The recent political campaigns (2008 to 2009) around Africa (e.g. Zambia, Kenya, South Africa) had for the first time interesting debate on the empowerment of indigenous Africans, particularly, in the mining and industrial sector. SMEs remain the largest source of domestic employment in most developed countries, and of non-agricultural employment virtually in all developing economies. Their presence can also be found across industries and sectors, domestic regions and rural locations, and urban and peri-urban areas. Moreover, they are an important vehicle for empowerment and participation -- especially of women, the young and other disadvantaged social segments.
Sub Saharan Africa, is characterised by a mass of private business activity but the overwhelming majority of it comprise Small Medium Enterprise’s (SME’s) engaged in the production of trade and services. Recent surveys have indicated that SME’s in SSA have density levels of 34-93 enterprises per 1,000 inhabitants and provide considerable evidence of geographic clustering (World Bank, 2005). A new development context has been ushered in by trade and investment liberalization in combination with rapid technological advances in many fields. This change has especially impacted greatly on the relationship between foreign multi-nationals and local SME’s.
In Africa, this has led to a call from the citizens that there is need for a deliberate policy (Citizens Empowerment) on encouraging domestic procurement that promotes local SME’s against foreign suppliers. This call has particularly become quite stringent with the high influx of Chinese investment into Africa. This paradigm shift has also underlined the importance of networks, linkages and alliances - and their widening and deepening within and across nations. SMEs are among the inevitable, if not always principal, stakeholders in the process. There remains a great shortage of medium-sized firms (or the "missing middle"), and this has severely constrained many efforts made to accelerate industrial deepening, upgrading, diversification and linkages among the different economic sectors. Many SMEs have an interest in closer business links to the corporate sector and many Corporations have an interest in deepening their engagement with local SMEs.
Strategically, therefore, the SME sector must have, or must be assisted to possess, the critical attributes noted above. These characteristics of healthy growth and dynamism, in turn, provide the main reference points for two of the following operational directions in this policy blueprint:
First is the promotion of a culture of entrepreneurship
Second is to ensure that SMEs become and remain a learning organization - one in which productivity is constantly improved through knowledge-based and innovation-driven practices.
These measures include, notably, the distribution of toolkit packages for self-diagnosis and trouble shooting of problems by SME’s themselves. Identifiable problems prevail, for example, in production processes, enterprise management, ICT-skills, and financial reporting and business plan preparations. Other specific recommendations relate to the needs to speed up SME participation in borderless e-commerce. Indeed, the tremendous potential of "virtual" trade remains untapped by most enterprises, both large and small, in Africa.
There are also additional policy suggestions to overcome major bottlenecks in bank and supplementary financing for SMEs. In particular, these suggestions concern credit rating and credit information systems, and the decentralization of financial resources and expertise to the district and community level. Furthermore, due emphasis should be given in the policy framework to the promotion of new and innovative modalities for industrial organization and co-operation. Indeed, the formation of SME clusters, investment zones, networks and linkages within and across borders has definitely come of age in Africa.
There is also a real need for better decentralized public services, particularly, at the local council level. An implied imperative in this regard is good governance and a conducive policy environment - especially in the promotion of entrepreneurial initiatives, private enterprise, on-going learning and innovation, and cross-border linkages and collaboration. But the public sector needs to also become "leaner and meaner" along with the process of policy liberalization, administrative deregulation and asset privatization. As such, it is essential to ensure greater consistency, coherence and clarity in SME related policies and programmes both across industries as well as within the public sector itself.
The framework for such a public-private partnership applies not only to the provision of business development services in favour of SMEs. It is also equally applicable to other joint ventures, too. Indeed, improved public-private sector synergies ensure a better and more conducive configuration of policies and institutions for overall process of national and regional development itself. The challenges we encounter have to be met because the competition for wealth-creating assets and opportunities has become greatly intensified across the world. And that is the final message of this article. Africa must create jobs that will drive the economic development of the country and the best way to do that is to empower Africans to become entrepreneurs and to link them with well established large corporations. We need an economic empowerment environment that promotes SME Development as the key driver of wealth creation.
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