Small and Medium Enterprises

Partnering the Small & Medium Enterprises Sector in Africa

Small and medium-sized enterprises (SMEs) are increasingly being recognised as productive drivers of economic growth and development for African countries. For example, it is estimated that:

  • SMEs account for about 70% of Ghana’s gross domestic product (GDP) and 92% of its businesses.
  • They also make up about 91% of formalised businesses in South Africa; and
  • Constitutes about 70% of the manufacturing sector in Nigeria.

 

Challenges of SMEs

Research has shown that SMEs in Africa face significant challenges. These include:

  • Lack of access to credit which places a heavy burden on entrepreneurs to raise large amounts of capital for business development themselves and makes it difficult for ideas to be translated into businesses. Improving access to credit is thus crucial if SMEs are to reach their potential and allow businesses to move from start-ups to established businesses with growth potential.
  • Lack of formal governance, management and financial structures that are critical for the running of successful businesses.
  • A centralized structure of management often dominated by their owners with substantially weaker delegation;
  • The absence of financial and internal control systems and where these systems exist, they are often weak and are overridden by owner-managers;
  • Lack of soft management skills in Marketing, IT, Human Resource and Risk Management, which are key skill sets required for transitioning to higher levels of growth.

These challenges make it difficult for SMEs to compete in the marketplace and are therefore less likely to gain the critical market share necessary for profitability and growth.

At Ephesus Consulting, we share the view that in order for African SMEs to play their roles as drivers of economic growth, they must be assisted to develop good governance, management and financial structures that will improve their operations and enable them to transition into larger entities capable of competing in the marketplace and making significant contribution to national development, particularly in the areas of skills training and employment generation which are among the biggest challenges facing African economies today.

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Empowering SMEs in Ghana

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