smes in africa
TRANSCRIPT
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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.
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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.
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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
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1. Current situationin Algeria, Ethiopia and South Africa
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1.1 Why did we choose these 3 countries ?
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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
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• 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
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2. Numerous barriers of the business environment
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African African SMESME
Low level of
EDUCATION
Business environmentBusiness environment
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2.1 Low level of education
Unqualified entrepreuneurs :
have difficulties to start and manage a business.
Lack of skilled employees.
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African African SMESME
FINANCELow level of
EDUCATION
Limited access to
Business environmentBusiness environment
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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.
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African African SMESME
FINANCE
ADMINISTRATION
Low level of
EDUCATION
Limited access to
Unwieldy
Business environmentBusiness environment
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2.3 Unwieldy Administration
Because of :- Taxation,- Corruption,- Complexity of the procedures,- Inefficient regulation…
Makes difficult to do business,Can cost a lot.
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African African SMESME
FINANCE
INFRASTRUCTURESADMINISTRATION
Low level of
EDUCATION
Limited access to
UnwieldyInsufficient and deficient
Business environmentBusiness environment
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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.
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African African SMESME
FINANCE
INFRASTRUCTURESADMINISTRATION
Low level of
EDUCATION
Limited access to
UnwieldyInsufficient and deficitent
Small local market for
Business environmentBusiness environment
SUPPLIERS & CUSTOMERS
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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.
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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
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3. Main solutions brought by the different actors
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GOVERNMENTS
African African SMESME
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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
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GOVERNMENTS-Provide training,
-Attract foreign direct investment,
-Facilitate access to infrastructures,
-Adapt the taxation,
-Facilitate the administrative environment.
NETWORKS & CLUSTERSAfrican African
SMESME
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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. »
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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
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3.3 Financial institutions and private equity
- Banks
- Micro-credit institutions
- Guarantee companies
- Private equity
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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.
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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
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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
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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