Dynamics of small-scale industry in Africa and the role of policy

While most research on these enterprises has focused on a single point in time, this study emphasizes firm dynamics (firm creation, evolution, and disappearance) and the way these dynamics vary by country, stage of firm development, industrial sector, and policy environment. Static studies are reviewed in Section I to provide a context for the examination of dynamic issues. Section II summarizes macro-level evidence of firm dynamics in Africa and updates the material covered in previous studies. In Section III, macro-level demographics are disaggregated in an attempt to shed additional light on the evolutionary (and devolutionary) process of individual firms. The final section examines the effects of policy on small-firm dynamics. Macro-level findings indicate that small African firms are evolving, with a shift toward somewhat larger firms that are based in larger localities and producing more modern products. Micro studies on the other hand indicate that the vast majority of new African firms are microenterprises, relatively few of which have been able to expand to the level of small or medium-sized firms. Policy and regulatory constraints seem to be more significant the larger the firm is at the time of its growth, although the degree of constraint appears to vary by country.