The Contribution of SMEs to Economic Growth in Africa
In recent times, governments of countries and various internationally recognised institutionshave come to the utter realisation of the somewhat overwhelming difference in the form ofeconomic liberialisation and sustainable accelerated growth in development, which can beachieved through engaging the Small and Medium Enterprises (SMEs) in numerous sectorsof the economy in different business operations. Targeting development through SMEestablishment has proved to be an important hydra-headed strategy to achieve an appreciableupgrade of the economic status of Western and Asian countries where SMEs account forabout 20% of the Gross Domestic Product (GDP) and 40 – 60% of employment, through thecomplimentary ripple effects like poverty alleviation, job creation, market industralisation,crime reduction etc which all point toward an increased standard of living for citizens of thecountry. This however has not been the case for Africa.This study looks into the contributions of SMEs to economic growth in Africa as measuredby selected economic variables i.e. entrepreneurial index of a country, per capita income ofSMEs, trade statistics of SMEs, attraction of FDI for SMEs and capital investment in SMEs,all as contributors to the GDP of countries. GDP in this research is a measure of the economicposition of a country. Five econometric models were developed for four African regionstotaling 16 countries, using multiple regression analysis to investigate the relationshipbetween GDP and the selected variables, in a bid to estimate the level of dependence of theGDP on these variables.The study finds evidence that GDP of selected African countries is not dependent on theeconomic indicators used as the yardstick for measurement. Hence, Africa shuts itself out ofviable growth opportunities in deciding not to invest in the SME sector as a long-termstrategy for economic resurgence and development. If the truly applaudable success achievedby foreign counterparts is to be realised on the African continent, in order to partake of thebenefits of economic development, governments must invest capital and FDI in the form ofeducation and management competencies within the SME sector and back this strategy upwith favorable policies to foster sustainable economic growth and appreciable development
Year of publication: |
2011-04-19
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Authors: | Oji, Chijioke Kennedy |
Subject: | Economic growth | Africa | Small businesses |
Saved in:
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