Business in the African continent is witnessing a transformative shift, one that promises an economic renaissance unlike any before. This shift is predicated on three key pillars - cross-border payments, remittances, and rapid growth of the small and medium-sized enterprises (SME) sector.
Each of these facets is dynamically interconnected, exerting a profound influence on the continent's socioeconomic landscape. As remittances surge into Africa from its diaspora, they not only provide financial stability to families but also act as seed capital for budding entrepreneurs, fuelling the growth of SMEs. Simultaneously, the Fintech revolution making cross-border payments easier is fostering new avenues for trade and global economic integration.
This triad of cross-border payments, remittances, and SMEs is setting the stage for Africa's economic renaissance, heralding an era of unprecedented growth and prosperity. Remittances are no longer just a safety net for families. They are now driving substantial improvements in living conditions, education, healthcare, and entrepreneurial activity.
Another transformative impact of remittances is in the realm of entrepreneurship. For many, remittances serve as seed capital for starting or growing their own businesses. The resultant growth of the SME sector, employment and creation of a buzzing ecosystem helps drive Africa out of poverty.
The participation of such SMEs in global trade drives outbound business payments from Africa. This, in turn, stimulates local economic growth, creates further employment opportunities, and sets the stage for sustainable development, contributing to a long-term development cycle.
The number of entrepreneurs in Africa is expected to reach 200 million by 2025, which will continue to propel the growth of the SME sector well into the future. There are currently an estimated 44 million SMEs in Africa, accounting for 90% of businesses and 60% of employment in Africa, and are responsible for creating the majority of jobs in the continent. Nigeria leads, with 17 million SMEs, followed by Kenya at 10 million and South Africa with an estimated 8 million.
According to the African Development Bank, the number of SMEs in Africa is expected to reach 120 million by 2025. The growth of the SME sector is having a positive impact on the African economy, with SMEs creating jobs, driving innovation, and contributing to economic growth.
SMEs in Africa are showing immense potential and resilience in driving economic growth despite facing numerous challenges. Their ability to innovate and adapt to market dynamics makes them an essential sector in Africa's economic landscape.
Small and medium-sized enterprises (SMEs) in Africa make up a significant portion of cross-border business payments. In 2021, it was estimated that SMEs accounted for 30% of all cross-border business payments in Africa. This figure is expected to grow to 40% by 2025.
The future of cross-border payments by SMEs in Africa is bright. With the right support, SMEs can continue to grow their businesses and connect to new markets.
The Emergence of African Business Payments: Gateway to Global Markets
The landscape of business payments, outbound from Africa to the rest of the world has witnessed a transformative evolution in recent years. Traditional barriers to cross-border transactions are gradually dissipating, largely due to the rise of digital financial solutions.
The global B2B cross-border payments market is estimated to be worth a staggering $150 trillion and is expected to reach $176 trillion by 2025. This is a huge market, and banks have a significant share of it. In contrast, the traditional Consumer-to-Consumer remittances are much smaller, at $800 billion.
A 2021 report by the African Development Bank (AfDB) estimates that the value of payments made by MSMRs in sub-Saharan Africa to their suppliers could reach $2 trillion by 2025.
The growth of the SME sector in Africa is one of the main drivers of this increase. The SME sector is the backbone of the African economy, and it is responsible for creating the majority of jobs in the continent. As the SME sector grows, so too does the volume of payments made by SMEs to their suppliers. The SME sector holds a key promise in pushing Africa into the forefront of the global economy, boosting the growth of the country’s middle class and giving birth to hope in Africa.
When comparing payment figures with the world, Africa is still in its infancy, but with a huge potential and a great Future. Banks and nonbank players alike (such as RemittancesHub) are innovating to reduce friction in domestic and cross-border payments and delivering much-needed new solutions to consumers and businesses. Some of the key figures regarding overall Cross border Business payments from Africa paint a new picture:
While Africa's cross-border business payment infrastructure continues to evolve, the recent developments are indeed promising. The rise in digital cross-border transactions is not just connecting Africa with the rest of the world; it's also playing a pivotal role in the continent's economic transformation.
How RemittancesHub Can Help
RemittancesHub is a digital solution that Banks, Remittance Operators and Fintechs can use to send outbound international business payments from Africa. RemittancesHub provides a single API integration, and single point settlement, to send payments globally, in near real-time, cost-effectively and with full transaction tracking.