Covid 19 has been described as an existential crisis testing Africa’s social, economic, and political resilience. The coronavirus was first detected in 2019 and still persists three years later with several variants, one more dangerous than the other. Throughout the pandemic, countries provided several legal and scientific solutions to manage the spread of the virus. The World Bank notes that COVID-19 “has caused reversals in development and is dealing a setback to efforts to end extreme poverty and reduce inequality.” The virus’s effect on African countries’ economies meant that countries could not meet the globalized world’s quest to bring the extreme poverty rate below 3% by 2030, adding a new inequality gap.

Governments created several policies to mitigate the impact of the hardships the virus caused for Micro, Small, and Medium Enterprises (MSMEs). The African Trade Policy Center (ATPC) and the International Economics Consulting Limited surveyed enterprises in fifty-four African countries to gauge the impact of COVID-19. One hundred and seventy-seven MSMEs (Micro, Small, & Medium Enterprises) and thirty-three large enterprises participated in the survey. The survey showed:  

1. Micro, Small, Medium Enterprises were concerned with cash flow in their businesses.
2. Closure of their businesses during the pandemic exposed them and their employees to suffering.
3. Considering their lack of operational flow, financial institutions—primarily commercial banks—found it difficult to help them through loans to fund their businesses.
4. The businesses did not get the expected relief from the government on tax payments and providing capital to firms.
5. Trade was impacted and businesses, mainly manufacturing ones that relied on overseas supplies, met significant difficulties due to the physical barriers arising from the pandemic.

Most African countries took immediate measures to mitigate the effect of the pandemic on their economies and the general living condition of their citizens. Governments also put fiscal and monetary policies in place such as making direct funding available, temporarily suspending debt payments, and providing temporary tax reliefs and credit guarantees. In addition, governments addressed the concerns about the liquidity of financial intermediaries and requirements of commercial banks before getting access to such financial intermediaries by reducing the cost of lending from central banks and decreasing the policy rates in most African central banks. Some African countries even made direct funding available for MSMEs.

According to the International Monetary Fund (IMF) article ‘Policy Responses to Covid-19,’ the central bank of Nigeria announced its establishment of a facility that would support Nigerian MSMEs with sixty million dollars. In South Africa, business growth and resilience facility were started to support MSMEs, specifically in supply value chains focusing on manufacturers or suppliers of locally made products facing shortages because of the pandemic. In Morocco, a guarantee agency that would provide financing and guarantees for MSMEs in distress was created, coupled with ease in the procurement processes and increased procurements from MSMEs.

South Africa also provided tax subsidies to MSMEs whose turnover was below 2.7 million USD in addition to deferring their pay-as-you-earn tax liabilities for over four months. In Malawi, commercial and microfinance institutions were allowed to provide a suspension of debt service for three months and restructure the loans of their MSME borrowers. 

With these targeted responses to the pandemic and their economic effect on MSMEs, the current policies seem only to be short-term solutions with the expectation that the pandemic would end in 2020, at most 2021. Here we are in 2022 and the omicron variant has emerged with the ability to multiply seventy times faster than other variants and poses danger for the unvaccinated, unsettling the world yet again with solutions to mitigate the economic effect. One solution is providing equitable access to COVID-19 vaccines. 

The ‘post-Covid’ world will present a new normal to doing business, so governments should consider policies that adapt to the new realities facing Africa and the world’s economy. Therefore, policies are to be made with the probable longevity of the virus in mind as opposed to the rapid response policies made to curb the negative effect of the virus within a year. Such policies should include:

The digitalization of businesses

The digitalization of businesses and the employment of targeted programs to accelerate the adoption of such digital processes is a good policy for African MSMEs. Government should help and train MSMEs on their digital skills. MSMEs can enjoy the adoption of digital technology through its ability to reduce and simplify the cost of access and time spent before getting access to submission and filing of tax forms and public tender applications. Also, the African countries’ governments can enhance digital connectivity and highspeed networks by investing in ICT so that rural and remote areas can adopt digital infrastructures in their businesses, bridging the gaps between them and the modern world in the use of technology.

Financing options

MSMEs have unarguably found access to finance more challenging than larger companies. Although the governments have made policies to help MSMEs, they still need to consider how long those policies will help them. One of the ways to do this is by widely promoting and communicating new funding opportunities and financial aid schemes available to MSMEs so that funding can reach even smaller business owners. The government should also conduct surveys and develop evaluation processes to determine which businesses need urgent/crucial support. An evaluation process would allow funding to reach those small businesses that need it the most.

Also, policies should explore how to restructure existing MSMEs debt, such as extending their maturity period or offering lower installments to avoid over-indebtedness. Governments should consider policies that support MSMEs’ solvency and the establishment of credit bureaus and credit registries.

Self-employment

Self-employment is a concept the African countries need to pay more attention to during times like these. Concern for vulnerable groups like students, youths, and women will mitigate long-term unemployment and cushion the effects of the pandemic on the economy. Governments should encourage self-employment by making policies that foster an entrepreneurial spirit where people can work for themselves and make ends meet. Facilitate policies through flexible business opportunities like funding and startup requirements, including providing education and training for entrepreneurs.

Self-employment can be encouraged by formalizing informal businesses, especially in countries with large informal sectors, so that they are able to access government funding. In addition, create policies to support access to regional and international markets by enabling MSMEs to take advantage of agreements like the African Continental Free Trade Agreement (AfCFTA). Furthermore, governments can provide technical assistance to build informal entrepreneurs’ capacities to help increase their competitiveness.

Social protection programs

Social protection programs should be made of importance in mitigating the effect of the pandemic on the livelihoods of informal businesses, which make up a large percentage of Africa’s small businesses. At the pandemic’s start, 200 social protection measures were provided by most African countries. The effectiveness of the measures requires more scrutiny. Targeted measures by African nations were enacted to accommodate the needs of citizens pushed into poverty by the pandemic.

African governments and their development partners should use the opportunity of the pandemic to prioritize investments in social protection for informal enterprises. Also, governments should aim for long-term social protection that will protect women and girls and help them to recover from the pandemic to ensure more citizens are not left in poverty during a pandemic or other natural disasters like floods or droughts. 

Conclusion

A World Bank report shows that “while people across all income experienced losses during COVID, the poorest 20 percent experienced the steepest decline in incomes.” Recovery is a matter of high importance for all, especially for small businesses that were hit hardest. Lasting business policies to keep MSMEs afloat means providing access to finance, supporting digitalization, increasing access to markets, and providing technical assistance. In addition, social protection programs will be essential, especially for informal businesses that are unregistered and unreachable for government funding. Micro, Small, and Medium Enterprises are an integral part of Africa’s economy. Policies to help them recover and stay afloat now and in the future are imperative for community and economic development.