Economic development in Africa report 2022: rethinking the foundations of export diversification in Africa – the catalytic role of business and financial services

The study proposed policy-oriented actions to help Africa leverage trade in services to diversify economic activities into new and potentially transformative sectors. Africa’s export diversification potential is linked to the catalytic role of firms and financial services, underpinned by capable, inclusive and accountable institutions. Currently, there are about50 million formal microenterprises and small and medium-sized enterprises in Africa, with an unmet financing need of $416 billion every year. Exporting firms, particularly new entrants and small-scale exporting firms need to secure external financing to cover the high costs of entering into export markets. The report addresses credit constraints and the need to facilitate access to the financial technology and affordable complementary financing that will be critical for the growth and competitiveness of small and medium-sized businesses, which represent the bulk of private enterprises on the continent. This report examines how African countries can work towards diversifying their exports by identifying feasible and innovative mechanisms for investment and trade policies to drive incentives to divert economic activities to transformative sectors.