THE ROLE OF MICRO, SMALL, AND MEDIUM-SIZED ENTERPRISES IN THE FOOD SYSTEM (#PowerOfSmall)

THE ROLE OF MICRO, SMALL, AND MEDIUM-SIZED ENTERPRISES IN THE FOOD SYSTEM (#PowerOfSmall)

In commemoration of Micro, Small, and Medium Enterprises (MSMEs) Day, FSNet-Africa fellow Dr Innocensia John, together with her research team (Prof. Diane Holt, Dr Chewe Nkonde, and Dr Colleta Gandidzanwa) reflect on the role of MSMEs in African food systems.

 MSMEs’ contribution to food systems

No standard definition of micro, small, and medium-sized enterprises (MSMEs) exist. Typically, these types of enterprises have 1 to 99 employees. Micro enterprises have less than 10 employees, small enterprises have 10 to 49 employees, and medium-sized enterprises have 50 to 99 employees. Globally, MSMEs account for more than 90% of businesses, and they contribute more than 50% to gross domestic product (GDP).

In Tanzania, MSMEs constitute more than three million enterprises and contribute more than 27% of the country’s GDP. MSMEs play a significant role in the food system – particularly for low- and middle-income countries. MSMEs can assist communities in accessing food by making it more available, accessible, and affordable.

Despite their critical role in the global economy as drivers of the global economy and of job creation, MSMEs are the most under-appreciated businesses. In developing countries, particularly in sub-Saharan Africa, these enterprises face a myriad of challenges, including access to finance. They struggle to access funds due to the high cost associated with loans, which is an impediment to their growth.

Discussion with women rice entrepreneurs in Kyela-Mbeya, Tanzania.

The role of youth and women in MSMEs

The role of youth and women in MSMEs cannot be overemphasised. Typically, the day-to-day running of small businesses is done by youth or women. The ability of youth to take risks and innovate is critical in this process. Market access remains a major challenge for youth and may require them to use innovation and ICT skills to access markets for their products in an increasingly digital world. Women particularly play a key role in the running of many micro businesses, which they use to support their households. An enabling policy environment is therefore crucial to support both youth and women in order for their small businesses to grow and be a sustainable source of income for them.

In some countries, like Zambia, the government has established a ministry specifically focused on MSMEs because they see the value of these businesses. However, in addition to this enabling policy environment it is also critical to support women and youth to initially set up and then successfully run small businesses through other forms of support such as financial and educational programmes delivered by a range of public, private and third sector organisations.

 

Researcher having a discussion with cassava entrepreneurs in Mkuranga, Dar es salaam, Tanzania.

What should MSME researchers focus on?

In addressing challenges faced by MSMEs, it is important to recognise that context matters. The experiences that MSMEs in the UK or the US have in their operations are not the same as those in sub-Saharan Africa. However, some common challenges exist and these are not unique to specific locations. Examples of widespread difficulties include access to finance and access to markets. Most MSMEs do not have various people with different skills available in-house, when competing with larger firms. Owners and employees often have to become a “jack of all trades” – performing multiple tasks related to product quality and service delivery.

Furthermore, the size of an MSME has a significant impact on the challenges it faces. For example, micro informal economy businesses and medium-sized organisations on their way to growing into larger companies experience different difficulties. Micro businesses that sell on the roadside are often precarious and insecure. They are at the mercy of the environment around them and, in most cases, are threatened by being illegally located on the side of the road or not having property rights. Most of these business owners are unemployed and set up a business out of necessity. Entrepreneurs, on the other hand, often create a business because they have an innovative idea. Thus, the size, formality, and environment of a business bring about unique challenges.

MSME researchers should thus tackle these challenges by first recognising the characteristics and context of a business and then adapting their research approach (e.g., study design and data capturing) in a way that is cognisant of these factors.

How does our research respond to MSMEs and challenges related to African food systems?

Our research focus is on indigenous crops – also known as orphan crops. These crops are traditional and underutilised crops in the communities producing them. In most cases, they have high value and are very nutritious. They are considered traditional crops because they have been part of the farming system in the communities for many years and are well known to community members. However, there are a number of challenges related to production, processing, and marketing opportunities of valuable indigenous crops.

This research investigates the economic potential of these crops in contributing to improved diets and incomes of rural households. Most of these crops are neglected and not recognised in the market. Using a value chain approach, we explore the potential for households to produce indigenous crops and pathways to link these crops to markets. We further assess the role of different actors, especially youth and women, in channelling these crops to different markets. The research also looks at the how indigenous crops are affected by the policy environment and challenges in the business environment.

What’s next?

Our hope is to increase support of MSMEs by the private sector in order to assist them to overcome challenges and grow. Information is also critical in the growth of any business; consequently, creating an environment that enables these businesses to access information is really key in terms of making available new technologies that promote production and access to markets. When researchers work with entrepreneurs, it is vital that they communicate findings back to communities through key gatekeepers.

Call to action

Our call to action is for everybody to understand the #PowerOfSmall. MSMEs have an important role to play in vulnerable populations through employment creation which lifting people out of poverty. These businesses need recognition and support through simple actions such as buying from them rather than from large enterprises. Supporting this business model has real potential to create a better future for communities.

 

To commemorate MSMEs listen to the authors full talk  here

Read more on their research project here