Small businesses key to economic growth in Africa.

• Date: 01 October 2020
• Author: Mupotola, Moono

The COVID-19 pandemic has had an adverse economic impact on Africa, with sub-Saharan Africa experiencing its first recession in 25 years. The continent's gross domestic product (GDP) is expected to decline from about 3% in 2019 to -2% to -5% in 2020, with the region's major sources of revenue declining. To give a few concrete examples, commodity exports and remittances declined by 17% and over 23% respectively, and the tourism sector has lost up to $120 billion in revenue.

The partial or complete lockdowns in most African countries imposed a huge economic shock on the private sector, especially for those on the fringes of the formal economy. Micro, small and medium-sized enterprises (MSMEs), took a heavy toll. If not effectively addressed, this does not bode well for the continent's recovery prospects, as MSMEs are the engine of Africa's job growth. Although many African countries borrowed from the African Development Bank (AfDB) for economic stimulus packages to cushion the effects of the pandemic, the support for MSMEs has been limited.

The current crisis, also required the Bank to reconfigure its MSME support systems to address the pandemic's economic consequences. This included, for the first time, leveraging the Bank's Regional Operations Envelope to bolster national...