smes in africa
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“Small and Medium Enterprises in Africa”
January 2009Florie THIELINJulien DE BENEDITTISMaster 1 International Business
Particular analysis through three selected African countries:
Algeria, Ethiopia and South Africa.
SMEs play an essential role in the economic development of Africa by :
Generating employments, tax revenues,
Meeting the national demand,
Increasing the exports,
Decreasing the imports ,
Creating wealth.
Development of the SMEs:Major problems and solutions
1. Current situation in Algeria, Ethiopia and South Africa
2. Numerous barriers of the business environment
3. Main solutions brought by the different actors
Perspective : The global financial crisis
1. Current situationin Algeria, Ethiopia and South Africa
1.1 Why did we choose these 3 countries ?
Algeria Ethiopia South AfricaPopulation 33.9 83.1 48.6
Education
Health
Unemployment
10 years 6 years 9 years
Good
Infrastructures
Retirement
Conflicts
Corruption
Activities
Inflation
Growth
Commercial Balance
I.T.
Bad Medium
14.10% 16.70%26.60%
Bad Awful Bad
With Marocco
3.2
Mainly Oil
2.50%
3%
-8.50%
Medium
Medium
Possible None
2.3 5.1
Mainly agriculture Mainly services
12.30% 4.60%
9.61% 13.30%
12.60% 13.80%
Bad Excellent
ExcellentBad
1.2 Main socio-politico-economical indicators
• Algeria : • Between 1 and 250 persons
• Turnover : less than €22.3 millions
• no more than 25% of the capital is owned by one or more other companies
• Ethiopia :• Microenterprises : turnover < than €1.600
• Small Enterprises : turnover < than €40.000
• South Africa : • Divided in 4 categories : micro, very small, small and medium
enterprises
• Depending on the sector of activity of the SME
• Workers : less than 200
• Turnover : less than €4millions
1.3 Legal definition of SME
2. Numerous barriers of the business environment
African African SMESME
Low level of
EDUCATION
Business environmentBusiness environment
2.1 Low level of education
Unqualified entrepreuneurs :
have difficulties to start and manage a business.
Lack of skilled employees.
African African SMESME
FINANCELow level of
EDUCATION
Limited access to
Business environmentBusiness environment
2.2 Limited access to finance
Because of :- the under developped financial market,- the information asymmetry,- not enough collateral.
High interests’ rate,Refusal of credit’s demand,Lack of external financings.
African African SMESME
FINANCE
ADMINISTRATION
Low level of
EDUCATION
Limited access to
Unwieldy
Business environmentBusiness environment
2.3 Unwieldy Administration
Because of :- Taxation,- Corruption,- Complexity of the procedures,- Inefficient regulation…
Makes difficult to do business,Can cost a lot.
African African SMESME
FINANCE
INFRASTRUCTURESADMINISTRATION
Low level of
EDUCATION
Limited access to
UnwieldyInsufficient and deficient
Business environmentBusiness environment
2.4 Insufficient and deficient Infrastructures
Limited access to :
- Energy, Water …
- Internet, Telecom …
- Roads, Airports…
Generates areas with limited possibilities,Makes difficult to do business,Leads to high costs.
African African SMESME
FINANCE
INFRASTRUCTURESADMINISTRATION
Low level of
EDUCATION
Limited access to
UnwieldyInsufficient and deficitent
Small local market for
Business environmentBusiness environment
SUPPLIERS & CUSTOMERS
2.1 Small local market for suppliers and customers
Because of :- Narrow domestic markets,- Tariffs and conflicts limit cross-border
exchanges.
Makes difficult to find reliable suppliers,Leads to high transport costs to export,Complicates the way to do business.
In South AfricaIn South Africa
In AlgeriaIn Algeria
In EthiopiaIn Ethiopia
FINANCE
INFRASTRUCTURESADMINISTRATION
Low level of
EDUCATION
Limited access to
UnwieldyInsufficient and deficitent
Small local market for
Business environmentBusiness environment
SUPPLIERS & CUSTOMERS
3. Main solutions brought by the different actors
GOVERNMENTS
African African SMESME
3.1 Governments
Algeria Ethiopia South Africa
Ministry for SMEs
and craft industry
Important SME’s development policy since 2001
Chamber of Commerce
« in process… »
No SME’s development policy
Department of Trade and Industry
Very important SME’s development policy since 1994
GOVERNMENTS-Provide training,
-Attract foreign direct investment,
-Facilitate access to infrastructures,
-Adapt the taxation,
-Facilitate the administrative environment.
NETWORKS & CLUSTERSAfrican African
SMESME
3.2 Networks & Clusters
Cluster =
« Group of SMEs from one industry sector that team up and act as one body. »
Network =
« Group of companies which are linked by means of individual connections. »
GOVERNMENTS-Provide training,
-Attract foreign direct investment,
-Facilitate access to infrastructures,
-Adapt the taxation,
-Facilitate the administrative environment.
NETWORKS & CLUSTERS
-Provide information,
-Share experiences,
-Make economies of scale,
-Facilitate access to finance.
African African SMESME
Financial institutions & Private equity
3.3 Financial institutions and private equity
- Banks
- Micro-credit institutions
- Guarantee companies
- Private equity
GOVERNMENTS-Provide training,
-Attract foreign direct investment,
-Facilitate access to infrastructures,
-Adapt the taxation,
-Facilitate the administrative environment.
NETWORKS & CLUSTERS
-Provide information,
-Share experiences,
-Make economies of scale,
-Facilitate access to finance.
Financial institutions & Private equity African African
SMESME-Reduce the info asymmetry,
-Increase equity,
-Generate collateral.
What is the level of development of african SMEs ?
• Overall, a good trend of SME’s development
• Above all in South and North Africa
But a threat for the future…
the global financial crisis
Perspective : The global financial crisis
• Consequences :- currencies devaluation- drop of commodity prices- cutback in foreign capital inflows
Slowing down of the recent SME’s development improvment
Ressources :• Economic commision for Africa: www.uneca.org
• United Nations: www.un.org
• Organisation for economic co-operation and development: www.oecd.org
• African development bank group: www.afdb.org
• The International Monatery Fund: www.imf.org
• The European Commission: http://ec.europa.eu
• African economic news: www.afrikeco.com
• Trade & Industrial policy strategies: www.tips.org.za
• Cap Afrique: www.capafrique.org
• AllAfrica Global Media: http://allafrica.com
• The Investment Climate Facility for Africa: www.icfafrica.org
• Overview of African SME research: www.sbaer.uca.edu/Research/icsb/2003/papers/66.doc
• Foreign trade: http://www.missioneco.org/me/
• Corruption in the three selected countries: http://www.transparency.org/
• Craft industry and SME Algerian Ministry: www.pmeart-dz.org
• Ethiopian Business Development Services Network (EBDSN): www.bds-ethiopia.net
• Chamber of commerce of Addis in Ethiopia: www.addischamber.com
• Ministry of Foreign Affairs of Ethiopia: www.mfa.gov.et
• Doing business with South Africa: www.southafrica.info/business
• Department of Trade and Industry of South Africa: www.thedti.gov.za
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