Financial Policies for Enterprise Growth in Southern Africa

This paper examines key issues relating to policies for promoting enterprise growth in Southern Africa. Initial results, using published data relating to South Africa, are reported briefly here, but the plan is to develop a Pan-African cross-country regression analysis as part of the ongoing ESRC/DfID ‘Inclusive Finance’ project led by Victor Murinde. The use of subsidies to promote start-ups and small firms believed to have high growth potential is increasingly being criticised. The failure rate of start-ups is generally very high and the focus should instead be to foster the sustainable development of MSMEs. Policy initiatives should encourage the development of venture capital and private equity funding, as well as internet-based debt and equity ‘crowd funding’ for MSMEs. Innovation through ‘co-creation’ with customers and end users should also be encouraged. A particularly interesting finding was a positive interaction between human capital and research and development (R&D); suggesting that investment in education and training might be more likely to enhance small firm growth than subsidising business start-ups and trying to identify and support potential growth firms.