Understanding SME financial resilience and survivability in Africa

The recent economic impact of the COVID-19 pandemic and its subsequent revelation of the weak coping mechanisms of SMEs, has renewed the debate on SME resilience. Largely, SME resilience depends on their financial capability as well as the presence of other environmental factors such as regulation, efficient market and favourable tax policies. Financial capability, being an integral part of an organisational resilience strategy, supports SMEs to adapt to both internal and external shocks. However, there is limited evidence that examines the financial resilience and survivability mechanisms of SMEs in Africa in the face of the COVID-19 pandemic. Adopting the Resource-Based View Theory (RBVT), this study follows a deductive research approach in examining the measures of SME resilience. Using a longitudinal research design, the study analysed a twelve 12-year data on five (5) predictors of financial resilience, namely public policy, specific tax policies, SME training, R&D, and accounting and assessment services for 20 African countries. A Multiple Linear Regression (MLR) was used to test five hypothesised paths predicting SME financial resilience in Africa. Our empirical evidence shows that effective public and tax policies, R&D, and accounting and assessment services promote the financial resilience of SMEs in Africa. However, SME tailored training is statistically insignificant in predicting SME financial resilience. Therein, tailored skill development for strategic decision-making is required to reverse the poor resilience trend of African SMEs. Furthermore, the weak institutional and technological environment in Africa perpetuates weak environment for SME resilience and this requires a conscious government support in addressing it. The findings of this study have policy and practical implications for financial resilience and survivability of SMEs in Africa.