With South-South deals, African SMEs have opportunities

The EastAfrican Newspaper, May 30 – June 05, 2015

By Eugene Jernigan

THE AID for trade initiative, launched during the Hong Kong Ministerial conference in 2005, bolsters building capacity to formulate trade policy, invest in infrastructure like roads, ports, telecommunication, strengthen economic sectors and helping with transitional costs to integrate international markets Aid for Trade has been increasing over the years through Overseas Development Assistance (ODA) but its impact has been minimal due to insurmountable barriers to trade.

The competitiveness of SMEs in Africa is hindered by numerous challenges yet this sector is the major contributor to total exports in developing countries. These SMEs are unduly affected by market and policy failures. The fail to reach international market due to lack of capital, information on markets, government assistance, technology, unfavourable business environment and basic understanding of the trade finance.

South-South Co-operation provides a unique relationship for the developing countries. The economies of developing countries share a common historical background: Most of them were affected by colonialism. The Bandung Conference of Asia-Africa in 1955 catalyses and ignites the South-South relations. This brings a spirit of comradeship and solidarity in the quest for development goals. In the global patterns of trade, world trade expanded more than fourfold while South-South trade multiplied more than twenty times. This has improved the multilateral negotiations for the African countries to get better trade deals.

The emergence of large developing countries as development partners has raised the quest for South-South cooperation. India, for instance is supporting African countries expand their export base, improve their skilled manpower, support access to international markets and transfer of technology. Firms like Tata Motors and Mahindra & Mahindra are creating employment in Africa.

Brazil has built its presences on social development. Brazil is mainly involved in technical cooperation through knowledge transfer, agricultural and health development.. China is on the forefront in development of hard infrastructure- roads, transport corridors, railway, bridges, hotels, offices and apartments.

But for African SMEs to experience growth and development a lot of inward measures need to be cultivated by governments. African economies need to provide adequate and reliable electricity, support banks to provide credit lines at reasonable interest rates, cut the high cost of borrowing from financial institutions, deal with corruption at the border post, open up borders for intra-trade, provide top notch training and skills to its citizens.

The government can also support SMEs to meet international standards. Markets in the developed countries have sophisticated consumers. They have the upper hand in deciding the quality of products they need hence it is imperative for the government to support the small medium-sized enterprises to keep abreast with the taste and preference of international markets.
South-South cooperation offers a lot of business opportunities for African SMEs in agriculture, IT, finance, health and manufacturing.

Eugene works at Consumer Unity and Trust Society, Africa Resource Centre in Nairobi