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1. “Small and Medium Enterprises in Africa”
Particular analysis
through three selected African countries:
Algeria, Ethiopia and South Africa.
Presented by
Vitalii Peiko
Krok-excl-09

2. SMEs play an essential role in the economic
development of Africa by :
 Generating employments, tax revenues,
Meeting the national demand,
Increasing the exports,
Decreasing the imports ,
Creating wealth.

3. Development of the SMEs:
Major problems and solutions
1. Current situation in Algeria, Ethiopia and South Africa
2. Numerous barriers of the business environment
3. Main solutions brought by the different actors
Perspective : The global financial crisis

4. 1. Current situation
in Algeria, Ethiopia and South Africa

5. 1.2 Main socio-politico-economical indicators
Algeria Ethiopia South Africa
Population 33.9 83.1 48.6
Education 10 years 6 years 9 years
Health Good Bad Medium
Unemployment 14.10% 26.60% 16.70%
Retirement Bad Awful Bad
Conflicts With Marocco Possible None
Corruption 3.2 2.3 5.1
Activities Mainly Oil Mainly agriculture Mainly services
Inflation 2.50% 12.30% 4.60%
Growth 3% 9.61% 13.30%
Commercial
-8.50% 12.60% 13.80%
Balance
I.T. Medium Bad Excellent
Infrastructures Medium Bad Excellent

6. 1.3 Legal definition of SME
• Algeria :
• Between 1 and 250 persons
• Turnover : less than €22.3 millions
• no more than 25% of the capital is owned by one or more other
companies
• Ethiopia :
• Microenterprises : turnover < than €1.600
• Small Enterprises : turnover < than €40.000
• South Africa :
• Divided in 4 categories : micro, very small, small and medium
enterprises
• Depending on the sector of activity of the SME
• Workers : less than 200
• Turnover : less than €4millions

7. 2. Numerous barriers of the business
environment

8. Business environment
Low level of
EDUCATION
African
SME

9. 2.1 Low level of education
Unqualified entrepreuneurs :
have difficulties to start and manage a business.
Lack of skilled employees.

10. Business environment
Low level of Limited access to
EDUCATION FINANCE
African
SME

11. 2.2 Limited access to finance
Because of :
- the under developped financial market,
- the information asymmetry,
- not enough collateral.
High interests’ rate,
Refusal of credit’s demand,
Lack of external financings.

12. Business environment
Low level of Limited access to
EDUCATION FINANCE
Unwieldy
African
ADMINISTRATION SME

13. 2.3 Unwieldy Administration
Because of :
- Taxation,
- Corruption,
- Complexity of the procedures,
- Inefficient regulation…
Makes difficult to do business,
Can cost a lot.

14. Business environment
Low level of Limited access to
EDUCATION FINANCE
Unwieldy
African Insufficient and deficient
ADMINISTRATION SME INFRASTRUCTURES

15. 2.4 Insufficient and deficient
Infrastructures
Limited access to :
- Energy, Water …
- Internet, Telecom …
- Roads, Airports…
Generates areas with limited possibilities,
Makes difficult to do business,
Leads to high costs.

16. Business environment
Low level of Limited access to
EDUCATION FINANCE
Unwieldy
African Insufficient and deficitent
ADMINISTRATION SME INFRASTRUCTURES
Small local market for
SUPPLIERS &
CUSTOMERS

17. 2.1 Small local market for suppliers
and customers
Because of :
- Narrow domestic markets,
- Tariffs and conflicts limit cross-border
exchanges.
Makes difficult to find reliable suppliers,
Leads to high transport costs to export,
Complicates the way to do business.

18. Business environment
Low level of Limited access to
EDUCATION FINANCE
In South Africa
Insufficient and deficitent
Unwieldy In Algeria
INFRASTRUCTURES
ADMINISTRATION In Ethiopia
Small local market for
SUPPLIERS &
CUSTOMERS

19. 3. Main solutions brought by the
different actors

20. GOVERNMENTS
African
SME

21. 3.1 Governments
Algeria Ethiopia South Africa
Ministry for SMEs Chamber of Commerce Department of Trade
and craft industry « in process… » and Industry
Important SME’s No SME’s development Very important SME’s
development policy policy development policy
since 2001 since 1994

22. GOVERNMENTS
-Provide training,
-Attract foreign direct investment,
-Facilitate access to infrastructures,
-Adapt the taxation,
-Facilitate the administrative environment.
NETWORKS &
African CLUSTERS
SME

23. 3.2 Networks & Clusters
Cluster =
« Group of SMEs from one industry sector that team
up and act as one body. »
Network =
« Group of companies which are linked by means of
individual connections. »

24. GOVERNMENTS
-Provide training,
-Attract foreign direct investment,
-Facilitate access to infrastructures,
-Adapt the taxation,
-Facilitate the administrative environment.
Financial institutions & NETWORKS &
Private equity African CLUSTERS
SME -Provide information,
-Share experiences,
-Make economies of scale,
-Facilitate access to finance.

25. 3.3 Financial institutions and
private equity
- Banks
- Micro-credit institutions
- Guarantee companies
- Private equity

26. GOVERNMENTS
-Provide training,
-Attract foreign direct investment,
-Facilitate access to infrastructures,
-Adapt the taxation,
-Facilitate the administrative environment.
Financial institutions & NETWORKS &
Private equity African CLUSTERS
-Reduce the info asymmetry, SME -Provide information,
-Increase equity, -Share experiences,
-Generate collateral. -Make economies of scale,
-Facilitate access to finance.

27. What is the level of development of
african SMEs ?
• Overall, a good trend of SME’s development
• Above all in South and North Africa
But a threat for the future…
the global financial crisis

28. Perspective : The global financial crisis
• Consequences :
- currencies devaluation
- drop of commodity prices
- cutback in foreign capital inflows
Slowing down of the recent SME’s
development improvment

29. Thank you for
your attention !!