With the recent advocating for entrepreneurship in Africa, it shouldn’t go without saying that businesses form the backbone to every economy. These businesses, whether govt-owned or privately-owned, are responsible for the monies government allocate and spend. But what becomes of such businesses, both existing and start-ups, if conditions are not suitable? How would businesses survive when poverty levels are on the rise?
Once upon a time, Africa was renowned for its exports of raw materials. Nowadays, businesses in the exports industry are also feeling the bite of the economic crunch. According to a research study, the average cost of living per individual per day is between $3 – $5, which is lower than the earning per hour of $7 – $10 in the US. Having known this, how can a nation’s economy be improved? How can SMEs play an important role in economy building?
What Are SMEs?
In Biology, you were taught that “cells are the building blocks of life”, right? Applying this to a nation’s economy, what would you say? If you are not sure, feel free to guess. If you said “businesses”, well done! Businesses are the building blocks of an economy. It is through these businesses the government imposes a levy – Tax. Importing and exporting, is another example. Trade between two countries is a business transaction too.
You’ll agree that no business starts out big and the big businesses you see today started sometime, somewhere. They once used to be categorised under SMEs.
The role SMEs play in economy building is very important and cannot be over-emphasised. SMEs are actively involved in the creation of jobs, production of goods and services, exportation as well as ensuring fair distribution of income. There are mainly two types of SMEs:
#1. Household and traditional cottage industries
This type of SMEs includes fishing, farming, handcrafts, village industries etc
#2. Present-Day SMEs
Present-day SMEs overtook the traditional cottage and village industries with its involvement of machines and technology, capital investments and labour force in its production process. SMEs, as defined by the industries, are businesses with more than 10 workers but less than 50.
How SMEs Contribute to Economy Building
These are some of the methods through which SMEs can help in economy building.
#1. SMEs contribute to the both the manufacturing sector and nation’s GDP in the form of total value added.
#2. SMEs help in creating jobs and distribution of income and wealth.
#3. SMEs provide opportunities for entrepreneurs and youths who are capable and have the potential to start and grow a business.
#4. It can help in making funds or capitals available for use to entrepreneurs and youths.
#5. SMEs can help in finding cost-effective techniques to production thereby reaping the benefits of such lean production.
#6. It can help the government of a nation generate revenue.
Because governments across Africa are starting to realise the usefulness, resourcefulness and importance of SMEs, they have taken steps to encourage and support them. Private bodies and/or investors are also on the look-out to provide support to capable entrepreneurs and youths with the potential to start and grow a business.
Financial institutions have decided not to be left out as they have come up with flexible repayment plans for entrepreneurs and youths with good credit ratings to apply and receive loans.