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SMEs in Africa - do interventions help SMEs
| Guest post by: Dr. Rob Smorfitt |
Article Overview: A brief look at a few African interventions and their impact
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Free Download - SMEs – SMEs struggling in South Africa. Why? By Dr. Rob Smorfitt |
SMEs in Africa - do interventions help SMEs
SMEs in Africa are afforded a variety of protective measures by their governments. However, this approach is by no means limited to Africa, and can be seen in many countries around the world. South Africa has the Broad Based Black Economic Empowerment, BBBEE, legislation, which attempts, among other things, to get big business to do business with SMEs. Botswana and a number of other countries insist on local partners in businesses in a variety of different ways.
The question is whether these make a difference.
1. If we look at the Porter approach to clustering and competition, Porter Diamond and Five Forces, Porter suggests that it is important to have strong competition in order to stimulate strong businesses locally. External business entering the market may disadvantage local businesses initially, but as staff begin to move around, and local innovation begins, so the local businesses begin to grow in strength. However, by forcing local participation in all new ventures, one deters investors from entering the market as the investor is unlikely to achieve required returns.
Therefore one has to question government policies that do not allow unfettered entrepreneurial enterprise in their country.
2. If we look at other protectionist measures such as the South African BBBEE, while the intention is good, it does not address the key issues of why big business does not deal with SMEs in the first place. The truth is that often SMEs present increased risk to the large business. Therefore, instead of forcing big business to do business with SMEs, governments should be identifying the cause of the increased risk in doing business with SMEs, and then attempting to mitigate this risk.
Government interventions are a fact of life in all governments. However, more thought must be given to the cause of the perceived problems, rather than the symptom of the perceived problems.
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Article Tags: entrepreneur, entrepreneurship, government intervention, SME, SME interventions, SMME, Smorfitt
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About the Author: Dr. Rob Smorfitt RSS for Dr. Rob's articles - Visit Dr. Rob's website Have an MBA and a PhD in entrepreneurship. Three key areas of ongoing research are entrepreneurship and innovation in large business strategy, the impact of legislation on SME development and SME finance. Run my own SME blog at http://sme-smb-smme.blogspot.com as well as an entrepreneurship and innovation for large businesses blog at http://innoveur.blogspot.com I have been self-employed since 1982. I have started or purchased in excess of 50 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 full time in my bigger businesses. Author of 6 books. Written articles for various magazines, newspapers and websites. Experienced in research within developing countries.
Click here to visit Dr. Rob's website  
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