How to Speed Up Growth and Innovation

• Africa’s SMEs are the continent’s next frontier, but realizing their potential demands bold action.
• By tackling data gaps, rallying investors like pension funds around various segment champions, and building capacity of founders, economies can harness this force for $3 trillion in growth.
• As one of the panels at the just ended Africa Investment Congress 2025 urged, the time for fragmented efforts is over—Africa must unite to turn innovation paths into highways of prosperity.

As the just concluded Africa Investment Congress 2025 held in Nairobi, a candid discussion on how investors, including pension funds, can turbocharge SME hubs across the continent raised a number of pain points facing budding entrepreneurs and funders in the continent.

Panelists like Executive Director at KIPPRA Dr. Eldah Onsomu and Kedibone Imathiu an Independent Non-Executive Director, serving on boards like Absa Kenya & AIG SA; Patricia Kiwanuka CFA — MD, Revenu Stream; Adam Camenzuli from Canada and Kwame Adjei Boateng, CFA — CIO at Black Star Group, Ghana, dissected the barriers and breakthroughs in Africa’s entrepreneurial ecosystem. They noted that Africa’s SMEs— the continent’s economic engine—are starved of the data, policy support, and the critical investment needed to scale.

Yet, with the right interventions, these micro and small enterprises could unlock a $3 trillion GDP boost by 2030, according to the African Development Bank’s (AfDB) 2025 African Economic Outlook. In a region where SMEs account for 80 per cent of employment and 90 per cent of businesses (World Bank, 2025), the path to innovation will involve addressing persistent data fragmentation, empowering regional enterprise champions, and positioning SMEs to tap big capital.

The SME Landscape in Africa: A Powerhouse Hamstrung by Potential

Africa’s SMEs are the unsung heroes of economic resilience, contributing 50 per cent of GDP and employing 80 per cent of the workforce, per the International Labour Organization’s (ILO) 2025 Global Employment Trends for Youth.

In sub-Saharan Africa alone, SME enterprise generate $96 billion in revenue from social enterprises, as highlighted in the World Economic Forum’s 2025 State of Social Enterprise report. Kenya’s 7.5 million SMEs, for instance, drive roughly 33 per cent of GDP and 80 per cent of new jobs, while Nigeria’s 41 million enterprises fuel 48 per cent of employment (AfDB, 2025). Innovation hubs like Nairobi’s iHub have birthed unicorns such as M-Pesa, processing $300 billion annually and lifting 2 per cent of Kenya’s GDP (McKinsey, 2025).

Yet, this powerhouse is hamstrung. The World Bank’s 2025 MSME Finance Gap Report estimates a $331 billion credit shortfall for African SMEs, with only 20 per cent accessing formal finance—compared to 50 per cent in Asia.

Youth unemployment, at 12.8 per cent continent-wide, exacerbates the issue, with 60 per cent of Africa’s 1.2 billion under-35s entering a job market growing at just 3.8 per cent (ILO, 2025). Fragmented data systems and weak governance stifle scaling: a Brookings Institution study (2023) notes that poor financial reporting deters 70 per cent of institutional investors from SME hubs.

This view was shared by panelist Dr. Onsomu stating that players in the SME segment as well as policymakers suffer since “there are no clear frameworks bringing data together in a useful way. This fragmentation makes it hard to invest in these centres.”

Challenges Facing SME Growth Hubs: Data, Policy, and Governance Gaps

SME hubs across Africa grapple with systemic hurdles that panelists at the Congress identified as innovation killers. Data fragmentation tops the list: only 40 per cent of African SMEs use digital tools for record-keeping, per the AfDB’s 2025 report, leading to inconsistent reporting that scares off investors.

In Kenya, where SMEs contribute 40 per cent of GDP, governance gaps cost $2 billion annually in lost opportunities, according to KIPPRA’s 2025 analysis. Policy support lags too—regulatory red tape takes 200 hours yearly for business registration in East Africa, versus 50 in Singapore (World Bank Doing Business 2025).

“Available policies are not locally made. Many policies address the macro, for instance, fintech data is mainly developed by international organizations,” Dr. Onsomu stated.

What’s more, the fintech glut sweeping across the continent exemplifies inefficiency. Today, Africa hosts 1,000+ fintechs, yet 60 per cent duplicate services like mobile money, per Partech Africa’s 2025 Venture Capital Report, crowding out innovation. Pension funds, with $500 billion in assets under management (AfDB, 2025), shy away due to these risks, investing only 5 per cent in SMEs versus 20 per cent in developed markets. This ecosystem fragmentation not only hampers growth but perpetuates inequality, with women-led SMEs receiving just 10 per cent of funding despite comprising 40 per cent of businesses (ILO, 2025).

As Boateng observed, Africa is perhaps having too many fintechs. “With M-Pesa in Kenya, one can do virtually all that any other fintech out there is seeking to achieve. MTN Ghana can do virtually the same. We have too many fintechs competing in a small area.”

The Role of Pension Funds and Big Investors: Bridging the Gap

Pension funds hold the key to unlocking SME potential, with Africa’s $1.5 trillion in pension assets poised to channel 10–15 per cent into high-return ventures, per the AfDB’s 2025 Economic Outlook. Kenya’s NSSF and LAPFUND manage $2 billion, yet only 3 per cent flows to SMEs, missing a $300 million opportunity (KIPPRA, 2025).

Panelist Adam Camenzuli from Canada advocated addressing governance gaps, including financial reporting for SMEs to attract big ticket finance:

Ghana’s Boateng highlighted the need for backing regional champions: “Rally around 2–3 fintechs per market to scale impact.” This approach could yield $10 billion in returns by 2030, per McKinsey’s 2025 Africa Digital Economy report.

Dr. Onsomu from Kenya stressed on the need for good governance: “Standard metrics for performance tracking invite expert guidance, reducing risk for big investors.” Pension funds like South Africa’s PIC, with $150 billion AUM, have piloted SME funds yielding 12 per cent returns, proving viability (AfDB, 2025).

Read also: Blockchain for Employment: Africa’s Leap into the Gig Economy

Policy and Capacity Building Solutions: Forging the Path Forward

To speed SME growth, policymakers must prioritize data harmonization and capacity building. Dr. Onsomu urged “market information systems” to combat fragmentation. Rwanda’s e-Soko platform has helped boost farmer incomes 30 per cent by 2024 (AfDB, 2025). Deploying standard metrics, as Dr. Onsomu suggested, could mirror the EU’s SME Performance Review, which tracked one million enterprises to optimize $200 billion in funding (European Commission, 2025).

Capacity building is crucial: the ILO’s 2025 report recommends vocational training for 50 million youth, projecting 12 million jobs by 2030. Kenya’s Ajira Digital, training 100,000 in freelancing, generated KES 1.5 billion in earnings (McKinsey, 2025). Engaging experts for data silos, as Imathiu proposed, could emulate Nigeria’s SMEDAN, which digitized 500,000 SMEs, attracting $1 billion FDI (World Bank, 2025).

Case Studies of Success: Lessons from Rwanda and Kenya

Rwanda’s innovation ecosystem exemplifies acceleration: its Vision 2050 invested $500 million in hubs like kLab, spawning 200 startups and 10,000 jobs, with GDP growth at 7 per cent (AfDB, 2025). Kenya’s iHub, since 2010, has incubated 1,000 ventures, contributing KES 100 billion to GDP (Partech, 2025). These models show policy-SME synergy yields dividends.

Africa’s SMEs are the continent’s next frontier, but realizing their potential demands bold action. By tackling data gaps, rallying investors like pension funds around champions, and building capacity, economies can harness this force for $3 trillion in growth. As the Congress panel urged, the time for fragmented efforts is over—Africa must unite to turn innovation paths into highways of prosperity.