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Challenges in revamping Africa’s Small and Medium Size Enterprises, By Chofor Che, 5 August 2013

05 Aug

Small and medium-sized enterprises (SMEs) happen to be companies whose personnel numbers fall below certain limits. The acronym ‘SME’ is utilised by African states, as well as international organisations like the United Nations, the World Bank and the World Trade Organization (WTO). SMEs outnumber large companies by a wide margin and also employ many more people. SMEs are also said to be responsible for driving innovation and competition in many economic sectors. According to Wikipedia, The Central Bank of Nigeria defines SMEs according to asset base and number of staff employed. The criteria are an asset base between N5 million and N500 million, and a staff strength between 11 and 300 employees. In Kenya SMEs employ a maximum of 1000 people.

SMEs in Africa have long been plagued by poor management and funding challenges. Despite numerous programmes instituted by governments and international organisations like the World Bank and the International Monetary Fund to revamp this sector, SMEs seem to be lost in the much talked about African renaissance.

In July 2013, the African Development Bank (ADB) promised to assist SMEs in supply chains across Africa with funding worth more than $125 million. This ADB four-year programme, which includes $125 million in direct funding and an additional $3.98 million in the form of a technical assistance package, is supposed to allow banks to furnish standardised lines of credit to SMEs, with a special attention to youth and female-owned businesses.

According to an article dated the 28 July 2013 by Adam Leach of Supply Management Daily, the amount of about $3.98 million will be furnished by the Fund for African Private Sector Assistance (FAPA) and will be utilised to build the capacity and capabilities of 25 lenders to support SMEs. The contribution marks the highest amount ever donated by FAPA and is intended to broaden support for businesses into more rural areas of Africa, where there are higher numbers of youth and women-owned businesses.

An official from the ADB adds that, “In response to these challenges the ADB, through this SME programme, will provide the necessary longer-term finance and a technical assistance package to address a number of the constraints faced by around 25 target financial institutions and their SME clients across Africa.”

The ADB initiative in a laudable initiative and would be instrumental in economic growth, development and the alleviation of poverty in Africa. The only concern is that similar initiatives in the past have not yielded any fruit. SMEs in Africa continue to be poorly financed and managed. Some of the past initiatives have either been crippled by corrupt government officials and the finances misappropriated or siphoned without any traces. Poor SMEs owners, especially women and the youth, who are supposed to benefit from such programmes have not benefitted much. Many SMEs owners are left disgruntled, while corrupt officials embezzle these finances destined for them.

It is imperative for the ADB to ensure that the SMEs initiative does not remain entirely under central government control. It is imperative to make sure that the private sector as well as other independent partners also has a say especially in the financial management of this initiative. Evidently the financing from the ADB is humongous and if care is not taken, this money will be siphoned as before by corrupt African government officials. If African governments are serious about revamping SMEs in Africa and achieving some of the Millennium Development Goals (MDGs), if not all, by 2015, then it is important to allow for a holistic approach to development. The private sector should be brought on board not like a subordinate to government, but as an equal partner. Without such a modus operandi which is of utmost importance to economic growth and development in Africa, then the SMEs in will remain crippled.

 
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Posted by on August 5, 2013 in Africa Development

 

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