Outdated laws and regulations inhibiting business growth – AGRA

The Alliance for a Green Revolution in Africa (AGRA) has said in a report that the existence of outdated laws and regulations is impeding the growth of small and medium scale enterprises (SMEs) on the African continent.

“Excessive costs for equipment and energy, inadequate infrastructure, especially of roads and wholesale markets and mobile phone connectivity, and some financial and credit restraints, make it difficult for SMEs to compete with imported goods that cost less to produce. Outdated laws and regulations also inhibit business growth,” the 2019 Africa Agricultural Status Report (AASR), stated.

It added that although the growth of SMEs in the agri-food supply chains has been profound, the report notes that progress has often taken place despite large barriers, and that much more can be done to foster the growth of SMEs. “Processors, wholesalers and logistics firms, in particular, face major constraints that drive up the cost of doing business,” it stressed.

Dr. Agnes Kalibata, President of AGRA said as was captured in the report that: “We live in a global market, our job today has to be to ensure that these SMEs are grounded enough to provide the right kind of support to family farms; and to be competitive so that they can survive and thrive in an increasingly interconnected and global market. Their success will determine the future of agriculture and food security in Africa.”

The policy recommendations laid out in the report stress that governments and donors should not “reinvent the wheel” by duplicating the work of the private sector.

Setting up state-supported or subsidized businesses, even in remote areas, would crowd out grassroots entrepreneurs. Instead, the key is to create conditions that make it easy for businesses to establish, develop and grow.

Given this, the AASR is calling for several key policy actions including “Public investment in infrastructure focused on priority needs: building wholesale markets and roads, improving ports and extending electrification and broadband coverage. Infrastructure investments that benefit the spontaneous clustering of SMEs have the most impact, greatly supporting the ease of doing business.

“Policies and regulations that reduce transaction costs and policy risks. SMEs most frequently invest in growth when favorable policies and infrastructure are in place. Such policies include cross-border trade liberalization, reduction of double taxation and regulations to reduce corruption. It is also essential to reduce bureaucracy, especially in areas such as registering new fertilizer products, approving new improved seeds or levying taxes on primary inputs that make the cost of access so much higher.

“Governments have a responsibility to protect SMEs and consumers from substandard products be it farm inputs like seeds, fertilizers and pest and disease control products or food products going to the market. Advancing and enforcement of appropriate policies and regulatory instruments to guide the SME landscape in Agriculture is the critical role that governments must play. This will protect farmers’ investments, expand the use of quality seed and fertilizer, increase output, protect consumers and will increase the ability of SMEs to compete for regional and global markets.”