Business leaders at the ongoing annual Africa Business Convention 2023, themed “Africa connected” said sources of funding for African businesses are gradually slowing due to rising global interest rates.
Businesses in Africa both small and large are presently confronted by the global financial crises resulting from weak commodity prices, and the Russia-Ukraine war. Rising global inflation has also led to an increase in interest rates as global central banks seek to rein in on price growth.
“The impact of the global economic crisis has created a liquidity squeeze in the system for businesses to access funds to operate and scale up,” said George Imeda, executive director at Alpha Morgan Capital.
Imeda explained that despite the global financial crisis and uncertainties of the government policies, funding should not be altered because it can limit the growth of businesses in Africa.
Imeda said, “funding is a key factor to business growth, the issue is where is the funding coming from? And how will the investing public have confidence in you to be able to entrust you with what you are doing?”
Similarly, Yyonne Ezekiel, managing partner, Olisa Agbakoba Legal, said funding is very critical for the survival of businesses. Venture capitalists are ready to take risks for this business, especially the tech sector.”
Read also: AFCFTA can solve currency crisis in Africa
“The major problem is securing these funds as these businesses find it difficult to acquire funds from traditional banks as a result of the high cost of borrowing.”
According to her, within the venture capital space, funds can be acquired from family and friends, savings, angel investors, and many others who are willing to invest.
In other for Businesses in Africa have to tackle liquidity requirements in order to scale up and expand.
Josh Bamfo, head, of transfer pricing, and economic advisory services, at Andersen Nigeria said that “a volatile macroeconomic growth indicates that economic activity is surging and this gives an opportunity for investment.”
“High Inflation rate, increased monetary policy rate results in an increase in the cost of borrowing causing businesses to borrow more and invest less,” Bamfo said.
The Nigeria inflation rate reported in January 2022 was 15.6 percent while the monetary policy rate was 11.25 percent and by the end of last year, both rates amounted to 21.37 percent and 17.5 percent, respectively.
Bamfo explained that the cost of borrowing has gone up significantly from January 2022 to January 2023, resulting in businesses struggling to invest.
On the other hand, Nigeria’s gross domestic product (GDP) for the third quarter of 2022 grew by 2.5 percent , which is lower than the population growth rate and hinders the economy’s growth rate.
However, technology is the major driver for every business, and being technically inclined is a call to growth and expansion.
“Covid-19 was a major driver to technology adoption in our environment,” said Yemi Keri, CEO of Heckerbella.
“Every business requires technology to perform several tasks, and those that cannot afford these tech gadgets face a higher threat of running out of business in the long run.”
“It is important to note that no organisation can strive without technology,” Keri said.
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
