How social media is powering Africa’s small businesses

Social media platforms are accelerating economic growth and opportunity across the continent, a new study by Genesis Analytics has shown.

The independent study aimed at exploring the impact of the digital economy on small- and medium-sized businesses (SMBs) was conducted in eight African countries – Kenya, Senegal, Côte d’Ivoire, DR Congo, South Africa, Nigeria, Ghana and Mauritius.

The survey explored the adoption and use of social media and messaging platforms; value to SMBs; barriers to usage; and the impact of the Covid-19 pandemic. The focus was on the Facebook company technologies, being Facebook app, Instagram, Whatsapp and Messenger.

The report shows that surveyed SMBs that use the Facebook apps have younger employees with an average share of 45 percent of employees under 30. Additionally, SMBs using Facebook apps reported a higher frequency of being owned by women, while SMBs in the manufacturing sector ranked the ability to access new foreign markets as the most beneficial advantage of the apps.

The survey finds that social media platforms are powerful catalysts in the formation and growth of new SMBs. Some 73 percent of surveyed SMBs report using social media.

Of the surveyed SMBs that use the Facebook apps, 84 percent report that the apps have been important in the growth of the business, 77 percent say the business is stronger today because of the apps, and 55 percent believe that the apps helped them to start the business.

Surveyed SMBs report that the apps are most useful in lowering barriers to entry, accessing markets, raising brand awareness, connecting with customers, increasing revenues and reducing costs.

Expansion

Luxe Nails Parlour is a nail salon business in Nairobi, Kenya that was founded by Jacquey Njue in 2014. The business delivers pedicure, manicure, nail art, nail overlays, acrylic extensions, gel nail extensions, dip system nails and gel polish and has recently launched some post-salon nail care products.

Using Facebook and Instagram, Ms Njue has grown the business and increased her customer acquisition to about 50 people daily. Some 70 percent of her customer conversion comes from people who found the business on Instagram or Facebook. She has expanded from a small kiosk in Juja, Kiambu County, to a leading nail salon in Nairobi and has hired over 11 employees.

“When you know you have to put food on the table for over 15 families, you have to keep that traffic flowing through your doors. Knowing that potential clients are somewhere, browsing through their phone or PC, waiting to find your services makes it easier. All these can only be attributed to using Facebook and its family of apps. Removing them from my business in this digital era means the business would probably slow down,” Ms Njue says.

In his comments on the report, Kojo Boakye, director of Africa Public Policy at Facebook said, “84 percent of surveyed SMBs reported that Facebook apps have been important for their business growth. This reinforces our commitment to providing the access and skills that help people use Facebook apps to increase employment opportunities, incomes, gender equity, and trade.”

“Facebook apps are the social media platforms with the biggest number of users in Uganda; this has helped businesses to reach more potential clients in Uganda. It also gives businesses the opportunity to push content with both visual and vocal stimulus hence giving them an affordable avenue to push their products. The apps have also created a platform for businesses to interact with the clients in real time, therefore improving customer experience,” Neville I. Igasira, an e-commerce business consultant at Creative Mode Uganda in Kampala, told Business Daily.

Igasira, who is the former chief marketing officer Jumia Uganda and Lead at Jumia Food Uganda, says: “Digital platforms play a very big role in business operations, as they have created an avenue to tap into data and information about their clients to help them make better decisions such as what their clients want, where they stay and what improvements to make.”

“Digital platforms are enabling economic development in Africa in many ways, such as job creation, through jobs such as digital analysts, digital marketing and supporting businesses through better logistics platforms and new payment methods like cashless payments,” Igasira observes.

Digital tools

The survey establishes a link between digital tools and business resilience during the Covid-19 pandemic. Sixty-five percent of surveyed SMBs report that they have increased the use of social media and online messaging during the Covid-19 pandemic to communicate with customers, operate remotely, raise capital and make sales. Over half of the surveyed SMBs in five of the eight countries report that social media helped the business to stay open.

The report finds evidence that social media platforms are powerful catalysts in the formation and growth of new SMBs, and shows that SMBs that use digital tools such as the Facebook apps (Facebook, WhatsApp, Instagram and Facebook Messenger), are the vehicles for realising Africa’s three latent opportunities: Leveraging Africa’s competitive advantage of an extremely young population; bringing more women into formal economic activity; and diversifying and expanding intra-African trade.

The purpose of this report was to investigate how these three opportunities are being enabled by the growth of Africa’s digital economy. The report argues that SMBs are the vehicle to achieve these three opportunities.

The African continent is heavily reliant on its SMBs, which are the backbone of the economy. A 2019 report by International Labour Organisation titled Small Matters: Global evidence on the contribution to employment by the self-employed, micro-enterprises and SMEs, indicates that SMBs contribute a remarkable 95 percent of total employment on the African continent.

According to the Genesis report, this is significantly higher than in developed and other developing regions. In many parts of Africa, the SMB economy is the economy.

According to the report, there is evidence that SMBs who use digital tools are helping to unlock the three opportunities in youth employment, gender equity, and diversification and trade.

The report observes that digitally empowered SMBs are unlocking Africa’s youth opportunity. Surveyed SMBs that report using the Facebook apps have, on average, a business-owner age of 36 years compared with 41 years for surveyed SMBs that do not use the apps. They also employ a significantly larger proportion of people under the age of 30 (45 percent), when compared with surveyed SMBs that report not using social media (37 percent).

“This suggests that digitally empowered SMBs are more youth-friendly,” the report notes.

According to the report, the evidence points to digitally-enabled SMBs being more supportive of gender parity. Bringing more women into more formal and more equitable economic activity means the energy, ideas, labour and creativity of the whole population can be employed.

Female-friendly

Surveyed SMBs using the Facebook apps report a higher frequency of being owned by women (36 percent) compared with those not using the apps (30 percent). Those using the apps also report having a slightly higher proportion of female employees, higher annual revenues, and are more optimistic about future revenues than non-users.

The report suggests that digitally empowered SMBs are more female-friendly.

The report calls on governments and private companies to partner and grow a digital environment that can power small businesses to unlock Africa’s three rich opportunities.

According to the report, digital tools are a powerful enabler of economic diversification and increased levels of trade. Most surveyed SMBs that report not using social media work in the more traditional primary sector, while those using the Facebook apps are skewed more toward services and manufacturing sectors.

Additionally, 67 percent of surveyed SMBs using the apps report that they have innovated their product or service offerings in the last six months based on information gathered through the apps. The surveyed SMBs in the manufacturing sector also ranked the ability to access new foreign markets as the most beneficial advantage of the apps.

“E-commerce is faring well in Uganda, with numbers of the ecosystem increasing every year. This is a result of increase in Internet penetration and the fair reduction in cost of Internet. There has also been an increase in the number of shifts from analog gadgets being used to more digital gadgets,” Igasira says.

“For SMBs to reap the benefits of digital tools they must be included in the digital economy,” the report suggests.

If the SMB is the vehicle, then the rocket fuel is digital inclusion, the report says. Digital adoption by SMBs is correlated with higher rates of employment creation and growth. This is because digital tools lower barriers to entry and improve the efficiency of businesses. They eliminate the need for most physical infrastructure, connect start-ups to mass local and foreign markets, and provide solutions in financing, training, hiring and networking.

“The Genesis Analytics study shines a much-needed light on how small and medium-sized businesses (SMBs) on the continent are embracing digital tools and platforms. It shows empirically that the use of digital tools can drive economic growth by bringing more women into the formal economy; creating economic opportunity for young people; and boosting intra-African trade,” said Ryan Short, a partner at Genesis Analytics.

“We urge policymakers and digital platforms alike to understand these opportunities and to create an optimal environment for SMBs to thrive using digital tools and social media.”

Evidence from surveyed SMBs shows that the most common barriers to greater uptake are the costs of Internet access and data, and low levels of trust in data privacy on social media.

Africa digital economy

The digital economy in Africa has been driven by explosive growth in Internet penetration, yet connectivity gaps remain, the report says.

In the eight-country sample, between 1999 and 2019, the proportion of citizens with access to the Internet grew from 1.2 percent to 36.7 percent. This phenomenal expansion - growing at a compound annual rate of 18.8 percent - is primed to continue, and will allow the African region to catch up to the BRICS countries at 56 percent and South America at 66 percent.

“However, when compared with more developed markets like Europe at 83 percent, Africa’s connectivity gap is clear,” the report notes.

“Closing this gap will be imperative if all Africans are to be able to tap into the power of the digital economy,” the report adds.

The predominant device for accessing the Internet in Africa is the mobile phone. According to the 2020 WeAreSocial individual country data, in Kenya 84.1 per cent of the population use a mobile device to access the Internet, in Nigeria 87 percent and in South Africa 73.4 percent.

The Mobile Economy: Sub-Saharan Africa 2020 report by GSMA shows that “Unique” mobile subscriptions reached 477 million in 2019 and will grow by nearly 200 million by 2025, with the mobile industry contributing 9 percent to GDP by 2024.

According to the 2020 WeAreSocial individual country data, in the eight countries on average, 97 percent of social media users did so using a mobile phone.

Yet in sub-Saharan Africa only 44 percent of the population have access to a smartphone, and only 26 percent of people are able to access the Internet with a smartphone, according to ‘The Mobile Economy: Sub-Saharan Africa 2020’ GSMA report.