SMEs Need Support For Sustainability And Climate Change Resilience

There is an urgent need to support small and medium enterprises (SMEs) within and without Africa for them to gain sustainability and climate change resilience. This is according to the Regional CEO of East & Southern Africa – Ebele Ogbue of United Bank for Africa (UBA).

Speaking at the Strathmore University Business School, Mr. Ebele Ogbue said that at a time when the world is moving towards green investment, SMEs in Africa will play a crucial role in ensuring the success of the same given that they form the majority of businesses in the continent.

“The urgency of mitigating climate change and building resilience cannot be overstated. Addressing climate change in Africa presents a $3 trillion economic investment opportunity in the continent by the year 2030,” he said.

SMEs are the backbone of the world economy, accounting for most businesses in nearly every region. In the developing world, SMEs make up 90 percent of the private sector and create more than 50 percent of jobs in their corresponding economies.

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In Africa, SMEs provide an estimated 80 percent of jobs across the continent, representing an important driver of economic growth. Sub-Saharan Africa alone has 44 million micro, small, and medium enterprises, almost all of which are micro. For these businesses to grow, create more jobs, and generate economic growth, they need access to capital especially when faced with climate change-related risks, which pose additional threats, from supply chain disruptions to increased operating costs.

The private sector in Africa is critical to adapting to, as well as mitigating, climate change. This is especially true of SMEs, given that they make up a significant part of the continent’s private sector. Incentivization must exist for SMEs to function sustainably and achieve green growth.

“African SMEs’ lack of access to financing unfortunately often forces them to behave in ways that are not sustainable. It is harder for SMEs focused on sustainability and green business to gain financial support because there are typically higher up-front costs and the markets are underdeveloped. Green technology is expensive because it is newer and comes with many up-front costs,” he added.

It is therefore important to find ways for SMEs to access affordable financial support to build more climate-resilient businesses and business models. This involves assessing vulnerabilities, developing adaptation strategies, and ensuring the resilience of

supply chains and operations. Collaborative efforts with industry peers, government agencies, and international organizations can facilitate access to knowledge, resources, and support in this regard.

Read Also: How Delayed Payments Are Killing SMEs In Kenya

So How Can SMEs Turn these Challenges into Opportunities?

The current climate crisis demands innovation. It is the SMEs that are perfectly poised to turn this mammoth challenge into a plethora of opportunities.

Sustainable practices can lead to cost savings, access to new markets, and enhanced reputation, which can be particularly advantageous for SMEs. Some of these opportunities are:

• Creating Sustainable Products & Services: Consumers globally are increasingly looking for eco-friendly products. African SMEs can carve a niche in producing sustainable goods, tapping into both local and global markets.
• Developing Innovative Agri-business Models: With changing weather patterns, there is an urgent need for adaptive agricultural practices. This opens avenues for SMEs in areas like drought-resistant seeds, water-saving irrigation systems, and sustainable farming consultancies.
• Energy Efficiency: SMEs can reduce their energy consumption and costs by investing in energy-efficient technologies and processes. This not only lowers their carbon footprint but also enhances their competitiveness by exploring opportunities in the production, installation, and maintenance of renewable energy technologies such as solar panels, biomass energy systems, etc. This sector is growing rapidly as governments and businesses aim to reduce greenhouse gas emissions.
• Green Financing: Commercial banks like mine can play a pivotal role by offering green financing options tailored to SMEs. These loans can support investments in renewable energy, eco-friendly infrastructure, and sustainable supply chains.
• Digital Transformation: Embracing digital technologies can enable SMEs to optimize their operations, reduce resource consumption, and access global markets more efficiently.
• Waste Management, Climate Risk Assessment, and Adaptation: SMEs can provide Consultancy services and technology solutions to help businesses and communities assess and adapt to the impact of climate change. This includes developing strategies to minimize waste and reduce environmental impact, man