Trade and Industry

In most African countries small and medium enterprises (SME) account for a significant share of production and employment and are therefore directly connected to poverty alleviation. While in many respects the South African economy is different to that of other countries in the continent, for the poor population in the rural areas SMEs are also very relevant for employment and as an income source. Especially in developing countries SMEs are challenged by the globalisation of production and the shift in the importance of the various determinants of competitiveness. Through the rapid spread of information and communication technologies (ICT) and ever decreasing prices for communication, markets in different parts of the world become more integrated. Therefore, one basic question of this study is whether the use of ICT (as production technology, as information processing technology or as information communication technology) can help them to cope with these new challenges. The spread of ICT has led several commentators to argue that these technologies are creating a new economy – an information economy – in which information is the critical resource and basis for competition in all sectors – manufacturing and probably even more in services. Generally, from the performance perspective, the competitiveness effect of ICTs derives from the impact that ICTs have upon the productivity of the factor inputs. In this regard, ICTs can improve efficiency and increase productivity by different ways including, improving efficiency in resource allocation, reducing transaction costs, and technical improvement, leading to the outward shifting of the production function.

It is argued that in remote regions, the disadvantages that arise with isolation can be significantly lessened through access to rapid and inexpensive communication. However, there are also more pessimistic views that assume that the digital divide will increase and therefore producers in developing countries and especially in rural areas will face even greater disadvantages relative to their competitors in developed countries. Although South Africa is much more developed and its ICT infrastructure is far more advanced than in most Sub-Saharan African countries, in remote areas with a poor population similar difficulties as in other African countries exist with respect to education, unemployment, ICT infrastructure and role of the SME sector and therefore the above questions are also relevant.

So far there is little empirical evidence of how the diffusion and application of information and communication technologies (ICTs) can be a catalyst for economic competitiveness and growth in developing countries. After a review of the macroeconomics of ICT diffusion and growth effects in this study, we therefore particularly focus on how micro-level competitiveness is influenced by ICTs using enterprise survey data from two East African countries: Tanzania and Kenya. In so doing, we also account for other factors that obviously influence competitiveness. Hence, the analysis incorporates also the influence of the enterprise resources in terms of factor inputs, because the performance is partly a function of the resources that are invested in such basic factor inputs as labour, physical capital, and production materials. Besides, the saliencies of African SMEs (e.g., relatively small size and young age by international comparisons, and human capital stock) are drawn into the analysis. As the food processing, textiles and tourism sector, where we have conducted our empirical analysis of East African SMEs, are also of considerable importance for South Africa, we can draw some conclusions and develop policy recommendations, that are relevant especially for rural South African SMEs.

  • Year 2001
  • Organisation Center for Development Research (ZEF Bonn)
  • Publication Author(s) Susanna Wolf

The aim of the paper is to demonstrate the ways in which EU competition policy and specifically Danish competition policy1, aim to protect the interests of not only private consumers, but also small and medium-sized enterprises (SMEs). As a point of departure it is useful to mention that the individual competition policy legislations of the member states of the EU now, after a period of adaptation stretching over many years, as an example of what might be termed voluntary harmonisation of policies, for all practical purposes although with certain noteworthy additions, consists of copies of the central competition rules of the EU. The provisions, that pertain to SMEs first and foremost, consist of articles 81 and 82 of the Treaty on the European Community (Treaty of Rome as amended by subsequent treaties, henceforth: the EC treaty).

  • Year 2001
  • Organisation Danish Federation of Small and Medium-sized Enterp...
  • Publication Author(s) Peter L. Vesterdorf

South Africa’s recent integration into the world economy provokes the question about its potential for building competitive advantage and prosperity at the local level in the context of an increasingly globalised economy. The experience of prospering localities in industrialised countries, in particular Western Europe and Japan, suggests that the small and medium-sized enterprise (SME) sector is at the forefront of local economic development. SMEs are reported to resolve the persistent problems of insufficient employment growth while being highly efficient in flexibly serving increasingly segmented consumer markets.

The small firm discussion has been taken up in South Africa, where small, medium and microenterprises (SMMEs) hold a numeric majority. SMMEs are expected to function as a driving force in South Africa’s both social and economic transition if supported by supply-side measures targeting enterprise constraints. Research on South African SMMEs reveals, however, a mismatch between the reality and the model of the SMME sector used by South African policy makers: The South African SMME sector is far from homogenous and would require a fine-tuned set of interventions rather than the generic assistance currently provided. Only the few, more dynamic SMMEs show a potential to contribute to rapid employment creation, while survivalist activities (as a result of ‘enforced self-employment’) constitute the vast majority of the South African SMMEs economy and grow in numbers, but not in size. Moreover, small business performance seemingly depends not only on the removal of constraints by means of (supportive) public policies and regulations, but decisively on industrial and organisational structures, the adaptiveness of firms and, above all, the capabilities and aspirations of the entrepreneur.

This paper aims to contribute to the South African SMME discussion by drawing together
findings from recent surveys on established manufacturing SMMEs in three South African regions. The descriptive findings on their turnover and employment growth trajectories confirm unambiguously that the present manufacturing SMME economy as a whole is no vehicle to tackle the problem of employment growth. This argument is developed in seven sections. Section two and three shed light on the international experience regarding SMMEs and employment growth. Section four turns to South Africa, its SMME policies and the debate about the role SMMEs are able to play. Theoretical and methodological considerations of section five form the background to section six, which contains the research findings on employment growth in manufacturing SMMEs in three regions. These findings are summarised and interpreted in the final section.

  • Year 2000
  • Organisation TIPS
  • Publication Author(s) Anna Kesper
  • Countries and Regions South Africa

The relationship between the size of an enterprise and other enterprise dynamics seems ambiguous. This paper highlights critical policy and research questions, with specific reference to the links between enterprise size, enterprise growth and the propensity to export. Preliminary findings suggest that the prevalence of some systematic gaps in size-class economic research may lead to a misguided policy framework for supporting small and medium enterprises. The paper articulates that public policy should encompass selective enterprise programs directed at enterprises of different size-classes, informed by a thorough comprehensive appreciation of the factors, systematic and unsystematic, involved in growth and exporting of small and medium enterprises. The tentative finding of this study imply that provision of finance, provision of information and training, ensuring an enabling environment, are the most important variables to take into account when crafting support framework for small and medium enterprises. It is therefore recommended that government should address high interest rates, high inflation, ameliorate access to information and markets, accelerate training of small and medium entrepreneurs, and most significantly embellish coordination and monitoring of units dealing with SME support. It is, however, argued that small enterprises should address certain constraints that are within their control. In addition to the issue of growth and exports of small enterprises, reference to employment and output trends of small enterprises is made, a theoretic model of possible relationships between enterprise export, employment and output is presented. This paper argues for a deeper examination of export processes and export success/ failure of small enterprises. To better understand the intricate dynamics of small enterprises, researchers should undertake comprehensive case studies, longitudinal studies and surveys on SME policy issues.

  • Year 2000
  • Publication Author(s) Vusi Gumede

This paper seeks to provide a coherent definition of BEE, which has the empowerment of the people as its prime objective. In the first section, I examine how the concept of empowerment has been used in the field of development. In section two, I introduce and critique the minimalist approach that emphasises individual empowerment especially through the creation of a filthy rich black business class without addressing the extreme poverty experienced by majority of the black population. In section three, I discuss the maximalist approach, which emphasises collective empowerment, that is, uplifting the living conditions of the majority of the black population. In section four, I analyse one of the government initiatives to promote BEE with a view of highlighting which of the two approaches have dominated the state policy. 

  • Year 1999
  • Publication Author(s) O'mano Emma Edigheji

This paper is concerned with informal clothing in the inner city of Johannesburg. This is done in the context of both the changing racial complexion of small enterprise development and of South Africa's economic heartland inner-city as an important incubator for emerging black manufacturers. This study builds on local research that has been carried out on various aspects of black businesses in the inner-city of Johannesburg. This study does not only confirm the importance of inner city as a hatchery for small manufacturers, it also investigates aspects that relate to sub-contracting and problems faced by clothing manufacturers. The results are presented from a survey of small black clothing manufacturers in the inner-city Johannesburg. Overall, the findings reiterates the importance of the inner-city as incubator.

  • Year 1998
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