By Ngembeni Wa Namaso
Shifting focus from large enterprises, Investment projects or even State-owned enterprises (SOEs), to smaller, family-owned, and individual enterprises, particularly those employing 3 to 10 people, can offer a more sustainable and inclusive pathway to economic development.
This shift does not mean the abandonment of State enterprises and large projects, but rather a balanced reallocation of resources and attention towards businesses that can deliver more immediate and widespread benefits to communities, and ultimately contribute to more resilient and diversified economies. Such a shift should be considered in the 2025 Finance Bill.
Below are some reasons why this can be transformational.
1. Poor Governance and Elite Capture in Large Enterprises
A key argument for focusing on smaller businesses is the pervasive issue of poor governance and elite capture within large-scale projects, especially state-owned enterprises. In many cases, large contracts are awarded to well-connected elites or administrative bodies, rather than being distributed to local communities or small businesses.
These processes often result in misallocation of public funds, inefficiencies, and corruption, with financial benefits being captured by a narrow group at the top rather than being broadly shared.
For example, in many developing countries, large infrastructure projects have historically enriched a small group of political and business elites, with only a fraction of the benefits trickling down to the broader population.
A study by the World Bank in 2021 indicated that state-owned enterprises in Sub-Saharan Africa alone cost governments over $15 billion annually in inefficiency, corruption, and mismanagement. This highlights the need for a more decentralized, inclusive approach where financial gains are distributed more equitably.
2. Direct Distribution of Benefits from Small Enterprises
In contrast, small businesses, especially family-owned and individual enterprises, directly benefit the local economy.
They create employment opportunities for families, generate income that stays within communities, and contribute to social cohesion.
By focusing on sectors like agriculture, local manufacturing, community-based tourism, and small-scale trading, these businesses can deliver tangible economic benefits and foster a more sustainable growth model.
For example, smallholder farmers in Kenya have shown that access to microfinance and improved market access can increase income levels by as much as 70%, directly enhancing the well-being of entire families.
Additionally, small enterprises are more likely to reinvest profits back into their communities, further stimulating local economies.
According to a study by the OECD, small businesses tend to create more jobs per unit of investment compared to larger corporations, and they are more resilient in the face of economic shocks, as they are diversified across multiple sectors rather than relying on a single industry.
3. Multiplier Effect of Small Business Growth
Small and family-run businesses are also highly effective at generating a multiplier effect in the economy.
Each job created within a small enterprise generates demand for local services, from suppliers to transportation, creating a chain reaction of economic activity.
Research by the Small Business Administration in the United States shows that small businesses generate nearly 70% of net new jobs annually, and the World Bank estimates that small and medium-sized enterprises (SMEs) contribute over 40% of GDP in developing economies.
Moreover, fiscal incentives—such as tax relief, subsidies for startups, access to microloans, and other forms of financial support—can encourage the growth of these businesses.
For example, in India, the government’s MUDRA scheme has provided more than $25 billion in microloans to small businesses, helping millions of individuals and families start their own businesses.
Such incentives not only promote entrepreneurship but also reduce poverty and income inequality, which in turn leads to social peace and stability.
4. Small Businesses in Key Sectors
Focusing on sectors like agriculture, community-based tourism, and small-scale manufacturing can have profound effects on local economies.
Agriculture, for instance, employs more than 60% of the workforce in sub-Saharan Africa, but smallholder farmers are often excluded from the benefits of large agribusinesses. By offering targeted support for small-scale farming, governments can help boost productivity and incomes.
In community conservation and tourism, small businesses can leverage natural resources and local heritage in a sustainable way.
For example, in Costa Rica, community-run eco-tourism initiatives have significantly boosted local economies while preserving natural resources.
Similarly, small-scale manufacturing enterprises can add value to raw materials locally, reducing dependence on imports and creating more jobs.
5. Large Enterprises and Infrastructure Development
While the emphasis should shift to small businesses, large enterprises still play a crucial role in infrastructure development and large-scale manufacturing.
Large-scale infrastructure projects—such as roads, power grids, and telecommunications—serve as the backbone of any economy, creating the foundation for more localized enterprises to thrive.
For instance, investments in roads and electricity allow small businesses in rural areas to operate more efficiently and access broader markets.
However, the balance lies in ensuring that these large-scale investments complement the growth of small enterprises, rather than overshadowing them.
Instead of funneling all investments into SOEs or foreign-owned large enterprises, governments can strategically direct funds to build infrastructure that enables small businesses to flourish—such as rural roads, digital access, and local energy solutions.
Conclusion: A More Inclusive Path to Economic Growth
In conclusion, a focus on small, family, and individual enterprises offers a more inclusive, sustainable, and resilient path to economic development.
These businesses are better at directly benefiting local communities, creating jobs, fostering social cohesion, and promoting economic stability.
By reallocating some focus away from large, elite-driven projects and supporting small enterprises with the right fiscal incentives, we can create a multiplier effect that drives economic growth, enhances well-being, and reduces inequality.
The result is a more equitable distribution of wealth, a more diversified economy, and ultimately, greater social peace.
Ngembeni Wa Namaso is a Technical Advisor, Korup United, Mundemba, Ndian, Cameroon. Contact: pmbile@gmail.com
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