Representing a key contingent of the global economy, Small and Medium-sized Enterprises are garnering an increasing share of the world’s attention. The following analysis highlights the impact SME gains have in differing markets across the globe. Comprised of independent ventures, family-owned operations that sidestep buyout offers and in some cases the early edition of potential corporate behemoths, SMEs paint a wide-ranging portrait. The diversity that exists within the ranks is progressively appearing as the way out of recession in Europe, a key means of employment in Africa and the next wave of innovators in Asia. Understanding SME income and job creation amidst ballooning deficit and unemployment has become imperative in service of uncovering much needed solutions.
The economic downturn of 2009 has been a catastrophe shared by economies all over the world. Wayward bankers over leveraged a real estate crisis into existence, catalysing a domino effect from Europe to Asia in turn signaling just how interconnected the world’s economies are.
Governmental regulation and austerity measures crowd the headlines yet large corporations continue to operate with ruthless vigor in an attempt to overcome the financial turmoil of life post-crisis. Small and Medium-sized Enterprises (SMEs), long championed as job creators and a key pillar to many nation’s bottom lines, have reemerged with added necessity as a result. The public eye is now fixed upon the underbelly havoc that the Wall Streets of the world may wreak, positioning small businesses as a source for guidance ever more.
EU enterprises look to Germany’s SME gains
According to Dutch research and consultancy firm Ecorys’ annual SME report “EU SMEs in 2012: at the crossroads”, an astounding 99.8% of all non-financial European Union enterprises are SMEs. With more than 87 million employees, SMEs account for 67% of the EU workforce. Though a beacon of stability for the European Union’s recovery, SME efficacy has had varying results from nation to nation. German SMEs, operating in line with the nation’s EU-leading economic performance, have exceeded Gross Value Added (GVA) and employment figures of the years pre-crisis. Austria is similarly posting statistics that indicate a return to the prosperity of the years prior to the present sovereign debt calamity. The remainder of the EU, however, has only managed to stabilise SME output over the previous year. Little growth, if any, has found its way into the majority of EU member states whilst critical cutbacks loom. The hopeful prospects of Germany and Austria owe largely to both countries strength in medium-tech and high-tech manufacturing. A healthy German consistency for continually investing in the nation’s science and engineering enterprises speaks loudest to this economic boon.
Despite the majority of EU SMEs operating at a standstill, the region has made clear the benefits of investing so heavily in a range of enterprises which provide a steady stream of employment. According to EIM’s EU SME job report, between 2002 and 2010 85% of employment growth was attributed to SMEs. Countries showing growth are providing hope to others via signals of what may be the first signs of recovery.
African enterprise investment spreads
The same European reliance on SMEs to stimulate the employment rate during times of reconstruction has been exhibited in countries undergoing far more drastic circumstances. Whilst EU SMEs are dominating the makeup of European industry, countries across Africa are borrowing from the trend by funding efforts designed to bolster their own SME production. This has been increasingly exhibited via a desire to fund the training and launch of aspiring entrepreneurs. Uganda currently operates the Youth Entrepreneurship Capital Fund, a micro-finance modelled loan programme which encourages job creation in a country stricken with an unemployment rate that has more than doubled in the last decade.
Similar governmental aids have been applied across Kenya, where SMEs represent 80% of all businesses. In a bid to eradicate poverty and promote a larger contribution to GDP, of which Kenyan SMEs presently produce 20%, the government is standing firmly behind the nation’s entrepreneurial endeavours. The array of financing that is driving the SME market has even encouraged Kenyan professionals to step away from larger enterprises in pursuit of more streamlined SME undertakings.
Joanna Mwangi’s Professional Marketing has found itself atop the Kenyan SME industry as a leading firm. By advancing on a newfound attentiveness to branding within the Kenyan marketplace and applying an understanding of local sensibilities honed working for a corporation, Mwangi’s SME is experiencing tremendous gains. The Kenyan government signalled a desire to bolster the output of SMEs within the country just over a decade ago and the fruits of investment are growing more apparent with every year.
Overruling governmental support and even financial catastrophe, the family business model has had the most lasting effect on the SME market. A considerable percentage of SMEs globally are family-owned, allowing a shared sense of methodology between the enterprises and family businesses. The same scrappy upstart ethos central to family businesses has come to define the hard fought reputations of SMEs all around the world. The phrase “family-owned SME” is one not uncommon in Japan, a country whose SME industry represents 99% of all businesses.
Cubic, a family-owned SME based in Tokyo, is a hotel chain which specialises in Japan’s world famous “capsule hotels”. Hotel “rooms” are merely cube-like tubes which travelling salesmen and budget backpackers frequent for a cheap space to sleep. Cubic’s president Keisuke Yui was bequest his father’s business once the elder Yui passed away. Steeped in debt, Yui took advantage of a government debt forgiveness programme and has expanded Cubic to additional locations and a consultancy service for other capsule hotels. As in the EU and Africa, crippling financial woes have alerted the Japanese market to the possibilities what much needed SME support can offer.
From the very first Mom-and-Pop groceries to the laboratories of engineering startups, SMEs have provided the world with a dependable employment base and firm trickle of revenue. The EU business landscape is almost entirely comprised of SMEs a reality contributing largely to their importance as essential job creators. African countries in dire straits are recognising how key a role these companies must play in escaping poverty and crushing joblessness. And the extent to which SMEs are furthermore offering new slices of creativity and expansion are making a mark on the way we all do business. At a time when complex loans and hyper functional corporations have nearly forced the globe to its knees, SMEs are helping countries simplify our return to solvency.
Tharawat Magazine, Issue 17, 2013