Friday, June 6, 2008

SMEs - the effects of government interventions

Governments the world over are renowned for intervening in the market in order to achieve whatever their political goals may be. Africa is particularly prone to these behaviours. Whether, as example, it is the blatantly racist policies of the South African government, or the xenophobic nationalist policies of Botswana and many other African countries, the nett result is a negative impact on the market players.

At times the impact is short term and other times long term. In South Africa the racist policies have resulted in SMEs being unable to grow simply because they cannot find suitably qualified staff, and they cannot employ whites with skills as they then face the probability of legal action. As a consequence, approximately 20% of the white population left the country in 2007.

This has also impacted on big business, as our lack of electricity has clearly demonstrated.In Botswana legislation has focused on protecting local citizens against non-citizens. This has lead to highly uncompetitive businesses. They are protected by law and have developed a sense of entitlement. The first thing the citizens rely on is not local market knowledge, but an appeal for even more protection.It is time governments stop this practice. They are not helping, but simply skewing the markets even further, resulting in even greter hardship for their citizens.

Rob Smorfitt

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