the COVID-19 pandemic, businesses worldwide have been forced to adapt to the new normal, pushing many towards digital transformation. The COMESA region, known for its vibrant entrepreneurial spirit, has not been immune to these changes. Inter-regional trade has faced significant disruptions, particularly in border towns. The question arises - can digitizing small and medium enterprises (SMEs) help drive recovery and amplify growth in the region? CNBC Africa sat down with Sandra Uwera, CEO of the COMESA Business Council, to delve deeper into this pressing issue. Uwera emphasized the critical role of digitization as a catalyst for SMEs, especially in the current landscape shaped by the pandemic. With Africa's population estimated at 1.3 billion and a significant youth demographic, there is a growing demand for services and jobs, which SMEs play a vital role in fulfilling. However, the sector faces numerous challenges, with access to finance being a major hindrance. The formal SME sector in Africa experiences an annual financing gap exceeding $136 billion, underscoring the importance of addressing financial barriers to unlock the sector's full potential. One of the key trends highlighted is the low level of technology investment among SMEs, with only one in four businesses having embraced digital solutions in recent years. Many SMEs allocate their funds towards operational expenses and neglect investment in digital infrastructure. The pandemic has underscored the necessity for SMEs to adopt digital solutions to remain competitive and agile in the market. Examples from Kenya demonstrate the significance of digital payment platforms in enhancing business operations, showcasing the tangible benefits of embracing digital transformation. The discussion then turned to the cost implications of digitalization for SMEs. Uwera acknowledged that historically, services targeting SMEs have been costly, limiting their accessibility and impeding growth. However, through collaborative efforts and government initiatives such as tax waivers, the affordability and availability of digital services for SMEs have improved. The push for more transparent, affordable, and accessible services remains a priority for the COMESA Business Council as they advocate for a conducive environment that empowers SMEs to thrive in the digital era. When considering the potential impact of digitization on SME growth models, Uwera emphasized the transformative effects it could have on enhancing market competitiveness and expanding market access. By leveraging digital solutions, SMEs can strengthen distribution channels, reduce trade costs, combat illicit trade, and enhance financial pathways, ultimately positioning themselves for global market penetration. The adoption of digital technologies presents a significant opportunity for African SMEs to elevate their products and services on both regional and international platforms. To realize this vision, an enabling environment is paramount. Uwera highlighted the importance of streamlining cross-border payments and implementing regulatory frameworks that support digital financial inclusion. Initiatives such as developing a digital common payment policy for cross-border transactions and enhancing technical capacity programs are vital steps towards fostering a conducive ecosystem for SMEs. Cooperation between countries in harmonizing policies and reducing logistical costs is essential for maximizing the potential of digitization in driving SME growth in the COMESA region. As the COMESA Business Council continues to champion efforts in promoting digitalization for SMEs, the focus remains on creating a future where African entrepreneurs can harness the power of technology to thrive in a rapidly evolving business landscape. The journey towards unlocking the full potential of SMEs in Africa through digitization is underway, with concerted efforts towards creating a vibrant and digitally inclusive ecosystem that propels SMEs towards sustained growth and competitiveness.