By Gerelyn Terzo
While it is rare to find any segment of the economy that remained unscathed from the pandemic, brick-and-mortar businesses without access to a digital platform were especially vulnerable. When the lockdowns were in place and stores were required to temporarily shut their doors, these business owners had no way to generate revenue and lacked the resources to develop a comprehensive e-commerce strategy to stay afloat. COVID-19 exposed the need for micro and small enterprises (MSEs) to build digital solutions.
While some of Ghana’s big e-commerce players have flourished, MSEs have had a tougher go of it. And these are precisely the types of businesses that one African-focused accelerator program is looking to back.
The Catalyst Fund Inclusive Commerce Accelerator, a program overseen by BFA Global and supported by the Mastercard Foundation and the Meltwater Entrepreneurial School of Technology (MEST), is paving the way for Ghana-based MSEs to participate in digital commerce solutions that would otherwise be out of reach. Catalyst is looking to make Ghana-based MSEs more financially stable and help them grow and gain scale to ride the digital commerce wave.
The Catalyst Fund, which in November 2020 launched with $4.3 million, is putting its money where its mouth is and has backed a pair of digital commerce companies in Ghana – Boost Ghana and KudiGo. Both companies are dedicated to Africa’s informal micro and small business community.
Boost’s mission is to help MSEs flourish in Africa’s digital economy through growth and employment by accelerating stock deliveries. Africa boasts more than 100 million small businesses, according to Boost Ghana. Jane Del Ser, project lead for the Catalyst Fund Inclusive Digital Commerce Accelerator at BFA Global, stated:
“MSEs are the backbone of Ghana’s economy, representing about 80% of the MSME sector and employing over 50% of Ghanaians.”
For its part, KudiGo is behind “simple software for retail,” helping entrepreneurs to manage their inventory and sales with a mobile app as well as to sell in-store and online.
The two companies are part of the maiden cohort of digital commerce startups to join the accelerator program. Each one will be awarded as much as $120,000 in grant funding in addition to gaining access to “tailored venture acceleration support” and Catalyst’s Circle of investors, which is comprised of more than 65 members and innovators. The rescue couldn’t have come soon enough for the hard-hit small business community in Ghana.
Small Business Spotlight
Between May and June 2020, 9% of businesses in Ghana bolstered their use of the internet to keep operations going, while more than two-thirds relied on mobile money, a digital financial service that lets the unbanked make transactions with their mobile device. There was a higher tendency to increase internet usage in certain sectors of the economy, including agriculture. Incidentally, businesses in the accommodation and food segment, which was among the hardest-hit sectors from the crisis, turned to digital solutions, including the internet and mobile money, the least.
Source: StatsGhana.gov
It is no secret that MSEs were hit harder by the pandemic than their larger counterparts, the latter of which are more robust. And despite the uncertainty that the small business community has experienced over the past year, one thing is clear – digital solutions are going to be key. Seth Twum-Awkaboah, CEO of the Association of Ghanaian Industries, said at a recent event, “SMEs must take advantage of e-commerce platforms.”
Indeed, There are a number of public and private organizations in Ghana that are looking to help the small business community to become more resilient. For instance, the National Board for Small Scale Industries (NBSSI) says it is looking to “support 500 growth-oriented SMEs.”
Nana Ama Yankah, founder and CEO of Accra, Ghana-based lifestyle brand Naya by Africa, was featured in an interview by VOA Africa on the fallout from COVID on small businesses. Yankah said that during the lockdowns, her startup suffered three weeks without any revenue, which she described as “tough.” During COVID, it was also difficult for them to get ahold of supplies since Ghana’s borders were closed, but fortunately, they had stock to last for a while. The business didn’t have to perform any layoffs and was helped by the fact that the landlord in the mall gave them a break from the rent for a couple of months.
Now that the economy has reopened, they have been attempting to contact their customers to let them know that they are once again open. They have also focused their efforts on ramping up online sales, engaging with customers on social media, and doing more deliveries of products like handcrafted soaps and sea salt scrubs. An advantage of their business is that soap is an essential item, Yankah explained, so customers are returning. They are attracting both local and international customers to their website.
Ghana-based MSEs that turned to online marketplaces during the pandemic experienced stronger profits on a weekly basis vs. those that did not, according to Catalyst Fund research, citing a small sample. Catalyst found that most MSEs in the country are aware of digital commerce but their use of it is limited in scope to activities such as marketing, orders and payments. The Catalyst Fund is doing its part to help the MSE community and plans to scale half-a-dozen digital commerce companies in two years.
Ghana’s Economy
Ghana’s economy, which is known for producing cocoa and gold, was growing at a rate of about 6.8% annually between 2010-2019. In recent days, the Bank of Ghana decided to keep the prime interest rate unchanged at 14.5%. Inflation is on the rise and has surpassed the central bank’s Western African inflation target, fueled largely by non-food prices.
In addition, consumer price inflation inched higher in February to 10.3% from January’s 9.9%, which also exceeds the central bank’s target range of 8%, give or take 2 percentage points. Price growth should normalize by the second quarter of 2021, according to the Bank of Ghana.
Ghana’s economy fell into recession in the third quarter of 2020 amid the pandemic-fueled slowdown but GDP is expected to increase by 5% this year, according to the government. Considering that small and medium-sized businesses contribute roughly 70% to the country’s GDP and are responsible for about 60% of formal sector employment, the rebound can’t happen soon enough.
(The writer is a Business Development Executive at Sharemoney, an online money remittance service that is passionate about providing people a way to cost-effectively transfer money to countries all over the world).
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