Unlocking market access for Africa’s small businesses: the road to growth - 22 On Sloane

The African Continental Free Trade Area (AfCFTA), which commenced trading in 2021, represents a historic opportunity to unite 1.3 billion people under a single market with a projected gross domestic product (GDP) of $3.4 trillion (R61.2trl).

However, SMMEs’ ability to participate meaningfully in this transformative trade framework remains constrained by systemic barriers, particularly access to finance, market readiness, and operational scalability.

According to the African Development Bank (AfDB), Africa’s SMME financing gap stands at a staggering $331 billion annually, with formal SMMEs receiving less than 20% of the credit they need. Non-tech sectors such as agriculture, manufacturing, retail, and services are disproportionately affected, as investor attention remains skewed towards scalable technology-driven ventures. Without deliberate interventions to bridge this financing gap, there is a real risk that the AfCFTA will deepen existing inequalities between large corporates and small, often informal, African businesses.

A Statista survey revealed that between December 2022 and January 2023, across Ethiopia, Kenya, Nigeria, and South Africa 41% of SMMEs relied exclusively on the founders' funds, 29% received financing from family and friends, 11% secured bank loans, and 7% obtained government funds. This over-reliance on self-financing limits the ability of businesses to grow, or innovate, and results in them being them vulnerable to market shocks such as the current market downturn.

Beyond finance, African SMMEs face persistent infrastructure and logistics bottlenecks that inflate operating costs and restrict access to regional markets. High transport costs, fragmented supply chains, and underdeveloped trade corridors make it difficult for small firms to compete with large corporates that benefit from economies of scale and more sophisticated logistics infrastructure. Yet, unless these infrastructural imbalances are addressed, the benefits will continue to accrue to large, export-ready firms that already operate across borders, leaving smaller enterprises behind.

Recent policy efforts across the continent demonstrate political will to enable SMME participation. In South Africa, for instance, the Department of Trade, Industry, and Competition introduced the Export Marketing and Investment Assistance scheme to support SMMEs in accessing new markets. This strategy is reiterated through bilateral agreements such as the Declaration of Intent signed by South Africa and Algeria during the Ministerial Roundtable at the GEC+Africa in 2024, followed by the memorandum of understanding signed during President Cyril Ramaphosa’s state visit to Algeria in December 2024. These interventions signal a shift toward inclusive industrial policy and local enterprise development.

However, policy ambition often outpaces implementation. Many SMMEs lack the trade compliance knowledge, export certification, and logistical planning needed to qualify for such programmes. Incubation hubs and industry associations can play a catalytic role here, offering tailored capacity-building programs on cross-border trade regulations, digital documentation, and customs processes.

Innovative financing models are essential to bridging Africa’s vast funding gap. Blended finance, revenue-based lending, and credit guarantee schemes have shown promise in improving access to capital. Platforms like Bright On Capital and Vula are using fintech to connect SMMEs to supply chains and lenders based on transaction data rather than traditional collateral requirements. These models lower entry barriers and reduce risk perceptions, particularly for informal or thin-file entrepreneurs. However, such platforms need to scale more aggressively, and regional development finance institutions (DFIs) can co-invest or de-risk these models. Public-private partnerships, tied to AfCFTA’s own Adjustment Facility, could provide the necessary push to mainstream alternative financing tools.

The stakes could not be higher. Without deliberate action, AfCFTA risks becoming another chapter in Africa’s history of missed opportunities, where macroeconomic progress bypasses the millions of small businesses driving local economies. The agreement’s promise lies not in its sheer market size but in its potential to empower grassroots entrepreneurs, if supported by patient capital, targeted policies, and ecosystem-wide collaboration.

Ruth Maposa is a programme analyst at 22 On Sloane.

*** The views expressed here do not necessarily represent those of Independent Media or IOL.

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