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Private equity firm, Kuramo Capital is calling for trade incentives as well as flexible regulatory environment that will unlock private sector lending to small business and startups seeking to tap opportunities available under the African Continental Free Trade Area (AfCFTA).
Speaking at the annual AfCFTA Investment and Trade Conference, Kuramo Capital Chief Executive Officer Shaka Kariuki said regulatory flexibility, tax incentives, and interest rate subsidies for banks that meet SME-lending thresholds are in unlocking the much needed funding for SMEs and startups.
“As the AfCFTA harmonizes regulations and creates a single, transparent market, it reduces legal uncertainty and transaction costs for investors. The scale and predictability of the AfCFTA market make African SMEs and startups more bankable and attractive to private equity investors seeking regional growth opportunities,” said Kariuki.
Data by the African Development Bank (AfDB) indicates that trade finance gap in Africa remains high at $81.8 billion with SMEs who are the largest economic contributors the most affected.
According to Kariuki financial products and services most needed by African SMEs and startups to capitalize on AfCFTA opportunities are those that address both growth capital and the unique risks of cross-border expansion.
Kariuki says private equity firms could provide growth equity for mature SMEs seeking to scale their operations, enter new markets, and build regional presence.
“This is critical for sectors like agribusiness, logistics and manufacturing, where AfCFTA is expected to boost intra-African trade and investment,” he stated.
Additionally, the firms back partnership with development finance institutions (DFIs) to provide blended capital, reducing risk for both investors and investees, and supporting high impact but capital-intensive sectors such as infrastructure and green energy.
“Combining concessional funds from development finance institutions (DFIs) with private capital can de-risk projects and attract larger pools of investment, especially for large-scale energy, transport, and digital infrastructure,” added Kariuki.
Kuramo Capital says it has so far mobilized at least Ksh 452 billion ($3.5b) in private equity and catalytic capital across more than 200 African companies, across diverse sectors from agribusiness to technology and infrastructure.
The firm further backs adoption of blockchain technology in digital trade finance to improve credit access and transparency in Africa’s trade ecosystem under AfCFTA.
Blockchain technology is backed to enable secure, real-time verification of trade transactions, digitize invoices, and create tamper-proof records of creditworthiness.
“By integrating blockchain with trade finance, businesses can reduce fraud, lower costs, and speed up access to working capital, especially across various jurisdictions with different regulations. In the context of AfCFTA, this means that an SME in Ghana can reliably transact and access credit with a buyer or lender in Rwanda or Côte d’Ivoire, based on verified digital trade data,” said Kariuki.
AfCFTA which came into effect on January 1, 2021 has so far been ratified by 48 African countries is expected to add at least $450 billion to the continent’s economy by 2035 and lift some 30 million people from extreme poverty.
