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SME's - an African challenge

Written by: Dr. Rob Smorfitt

Article Overview: Trying to understand the clash between tribal systems and entrepreneurialism

SME's - an African challenge

African governments are all beginning to jump onto the SME bandwagon. They are all seeing it as a liferaft in a sea of poverty, which ultimately leads to unrest.

However, Africa finds itself in a situation which I think is difficult. I do not fully understand it myself, but I can see the conflict.

de Soto suggests and I concur, that land ownership is key to entrepreneurship, as it provides the owner with equity which can be leveraged into capital.

However, in many African states including South Africa, vast tracts of land (eg. 70% in Botswana) are tribal land. Title deeds cannot be gained to this land. You can get a long lease on the land but not ownership. Therefore you cannot use it as collateral. How does this problem get resolved?

South Africa has a traditional, well the ANC version of it, democracy. It also has a whole bunch of what is colloquially known as traditional leaders. Of these a number are still illiterate rural people, and yet they can control the future of the people in their areas.

How can you be entrepreneurial when you cannot own your land? When you have to pay a "tax" to the chief? When he decides how much land to give you, if he gives it to you at all? When the bank will not give any consideration to this being collateral?

I believe that this system is very similar to the old communist collective approach which we know failed. It is also why I believe communism and socialism still have such strong support in Africa today. It is a system that is known and understood, and in the context of Africa as a subsistence economy, it worked.

However, Africa is being forced away from a subsistence economy through many factors such as westernisation and globalisation. But the social systems and structures are an anachronism from the past, which are not changing. The democracies are simply trying to find ways to accommodate them, rather than change them.

Time is running out and this change has to happen sooner rather than later. There is no place for monarchies and traditional leadership in the modern world. Just like the UK and European monarchies had to change and accept their new diminshed role in society, so too do the African traditional leaders need to change and adapt before it is too late.

Rob Smorfitt

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Article Tags: Africa, democracy, entrepreneurship, SME, Smorfitt, traditional leadership



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Re: In-House or Outsource? - Unfortunately, in the South African context, very few SMEs see outsourcing as an option. They believe it is too expensive, and they are paranoid that someone will "steal their ideas". I believe that the three main functions that cannot be outsourced are marketing, sales and strategy. These must be done in house I believe. If you do not have the marketing skills then get them. Hire a consultant or attend a course, but get the skills. Even if you use a consultant, you need to understand what marketing is about, as no one knows your market like you do. Marketing is made to seem difficult and complex, but everyone who really understands their markets, can easily learn to do their own marketing. In South Africa, labour legislation is extremely inflexibile, and consequently labour broking is a large industry. This is an ideal starting point for SMEs in South Africa, as it is a legally complex area, whih comes with severe penalties. I say do it! Rob Smorfitt
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What do you do to give back? - I'm launching new section of the site for social entrepreneurship and our first category is going to be called African Accounts. The goal with the project is to raise awareness of African entrepreneurs and showcase that entrepreneurship can be the path to achieving sustainable development. This has always been a passion of mine and I have done a number of talks around the world on this subject so I'm excited to bring it online as well. We have recruited some of the top bloggers in the world who focus on African entrepreneurship and are preparing additional resources. I believe that a big part of running a business is being socially responsible and giving back - even if it's donating your time to an organization or small amounts of money or products. You don't have to be mega-successful to make a difference. What are some of the things you are doing to give back to the community around you?
Re: How will an african make money truely on the net? - Is it possible for an African business to set up an "offshore" account in the US or England... or even Switzerland... where all monies are paid? And a trusted agent there, who gets a percentage of any money, can then take that money from paypal and wire it or mail it or whatever to an African bank? There are lots of countries in Africa, is this a problem in all of them? Seems like an internet entrepreneur who can set up a "Paypal" like company of their own might be able to make money on this... ? Course you'd need governmental contacts...
Re: How will an african make money truely on the net? - [quote="OmnivoreInk":koqfopnc]Is it possible for an African business to set up an "offshore" account in the US or England... or even Switzerland... where all monies are paid? And a trusted agent there, who gets a percentage of any money, can then take that money from paypal and wire it or mail it or whatever to an African bank? There are lots of countries in Africa, is this a problem in all of them? Seems like an internet entrepreneur who can set up a "Paypal" like company of their own might be able to make money on this... ? Course you'd need governmental contacts...[/quote:koqfopnc] Hi Topeyinka I don't know what products you sell, but if they are digital how about selling them through Clickbank. They will handle the sale for you and will send you cheques on the money you have earned. MichelleJ


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