Global Courant 2023-05-10 17:41:24
Large-scale economic research unequivocally reveals the high returns of investing in opportunities for women in Africa.
For example, the UN reports that women typically reinvest up to 90% of their income in education, health and nutrition for their family and community. This compares to only 35% of such reinvestments by men, clearly illustrating that investments in women’s businesses help transform African economies and societies.
SMEs now account for more than 80% of employment across Africa, where they have created a thriving new middle class and fueled strong demand for new goods and services.
According to the World Economic Forum (WEF), women make up 58% of Africa’s self-employed population and contribute about 13% to Africa’s total GDP.
Regionally, Sub-Saharan Africa has the highest rate of entrepreneurship in the world, with approximately 42% of the region’s non-farm workforce classified as self-employed or employed. Meanwhile, the Mastercard Index of Women Entrepreneurs shows that Botswana, South Africa and Ghana are among the largest female entrepreneurs in the world.
This positive data can only grow as a growing number of government strategies support women entrepreneurs and women-led startups in Africa through targeted policies, including gender budgeting and through the use of the African Continental Free Trade Agreement (AfCFTA).
The UN estimates that about 70% of informal cross-border trade in Africa is now conducted by women traders. In addition, the AfCFTA, launched in 2021, raised the hopes of many female entrepreneurs that this free trade zone, with a market of 1.2 billion people, will boost their businesses and reduce endemic poverty.
The UN reports that the gender pay gap in sub-Saharan Africa is 30% compared to 24% globally. According to the International Finance Corporation (IFC), which is leading an initiative with the European Commission to boost online trading opportunities for women in emerging markets, the income gap between male and female traders needs to be closed. It predicts that this would increase Africa’s market value by at least $14.5 billion.
Numerous initiatives are now tackling the gender pay gap. For example, UN Women has pledged to continue efforts to raise awareness and promote policy change to reduce and close the gender pay gap and ensure that women and girls have equal rights with their male counterparts.
While the gender pay gap has steadily narrowed in recent years, the funding gap for female entrepreneurs in sub-Saharan Africa still stands at $42 billion.
The WEF reported that by 2022, 67.8% of the gender gap in Sub-Saharan Africa had been closed, compared to 63.4% in North Africa. Although lower than North America, which closed the gender gap at 76.9%, both North and Sub-Saharan Africa closed the gap at 62.4% to a greater extent than South Asia.
Encouragingly, according to the WEF Global Gender Gap Index, Rwanda has closed the gap at 81.1% and Namibia at 80.7%. This gap is widely expected to improve as access to finance further unlocks the entrepreneurial capacity of women in Africa.
Read more about women entrepreneurs in Africa
Access to credit
The fashion industry in sub-Saharan Africa is dominated by women, whose small businesses connect a vibrant cotton-textile apparel industry that alone produces $31 billion a year.
However, without access to finance, women-owned enterprises and entrepreneurs struggle to tap into high-value segments of the fashion industry, whose users are expected to reach nearly 400 million by 2027.
According to the World Bank, establishing an appropriate legal framework is a crucial starting point for overcoming women’s lack of financial inclusion. Laws to eliminate gender discrimination in access to banking services in Africa are at the center of this movement.
By 2021, no fewer than six sub-Saharan countries had laws prohibiting women from opening a bank account without their husband’s consent, and amendment of such laws is actively encouraged.
The IMF identified further opportunities to close the persisting gender gap in access to finance, and advised African decision-makers to take practical steps to address demand-side factors such as the financial illiteracy of women and girls.
Arming female entrepreneurs with the right financial knowledge and skills will inevitably increase their effective engagement in the credit market, opportunities for which are increasing as more and more female-led SMEs contribute to the social fabric and infrastructure of African countries in a virtuous circle.
In his report Access to finance: Why aren’t women leaning in?cites the IMF Affirmative Finance Action for Women in Africa (AFAWA), which provides capacity-building services for women entrepreneurs and reform advocates to support women-owned businesses, revealing that G7 leaders pledged $251 million last year to support the program, which aims to unlock $3 billion in private sector financing in Africa.
E-commerce growth for women
Unsurprisingly, until recently, Africa lagged behind the developed world in terms of digital infrastructure. This is changing quickly. The goal of the African Union’s digital transformation strategy is digital inclusion for every African citizen by 2030 – up from just 22% of the population in 2017.
This rapid growth of internet access across the continent will inevitably reveal huge new opportunities for female startups and for self-employed women.
Further digital investments in Africa’s economies will enable the growth of economic opportunities for women across the continent.
Kenyan M-Pesa, for example, is a mobile money service operated by Vodafone and Kenyan telecommunications provider Safaricom that offers payment and financial services even if a customer does not have access to a bank account. By 2022, access had risen steadily to 52.4 million customers.
Sales in the womenswear sector are expected to grow at an annualized rate of 12.5% through 2027 to $13.3 billion. Meanwhile, according to the World Bank, the proportion of women in Africa with access to a bank account has more than doubled in the past 12 years.
This gives more traction to the AfDB’s offering of a range of fundraising facilities that are part of its initiative to improve access to finance for women in Africa. These include an individual loan guarantee of up to $2.5 million and assistance for partner financial institutions to support them in lending to SMEs and thus help grow their SME portfolio. In the latter case, the AfDB shares the loan costs equally with the bank.
In January, AFAWA announced that it had reached the $1 billion investment milestone in women entrepreneurs in Africa.
In addition to focusing on raising loan financing, the AfDB launched its flagship initiative in 2015, Fashionomicsto raise awareness of African fashion and textiles on the international scene, investing in high-growth sectors with the potential to promote women’s empowerment and create 25 million jobs by 2025.
Sub-Saharan fashion industry alone is valued at over $30 billion. Fashionomics pairs female designers, buyers and suppliers with financial service providers and mentors, significantly increasing the industry’s overall value.
A wave of developments since the establishment of AFAWA clearly demonstrates that its investment ambitions are value for money.
