There are a number fo key issues relating to SME failure in Africa.
In the South African context for instance there is no SME strategy for the formal sector. All government's efforts are focused on the informal sector. These people rush headlong into creating poorly conceptualised businesses with failure being the final outcome for the greater bulk of them.
Then there is the drive to push the youth into business. Youth lacks knowledge and experience, and the odds are heavily stacked against their succeeding, and this is reflected in the statistics on the outcomes of these efforts.
The problem with both of these scenarios is that there is consequently no job creation and negligible GDP growth.
The formal sector does not grow as there is no way for the bulk of the population to raise capital.
The whole of Africa is still based upon a feudal system which robs people of the right to own land. South Africa and Botswana as an example have large percentages of land that are state owned or owned by the local chief or is tribal trust land. As Herman de Soto suggests, without land ownership, people have no equity, and therefore they cannot raise capital.
The drive throughout Africa is to correct the imbalances created by colonialism and in the South African context, apartheid as well. Howver, while Africa is busy removing productive farm lands from commercial farmers who generate food and GDP, these self-same governments are sitting on the bulk of the land. This land is not all useless land. I believe that in Botswana 70% of the country is still owned by the tribal authorities and a further 14% is owned by the state! South Africa has a similar situation particularly in the KwaZulu Natal province, where vast tracts of land are owned by a tribal trust.
The problem is that Africa has no idea on how to undo its tribal/feudal system and are too fearful of the change and its consequences tomake the change. They forget that the many people who would be so empowered by this action, would willingly support these efforts and would mitigate any risk asscoiated from this action from the "traditional leaders".
All they have to do is dismantle the feudal system and share the land out. It sounds simple but it is not as simplistic as it sounds. However, the situation requires urgent attention if these govonments want to see progress in formal sector SME development.
SMEs - why governments contribute to SME failure in Africa - To learn more about this author, visit Rob Smorfitt's Website.
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Rob Smorfitt
(Visit Rob's Website)
Based in Pietermaritzburg, South Africa.
Married with 3 children (22, 21 and 14).
Have an MBA and am currently doing a PhD
in entrepreneurial success. I have been
self employed since 1982. I have started
26 and bought 5 businesses since then.
Most were sold again and a few were shut
down because of a lack of profitability.
Many were run by staff or family while I
worked in full time employment in my
bigger businesses. 6 books written in SME
and Project Management educational field.
Written articles for various magazines,
newspapers and websites.
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