African businesses shifting towards new technologies in response to COVID-19 pandemic

Addis Ababa, 24 August 2020 (ECA) – The Economic Commission for Africa, jointly with International Economics Consulting Ltd, released the report of the second comprehensive survey on the COVID-19 pandemic and its economic impact across Africa. The online survey was conducted from 16 June to 20 July to provide insights into the effects of the pandemic on economic activity for businesses across Africa, identifying the challenges they face as well as their responses.

The results of the survey show that the top three challenges faced by companies are: a) reduced opportunities to meet new customers; b) drop in demand, and; c) lack of cash flow. Companies have faced serious disruptions in both supply and market due to COVID-19, with unfair pricing seen as a major concern. Feedback from companies about government assistance is mixed with nearly two-thirds of the respondents indicating from moderate to no satisfaction. As a consequence, 50% of the respondents approached financial institutions from which 25% got positive responses; among the latter, 42% were not satisfied with the service due to high interest rates, delays and/or collateral requirements.

When it comes to their performance, companies are currently working at about half their capacity. Company revenues are expected to drop by about 18% in 2020 (as compared to 2019) and lay-offs to increase by 20% in the next three months. Still, the situation could have been worse if a significant share of employees (27%) had not been able to work remotely. It is worth noting that remote working options proved more challenging for Micro, Small and Medium Enterprises (MSMEs), particularly those dealing with goods, whose performance has been relatively more negatively affected than larger-sized companies and more generally those involved in services. Moreover, women are more at risk of being laid-off than men, which is consistent with the fact that, from interviewed companies, women tend to be employed more in MSMEs in which their primary business is related to goods.

One of the main takeaways from this survey is the very positive fact that two-thirds of the surveyed companies indicated that they have identified new opportunities in response to the crisis. Mr. Simon Mevel, Economics Affairs Officer at the Regional Integration and Trade Division in ECA said: “Very interesting to note that firms involved in goods and MSMEs are displaying the highest shares in terms of new opportunities identified following the crisis, which in turn is expected to be positive from a gender point of view as women are primarily engaged in MSMEs dealing with goods”.

Those opportunities attest to a clear shift towards new technologies, particularly the development of online platforms for e-commerce. While the current share of e-commerce revenues remains relatively small (16%) - essentially due to challenges around internet connectivity, payment gateways and logistics/transport/deliveries - nearly half (47%) of the companies are moving or planning to move towards innovative/digital solutions through collaborations and partnerships.