Working Paper 53 - Linkages between SMEs and Large Industries for Increased Markets and Trade: An African Perspective

This paper considers modalities and mechanisms through which SMEs could forgehorizontal links between themselves and vertical linkages with larger manufacturingand service industries for increased market access, enhanced investment flows,skills development and technological advancements. Such linkages would helpovercome the constraints that currently plague industry in African countries. Asthe global economy becomes more integrated and economic reforms and liberalizationtake root in Africa, indigenous SMEs will have to network and build alliances to beable to survive and compete effectively. There is strong evidence that formingalliances, clustering and networking help small firms to compete, grow and cooperatewith large firms. By working together, firms can gain the benefits of collectiveefficiency, enabling them to link with larger producers and break into national andglobal markets. The key to success seems to be a customer-oriented focus, amutually supportive approach, and a cumulative effort to ensure continuous, ratherthan discrete improvements. While SMEs in Africa remain largely underdevelopedand isolated, SMEs in Mauritius illustrate the various forms of linkages that can beforged specially clustering in the Export Processing Zone (EPZ). Vertical integrationin the textile industry in Mauritius also stands out as an interesting and successfulexample.