Researchers at Chatham House identify factors needed to scale small businesses and startups in Africa
The study provides an insight into how government can help small businesses survive and achieve growth.
According to the research, there is universality in the factors that will ensure SMEs scaling in all countries. Since the business environment of each country has its own dynamics.
“There is no single solution for scaling up small and medium-sized enterprises (SMEs) in Africa. The political economies of African states and sub-regions preclude easy generalizations.”
Private sector role as the main catalyst for economic growth and wealth creation must be established.
This would provide the needed robust business environment suitable for scaling and growth of many SMEs in Africa. The growth of the continent was tenaciously tied to this.
“...there is great potential for small businesses to upscale and grow, to create meaningful employment in more productive and higher-value-adding roles."
"Unlocking the potential of small and medium-sized enterprises (SMEs) and achieving greater economies of scale is an essential long-term driver of growth.”
Improving infrastructure is considered the first action to be considered by African countries. This would “constitutes a significant opportunity for investors and an essential part of the transformation of Africa’s economies.”
Ensuring financial sector plays its growth financing role was the next action. This is an important factor to stimulate and sustain growth strategies of these businesses.
Divergence between the goals of bankers/lenders and many SMEs is noted as growth impending. Thus, the research suggested that the banks need to adopt a strategic patience in their relationship with small businesses.
“Banks and lenders need strategic patience in order to be catalysts for business expansion. Growing a business can take many years, but too many banks operate on a model of issuing short-term, high-interest loans.”
Qualitative education too is considered pivotal to successful scaling of these businesses. Hence, the research suggests the provision of one to maximise the enormous entrepreneurial energy in Africa.
“The lack of skilled labour and management is identified as an important barrier to scaling up. The youth bulge is not being matched by an increase in skilled human capital for businesses to draw on.”
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