Innovative Private Sector Development Instruments – an African Perspective

Abstract

Small and medium enterprises (SME) are viewed as a key driver of economic and social development in the African context. They represent a large number of businesses, generate a relative large proportion of employment and are widely considered to be vital for a country’s competitiveness. To be competitive, they need one key ingredient: innovation. However, they are often unable to develop appropriate and innovative products due to a general lack of financial strength as well as technical and managerial skills. A part from that, they operate in an environment with multiple challenges: On the macro level, these include bureaucratic legal and regulatory frameworks, poor physical infrastructure, and a multiplicity of taxes. On the meso level, the challenges include inadequate support in terms of business training and skills, the unavailability of information on markets, suppliers and partners, a limited access to finance as well as weak, fragmented and uncoordinated institutions supportive of SME. Nevertheless, opportunities for investing in SME development are given, they include the commercialisation of SME innovations, the provision of resources to SME so that they are able to conduct research and market testing, business incubation, the funding of indigenous knowledge development and transfer, the development or rejuvenation of industry clusters, and the establishment of SME support centres These initiatives can enhance SME competitiveness, create more opportunities for employment and economic development and address a number of the challenges listed above.