NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

It is well known that the Rule of Law is the foundation of a society, and a key factor for sustainable development and for stable, broad-based economic growth. The Rule of Law assists the operations of free-markets and the stability of commercial arrangements, through clear, non-discriminatory, non-retroactive legislation, which benefits everyone, including small business owners. The Rule of Law is also important to safeguard corporate legal personality, property rights (including for intellectual property), neutral courts and a clear and fair process for the determination of rights and obligations. The Rule of Law is therefore important for the SME sector.

Although Small and Medium Enterprises (SMEs) can vary in size from country to country, SMEs are typically recognised as being the backbone of any economy, and Africa is no exception. SMEs are an important engine of growth and employment. Nevertheless, SME development is often constrained by a number of obstacles: financial (access to finance and limited access to markets), administrative (laws & regulations) and technical or internal (e.g. lack of access to appropriate technology, poor management skills or capacity, etc).

While accessing capital and financing is among the most important obstacle to firm growth, some of the pressing legal and regulatory issues include among others: corruption; obtaining business permits (which in some cases can take long); lack of dispute settlement mechanisms and inefficient court systems. The cost of compliance – for example for tax and labour laws, and health and safety regulations – is also said to be great for SMEs and comparatively higher than bigger companies. There are also sector-specific legal and regulatory issues that affect the SME sector (e.g. in agriculture, energy or ‘financial-technology). An unfavourable regulatory and legal environment can dissuade investors and slow growth.

What are the key legal and regulatory issues for the SME sector? How is the Rule of Law important for the SME sector? What does an enabling legal and regulatory environment for SMEs look like? What is the effect of an unfavourable regulatory and legal environment on investors and SME growth? Are local SMEs at a competitive disadvantage compared to international SMEs and investors, or are rules and regulations the same and equally enforced for everyone? What is the cost of compliance to African SMEs, and is compliance bad for business? What solutions are in place to address the abovementioned legal and regulatory issues, and how can other countries learn from these? What is the role of Governments and the private sector in developing a better SME sector in Africa? What are the incentives or disincentives for progress?

Drawing on the experience of entrepreneurs, international investors, the legal profession, government representatives and international organisations, these are some of the questions this conference will seek to address through a range of keynote speeches and panel discussions. It will also aim to identify practical solutions to addressing some of the legal and regulatory issues African SMEs face.