Obstracles facing small and medium enterprises in African manufacturing industry

Abstract

Small and Medium Enterprises (SMEs) are universally recognised as effective instruments for industrialisation and as a contributing  factor to economic growth. Yet, despite the adoption of economic and institutional reforms in SubSaharan Africa (SSA) in the last two  decades, the performance of the manufacturing sector in general and SMEs has not been that impressive. The contribution of SMEs in  manufacturing industry has not been significant. Although a considerable amount is known about the poor record of SME progress on  the African continent, this knowledge continues to be unsatisfactory in several areas or even defective in others. In fact, a large number  of questions remain unanswered, implying that there is no clear identification of the most pertinent explanations to the essence of SME predicaments. Industrial clustering of firms,integration into global commodity chains, access to factor markets, and their attendant  benefits help SMEs to overcome growth constraints and compete in distant markets. There is also recognition that these have been  identified as problem areas for SME development in the SSA literature. The institutionalist literature can provide  insights in these areas and also explain thriving interactions and relationships that give rise to unprecedented opportunities and benefits such that SMEs can overcome growth constraints. The findings from the reviewed literature highlight that the existing public sector and business  environments in SSA have largely failed at facilitating SME and manufacturing industry development. Stumbling blocks encountered by  this emerging private sector include: problems with finance, technology, information, inter-firm linkages, business regulations, ethnic  and kinship networks and competitive pressures brought by globalisation . In order to allow the manufacturing sector including SMEs to play in a leading role in African countries’ pursuit for strong economic and industrial development and ultimately poverty reduction as  called for in the Millennium Development Goals, the policy environment needs to be substantially improved to minimise transaction costs  and facilitate business transactions thus resulting in a richer set of interactions and relationships. Recommendations are provided  to expand the possibilities of survival for Africa ’s ailing manufacturing industries.