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Future policy in Africa should expand the range of government services to SMEs

SME clustering is critical in addressing socio-economic objectives, the achievement of which can make them more competitive in the global economy; generating and spreading innovations; creating employment; and distributing broad-based income and welfare.

Brian Mudumi and Takudzwanashe Mundenga
The rapid Chinese economic growth is profoundly treasured for its entrepreneurial backing. The Chinese were trained to be good at running small or medium-sized ventures.

That alone has made them small and medium company owners, sole traders and prominent informal traders wherever they are in the world.

It is apparent in Africa that small to medium enterprises (SMEs) is a remarkable concept that we have assimilated in our policy construction yet still struggling to make it an economic reality capable of expanding our GDP.

The development of SMEs has increasingly contributed to China’s economic growth.

They make up over 99 percent of all enterprises in China today.

The output value of SMEs accounts for at least 60 percent of the country’s gross domestic product, generating more than 82 percent of employment opportunities in China.

By definition SMEs are micro and average business entities whose employee numbers fall below certain limits.

The definition of an SME is quite complex and can include what others consider to be large firms.

Nonetheless the benchmarks mainly cover the number of employees, payrolls, revenue and total assets of enterprises.

In Sub-Saharan Africa, SMEs are discussed in the context of growing unemployment and high population rates as the region rushes past the billionth person population mark most of whom are under 30.

There are several international forums, which have focused on developing Africa’s SME sector concentrating mostly on two components that see them as vehicles to employment and as a key to the region’s entrepreneurial environment needs.

SMEs play a critical role in nation building, nation advancement, and a nation’s innovativeness.

Development in Africa cannot materialise without them; the envisioned growth cannot happen without them; socio-economic paradigm shifts cannot happen without them; and poverty cannot be eradicated without them.

They are what produces a country’s middle class. This is their development enterprise role.

SME clustering is critical in addressing socio-economic objectives, the achievement of which can make them more competitive in the global economy; generating and spreading innovations; creating employment; and distributing broad-based income and welfare.

In Africa, the sectors needing expansion are similar: agriculture, infrastructure development, manufacturing, and information technology. However, SMEs bring other innovations to the table especially for the heavily-populated African urban areas.

There are many ways by which governments can support SMEs.

First, the SME promotion law which lays a groundwork for public support for small and medium enterprises. Under this law, the government will have to protect lawful investments of SMEs and their equity investors alongside their investment earnings as was done in China in January 2003.

Also government should be ready to develop different types of social intermediary service organisations, intensifying policy support for necessary automatic funding of specific undertakings, backing up the conduct of trainings among enterprise personnel, strengthening services for science and technological innovations, supporting enterprises in opening up domestic and foreign markets, and actively pushing for the creation of a credit system for enterprises.

Additionally, the state-allocated budget for SME financing should include an item dedicated to supporting SME development.

It must also set up an SME development fund to boost donations through tax incentives extended to SMEs.

The governments are also required to work hand in glove with financial institutions to improve the financing environment for SMEs, strengthen their support to SMEs in terms of enhanced credit and direct financing channels.

Governments can also help SMEs improve their market access by assisting them improve their skills. SMEs should be ordered to implement the nation’s industrial policies, industrial planning regulations, specifically those on market access.

Such stipulations permit them to avail themselves of vital services, such as those involving monopoly industries, public utilities and infrastructures, social undertakings, financial services, and science and technology industries.

Government can also encourage SMEs to expand their markets by enforcing financial policies that allow imports and exports credit and export credit insurance.

Our governments should also encourage qualified enterprises to expand their network.

It also promotes specialisation and coordination among SMEs so they can pursue collective development of materials supply, production, sale, and technological innovations in a bid toward market expansion.

The state can also promote merger and acquisition activities among SMEs, alongside reorganisation and optimised resource utilisation.

Provision of government subsidy or loan facility should be intended to support and encourage SME innovations with large enterprises.

Future policy in Africa should expand the range of government services to SMEs.

Our respective governments can learn lessons from the Chinese government and devote attention to promulgating supporting policies for the development of small enterprises.

Our governments should also develop an industrial cluster plan for small enterprises, as well as financing and technological innovation systems for SMEs.