The Micro, Small and Medium-sized Enterprise (MSME) sector is crucial to Africa’s growth, currently contributing more than 45% to employment and 33% to GDP (source: ADB). However, MSME’s in Africa face growth, viability and sustainability challenges.
Despite local country commitment to growing and supporting their country’s MSMEs, these firms continue to face an extremely hostile business environment, including lack of skilled staff, burdensome regulations, tough local economic conditions, lack of finance and the high costs associated with expansion, marketing or employing staff.
Growth of the sector has been stagnant in recent years, and different government’s efforts to boost this sector over the past two decades has yielded limited results.
Small and medium enterprise development and growth requires an integrated, practical approach, one that enhances the business environment and provides quality capacity building and training. However, most importantly, MSME assistance must be tailored to meeting the specific needs of entrepreneurs.
There is a great deal of hype around the potential for Micro, Small and Medium-sized enterprises (MSMEs) to provide the thousands of jobs that are needed to lift people out of poverty. However, not everyone agrees on what is needed to realize this potential. Some experts call for better business environments, improved access to finance, and adherence to generally accepted business standards. Others, equally distinguished, argue that these are merely facilitating preconditions and that capacity building, training and business support are the real keys to MSME development.
Both of these views make valid points. But I do not believe that it is a case of either/or. Yes, certain aspects make more sense in one setting than in another, but not all of them are equally important at any given moment. I believe that MSME growth requires an integrated and practical approach. One that incorporates many of the points raised in previous contributions, but that is tailored to meeting the needs of (groups of) individual entrepreneurs.
Adge Africa www.adgeafrica.com (formerly KBA Africa) has worked with youth-led and owned MSMEs in South Africa and Zimbabwe since 2015. It is probable that 60% of Zimbabwe’s national population is under the age of 30. Like many other young people in Africa, Zimbabwean youth have been challenged by the predicament of high unemployment rates and limited civic engagement opportunities, amongst other adversities. The exact unemployment rate in Zimbabwe is currently unknown, but estimates as high as 95% have been calculated for the country.
Youths face an uncertain future, but for many of them hope has been rekindled with the surge of entrepreneurial ventures. The hope is to create self-employment opportunities that will lead to a constant revenue flow, allowing sustainability in line with household expectations.
Our trainees face many challenges, both before and after completing the course. The business environment is tough. MSMEs face difficulties, ranging from theft to harassment and social and familial expectations. Yes, a better business environment would be more conducive, but we focus less on trying to change the surroundings and more on showing people how to change the way they respond to their surroundings. What is, just is – but your actions and choices can and do influence reality.
A key role exists here for business support that is tailored to the specific needs of the entrepreneur. This point was driven home when we realized that our first graduates were struggling in their businesses. Uncertainty, little or no access to advisory services and finance, and poor financial literacy were important causes. To address this, we are currently in talks with a financial institution to develop programmes that are tailored to our trainees’ needs. In our 2018 courses, financial literacy training will be compulsory and our entrepreneurial development will include topics such as how to manage your personal and business finances, how to enhance your financial profile, in addition to the normal, start a business, marketing and basic financial planning courses. In short, we want our trainees to be able to experiment with all aspects of financial management and business structure during the course. Thus, offering them the opportunity to practise and learn in a safe, but realistic, environment.
But it does not end there
If we want our young entrepreneurs to grow their businesses, more business support, training and advisory services are needed – as are access to finance, qualified employees and knowledge of sound business principles. They need to network with like-minded entrepreneurs who are facing similar problems. They also need access to experienced business coaches who will coach them through business challenges and ultimately increase their chances of business success.
Ultimately, boosting employment in MSMEs is about building an entrepreneurial ecosystem that incorporates all of the above, while allowing MSMEs to grow at their own pace and without burdening them with the responsibility of lifting a whole country out of poverty. Not everyone in developed countries aspires to change the world, nor does everyone in developing countries. In that, there is no difference between ‘us’ and ‘them’.