The Role of the Small and Medium Enterprise Sector in Latin America: Implications for South Africa

The current economic setting in most Latin American countries suggests that if the small and medium enterprise sector does not perform well during the next couple of decades, overall economic performance will also be unsatisfactory, especially in the areas of employment creation and income distribution. No other major sector has the potential to generate a large amount of adequate-income jobs. Experience of other countries has proven that this sector can play a central contributing role under proper conditions and with adequate support. Various types of evidence from the countries of the region suggest that considerable potential is present in their SME sectors. But both experience elsewhere and economic logic imply that a strong and coherent support system will be necessary if that potential is to be reasonably fully reaped. Such a system has been notoriously absent in most Latin American countries in the past. Countries which fail to rectify this lack may suffer serious social and economic consequences. The marked parallels between the economy of South Africa and those of many Latin American countries, both in economic structure, recent growth performance and level of inequality, suggest that many of the conclusions applicable to Latin America are likely to be relevant to south Africa as well.