SMEs need education and motivation

Stellenbosch entrepreneur Oliver Chikozore.

Absence of an enabling environment, lack of financial support, weak economic infrastructure, and lack of policy coherence for small business support need to be addressed quickly if small businesses are not to fall far behind their counterparts in other parts of the world.

Given the small number of indigenous African Small to Medium Enterprises (SMEs) compared to other parts of the world, education and training support for entrepreneurs is needed to help establish a good foundation for small business growth.

Students and anyone interested should be encouraged to become entrepreneurs because of their potential to explore non-traditional business models.
Another area where government assistance and support is needed is inter-firm linkages.

Strengthening inter-firm linkages will enhance learning for local entrepreneurs and provide opportunities for growth and the acquisition of skills for effectively competing in today’s global marketplace.

Large buyers are important drivers of technological innovation in global value chains because of their emphasis on higher product standards, the constant threat of supplier replacement, and their support of their customers and suppliers.

Supply relationships with large buyers provide SMEs access to new products, process technologies and trade credits. Therefore, African governments should encourage inter-firm relationships and large buyers.

Efforts should be made to help entrepreneurs meet international product and process standards.

To establish a strong presence in the global marketplace, the number of small African export companies has to increase.

Participation in international trade opens up new markets. African governments should devise policies and regulations that encourage small manufacturers to export.

The era of complete dependence on sales in the domestic market is over, and new entrepreneurs should be made aware of this situation to ensure their long-term survival.

Partnerships with foreign firms through joint ventures, licensing, and other collaborative modes of operation should be encouraged, especially partnerships that have export potential.

Development programmes such as the Export Promotion of Organic Products from Africa (EPOPA), initiated by the Swedish International Development Cooperation Agency (SIDA), is an example of the kind of partnership that helps small businesses in Africa gain access to markets in developed economies.

EPOPA offers small farmers in Africa opportunities to participate in organic food markets in Europe.
Access to bank loans and direct government financial support are reported in surveys of entrepreneurs as a serious problem for small businesses in Africa.

Better financial assistance is needed to address this problem. According to Honohan and Beck, African firms finance a significant percentage of their investment with internal funds, about 68%.

This observation highlights the lack of financial assistance to small-scale enterprises. Policies to address this problem should be established with input from lending institutions.

The concerns of banks should be taken into consideration in developing financial support policies for small businesses. Governments should work with lending institutions to lower the risk of loan default.

While governments need to play an important role, other sources of assistance to small businesses, such as venture capital should be considered.

Entrepreneurs should be made aware of the importance of family members, friends, and business partners in raising start-up capital.

It is also important that entrepreneurs recognise the benefits of education and training in ensuring the success of any business endeavour.

A successful entrepreneur understands what makes a good product, the manufacturing and production process, and must be capable of understanding how to market it. One needs to have good financial understanding. A collaborative approach is needed to successfully achieve an end to poverty and an increase in youth involvement in entrepreneurial business.

Mine is a vision that was born out of passion as well as by my experience being in the community and facing the challenges that other young people are facing. Being in the community and working in the community, I found out that our government talks about community members having to establish businesses, but they don’t have the skills, are not educated and motivated.

How are they going to establish businesses and employment for other people?

Stellenbosch-based Oliver Chikodzore is an entrepreneur, and the owner of Ollie’s African Clothing and Accessories. He writes in his personal capacity.