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WBCSD-SNV Issue Brief on Small and Medium Enterprises
- 1. Promoting SMEs for Sustainable Development – An Issue Brief
- 3. Why are SMEs so important to a country’s economy?
- 5. Anglo American: Anglo Zimele investing in SMEs Go-Awaste Management Services Specialised Rubber Bambanani Health & Safety Specialized Rubber
- 7. Formal vs. informal economy
- 8. Regulatory framework for SMEs – the role of governments high low
Editor's Notes
- In OECD economies: SMEs and microenterprises account for over 95% of firms 60-70% of employment 55% of GDP and generate the lion’s share of new jobs. In developing countries: more than 90% of all firms outside the agricultural sector are SMEs and microenterprises, generating a significant portion of GDP. Examples: Morocco: 93% of industrial firms are SMEs and account for 38% of production, 33% of investment, 30% of exports and 46% of employment. Bangladesh: enterprises of less than 100 employees account for 99% of firms and 58% of employment. Keep in mind: not all microenterprises are in the formal sector; some occupy the unofficial labor market, which varies in size from an estimated 4%-6% in developed countries to over 50% in developing nations.
- Anglo Zimele: supporting entrepreneurship by taking equity in local SMEs and building capacity Anglo Zimele, established in 1989, creates sustainable, commercially viable enterprises, and empowers entrepreneurs in all business areas, equipping them to operate independently in the mainstream economy empowerment of SMEs. Derived from Zulu and Xhosa, 'Zimele' can be translated as "to be independent" or "to stand on one's own feet". Anglo Zimele is the enterprise development and empowerment initiative of Anglo American. Its focus lies in the investment in black empowered SMEs which demonstrate a commercially viable and sustainable business or business plan. Each investment is funded on a deal-by-deal basis. Anglo Zimele’s SME business development and empowerment model, applied by Anglo American, its divisions and operations to facilitate the development of the SME sector, comprises three primary investment pillars: procurement, business development, and the Anglo Khula Mining Fund
- Countries with poor business environments – costly regulations, heavy bureaucracy, poor credit and banking systems – tend to have large “informal” sectors. These are economic activities that are conducted outside the formal regulatory environment. They include everything from casual labor to thriving SMEs and occasionally illegal activities. For many SMEs, the decision to remain informal is deliberate, because the costs and procedural burden of joining the formal sector outweigh the benefits of staying in the informal sector. In many developing countries the informal economy accounts for a significant, but hidden, portion of GDP – anywhere between 30% and 70%. Informal sectors make large contributions to nations’ economies, in both human and financial terms. But being “invisible” to government agencies and formal sector companies, they cannot be easily reached with capacity building improvement schemes, and they cannot compete for business with larger companies. Workers in the informal sector lack job protection and benefits such as access to health and safety provisions, wage protection, insurances, pensions and unions. Informal SMEs also have restricted access to investment and credit facilities. By being outside the formal regulatory framework, informal sector activities cannot be taxed, which represents lost revenue for governments. As such, informal sectors can be a barrier to broader economic development.
- Like bigger companies, SMEs require a favorable institutional framework. Most are overlooked by policy-makers and legislators, who tend to target larger corporations. SMEs often miss out on tax incentives or business subsidies. They suffer more than big companies from the large burden and cost of bureaucracy, as few SMEs possess the necessary financial or human resources to deal with this.