SMEs and Economic Development in Africa (Routledge Studies in Development Economics)

Small and medium-sized enterprises (SMEs) are a driving force of the global economy, contributing up to 50% of gross domestic product in some instances. They also contribute to economic development through various channels such as employment creation, economic growth and poverty reduction, key elements of the Sustainable Development Goals. Furthermore, in many economies the majority of jobs are provided by SMEs. However, despite their support of the economy, SMEs are prone to several binding constraints, such as access to finance and market entry, as well as exogenous shocks and crises, most recently the COVID-19 pandemic. Building on evidence from international experience, SMEs and Economic Development in Africa provides grounded solutions to challenges affecting SMEs, particularly in Africa, and offers guidance on how to build resilience to counteract future shocks. It also offers a number of policy measures which governments in developing countries may need to consider in order to encourage economic growth and development, such as increasing productive capacities, training, enhancing business ethics and professionalism and improving competitiveness. What makes this book distinctive is that fact that it brings together the literature concerning SMEs in one place, and using case studies, it showcases how policymakers can overcome the challenges affecting SMEs. The book also provides tested and practical remedies for African economies with a view to making SMEs a springboard for economic prosperity. The book will appeal to advanced students, scholars and researchers, as well as policymakers, development agencies and non-governmental organisations. Cover Half Title Series Page Title Page Copyright Page Table of Contents List of Illustrations Figures Tables Boxes Acknowledgement About the Editors List of Contributors Chapter 1: Role of SMEs in Economic Development in Africa 1.1 Introduction 1.2 Definition of SMEs 1.3 SMEs Foster a More Inclusive Growth 1.4 Barriers to the Development of SMEs in Sub-Saharan Africa 1.5 Policies to Unleash SME Potential 1.5.1 Improving Access to Global Markets and Knowledge Networks 1.5.2 Improve Information Communication Technology 1.5.3 Improve Business Environment 1.6 Conclusion References Chapter 2: SMEs and Equality in Africa 2.1 Introduction 2.2 Definition of Terms 2.3 Theories of Equality 2.3.1 Equity Theory 2.3.2 Egalitarianism 2.3.3 Rawls’s Theory 2.4 Contribution of SMEs to Equality 2.4.1 Employment Creation 2.4.2 Economic Development 2.4.3 SMEs Drive Innovation 2.4.4 SMEs Drive Competition 2.5 Forms of Equality 2.6 Benefits of Achieving Equality through SMEs 2.6.1 A Large Population is Covered 2.6.2 Financial Innovation 2.6.3 Competition 2.6.4 Expanded Tax Base 2.6.5 Financial Assistance 2.7 Challenges Associated with Achieving Equality through SMEs 2.7.1 Lack of Funding 2.7.2 Technology Deficiencies 2.7.3 Barriers to Entry 2.7.4 Constraints to Importing 2.7.5 Poor Management Practices and Poor Corporate Governance Structure 2.8 Determinants of SMEs to Achieve Equality 2.8.1 Location 2.8.2 Gender Equality 2.8.3 Education Background 2.8.4 Age 2.8.5 Behavioural and Personal Traits 2.8.6 Access to Finance 2.8.7 Innovation 2.8.8 Location 2.8.9 Entrepreneurship Training 2.8.10 Social Responsibility 2.8.11 Tax Rate 2.8.12 Inflation Rate 2.8.13 Competition 2.8.14 Government Policies 2.9 Relationship between SMEs and Inequality in Africa 2.10 Government Initiatives in Promoting Equality through SMEs 2.11 Lessons Learnt from Developed Countries 2.11.1 Training Ground for the Development and Growth of Indigenous Entrepreneurs 2.11.2 Strengthening Industrial Inter-Linkages 2.11.3 Transition Channel from Traditional to Modern Industrial Sector 2.11.4 Dispersal of Economic 2.11.5 Job Creation and Poverty Reduction 2.12 Conclusion References Chapter 3: African Women-Owned SMEs Post-COVID-19: Toward a Gender-Sensitive Policy Development Strategy 3.1 Introduction 3.2 Meaning of Women Entrepreneurs 3.3 Women-Owned SMEs in Africa 3.4 Women Entrepreneurs as a Catalyst for Economic Change 3.5 Factors Influencing African Women’s Entrepreneurship 3.6 The Impact of the Pandemic on Women Entrepreneurs 3.7 Challenges and Opportunities that COVID-19 has Actuated for Women Entrepreneurs 3.8 Post-COVID-19 and Gender-Sensitive Policies for African Women Entrepreneurs 3.9 Priority Areas for African Women Entrepreneurs Post-COVID-19 3.9.1 Access to Financial Service Support 3.9.2 Digital Financial Literacy 3.9.3 Information and Communication Technology Training 3.9.4 Capacity 3.9.5 Government Intervention Strategies 3.9.6 Elimination of Discriminative Policies against Women 3.9.7 Data Collection, Registration and Help Line 3.9.8 DFIs and NGO Intervention Strategies 3.10 Women-Owned SMEs Post-COVID-19 Support Model 3.11 Conclusion Notes References Chapter 4: Fostering Global Competitiveness of SMEs in the Supply Chain Post-COVID-19 4.1 Introduction 4.2 COVID-19 and the Global Supply Chains 4.3 Global Disruption Accentuated by COVID-19 4.4 COVID-19 and Impact on SMEs in Africa 4.5 Consequence of COVID-19 Pandemic on SMEs 4.6 Global Supply Chain Strategies Post-COVID-19 4.7 Technology and Digitisation 4.8 Supplier Solvency 4.9 Diverse Supply Sources 4.10 Over-Dependence on Production Centres 4.11 Focus on Manufacturing Hubs 4.12 Development of Local Sourcing Capacity 4.13 Development of Low-Cost Sourcing Centres 4.14 Cost Competitiveness 4.15 Production Material 4.16 Conclusion Notes References Chapter 5: SME Finances: Challenges and Policy Options 5.1 Introduction 5.2 Access to Finance as an Obstacle for SMEs 5.3 Access to Finance and Institutional Constraints 5.3.1 Transaction Costs and Interest Rates 5.3.2 Adverse Selection and Moral Hazard Issues 5.3.3 Role of Large Banks and Foreign Banks 5.4 Remedies 5.4.1 Role of Direct State Intervention 5.4.2 Role of Credit Guarantee Schemes 5.4.3 Alternative Financing Instruments 5.4.4 Use of Blended Finance 5.4.5 Role of Human/Managerial Capital 5.5 Conclusion References Chapter 6: Payment of Taxes: Challenges and Options 6.1 Introduction 6.2 Conceptualisation of SMEs and Taxes 6.3 Challenges in Tax Compliance 6.4 Reforms and Strategies Used to Foster Tax Compliance 6.4.1 Enforcement: Countering Avoidance and Evasion 6.4.2 Encouraging Quasi-Voluntary Compliance 6.4.2.1 VAT Regimes 6.4.2.2 Preferential Tax Regimes 6.4.2.2.1 The Rationale for Preferential Tax Regimes 6.4.3 Formalisation 6.5 Conclusion References Chapter 7: Global Supply Chain and SMEs 7.1 Introduction 7.2 Global Supply Chains – A Definition 7.3 Historical Evolution of Global Supply Chains 7.3.1 Supply Chain before 1900 7.3.2 Supply Chain from 1900s to 1940 7.3.3 Supply Chain in the 1950s (Standardisation and Containerisation) 7.3.4 Supply Chain from the 1960s to the 1980s (Digitisation and Efficiency) 7.3.5 The Supply Chain in the 1980s to Date (Shift to True Globalisation) 7.4 Globalisation – The African Experience 7.5 Growth within African Banks 7.6 Growth within the African Retail Sector 7.7 Telecommunication Growth in Africa 7.8 Impact of Global Supply Chains on SMEs during the Pandemic 7.9 Beyond the Pandemic 7.10 Proposing a Pathway for SMEs in the Post-COVID-19 Era 7.11 Conclusion References Chapter 8: Building Productive Capacities: The Role of Business Linkages 8.1 Introduction 8.2 The Profile of SMEs 8.3 SMEs and Their Contributions 8.4 Developing Productive Capacities in SMEs 8.5 Factors Affecting Productive Capacities in SMEs 8.6 What are Linkages? 8.6.1 Impact of Business Linkages in SMEs on Productive Capacities 8.6.1.1 Forward linkages 8.6.1.2 Backward linkages 8.7 Depth and Breadth of Linkages 8.8 Key Challenges in Building Productive Capacities 8.9 Policy Recommendations 8.10 Conclusion References Chapter 9: Skills Training by SMEs: Global Experience and the South Korean Consortium Approach 9.1 Introduction 9.2 Skills Gaps in SMEs 9.2.1 Leadership Skills 9.2.2 Creativity and Innovation Skills 9.2.3 Networking Skills 9.2.4 Goal-Setting Skills 9.2.5 Time Management 9.3 SME Training Funding Models 9.3.1 The Training Levy System 9.3.2 Training Levy Grant System 9.4 Special Challenges for SMEs in Training 9.5 International Experience in SME Training and Government Policies 9.6 System and Strategy of Implementation of Training Programmes 9.7 Achievements and Impacts of the Training Consortium Project 9.7.1 Promotion of SME Productivity 9.7.2 Prevention of Unemployment 9.8 Conclusion References Chapter 10: Access to Markets and Internationalisation of SMEs 10.1 Introduction 10.2 Challenges Faced by SMEs in Accessing Local Markets 10.3 SME Access to International Markets: Opportunities and Challenges 10.3.1 Export Promotion 10.3.2 Rationalising Production: Offshore Outsourcing and Acquisition of Strategic Assets 10.3.3 Integration into GVCs 10.3.4 Use of E-Commerce 10.4 Improving Access to Global Markets and Knowledge Networks 10.5 Mitigating Challenges Faced by SMEs in International Markets 10.6 Conclusion References Chapter 11: SMEs and the African Continental Free Trade Area 11.1 Introduction 11.2 Overview of AfCFTA 11.3 SMEs and AfCFA 11.3.1 Free Movement of People 11.3.2 Market Access 11.3.3 Reduced Trade Costs of NTBs 11.3.4 Reduced Trade and Transactions Costs 11.3.5 Expanded Value Chains 11.3.6 Improvement in Basic Trade Infrastructure and Facilities 11.4 Unleashing SME Potential in AfCTA 11.4.1 Capacity Building 11.4.2 Access to Finance 11.4.3 Access to Power 11.4.4 Network Infrastructure 11.5 Pathways that can be Used by African SMEs to Benefit from AfFCTA 11.6 Conclusion References Chapter 12: Fostering Business Ethics and Professionalism 12.1 Introduction 12.2 International Guidelines for Ethical and Professional Business Practices 12.3 Ethical Fibre of a Society 12.4 Theorising Ethics 12.5 Determinants of Business Ethical Fibre 12.5.1 Formation of Individual Ethics 12.5.1.1 Family influences 12.5.1.2 Peer influences 12.5.1.3 Life experiences 12.5.1.4 Personal values and morals 12.5.1.5 Situational factors 12.6 Influence of Societal Fibre on Business Ethics 12.7 Ethics and Professionalism: The Unconventional Practice 12.8 Professionalism in Business 12.9 Factors Mitigating Ethics and Professionalism 12.10 Need for Adherence to Ethics and Professionalism 12.11 The Impact of Fostering Ethical and Professional Culture on SMEs 12.12 Perpetuating a Dominant Ethical and Professional Culture among SMEs 12.13 The Way Forward 12.14 Conclusion References Chapter 13: Enhancing Quality and Standards among SMEs 13.1 Introduction 13.2 Economic Outlook: 2020–2021 13.3 SME Outlook: 2020–2021 13.4 Theoretical Background 13.4.1 The ISO 13.4.2 Need for the ISO 13.4.3 Diffusion Rate of ISO 14001 across Africa 13.4.4 Improving Quality and Standards of SMEs through ISO 13.4.5 Impact of Quality Standards (SANS 9001/ISO 9001) on the Performance of SMEs 13.5 Internalising QMSs among SMEs 13.5.1 Benefits of Internalising QMSs 13.6 Implication of QMSs 13.7 Adopting Good Quality and Standards 13.8 Establishing a Quality Control Process 13.8.1 Consequences of Non-Compliance with Quality Control Processes 13.9 Developing a Quality Control Process 13.10 Selecting a QMS 13.10.1 EFQM Business Excellence Model 13.11 Conclusion References Index "Small and medium-sized enterprises (SMEs) are a driving force of the global economy, contributing up to 50% of GDP in some instances. They also contribute to economic development through various channels such as employment creation, economic growth and poverty reduction, key elements of the Sustainable Development Goals (SDGs). Furthermore, in many economies the majority of jobs are provided by SMEs. However, despite their support of the economy, SMEs are prone to several binding constraints, such as access to finance, market entry, as well as exogenous shocks and crises, most recently the COVID-19 pandemic. Building on evidence from international experience, this book provides grounded solutions to challenges affecting SMEs, particularly in Africa, and offers guidance on how to build resilience to counteract future shocks. It also offers a number of policy measures which governments in developing countries may need to consider in order to encourage economic growth and development, such as increasing productive capacities, training, enhancing business ethics and professionalism and improving competitiveness. What makes this book distinctive is that fact that it brings together the literature concerning SMEs in one place, and using case studies, it showcases how policymakers can overcome the challenges affecting SMEs. The book also provides tested and practical remedies for African economies with a view to making SMEs a springboard for economic prosperity. The book will appeal to advanced students, scholars and researchers, as well as policymakers, development agencies and non-governmental organisations"-- Provided by publisher