what is online trading in india
1 dollar binary options system dynamics
top 10 best stock market books
binary options paypal deposit trading questions
home based gift basket business plan
60 second binary option platforms application
make money online casino scams
how to win in binary option usd system 89
how to profit from binary options reversal strategy
binary option indicator application
binary option bullet worldwide invest investing
ikkotrader binary options range strategy
abu dhabi stock exchange indices
60 seconds binary options strategies with mt4
binary options 247 in india
regulated binary option companies broker list
power home remodeling group better business bureau
online stores similar to sierra trading post
binary option trading plus500 brokers in us
the futures trading mastery course
successful binary option trading secrets
list of companies traded on the new york stock exchange
tricks of steve i quit binary options
name ideas for home decor business
cheapest online share trading in south africa
pricing binary options formula 101 course
virtual stock exchange help
demo trading in binary options youtube
binary options demo trading safe
binary options trading example white label
binary options 101 home study course 1 gambling
why do companies issue their shares in the stock market
binary option bit learning
binary option indicator program 81c
binary option robot 1 365
free demo accounts for binary option strategies x
stock market astrology in hindi
below are binary options day trading systems
top 10 most profitable binary option robot signals
binary options brokers accept paypal u s regulation
binary option trading wikipedia 60 second demo account
extended hours options trading
trading binary options beginners cyprus
binary works
24 trade binary options 593
why everyone is trading with binary options
binary options indicator metatrader bonus 300
binary options free demo accou
60 second binary options trading brokers websites
role of zimbabwe stock exchange pdf
ideas for starting a home based business
china stock market in 2015
gt binary options signals live stream
l binary options strategies by risk level
latest stock market news usa
etx capital binary option review trading hours
binary options strategy go with green
johannesburg stock exchange directions
best online forex trading platform uk
best binary option autotrader with paypal
how to start your own home daycare business
make money with online ads
online stock broker comparison chart
space trading and combat simulator online
binary options stocks
how do binary option auto trader reviews
stock market price history download
health savings accounts investment options
binary options halal or haram t
binary options trading signal login in excel
top 5 what are binary options uk brokers
nigerian stock exchange index fund
binary option trading manual 25 deposit
traderxp binary option review reviews
the best binary option trading strategy millionaires
alpari us top rated binary options sites
binary options live trading rooms tricks
how to get profit in option trading
binary options methods vs techniques 20 deposit
purified sentiment indicators for the stock market
secrets to binary options on stock
cara trading di binary options buddy 2 0 mt4
trading binary options and top 10 brokers by charterresource
end of day trading strategy forex
binary option no deposit 2015 basics
binary option 1 minimum deposit comparison
how safe is binary option trading white label
10 binary option trading legal us
sweden stock exchange holidays
binary options 350z white label
listings on frankfurt stock exchange
is binary options 100 deposit legitimate
binary options trading eboo
global 365 binary options strategy mmx
national stock exchange of india courses
is free demo account for binary options trading worth it
bbinary binary options online trading live 24 hour live support
how to buy stock on the primary market
mumbai stock exchange national stock exchange
trade binary option with mt4 derivation
nz stock exchange pumpkin patch
learning how to trade binary options buddy ex4
100 win free 60 second binary options demo accounts
binary options methods jelqing oanda
otc stock market definition
binary option trading system scams defined
direction neutral option strategies
what to look for in a binary option broker scalper
new york stock market school
binary option with metatrader contest
single stock futures settlement
sane binary option methods jobs
binary options signal free hedging
home business ideas for ladies
who was the first african american member of the new york stock exchange
best currency to trade in forex
uk stock market correction 2015
selling free money to trade binary options
best binary options trading tools candlestick patterns
top futures trading books
when do weekly options start trading
cftc trade option rule
how to trade options on etfs
binary option broker vergleich holy grail
usa stock exchange wikipedia
tips on binary options strategies x
binary options trading singapore pro signals review
point zero trading binary options ea review
hawkins funeral home u s 83 business weslaco tx
indian stock market future trading
binary options interactive brokers kenya
dow jones stock market companies
td online stock trading
us binary options traders trading robot
sane fx binary option
binary option nadex world
what do you need to start a baking business from home
stock market results today
does binary options bully work algorithm
kp astrology stock market
professional binary option strategy killer
stock market report march 3rd 2015
shanghai stock index futures
cedar finance binary options video brokers japan
investments not correlated to stock market
forex binary options risk
bahrain stock exchange market cap
chicago stock exchange trading floor
tax on binary options system nadex uk
binary option popularity chart methods 360
binary options jobs uk lingo
borsa istanbul stock exchange index
binary option platform graphics
learn kraken forex binary options system
history of binary option graphs
binary options brokers demo accounts winning formula
binary option us broker formula
etoro binary options tester
9 ways to make money online
practice binary option greeks
best stock trading brokerage
insurance for home business
binary options 1 minute scalp
forex 1 hour binary options
insights into easy advice of binary options
binary options model usa brokers
uk online stock trader
binary options historical data franco
binary options trading anz bank
binary option saudi arabia application
who is redwood binary option strategies v
best penny stocks december 2015
short term binary options trading strategi
forex trading leverage and margin
the binary option 3 program
how to withdraw money from binary options us customers
best book on binary option trading investopedia
binary options by john piper trading system
boss capital binary option review system 5 s
binary options too risky
trade signals for binary option broker
binary options paper trade 5 deposit
binary options chart analysis 60 seconds robot
how to win in binary option demo account coaching
best stock trade book
how to win in binary option 4 health hirose
stock market articles
no deposit binary options bonus pdf
Home Discussion Papers Asia Dimension SMEs in Africa: Challenges and the role of Government for the future
SMEs in Africa: Challenges and the role of Government for the future
Written by Yejoo Kim (1) Friday, 02 December 2011 08:18

Small- and medium-sized enterprises (SMEs) are considered the engines of growth in developing countries. In developed countries, SMEs have historically played a vital role in creating jobs, spurring innovations, and creating new products, and thus contributed to economic vitality and growth. Taking these experiences into account, African countries should not overlook the importance of promoting SMEs in the same regard. However, considering the situation of most African countries, there are several impediments that have to be removed in order for SMEs to flourish. Recently, the strong presence of Asian SMEs in Africa and increasing competition have negatively affected local SMEs.

The purpose of this paper is to revisit the challenges facing the growth of SMEs in African countries, especially regarding the contemporary presence of Asian investors on the continent. The paper begins with a discussion about the general situation of SMEs in Africa. Secondly, impediments will be explored by looking at some case studies. Focus is placed on how the Asian private-public sector has influenced SMEs in Africa and, furthermore, the critical role of African Governments is explored.

The general features of African SMEs

It goes without saying that SMEs in Africa have played a significant role in the macro economy.(2) In the case of South Africa, the most economically developed African country, SMEs generated more than 55% of all jobs and 22% of the country’s Gross Domestic Product (GDP).(3) Despite the importance of SMEs, SMEs in other African countries have generally shown asymmetrical development. Unlike that of South Africa and the other powerhouse, Mauritius - two notable examples of countries with vibrant SMEs – most countries have relied on oil or other natural resources for their economic development. Additionally, in some countries such as the Democratic Republic of the Congo, most local SMEs went bankrupt due to the civil war. Long-lasting civil wars have undermined the foundations for many SMEs.(4) To further complicate matters, in many countries, the lack of infrastructure and environmental conditions such as unattractive tax regimes and legal systems, small local markets, and corruption have hampered the development of SMEs.(5) All of these factors have resulted in an uncertain environment for local entrepreneurs. As a result, local businesses tend to stay in the informal sector and do not contribute to national economic growth.(6)

In the case of developed countries, for example Germany, the economy is characterised as having strong SMEs and about two-thirds of the workers are employed by these enterprises.(7)  Furthermore, in newly industrialised Asian countries, SMEs have become the driving force in their rapid growth. For example, SMEs account for 99% of all enterprises and 88% of all employees in South Korea.(8) Some of the world’s leading Korean companies such as Samsung and LG were once small enterprises. From these examples, it is clear that SMEs are important to the development process and that it would be beneficial for African countries to promote SMEs for further growth.

Challenges for African SMEs

Despite the importance of SMEs, barriers do exist for SMEs in Africa. Most notably, many African countries lack the governmental capacity necessary to properly support the development of local SMEs. What is worse, it has been pointed out that some African Governments impose harsh regulations on local SMEs. As an example, in Ethiopia many local SMEs complain that regulation is too tight. They feel that it is too difficult to obtain a licence. Additionally, proof of premises and requirements for large amounts of capital and high qualifications stifle growth. SMEs are also heavily taxed. This makes it difficult for SMEs to emerge from the local sector.(9)

Some Governments actually present quite an ironic attitude towards their own local SMEs. For example, in Ghana, after the discovery of oil in the Sekondi-Takoradi region, many local businesses related to both the oil sector and related industries such as gas refinery have emerged. Thus, many new SMEs have tried to enter the market. In actuality, however, it is said that the existing legal system provides a more favourable environment for international companies. It is, therefore, impossible for local SMEs to compete with international firms that have greater know-how and capital. Thus, the Ghanaian Government is supporting foreign investment rather than local growth.(10) There is another complaint from local Ghanaian SMEs that the bidding process seems to favour foreign companies. Local SMEs complain that information about contracts is not made available to local providers; this situation is closely related to corruption and the agreements signed behind closed doors between businesses and governments. Locals perceive that there is no transparency in this regard.(11)

When it comes to the influx of Asian investors in the case of Chinese businesses, in general, many are likely to think that Chinese companies operating in Africa are mostly related to oil or other natural resources sectors; however, 80% of the Chinese companies currently in Africa are SMEs.(12) Chinese businesses are likely to enter where most other foreign businesses do not consider it worthwhile to do business, because there are low profit margins and weak supply chains. Chinese businesses see this as an opportunity and Africa as a new market.(13) The problem is that the increasing penetration of China in the African market has also brought about several negative consequences.

For example, Chinese SMEs are likely to bring over their own workers, and thus “new” business does not contribute to local job creation. Secondly, it is said that the Chinese do not trust local systems; for example, they do not trust the local banking system, so they are likely to send profits back to China instead of reinvesting in the host countries. Most importantly, Chinese SMEs lack an understanding of African business, as they do not try to integrate into the host countries.(14) The most significant consequence is that as a result the strong presence of Chinese SMEs forces local firms out of business. Thus, the penetration of Chinese companies threatens to undermine the development of local (African) SMEs.

The role of African Governments in creating an environment for local SMEs

Realising this, some African Governments have started to protect their own industries by enacting new laws. For example, the Nigerian Government prohibits the import of fully-manufactured products from China. In this way, for example, the Government indirectly forced Chinese manufacturing companies to establish their factories in Nigeria and expects those companies to contribute to (local) job creation and technology transfer. As a result, up to 93% of the workers are now local in Nigeria due to this regulation.(15)

There is another similar case in Namibia. Recently, since the Windhoek Chamber of Commerce complained about an invasion of Chinese SMEs, regulations have been changed so that all foreign businesses in public transport and hair salons, which Chinese businesses have dominated, are now regulated under a new permit system, which states that new entrepreneurs have to comply with local registration requirements.(16)

These are examples of how the role of African Governments is important when it comes to protection of local SMEs. At the end of the day, however, these are all passive responses, and instead, Governments need to be more pro-active in creating favourable environments for their own SMEs.

The role of Asian Governments for promoting African SMEs

Many Asian countries – from China and Japan to South Korea – have established various mechanisms to boost African SMEs by emphasising the importance of local ownership.(17) In reality, however, the outcomes are rather insignificant. From time to time, their efforts bring about counter-productive results. In the case of South Korea, the Government agency, the Small and Medium Business Administration, has tried to seek ways to promote SMEs in Africa as part of Official Development Assistance (ODA). The approach, however, has been criticised both inside South Korea and the recipient country, Kenya.

In 2011, for example, a local South Korean newspaper reported that aid programmes from South Korea were causing strains in Korea-Kenya relations.(18) According to the Korean Times, while the Kenyan Government placed a priority on technical, industrial, vocational, and entrepreneurship training, South Korea instead preferred agricultural programmes such as supplying tools.(19) Although the Government has emphasised transferring its own developmental experience to other developing countries, in actuality, it seems that the Government ignores the real needs of Kenya.(20) The South Korean Government has to realise that its own successful development strategy from the 1970s has to be modified when applied to African countries since the environment is different. South Korea, as well as other newly emerging Asian donors, is likely to highlight the sharing of their own developmental strategies; however, before applying these strategies, the needs of the recipient countries should also be considered.

Concluding remarks

The African continent is currently undergoing an unprecedented rate of rapid development. Without economic transformation, however, it is difficult to expect further progress. In this regard, the promotion of SMEs cannot be overlooked.

Several factors are vital. In order to build an enterprise culture, the role of Government is significant. As is evident from the previously mentioned cases of Nigeria and Namibia, African Governments have to exert themselves to create favourable conditions for their own entrepreneurs.

In terms of Asian investors, Asian companies have hands-on experience, and it is hoped that they will share their experience and contribute to the local economy. When Asian enterprises enter Africa, they should provide opportunities for local companies. In practice, however, only a few Asian businesses consider that as part of their overall goals. As seen from the case of South Korea, it is important to create renewed emphasis on meeting the real needs of the recipients as a top priority.


(1) Contact Yejoo Kim through Consultancy Africa Intelligence’s Asia Dimension Unit
( This e-mail address is being protected from spambots. You need JavaScript enabled to view it ).
(2) Okpara, J., 2011. Factors constraining the growth and survival of SMEs in Nigeria. Management Research Review, 34(2): pp. 156-171.
(3) Kauffmann, C., ‘Policy Insights: Financing SMEs in Africa’, OECD Development Centre, 2005, http://www.oecd.org.
(4) Ibid.
(5) Sacerdoti, E., ‘Access to Bank Credit in Sub-Saharan Africa: Key Issues and Reform Strategies’, IMF Working Paper, 2005, http://www.chatama.netau.net.
(6) Kauffmann, C., ‘Policy Insights: Financing SMEs in Africa’, OECD Development Centre, 2005, http://www.oecd.org.
(7) Hill, S., ‘Economic Powerhouse Germany’, IP Global, 22 February 2011, http://www.ip-global.org.
(8)  ‘Statistics’, Government of Korea, 2011, http://eng.smba.go.kr.
(9) ‘Ethiopia: Finding the Fine Balance’, African Business, October 2011.
(10) Ibid.
(11) Fletcher, R., ‘Disquiet in the Oil City’, African Business, October 2011.
(12) Thorniley, T., ‘The real Chinese entrepreneurs make their presence felt in Africa’, Daily Maverick, 11 August 2010, http://dailymaverick.co.za. 
(13) Ibid.
(14) Ibid.
(15) Gu, J., 2009. China's Private Enterprises in Africa and the Implications for African Development. European Journal of Development Research, Special Issue on China, India and Africa, 21(4): pp. 1-35.
(16) Thorniley, T., ‘The real Chinese entrepreneurs make their presence felt in Africa’, Daily Maverick, 11 August 2010, http://dailymaverick.co.za. 
(17) China has granted loans to SMEs through the China Development Bank, and the Japanese Government has increased its assistance to African Development Bank to boost SMEs in Africa as well.
(18) Kim, J.W., ‘Aid program strains Korea-Kenya ties’, The Korea Times, 19 September 2011, http://www.koreatimes.co.kr.
(19) South Korea has introduced Saemaul Undong, an agriculture and rural development programme, to many countries in Asia and Africa.
(20) Ibid.


Facebook Twitter Google+ LinkedIn Plaxo