by Tunde Adelakun

Created on: April 27, 2008   Last Updated: April 28, 2008

Africa has the highest mortality rate for small scale and medium scale businesses around the world. Recent research findings show that only one out of five small scale and medium scale businesses started in Africa will celebrate its fifth year anniversary. This also means that only one business out of every new five small scale business set-up will survive after five years of operation.

Years of reforms and policies for small and medium scale businesses has continued to make little or no impact in most African nations. The business climate is rather too harsh for such businesses to survive.

According to the world economic forum ,2006, Many African nations are said to be fast de-industrializing. According to the world economic forum, Global competitiveness ranking, as well as performances in the manufacturing sectors of most African countries declined from 8.0% in 1980 to 5.0% in 1999 and to 4.2% in 2005.The Contribution to countries' economies were said to have declined much further. In Nigeria for instance which has the biggest economy in Africa, manufacturing value added per capita stagnated at about $17 between 1990 and 2002 whereas value added in countries like Indonesia and Mexico rose from $133 to $273 and $600 to $1,066 respectively, within the same period. In Lagos{the most populated African city} alone, more than half of the newly established small and medium scale businesses packed-up in 2003.The textile industry in Nigeria which used to be the biggest in sub-Saharan Africa for instance suffered a terrible 64% decline between 1994 and 2005.

Depleted infrastructures, dysfunctional public utilities, multiple taxation, rising costs of imported raw materials and other inputs for manufacturing goods and services, prohibitive interest rates and inconsistent government policies and regulations have all combined to make it difficult for these small and medium scale businesses to thrive. Many of these companies or industries have either close-up for business or relocated to some other countries to start a new life and the few remaining ones churn out substandard products in a bid to catch up with the existing reality and maximize profit.

To bring these small and medium scale businesses back to life in Africa, the electricity power supply which is the main source of energy for production must be revived and made stable. Alternative sources of cheap funds must be made available for entrepreneurs. Loans at more than 25% interest rates are usually too dangerous for the survival of a small scale business. Micro-credit funds should be made available .Import taxes must be reduced on all input or raw materials, multiple taxations must be solved and government policies must be favorable and stable

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