Amid growing uncertainty in global trade and finance, African policymakers are doubling down on strategies to build resilient economies from within. A central recommendation in the 2025 African Economic Outlook (AEO) report is for countries to adopt and enforce local content and preferred procurement policies, a move with strong implications for the growth of small and medium-sized enterprises (SMEs) across the continent.
These policies, according to the report, can deepen local value chains, expand domestic markets, and protect jobs by ensuring that a significant portion of government and private sector procurement budgets is spent on goods and services produced locally.
Linking Procurement to Industrial Development
The AEO indicates that African countries can leverage local procurement policies not just to support SMEs, but to stimulate broader industrialization. By prioritizing local firms in the awarding of public contracts, especially in sectors like construction, energy, healthcare, and agro-processing, governments can increase demand for domestic inputs and foster backward linkages across multiple industries.
In effect, procurement becomes a tool for industrial policy. As demand for local goods and services increases, businesses are encouraged to scale operations, invest in quality improvements, and formalize their activities. This can lead to technology adoption, skill development, and employment generation.
Opportunity for SMEs and Youth-led Businesses
The report underscores that local procurement policies, when well-structured, offer a unique opportunity for youth- and women-led enterprises, many of which operate at the micro or informal level. By setting aside a percentage of public procurement for local or disadvantaged groups, governments can foster inclusive growth and reduce unemployment.
Preferred procurement can also unlock new markets for local manufacturers and service providers that might otherwise be outcompeted by larger multinational firms with better access to finance and economies of scale.
Strategic Implementation and Governance
For these policies to work, however, the report warns that governance and institutional capacity are critical. Countries need transparent procurement frameworks, clearly defined eligibility rules, and effective monitoring systems to prevent abuse, corruption, and inefficiencies.
The AEO recommends that governments:
•Enact procurement laws that define and enforce local content thresholds
•Build capacity among local suppliers to meet quality and delivery standards
•Digitize procurement systems to increase transparency and access
•Harmonize standards across borders to promote regional trade under the AfCFTA
The report also stresses that local procurement should not result in protectionism or reduced competitiveness. Rather, it should be strategically used to build productive capacity, particularly in sectors where African countries have comparative advantages.
Examples of Sector Impact
The report highlights potential sector-level impacts:
•Manufacturing: Encouraging public institutions to source uniforms, school supplies, and basic medical goods from local manufacturers
•Construction: Prioritizing local contractors and material suppliers for infrastructure projects
•Agri-business: Linking government food supply programs to smallholder farmers and processors
•Energy: Supporting local engineering and renewable energy firms through power sector contracts
Tied to Regional Trade and Resilience
Preferred procurement policies can also strengthen intra-African trade. When paired with the African Continental Free Trade Area (AfCFTA), such policies can promote cross-border supplier networks, boost competitiveness, and reduce vulnerability to external shocks, such as global supply chain disruptions or geopolitical tensions.
The 2025 AEO report makes clear that procurement is not just a spending tool, it’s an industrial policy lever. When used strategically, local content and preferred procurement policies can empower African businesses, reduce import dependency, and help build more self-reliant economies. For SMEs and entrepreneurs across the continent, this shift could unlock new demand, investment, and job opportunities in the years ahead.
