Private sector development – micro, small and medium enterprises (MSMEs) – as envisaged by SDG 8, typically follows a state-led approach, where national agencies conduct a variety of activities in order to i) improve the business environment: including investing infrastructure, establishing apex bodies, and arranging trade deals with foreign partners on behalf of the private sector; and ii) Build the capacity of MSMEs: including training and mentoring of business owners and managers on marketing and business management. This dual approach normally includes the coordination of business development agencies and private sector associations. For instance, in Botswana the Ministry of Investment, Trade and Industry coordinates with the business development agency Business Botswana and the private sector to improve the business environment and build the capacity of MSMEs.
When asked to reflect on a 3-day export training course, a group of Nigerian MSMEs revealed that the course had improved how their businesses were managed (52% of the respondents). Notably however, none of the enterprises reported any impact on their financial performance. While this group does not necessarily represent MSMEs across sub-Saharan Africa, the results generally mirror the impact of interventions to assist MSMEs in the region. Although businesses participate in training and awareness programmes, only a few of them show improvements in signing new and more lucrative contracts (or entering new markets and acquiring new clients). In short, programmes that have focussed on training and empowering MSMEs have not translated into increased productivity of the businesses nor its beneficiaries. Although this is important, this approach is missing something: a mechanism to ensure new knowledge and skills given to business managers translates into positive financial results.
Imani’s experience in the delivery of the Revised Botswana Exporter Development Programme (BEDP) as well as managing the EU-funded AgriFI Kenya Challenge Fund, has yielded important insights into continuous efforts to improve the growth and performance of MSMEs in sub-Saharan Africa. The key to unlocking sustainable MSME growth (and subsequently unleashing positive multiplier effects in employment, women empowerment, youth employment and poverty alleviation) is to manage the process – translating the acquired skills into clear process changes at company level – to achieve positive financial results.
A key component of the AgriFI Kenya programme is a gap analysis that identifies areas in the business’ operations that need technical support. This has allowed for the programme to focus on specific company level interventions, such as funding specific activities that the companies have proposed in their business proposals. A shift in mentality is required from assuming that businesses have the motivation, resources, and capacity to implement learnings to actually conducting implementation oversight at the company level. This can be an effective way for MSME development agencies to ensure positive impact on financial results.
In addition, the programme’s design niche solicits and funds MSMEs and organisations that occupy or could occupy a strategic position in agricultural value chains, thus ensuring the maximum impact. For example, funding a youth-owned seed distribution co-operative to improve its tracking and logistics could potentially improve the yield for 500 farmers who receive seeds from this co-operative. To achieve this desired multiplier effect, implementation oversight is an important lever in the potential success of impact-driven development intervention. As such, robust monitoring, evaluation, and learning systems need to be in-place.
We have learnt that training, mentoring, and informing MSME managers alone is not enough to unlock sustainable growth and performance for MSMEs. Moreover, identifying and funding specific activities, ensures that companies that receive skills and market opportunities, will also benefit from implementation support of pivotal activities that will increase their productivity and market share.
Katlego Nkgudi is a Junior Consultant at Imani Development with experience in agriculture, trade development, rural development and youth entrepreneurship. He holds a Bachelor’s degree in Political Science and Sociology, and an Honours in Public Policy and Administration from the University of Cape Town (UCT).