SMMEs – engines of economic growth and regional trade

By Mandla Mpangase

Small, medium, and micro enterprises stand poised to become powerful catalysts for regional trade and economic growth.

This was one of the key messages of Gauteng MEC for Finance and Economic Development Lebogang Maile to the delegates at the African Continental Free Trade Area (AfCFTA) Conference taking place on 24 July 2025 in Johannesburg.

“Micro, small, and medium enterprises (SMMEs) represent the heartbeat of Africa’s economy,” the MEC said.

SMMES across Africa create the most employment, drive innovation and provide much-needed goods and services that sustain communities.

In South Africa SMMEs account for 80% of the country’s workforce and create an estimated R5-trillion turnover annually.

It is estimated that there are three million SMMEs in South Africa, which employ some 13.4 million people. Of those, 2.5 million are micro-enterprises. Of these micro-enterprises, 72% operate in the informal sector.

The SMME sector is vitally important to the Tshwane Automotive Special Economic Zone, which, from its inception, committed to building the local township economies of Eersterus, Mamelodi and Nellmapius.

During its Phase 1 development, Africa’s first automotive city ring-fenced R1.7-billion of its procurement spend for SMMES and emerging entrepreneurs.

As it expands Phase 2 of its development, TASEZ is planning to increase the numbers of SMMEs it supports through infrastructure projects, the creation of job opportunities, and skills training in both business development and in technical training for the automotive manufacturing industry.

SMMEs as catalysts

Speaking at the AfCFTA Conference, MEC Maile also noted: “In light of the African Continental Free Trade Area – the largest free trade area in the world by the number of participating countries – SMMEs stand poised to become powerful catalysts for regional trade and economic growth.”

The responsibility of the Gauteng Provincial Government, and all the stakeholders attending the conference, is not only to explore the pivotal role of SMMEs in shaping Africa’s economic landscape, but to outline their opportunities and challenges under AfCFTA, the MEC added.

It was important to identify the strategies needed to harness the full potential of SMMEs for sustainable development.

SMMEs in Africa operate across diverse sectors, from agriculture and manufacturing to services and digital innovation. They drive local value addition, foster entrepreneurship, and serve as engines of social mobility, particularly for youth and women.

The latest FinScope MSME South Africa 2024 Survey, launched a few months ago, found that in the South African context of high unemployment rates, particularly among the youth, 30% of SMME-owners are 35 years old or younger.

“While this may be considered too low, given that 50% of the adult population are youth aged 16-35 years, and that this demographic constitute 60% of the unemployed population, it indicates the important role that the SMME sector can play in turning the tide of youth unemployment in a continent with the world’s youngest population,” MEC Maile said.

SMMEs creating jobs

SMMEs are vital for job creation, notably absorbing the continent’s rapidly growing workforce. Their size also allows them to adapt quickly to market needs and to experiment with new products and services, facilitating innovation and flexibility.

They also play a significant role in poverty reduction on the African continent, the MEC said, adding that by offering livelihoods to millions, they also play a direct role in reducing poverty and enhancing inclusive growth.

The AfCFTA promises to reduce tariffs, eliminate barriers to intra-African trade, and stimulate industrialisation and investment.

In doing so it will allow the SMMEs to access a much larger market beyond their national borders and creating unprecedented opportunities for growth by tapping into regional value chains, supplying components, services, or finished goods.

“This not only promises gross domestic product growth across the African Union but also sets parameters for attracting investment in a depressed and volatile global economy.”

A harmonised market environment would make African SMMEs more attractive to investors, both domestic and foreign, like the European Union.

“The integration of markets through AfCFTA empowers SMMEs to play a transformative role in regional trade.”

They can do this through enhancing of cross border trade, leveraging AfCFTA to expand their reach.

“Reduced tariffs and simplified customs procedures lower the cost of doing business across borders, Maile added.

This enables SMMEs to diversify their customer base, mitigate risks, and benefit from economies of scale.

SMMEs as innovators

In addition to this, they can also act as catalysts in driving innovation and competition.

“Exposure to a broader market compels SMMEs to innovate and improve their competitiveness. This, in turn, stimulates higher quality standards, greater efficiency, and the adoption of new technologies,” Maile said.

The AfCFTA facilitates the creation of regional value chains, where SMMEs can serve as suppliers, assemblers, or distributors.

“By collaborating with firms in other African countries, SMMEs can access raw materials, expertise, and markets otherwise beyond their reach.”

Such integration boosts industrialisation and intra-African trade, which remains concerningly low.

“Intra-African trade still represents a relatively small portion of Africa’s overall global trade. In 2022, a year after the implementation of the AfCFTA, it reached $102-billion but only accounted for 15% of Africa’s total trade.

“However, in 2024, intra-African trade reached $208-billion, representing a 7.7% increase compared to the previous year.”

This growth could be attributed to the implementation of the AfCFTA and improved trade policies.

The final key catalyst of SMMEs in the context of the AfCFTA is the promotion of inclusive economic growth. SMMEs are often owned or led by women and youth.

“Their participation in regional trade under AfCFTA ensures that the benefits of integration are broadly shared. This inclusivity promotes equitable development and reduces inequalities within and between countries,” said MEC Maile.

He also noted the AfCFTA creates a fertile environment in which SMMEs could survive, providing opportunities to access to new markets, an improved business environment, technology and knowledge transfer, and finance and investment.

However, SMMEs also face hurdles that could hinder their ability to capitalise on AfCFTA such as a lack of information, inadequate access to finance, poor infrastructure, capacity constraints, and a complex regulatory environment.

“To ensure that SMMEs become true catalysts for regional trade and growth under AfCFTA, coordinated efforts are required from governments, the private sector, and development partners,” the MEC said.

The Gauteng Provincial Government has implemented a vast range of interventions to respond to these challenges, including running training programmes focused on business management, digital literacy, and export readiness, offering structures such as incubators and accelerators, and working with the private sector, particularly banks, to develop innovative financial products, guarantee schemes, and support for fintech solutions to unlock capital.

Unblocking financial barriers

In his recent budget vote speech, MEC Maile outlined how the province intended to inject tens of billions of rands as credit to unlock funding for SMMEs.

In addition, infrastructure development is also a key intervention for the province to grow its economy.

“Investment in roads, ports, logistics, and digital infrastructure is vital for seamless regional trade. Special economic zones and industrial parks tailored to SMMEs can provide affordable facilities.”

Gauteng is aligning with national infrastructure financing reforms, including simplified public private partnership regulations.

Streamlining customs procedures, standardising product regulations, and creating pan-African platforms for business registration will reduce administrative barriers, as will easing red tape to help business growth.

Other important actions required to make the AfCFTA a success is the development of digital trade portals, market intelligence platforms, and trade fairs that can inform SMMEs about opportunities and requirements under AfCFTA.

“Linked to this must be the fostering of regional collaboration. Cross-country business networks, trade associations, and public-private partnerships can facilitate SMME integration into regional value chains.”

The Gauteng Provincial Government is also promoting digitisation and e-commerce for SMMEs. “We believe in the value of encouraging SMMEs to adopt digital tools as these will enable them to access regional and global markets more effectively.”

In addition, MEC Maile told the gathering that SMMEs hold the key to Africa’s successful economic integration and sustainable growth under AfCFTA. “Their agility, innovation, and deep roots within communities make them uniquely positioned to drive intra-African trade, generate employment, and foster inclusive development.”