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Digitization, a catalyst to the exponential growth of African Small Businesses.

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Post by Visa

The year 2020 came with lots of hopes and expectations for individuals and businesses, interesting economic projections across most of the world’s thriving industries, a landscape of growth and meaningful insights for what seemed like the most productive year ahead, leading onto the end of yet another decade.

What many did not envisage however, is a global public health emergency – the worst economic downturn since the great depression as described by the International Monetary Fund, a truly global crisis where no country is spared.

Evidently, the impact of the Covid-19 has significantly hindered economic and social development across Africa, with individuals and businesses having to unlearn and learn new changes in lifestyle habits, business restructuring, adoption of innovation and technology and most importantly digitization in the way people live and work. In the last few months, the pandemic have now become a situation countries and people have to live through, with the hopes of an economic recovery.  

If Africa is to recover, then a spotlight on small businesses, which make up a large percentage of global and local economies, will be pivotal to this transitioning. This business-led recovery will majorly revolve around digital technology; a catalyst for inclusive growth.

But how do we enable African SMEs to become digitally enabled? Clearly, the introduction of technologies can improve SMEs’ productivity, growth and improve quality of life for consumers, in regards to convenience. According to data from the World Bank in the Foresight Africa 2020-2030 report, GDP growth in the continent could increase by 2% per year if the African Union’s goal of universal and affordable internet coverage is reached, and fast internet could increase the probability of employment to 13.2% from 6.9%. 

While this is a major challenge to the growth of Africa’s digital economy and would require years of policy implementation, corporate Africa can begin to support (in their ways) the digital transitioning of SMEs. Digital entrepreneurship has the potential of becoming an instrument of economic revolution for Nigeria’s largely young and business-thinking population for example. The country is home to some of the most innovative startups and small businesses in Africa which provide proof of Nigeria’s digital potential. One of such forward-thinking small businesses is a popular Nigerian indigenous skincare brand, Arami Essentials.

Earlier this year, part of corporate Africa and global digital payments company, Visa had championed a global WhereYouShopMatters campaign which focuses on supporting small businesses and canvassing for renewed consumer patronage following the impact of the pandemic on shopping behaviors. Visa had researched consumers’ changing shopping habits since the pandemic and leveraged the results of the report to educate small businesses on the need to also change how they sell and do business. The Where You Shop Matters Initiative is an offshoot of Visa’s study which reveals that consumers are increasingly embracing e-commerce and digital payments over cash, and 42% of consumers started purchasing food for the first time online in Nigeria.

Since the pandemic, consumers now want safer and more convenient ways of shopping and so digital payments have been on the rise in Nigeria. Digital payments allow consumers to shop after-hours, when the traditional stores are closed and to avoid crowds and wailing lines, especially during holiday shopping and so retailers and small businesses are encouraged to embrace it.

One very critical angle to the Where You Shop Matters initiative is the educational fragment. Digital skills are a prerequisite for benefitting from any technology at all and the digital economy at large.  With wide digital literacy gaps in Africa, Visa set up a small business resource hub where entrepreneurs can find useful resources for growing their businesses. More importantly, SMEs can do more than just communicate with their customers online – they can find other businesses and create partnerships. This is also one strong element of digitalization for small businesses. The Small Business Hub provides the right visibility and partnerships needed to scale small businesses.

Nigeria based small business, Arami Essentials, had participated in the Where You Shop Matters initiative and was eventually nominated as a Visa merchant. The brand’s progress through the years have been remarkable especially since it began as an online store. The founder and CEO of Arami Essentials, Ore Runsewe, advocates for more education of the benefits of small business digitization which she believes is the reason for the low number of entrepreneurs doing business online.

“There is need for more education on the essence of small business digitization and if we can get a good number of small businesses in Nigeria logged into the digital economy – that would be a great feat. At Arami Essentials, we started on Instagram and then gradually built the website. Setting up the business on Instagram allowed us to reach a wide audience in such little time because we were constantly in their faces; if we had not a digital store there is the unlikelihood of reaching customers outside of Lagos and Nigeria”.

Ore also advocates for online retailers to partner with payment gateway companies to secure customer’s data on their websites and to enable cross-border payments as well. “The pandemic has shown that we need to look at ways to promote the digitization of Nigeria’s and African small businesses – encouraging merchants to join the digital economy” she says.

Small and medium enterprises that have been able to ‘digitally diversify’ have proven themselves to be more irrepressible during the COVID-19 crisis just like Arami Essentials. Those who were not digital as at the eruption of the pandemic had to play catch-up in the midst of an economic crisis.

To support these businesses, we must influence existing and create new technology offerings tailored towards these small enterprises in Nigeria, rolled out with the support of government.

And as the African Union Commissioner Amani Abou-Zeid had also emphasized in the past: “COVID-19 crisis has become the single biggest catalyst for digital transformation and has moved digitalization from a niche market into mass adoption”.

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