We often hear that businesses are one lousy government policy away from closing shops, and this is a common scenario in many African countries. Governments sometimes create and enforce policies that are highly detrimental to the survival of small and medium enterprises (SMEs). One of the main reasons for this is the lack of appropriate consultation with forums, cooperatives, and associations that represent these SMEs. As a result, the government often lacks thorough insights into the challenges faced by SMEs and how to address them.
Nevertheless, SMEs in Africa continue to exist and strive despite the harsh impact of business policies and other unique challenges. From navigating bureaucratic hurdles to limited access to resources, African SMEs face numerous obstacles on their path to growth. Public policies play a crucial role in shaping the entrepreneurial dynamics of a country or region. In different time periods, African states have introduced policies that have had both positive and negative consequences. These policies can either encourage entrepreneurship and establish an institutional framework that supports it, or have the opposite effect.
We see one such pivotal government policy in Nigeria with the recent removal of fuel subsidies. While this policy shift aimed to reduce government expenditure and redirect resources to critical sectors, it has had unintended consequences on women-owned SMEs. There are concerns that it will lead to a sharp increase in transportation costs, affecting the entire supply chain. This burden disproportionately affects women entrepreneurs who operate SMEs, who often rely on transportation to distribute their goods and services. Due to the higher transportation costs, these SMEs will experience squeezed profit margins, reduced competitiveness, and limited resources to invest in growth initiatives. In light of this policy, Olutosin Olaseinde brought up an important question:
And we have already witnessed businesses temporarily suspending all operations with many others having had to scale down or close up.
On the other part of the continent in East Africa, Kenya made efforts to formalise the informal sector, encouraging businesses to pay taxes and improving access to finance and additional support. To drive this, they created an enabling environment that removed common bottlenecks faced by SMEs when registering their businesses. In 2023, Kenya’s Business Registration Services (BRS) reduced the time and cost of registering a business from 12 days and $100 to 24 hours and $1. This policy significantly contributes to the growth of SMEs.
Navigating unfriendly public policies can be challenging for SMEs and may even seem impossible, to the point where closing down becomes a consideration. However, with strategic approaches, women-led SMEs can minimise the negative impact and find opportunities for growth. Here are some tips to help you navigate unfriendly public policies:
- Stay informed: Keep up-to-date with policy changes that may affect your business. Stay updated through government announcements, industry publications, and engagement with business associations to understand the implications and adapt your strategies accordingly. Through our newsletters, Growth4Her will be keeping you updated; stay tuned!
- Adapt and diversify: Be flexible and try different things by adjusting your business to fit the rules and regulations that are in place. If possible, try to find new markets or customers unaffected by the policies. You can also offer different products or services so that you’re not relying too much on just one area. This way, if one part of your business is affected by the policies, you have other areas that can still make money. Have multiple streams of income.
- Seek exemptions and incentives: Research and identify any exemptions or incentives available within the existing policy framework. Some policies may have provisions or special programs that can provide relief or benefits for SMEs. Take advantage of these opportunities to minimise the negative impact of unfriendly policies.
- Embrace innovation and technology: Leverage innovation and technological advancements to streamline operations, increase efficiency, and reduce costs. Embracing digital tools, automation, and process improvements can help SMEs navigate policy challenges more effectively and identify new growth opportunities. As an SME, do you need a physical shop when you can operate a website and active social media pages?
- Advocate for change: Engage in advocacy efforts by joining industry associations and participating in policy discussions. Collaborate with other SMEs to amplify your collective voice and advocate for policy changes that support SME interests. Engaging with policymakers and providing feedback can help shape more favourable policies. For this, Growth4Her has Policy Conversation coming up that you should look out for and be part of.
Remember, while navigating unfriendly public policies can be challenging, it’s crucial to remain proactive, adaptive, and persistent. By employing these strategies and seeking opportunities within the constraints, SMEs can mitigate risks and continue to thrive in the face of challenging policy environments.
To our African policymakers and the general public, let’s also remember that SMEs are vital contributors to our economy, employing a significant portion of the population. The importance of SMEs in African states cannot be overemphasised. It’s time we start implementing policies that allow women entrepreneurs to grow, addressing funding, infrastructure, and gender-specific challenges. The key to unleashing the full potential of its SMEs and driving sustainable economic development for the benefit of all is for governments and stakeholders to work together to create an enabling environment that fosters innovation, entrepreneurship, and equitable growth.