Africa’s SMEs need more female fund managers for growth
By Lindeka Dzedze, Standard Bank Group’s Executive Head Strategic Partnerships, Global Markets
In Africa, Small and Medium Enterprises (SMEs) play a significant part in shaping the backbone of the economy. It is estimated that, in South Africa, small and medium-sized enterprises make up 91% of formalised businesses, provide employment to about 60% of the labour force and total economic output accounts for roughly 34% of GDP.
These businesses are the core contributors to job creation, innovation, food security, and poverty reduction across the continent. Their success or failure has a domino effect on the overall continent’s gross domestic product (GDP). According to the European Journal of Research and Reflection in Management Sciences, African small and medium enterprises (SMEs) contributions, challenges and solutions 95% of all registered businesses are SMEs and they contribute about 50% to the total GDP of the Sub Saharan Counties.
Unfortunately, reports have also revealed that the survival rate of these SMEs is at its lowest in Africa. This has direct jeopardy for the growth of the continent’s economy. The question is, who are the core driver’s entrepreneurship in the continent and are they empowered to ensure the success of the sector?
The Global Entrepreneurship Monitor (GEM) 2016/17 Women’s Report, reported that one in four (25.9%) women starts or manages a business. Women reinvest up to 90 percent of their incomes in education, health, and nutrition, compared to 40 percent by their male counterparts. Despite this clear record of women’s drive for entrepreneurship in Africa, female-only founding teams received 2.3% of global venture capital funding in 2024, which amounted to $6.7 billion out of the total $289 billion invested. A Mastercard Foundation report found that tackling systemic barriers towards the participation of young women in Africa’s workforce will drive an estimated $287 billion to its economy by 2030, boosting GDP by 5%. The exclusion of women entrepreneurs therefore places the SME sector at a disadvantage; the effects thereof impact African economies and communities. What is creating the gender gap in private equity in Africa and how does this impact the success of the SME market in Africa?
Gender inclusivity in decision making.
According to a joint study by Oliver Wyman, RockCreek and International Finance Corporation titled “Moving toward gender balance in private equity and venture capital”, women manage less than 10% African Venture Capital and this contributes significantly to the imbalance in capital distribution. We need more gender diverse decision-makers to approve SME funding earmarked for women entrepreneurs. This is the Africa Women Impact Fund’s (AWIF) core objective to position Female Asset Managers as key players in decision making in private investment.
The initiative is aimed at strengthening the economic empowerment and financial inclusion of women in Africa, by accelerating the growth and development of women fund managers on the continent.
Bridging the gender divide could potentially increase Africa’s GDP by an estimated 10% by 2025, according to a recent McKenzie study. It starts with putting the funds in the correct hands if we are to truly increase the opportunity for African SMEs to succeed.
Fund investment beyond profit focus.
McKenzie also reported that SMEs supported by female investors have 15-20% higher revenue growth than those funded by men. This is because female investors approach business investment looking beyond profits and focused into the impact and greater value of the investment.
There is evidence of increased positive impact when a female asset manager drives fund investment. Hedge funds managed by women have delivered returns twice as high as the average hedge fund, and female clients and female-founded companies have been shown to generate an average of 10% more revenue over a five-year period than male-founded companies.
Drive impact funding.
It has been observed that female asset managers are two times more likely to invest in women-led businesses which are usually excluded in traditional financing.
These findings highlight the pressing need for capital allocation that champions diversity, prioritises long-term development over short-term returns, and actively seeks to amplify the social and economic footprint of each investment. By channelling resources into female-led initiatives and supporting women asset managers, the continent stands to benefit from resilient SMEs that are better positioned for inclusive growth and transformative impact.
Female fund managers also have a greater focus on underserved business sectors like agriculture, retail, healthcare and fintech which are key economic drivers in Africa.
Skill sharing and mentorship.
One of the challenges that SMEs face is the lack of skills in business management. Truth is, understanding of the business opportunities does not suddenly present one with a skill to manage a business and the admin thereof.
Asset managers can support in this regard in guiding the entrepreneur and supporting them on elements they might not understand. True to their nature, females are more hands-on with their mentorship providing support and training post the investment. This could be financial training, governance or business managements which empowers the entrepreneurs and sets up for success.
The role of an asset manager is essential for SMEs readiness for growth and building the business for future investment. It takes specific skills to position the business and operate in a way that is attractive to the investors. While the role is essential for businesses, having female asset managers is even more vital and impactful in driving the success of Africa’s SMEs. This is due to their inclusive investment strategies, focus on impact investment and sustainable growth.
So, if you are an investor or influencer of investment, you are wondering where you would invest, explore partnering with a female fund manager as they can drive the success of the African economy by empowering and supporting SMEs in sectors that can contribute to the continent’s sustainability.
Africa’s full potential cannot be realised while women remain on the margins of economic participation. To truly unlock the continent’s development, we must forge meaningful partnerships and actively invest in and scale solutions which advance women led businesses.
South Africa’s G20 Presidency provides a strategic opportunity to spotlight women as the driving force of Africa's economic growth. In this spirit, and in alignment with the theme of South Africa’s G20 Presidency – Solidarity, Equality, and Sustainability – Standard Bank, in collaboration with the Department of Women, Youth, and Persons with Disabilities are preparing to host a landmark event: one that unites the African continent under a single banner of progress towards women economic empowerment and inclusion.