Other | December 3, 2013

Why Big Business Should Support Small Business

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WHETHER you are in Brazzaville, Dar es Salaam or Boston, micro-and small businesses are vital to prosperity, economic growth and employment.

Global Entrepreneurship Week, which ran from November 18 to 24 this year, was an opportunity to recognise these motors of job creation — never more important as economies around the world continue to struggle with the legacy of the global financial crisis.

And because they are found in every community, rural and urban, they play a key role in driving social progress. This is why supporting micro-and small businesses — and the entrepreneurial spirit that drives them — has to be at the top of the policy agenda for both governments and the private sector.

When we think of entrepreneurs, of course, it is easy to look no further than high-profile individuals or tech start-ups. But for every Gates, Masiyiwa or Branson, there are millions of microentrepreneurs whose businesses are drivers of prosperity and opportunity within their communities.

They may never be global celebrities or billionaires or have cool headquarters, but they are just as vital to their country’s ambitions. And, within their own communities, they are often important role models. What they do have in common with these billionaires is that they see setting up their own businesses as the best route to success.

In some cases, they have the same strong sense of personal drive and ambition. In many others, however, it is simply the best option for improving their personal circumstances, in the context of the available economic opportunities.

These micro-entrepreneurs are found, of course, in both developed and developing countries. But what is different is that in Africa, Latin America and Asia, they make up a much greater proportion of the economy.

Just more than half of sub-Saharan Africa’s gross domestic product, for example, comes from the informal sector, which provides employment, at least in part, to nine out of 10 of the region’s workers. While these businesses are of crucial importance, they can face huge obstacles to survive and thrive. Access to finance, for example, is a major problem.

More than eight out of 10 small and medium- sized enterprises in Africa, where a lack of formal property rights undermines hopes of obtaining loans, are either unserved or underserved by financial institutions.

Tackling this finance gap — which in Africa is an estimated $140bn — would be a major boost to prosperity and employment. Bureaucracy and regulation can also be a major disincentive when businesses want to make the leap from informal to formal economies.

This is frustrating for the entrepreneurs themselves and limits both the contribution they can make to their communities and tax revenues. When regulations are simplified, it can make a huge difference.

In Guinea-Bissau, the World Bank found that creating a one-stop shop for business registration made it easier and faster to start up a business. Low-income economies that made it easier for firms to do business saw their growth rate increase almost 0.5% the next year, another study has found.

But helping to remove the barriers that stop small businesses growing is also in the interests of large companies. SABMiller may be one of the world’s biggest brewers but, like many global enterprises, it depends on thousands of micro-businesses.

It is often small farmers who grow the crops it uses and small retailers who sell its drinks. Wider economic development, of course, also benefits big companies. As small businesses prosper, incomes rise and consumers have more money in their pockets.

So it makes commercial sense to support these microenterprises wherever possible. This is part of the SABMiller heritage. The company has its roots in Africa, which accounts for 40% of its global business. With operations in 15 African countries, it directly employs 13,500 people.

It has grown steadily by respecting and learning from local cultures and promoting local development, including support for smallholder farmers. This is part of the SABMiller heritage. The company has its roots in Africa, which accounts for 40% of its global business.

With operations in 15 African countries, it directly employs 13,500 people. It has grown steadily by respecting and learning from local cultures and promoting local development, including support for smallholder farmers. But the company wants to do more, so it has set (and met) a target of sourcing more than 50% of its grains from local markets in Africa.

One of the most important ways of supporting entrepreneurs and micro-businesses is by integrating them into the SABMiller value chains. Perhaps no other sector shows the opportunity to transition from subsistence to a successful business as well as agriculture.

In Uganda, for instance, SABMiller modified its brewing process to make beer from the local variety of sorghum. It set up partnerships with local farmers and now sources sorghum from 8,500 farmers in the region. These farmers, many of which previously farmed for subsistence, now have a steady income.

This approach is being applied throughout the entire value chain and across different markets. In Latin America, the company is helping 40,000 small shopkeepers strengthen and formalise their businesses, by accessing microcredit facilities and professional training.

There is a huge amount more that governments and the private sector — individually and collectively — can do to maximise the potential of micro-businesses to raise living standards and drive development.

Every step taken to overcome the barriers that confront aspiring entrepreneurs, whether a lack of finance, skills or simply confidence, will pay huge dividends.

Above all, the best way to give this support is by integrating them into supply chains. It is by letting them benefit from our knowledge, experience and networks that we can best help create an environment where microbusinesses can develop successfully.

If we succeed in helping them increase their productivity and competitiveness, this ultimately results in a sustainable model where the dynamic becomes that of supplier and buyer, rather than philanthropist and beneficiary. It’s the best way of making sure that we all grow together.

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Alan Clark is the CEO of SABMiller, a multinational brewing and beverage company headquartered in London and founded in Johannesburg, South Africa. It is the world's second-largest brewer measured by revenues and is also a major bottler of Coca-Cola. A version of this article first appeared on FT Beyondbrics.