‘SMEs hold the key to Africa’s growth’

ALAN PEAT
AFRICA NEEDS small- to medium-sized enterprises (SMEs) for long-term prosperity, according to Felix Zimmermann of the OECD development centre.
Quoted in the Accra Daily Mail recently, he said the finding of the 2005 African Economic Outlook (AEO) that the continent’s economic growth of 5.1% in 2004 was the highest it had been in the last decade was largely due to outside factors - such as higher global prices.
“There are innovative local entrepreneurs who establish a multitude of very small businesses,” said Zimmerman, “but they do not grow, as expected, into medium-sized businesses.”
One of the reasons for this cited in the report is that banks are not used to lending to them and refuse because of the risk involved. ”It is important that Africa repairs the situation and encourages SMEs,” said Zimmerman, “for this is where future prosperity lies.
He suggested that banks could help by setting up special SME units in banks where novice entrepreneurs could be assisted with information and trained to draw up acceptable business plans.
He also suggested that they travel to rural areas with mobile banks and allow produce, stored in certified warehouses, to be used as collateral for loans (as maize farmers have done in Zambia).
It is possible for SMEs to help and support each other, Zimmerman added, by joining forces and increasing their negotiating power with lenders.
“If they share equipment and premises they could also reduce costs,” he said.
When the G8 leaders meet in July, Africa will be on the agenda.
Zimmerman said that, if SMEs were neglected in their planning, “that will be tantamount to neglecting development itself”.