BONN: A study by the Economist's Economic Intelligence Unit (EIU) has found that despite media hype, SMEs remain wary of expanding into Africa.
Survey results from a multi-sector group from the G7 and BRICM countries (Brazil, Russia, India, China and Mexico), suggest 40 percent of respondents cite an unstable political environment and underdeveloped infrastructure as the basis for no growth opportunities in the continent.
On the other hand SMEs think China is the most attractive growth market due to its size and the government's "focused economic policy".
"Tapping into new markets is clearly still not easy for many small enterprises with growth ambitions, particularly for regions such as Africa that offer great promise for the future," said DHL Express CEO Ken Allen.
Despite reservations over Africa, the EIU says the majority of the SMEs it surveyed expect to overcome the hurdles of political instability, culture and inadequate infrastructure to earn up to 50 percent of their revenues internationally in five years' time.
"BRICM SMEs are better positioned in other developing markets thanks to their superior ability to navigate the challenges that these markets present. They are also taking advantage of lower costs and smaller pools of competitors. If you consider these countries as the growth markets of the future, then SMEs in industrialized economies need to review their approaches to emerging markets and identify new strategies that will help them to compete internationally in the future," added Allen.
Sponsored by DHL Express, the EIU surveyed 480 SMEs in 20 sectors including real estate, consumer goods, financial services, information technology, manufacturing, professional services and telecom.
More than half of the companies reported between US$500,000 and US$5 million in annual revenue; one-third reported between US$5 million and US$20 million and a minority up to US$70 million a year.