THE ECONOMIC TAPESTRY: SMALL ENTERPRISES' INFLUENCE IN GHANA AND SOUTH AFRICA

Abstract

Small and medium-sized enterprises (SMEs) are pivotal to economic growth, job creation, and fostering innovation, which in turn enhance overall well-being. The impact of entrepreneurship on economic growth is widely acknowledged, although it is influenced by institutional context and economic development levels. This paper explores the multifaceted role of SMEs in developing countries, particularly in Sub-Saharan Africa, a region characterized by a diverse SME landscape. Africa boasts the world's highest rate of new business start-ups, with 22 percent of the working-age population engaged in entrepreneurial activities. SMEs account for over 95 percent of all enterprises in the region, contributing to its economic heterogeneity. With varying experiences of economic growth across countries, understanding the growth patterns and drivers of SMEs in Sub-Saharan Africa is essential. This study focuses on two countries, Ghana and South Africa, both of which have undergone significant economic and political transformations in recent decades. Ghana has evolved into a stable democracy since 1992, while South Africa has undergone substantial economic and societal changes post-Apartheid (1948-1994). In both countries, SMEs are increasingly recognized as essential tools for fostering economic growth and development. Our comparative analysis sheds light on how these two nations have come to acknowledge the pivotal role of SMEs in their economic landscapes and how SME policies have evolved as integral components of broader economic development strategies.