We’ve heard over and over that entrepreneurship is a key factor to improving growth in developing countries, yet there is slow progress being made in removing stumbling blocks that impede the success and growth of SMEs. So, are there really merits to the claim that small and medium enterprises are engines of economic growth?
Well, I recently read an article stating that small and medium enterprises make up the bulk of firms and they are the primary source of employment in low–income economies after subsistence farming; this is according to Rand Merchant Bank. Furthermore, the UN Economic Commission for Africa suggests that SMEs account for 70% of jobs in Nigeria and 55% in South Africa.
So, it goes without saying that any sector that creates between 55% and 70% new jobs in Africa warrants support and development as it is clearly instrumental in poverty reduction – bearing in mind that job creation and poverty alleviation have been part of the development agenda for decades. Moreover, the population projections suggest that the world will need up to 500 million new jobs by 2020, the majority in developing countries as their relatively young population enters the work force. In the current tough economic conditions for many unemployed women, entrepreneurship is the best way to recover as starting businesses allow them to create their own jobs.
So, the presence of SMEs on a large scale can completely change the dynamics of African economies. Imagine what Africa can achieve if we have effective macroeconomic policies, simplified regulatory framework, access to finance, a supportive and enabling environment for SMEs – more entrepreneurs may be encouraged to launch their businesses.
To boost entrepreneurial energy and innovation on the continent, a cross cutting SME development strategy that involves all stakeholders is critical. These strategies cannot be delivered in isolation; partnerships consisting of government, business, entrepreneurs and communities are essential for continued dialogue, strategy implementation and review.
I came across an interesting program called the Self Employment Assistance Program (SEA) from the US that authorizes different States to support retrenched or unemployed individuals interested in entrepreneurship. This program provides training and pay benefits while people start their businesses. So, there’s a lot we can learn from others.