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SMEs: Government Support and Effective Policies Key to Future Growth-Mastercard Study

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New research by Mastercard has highlighted the important role of government support in helping small and medium enterprises (SMEs) across the Middle East and Africa (MEA) to recover, position for growth, and contribute to economic prosperity.

In the inaugural Mastercard MEA SME Confidence Index, government support and implementation of effective policies was highlighted as ‘important’ by 88% of the region’s SMEs, 50% of which rated this point as a ‘must-have’ essential.

This sentiment was especially pronounced in the Middle East and North Africa (MENA) (92%) and Sub-Saharan Africa (90%) regions.

Multitude of opportunities

In addition to looking for effective regulatory support from governments, 92% SMEs in MEA said they are also looking for support in upskilling of their teams, and 88% highlighted the importance of improved telco infrastructure – pointing to opportunities to effect positive change in wide-ranging areas from education and skills development to systems and infrastructural progress.

Public-private partnerships are crucial for effective development and implementation of initiatives that advance financial inclusion and inclusive growth. To achieve this, governments and the private sector must play a joint role in enabling a safe and secure operating environment.

Mastercard works closely with governments and the wider business community to advance SME inclusion into the digital economy through tailor-made digitization strategies, cutting-edge technologies, insights, and policy advice.

Government-led initiatives key to positive growth

Across MEA, 51% of SMEs say government-led initiatives could have a positive impact in supporting their businesses.

These include the UAE, where Dubai Government launched a third stimulus package to support small and medium enterprises maintain business continuity by reducing operational costs, while the Abu Dhabi Executive Council allocated AED 3 billion to the SME Credit Guarantee Scheme. The Central Bank of Egypt made it easier for SMEs to access capital by encouraging banks to raise their share of loans to MSMEs. A six-month debt relief finance scheme for SMMEs was launched by the South African government, along with a spaza support scheme and an agricultural disaster support fund for smallholder and communal farmers.

Public private partnerships a catalyst for growth 

Furthermore, SMEs in the region recognize the great potential of public-private partnerships (PPP), and 63% think private sector initiatives and partnerships will benefit businesses and the markets in which they operate.

One in three SMEs (32%) think that collaborating with governments and businesses outside their markets could impact their growth. In Southern Africa this was especially pronounced, with over half (56%) agreeing.

The need for the public and private sectors to work together to create a better environment for small businesses has been outlined in a public policy paper* titled Reimagining Support for Small Businesses, released by the Mastercard Policy Center for the Digital Economy in partnership with global consulting firm Kearney. The paper outlines a number of strategic recommendations which highlight how effective policy and innovation can address many of the challenges faced by business-to business SMEs.

The key recommendations are:

  1. Ensure ongoing working capital stability for SMEs by driving solutions that ease cash flow burdens.
  2. Remove barriers that hinder women-owned businesses’ ability to receive capital by making IDs more accessible, and allowing different types of collateral.
  3. Make funding and resources available for B2B SMEs to build their digital capabilities by offering digitalization support for SMEs buying and selling internationally.
  4. Ensure a safe and secure operating environment for SMEs, in terms of cybersecurity, trust and transparency, as SMEs become increasingly digital.
  5. Build B2B SMEs’ knowledge of the financial and digital tools and resources available to them.
  6. Facilitate partnerships in which private entities, non-banking financial institutions (NBFIs), development finance institutions (DFIs) and non-governmental organizations (NGOs) are incentivized appropriately to provide cash flow management support, capital or digital services to B2B SMEs.
  7. Improve the collection, analysis and availability of B2B SME data for use by governments and B2B SMEs.
  8. Model best practices by buying goods and services directly from SMEs, adopting payment and invoice digitalization and increasing the credibility of emerging businesses.

“Collaboration is the key to developing a commercial landscape that is fit for future growth. Through effective partnerships, the public and private sectors can together create a supportive environment where SMEs can thrive. The contribution of small businesses to regional economies is ultimately about much more than the immediate gains to livelihoods – it’s also about the sustainable development of an ecosystem that can advance inclusive growth and prosperity for all. This is why it’s so important that we prioritize public-private partnerships for SME growth, and why we’re putting our technology, expertise and global network to work, helping to develop the infrastructure to connect more people – and more small businesses,” said Valerio Murta, Senior Vice President, Core Products, Middle East and Africa, Mastercard.

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Technology

WATRA Advocates E-Governance and Technology to Boost Jobs for Youths In Nigeria, W/Africa

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WEST Africa Telecommunications Regulators Assembly (WATRA) has advocated greater adoption of e-Governance and concerted effort to expand the digital economy in Nigeria and other countries of West Africa. 

The executive secretary of WATRA, Aliyu Yusuf Aboki stated that this will boost investment and create quality jobs for young people in Nigeria and West Africa. He stated that despite the comparatively low rate of literacy in West Africa, there is a very wide scope for digitizing government services. 

He said he sees the enormous opportunity for e-governance as he travels across the 15 ECOWAS states. He explained that governments at all levels could increase their taxes dramatically by digitizing the identities of taxpayers and tax collection processes. He also emphasized that there is a great opportunity to expand access to education and healthcare through digital tools. 

 WATRA is a regional organisation that has the mandate to promote the adoption and harmonization of regulations that stimulate investment in telecommunications and increase affordable access for citizens.

 The WATRA boss cited the example of India where over 1 billion citizens, including the poorest citizens, could easily receive or make payments using their telephones through a government-supported platform, the Unified Payments Interface (UPI).

 Other government-backed digital schemes in the country enable municipal governments to manage healthcare online and citizens to store and readily access government documents such as tax returns on their phones. 

Aliyu pointed out that the digitalization of government services has transformed the lives of the 273 million Indians who are classified as living in poverty. While noting progress in the adoption of ICT to deliver and manage government services in West Africa, the WATRA boss emphasized the need to scale up existing schemes in the sub-region. 

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Africa Region

Africa’s Smartphone Market Declines 3.4% In Q1

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Africa’s smartphone market declined 3.4 per cent quarter on quarter (QoQ) in Q1 2023 to total 17 million units, the lowest level of shipments since the start of the COVID-19 pandemic in Q1 2020.  That’s according to the latest figures announced by International Data Corporation (IDC), with the firm’s newly released Worldwide Quarterly Mobile Phone Tracker showing that rising inflation and local currency depreciations against the U.S. dollar have negatively impacted demand for smartphones across the continent.

Shipments of feature phones across Africa also declined in Q1 2023, although not to the same extent as smartphones. Feature phones remain relatively affordable and are still the preferred secondary device option for many consumers.

“Africa’s smartphone declined throughout 2022 amid weak consumer demand, and this has been exacerbated by rising inflation and higher device prices,” says George Mbuthia, a senior research analyst at IDC. “The average selling price (ASP) for smartphones grew QoQ due to high import costs and the fact that many vendors’ flagship devices are now equipped with 5G and have therefore moved up in price to the premium segment.”

Africa’s top 3 smartphone markets recorded a mixed performance in Q1 2023. South Africa and Nigeria both saw shipments decline QoQ, while the Egyptian market registered growth. South Africa was impacted by seasonality issues and weak demand, meaning vendors were unable to bring in new units while they continued to clear the channel. Egypt remains below its potential, but local assembly is picking up in the country and the government has now dropped its “letters of credit” requirement for vendors, both of which have helped the market to recover from its low base.

Transsion (Tecno, Itel, and Infinix) accounted for the largest share for smartphone shipments across Africa in Q1 2023, despite experiencing a decline in units. Samsung placed second, while Xiaomi came in third.

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Africa Region

M-KOPA raises $250m to scale high-impact consumer fintech across Africa

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M-KOPA, a leading fintech platform, today announced it successfully closed over $250m in new debt and equity funding to expand its financial services offering to underbanked consumers across Sub-Saharan Africa. This marks one of the largest combined debt and equity raises in the African tech sector, enabling M-KOPA to continue its rapid growth.

Over $200m in sustainability-linked debt financing was led and arranged by Standard Bank Group, Africa’s largest bank and long-term strategic partner to M-KOPA. Other participating lenders include The International Finance Corporation (IFC), funds managed by Lion’s Head Global Partners, FMO: Dutch Entrepreneurial Development Bank, British International Investment, Mirova SunFunder and Nithio. A further $55m in equity investment was backed by existing strategic investor Sumitomo Corporation, which is contributing $36.5m to the total raise and will engage closely with M-KOPA on new growth markets and products. Blue Haven Initiative, Lightrock, Broadscale Group and Latitude, the sister fund to Local Globe, also participated in the transaction.

M-KOPA’s fintech platform combines the power of digital micropayments with the Internet-of-Things (IoT) to provide customers with access to productive assets. In markets where individuals have limited pre-existing financial identities and conventional collateral, M-KOPA’s flexible credit model allows individuals to pay a small deposit and get instant access to everyday essentials, including smartphones, electric motorcycles and solar power systems, and then graduate to digital financial services such as loans and health insurance. M-KOPA’s solution embeds credit into the product through a smart digital connection, giving customers ownership instantly, which they can pay off through micro-instalments over time. The company has sold over 3 million of these products through a unique direct sales model that includes more than 10,000 agents. M-KOPA’s operations started in East Africa and successfully expanded to Nigeria in 2021 and, more recently, Ghana. From 2020 to 2022, M-KOPA recorded a compound annual growth rate of 85% in new customer acquisition, and was recently recognised as one of Africa’s Fastest-Growing Top 100 companies by the Financial Times for two consecutive years, in 2022 and 2023.

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