At one time or another most of us have had an opportunity to interact with a small and medium-sized enterprise (SME), either through a transaction, personal knowledge of an individual or individuals who run or are involved in one, or word of mouth.
At one time or another most of us have had an opportunity to interact with a small and medium-sized enterprise (SME), either through a transaction, personal knowledge of an individual or individuals who run or are involved in one, or word of mouth.
It may be the middle aged woman selling vegetables at the corner of your local vegetable market. Or it may be the young man you met through a mutual friend who has started his own microfinance outfit. It may in fact be you. It doesn’t matter who they are or what they do, SMEs are responsible for creating employment and inspiring a culture of entrepreneurship all over the world. In Africa, there is an increasing number of enterprises emerging every day and according to the African Development Bank (AfDB), SMEs “contribute to more than 80 per cent of output and jobs in most African nations.”
But in order for SMEs to fully tap into their potential, they must be able to trade with other nations, and export their goods or services. Many aren’t able to do this and often stumble across barriers when attempting to access a wider market, the reason behind this? Stifling trade regulations, stringent standards of quality, and non-tariff barriers amongst other issues.
Tackling these issues will be on the agenda when members of the World Trade Organisation (WTO) convene in Nairobi on Tuesday 15th December, 2015 for the 10th Ministerial Conference (MC10). It will be the first time an African country has hosted the prestigious event, and the first time an African (and a woman) will chair the conference. There has never been a more perfect opportunity to address the needs of Africa in regards to trade and doing business in the region.
One of the hottest agreements on the table is the WTO Trade Facilitation Agreement, which includes measures to make export processes easier for traders. The agreement has been ratified by 53 WTO members with an increase in ratification in the months leading up to the conference. Perhaps this upward streak will continue post MC10. If it does, and a two thirds majority is attained, SMEs stand to benefit from reduced trade-related costs. They could also take an active role in ensuring that they gain wholly from the agreement. One of the provisions of the treaty is that a national committee is set up by each WTO member and as Cuts International has highlighted, SME representation within these national committees would prove invaluable to small businesses.
Imagine for a moment the young man; let’s call him James, with the microfinance business. He’s bursting with energy and ideas and is keen to build his empire from scratch. He’s thinking about the millions of young Africans he could partner with – the young woman sitting in Uganda with a flourishing business, for example, who cannot expand due to a lack of working capital. He’s ready, but he’s frustrated by the process. What now? This is where the work of the MC10 delegates comes in. Intra-Africa trade currently stands at 12%, one of the lowest regional rates globally, which is disheartening when you consider the opportunities available on the continent with a population of over 1 billion and a rapidly expanding middle class. At the conference, finding the means to ensure intra-African trade is boosted will be a priority for African nations. If successful, a myriad of opportunities will open up for James and other like-minded entrepreneurs out there.
What about African farmers and SMEs in the agricultural sector who are the backbone of the continent? Guided by developmental objectives, delegates will be looking at ways to ensure that they are able to succeed. A consensus revolving around the three pillars of the 1995 Agricultural Agreement (domestic support, market access and export competition) will be up for discussion and while there is currently a divergence of opinions amongst WTO members about the first two pillars, it has been reported that there is potential for an agreement on export competition in the upcoming ministerial conference. Negotiations for this deal will revolve around the elimination of export subsidies, which is hampering domestic produce. This means WTO members from developing nations will want to curtail cheap imports from infiltrating their respective markets and undercutting the prices of domestic produce. Once this is achieved, small scale-farmers will be in a better position to sell goods to both a domestic and international market.
Have you ever thought about the journey of a specific product and how it is transformed into a finished good from raw materials? Take your favourite t-shirt for example, assuming it’s made from cotton, it has made the journey from a cotton farm in Benin (a top producer of cotton in Africa) all the way to your local retailer in Nairobi (with a few other detours along the way of course). This process, often referred to as a global value chain, is a crucial part of international trade. Once a company is incorporated into a global value chain, the opportunities are endless; from reaching more consumers to entering new markets. Integrating SMEs’ into global value chains will become more of a reality once WTO members ensure there is greater market access, which is also on the agenda for MC10.
When the world convenes in Nairobi on the 15th-18th of December, it will be a chance for Africa to have her voice heard. Around a quarter of the WTO membership consists of African nations, and it’s hoped that the needs of the continent will be reflected in the outcomes. It is also important to note the business opportunities that may arise out of MC10 agreements are up for grabs for anyone who is interested. If you’re a business owner or entrepreneur, it’s worth taking a keen interest in the WTO talks. It may also be worth telling that man or that woman you know with an entrepreneurial spirit to do the same.