THE ROLE OF GOVERNMENT POLICIES IN THE GROWTH OF SMALL AND MEDIUM ENTERPRISES IN CAMEROON

CHAPTER ONE

INTRODUCTION

Background of the study

A consensus exists among policy makers, administrators, researchers, donors, and non-governmental organisations in all economies, including developed and developing nations, with particular emphasis on developing and fast-growing economies. This consensus holds that small and medium enterprises (SMEs) are the most influential catalysts for industrial expansion, sustainable development, and economic growth. In developing economies, small and medium-sized enterprises (SMEs) are commonly recognised as the driving force behind economic expansion and fair development. They are capital-efficient, labor-intensive, and capable of contributing to the creation of the majority of the one billion new employment that will be required globally by the end of the century (Asmelash, 2019).

Furthermore, they are considered crucial for fostering economic expansion, reducing poverty, and creating jobs in Cameroon (Michaelis, 2019). Based on data from the World Bank (2018), micro, small, and medium-sized enterprises (MSMEs) comprise an estimated 99 percent of the 19.3 million businesses in the European Union (EU). These businesses also account for two-thirds of all employment, or approximately 65 million jobs. Within the developing world, small and medium-sized enterprises (SMEs) occupy a predominant position in terms of business ownership and employee count, with Africa accounting for the largest proportion of enterprises (Ndjanyou, 2019). Ola (2021) further ascribes the economic prosperity of Asian nations to the endeavours of SMEs.

An appropriate regulatory environment is the most crucial component of an economic growth strategy, according to Harris (2018). Although regulations are essential for the sustainable and equitable operation of market economies, even the most socially necessary regulations generate costs and benefits, some of which may be excessively high. It is commonly believed that private sector regulation is essential for promoting competition and equitable trade. However, it is counterproductive to burden the private sector with unnecessary regulations, as it results in a decline in the number of enterprises, their efficiency, and competition. Therefore, appropriate regulation is crucial for the development of a robust private sector. Concerning the legal structure, organisations must function in accordance with the rule of law. In the absence of a sufficient legal framework to protect property rights, facilitate efficient transactions, and resolve disputes, the private sector cannot be robust.

In the literature, the negative effects of regulation on enterprises are another subject that has been extensively studied. There is a prevailing belief that business regulation imposes a disproportionate burden on small enterprises. Nevertheless, burdens, regulatory requirements, and red tape (excessive use or adherence to formalities) typically impact SMEs disproportionately. Regulation may compromise their viability, competitiveness, and capacity for expansion. In recent times, inquiries pertaining to regulations and the regulatory landscape concerning the development of small and medium-sized enterprises (SMEs) have sparked an abundance of exhaustive research inquiries. Asmelash (2019) demonstrates, at the macro level, that economies of nations with more stringent regulations do expand at a quicker rate. World Bank researchers quantify the possible advantages of enhanced regulation. Improvement from the lowest quartile to the highest quartile of business regulations results in a 2.3 percentage point increase in annual growth, the authors demonstrate hence the need for this study.

1.2 Statement of the problem

The private sector, which was previously undervalued in Cameroon, is now being acknowledged as a significant driver of the country's economic expansion. Similar to many developing nations, Cameroon's private sector is predominately comprised of small and medium-sized enterprises (SME). Consequently, SMEs could potentially assume a pivotal role in encouraging and mitigating poverty in Cameroon. The effectiveness of SMEs as a catalyst for employment generation, income creation, and economic growth is widely recognised. In developed nations like the United States and Europe, SMEs make a substantial and noteworthy contribution to the Gross Domestic Product (Ndjanyou, 2019).

Cameroon's economic performance has been comparatively unimpressive since the 1980s. The outcomes have been inconsistent at times, with performance declining and then increasing. The absence of infrastructure, the deplorable level of internal debt, the prevalence of corruption, and the decline in GDP per capita have all contributed to an unfavourable environment for development. In an effort to stimulate economic expansion, the Cameroonian government has begun to consider policies that would augment the sector of small and medium-sized enterprises. It is widely recognised that the private sector can significantly contribute to a nation's development; however, in order for this to transpire, the government must establish a macroeconomic climate that is conducive to their progress (Ndjanyou, 2019). 

Despite the government's endeavours to improve the small and medium-sized businesses (SMEs) sector in Cameroon, the nation continues to grapple with an inflexible business environment that impedes both domestic SME growth and foreign investor access. This argument is substantiated by specific indicators of the nation's investment climate and business environment that were extracted from the World Bank indicator (2018). Business conditions in Cameroon have substantially deteriorated. In comparison to other African nations, Cameroon exhibits subpar performance in terms of investment climate and convenience of doing business indicators (World Bank, 2018).

The country's regulatory process is notably convoluted, potentially attributable to the substantial proliferation of regulatory bodies. There are numerous regulations in the country, including fiscal, employment, and economic regulations, which impose a significant obstacle on the growth of small and medium-sized enterprises (SMEs) due to the time-consuming and expensive registration process. It is against this backdrop that this study will be investigating the role of government policies in the growth of small and medium enterprises in Cameroon.

1.3 Objectives of the study  

The general objective of this study is to investigate the role of government policies in the growth of small and medium enterprises in Cameroon. The specific objectives include the following:

To find out whether government policies has an effect on the growth of small and medium enterprises in Cameroon.

To find out the different government business regulatory in Cameroon.

To investigate how government improve in the implementation or formulation of policies relating small and medium enterprises in Cameroon.

1.4 Research Questions 

The following research questions will be answered in this study:

Does government policies have an effect on the growth of small and medium enterprises in Cameroon?

What are the different government business regulatory in Cameroon?

How can government improve in the implementation or formulation of policies relating small and medium enterprises in Cameroon?

1.5 Research Hypothesis

The following research null hypothesis will validate this study:

Ho1: Government policies do not have an effect on the growth of small and medium enterprises in Cameroon.

1.6 Significance of the Study

The study's findings regarding effective strategies could significantly influence the capacity of current and prospective small and medium-sized enterprises (SMEs) in Cameroon to comply with government policies, sustain operations, and make contributions to economic expansion. Providing support to small and medium-sized enterprises in the process of method development. Furthermore, the establishment of effective methodologies could potentially strengthen ties between financial institutions and proprietors of small and medium entrepreneurs. By formulating business-oriented policies, the government of Cameroon could utilise the findings of this study to encourage and facilitate the development of existing small and medium-sized enterprises (SMEs) and to stimulate the formation of new businesses.

This research work will also be of relevance to individuals most especially students in the field of business studies as it will enlighten them on how to become efficient business professionals.

Lastly, it is of great significant to the researcher because it has broadened his knowledge on the importance of leadership in an organization.  

1.7 Scope of the study

Generally, this study focuses on investigating the role of government policies in the growth of small and medium enterprises in Cameroon. Empirically, this study focuses on finding out whether government policies has an effect on the growth of small and medium enterprises, finding out the different government business regulatory in Cameroon and investigating how government improve in the implementation or formulation of policies relating small and medium enterprises in Cameroon.

This study will be carried out in Cameroon.

1.8 Limitation of the study

The researchers encountered slight constraints while carrying out the study. The significant constraint was the scanty literature on the subject owing that government policies in the growth of small and medium enterprises discourse is vast thus the researcher incurred more financial expenses and much time was required in sourcing for the relevant materials, literature, or information and in the process of data collection, which is why the researcher resorted to a limited choice of sample size covering only residents of Cameroon. Thus findings of this study cannot be used for generalization for other regions within Cameroon. Additionally, the researcher will simultaneously engage in this study with other academic work will impede maximum devotion to the research. Howbeit, despite the constraint encountered during the research, all factors were downplayed in other to give the best and make the research successful.

1.9 Definition of terms

Small and Medium Scale Enterprises: A small and mid-size enterprise (SME) is a business that maintains revenues, assets or a number of employees below a certain threshold. Small and medium-sized enterprises or small and medium-sized businesses are businesses whose personnel numbers fall below certain limits. The abbreviation "SME" is used by international organizations such as the World Bank, the European Union, the United Nations, and the World Trade Organization.

Government: It is an agency designed to administer the affairs of a state or nation.

Regulation: This is the system which government in controlling the economic activities of the nation.

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