The role of small scale enterprises in reducing poverty and income inequality in Africa : a case study of manufacturing industries in Nigeria
The aim of this research is to investigate the claim made for small enterprises with specific reference to their ability to reduce poverty and unemployment in the countries of the developing world. According to World Bank estimates, about 1,115 million people in the developing world lived in poverty in 1985. This represented a third of the total population of the developing world, of which 630 million were extremely poor with annual consumption less than US$275. Evidence from Nigeria indicated that during the 1980's consumption plummeted by 7 per cent a year and the standard of living became lower in the mid-1980's than in the 1950's. With few notable exceptions, the overall evidence is that poverty and income inequality in sub-Saharan Africa is severe and has seriously limited the ability of the poor to have access to adequate work, water, clean air, habitable land and sanitation. Since there are no social security and unemployment benefits in the majority of African countries, development experts have been forced to respond to the reality of an ever increasing number of unskilled, unqualified and untrained urban population who enter the labour market and fail to find work. It is argued that reduced investment due to capital scarcity and shifting demand for labour has resulted in higher unemployment and larger numbers of day labourers than long-term employed workers. As a result, the majority of the urban poor and the unemployed have been forced to compete for basically unskilled jobs in order to survive. Since the long-term consequences of the unskilled unemployed people are socially and politically undesirable and must therefore not be ignored, a consensus has been formed within international development establishments in favour of a strategy of development that would result in higher demand for the labour of the urban poor. In response, the World Bank and other development experts have tried to examine the potential for job creation and other benefits from enterprises of different sizes and degrees of capital intensity, and to look for ways to assist financially and by other means manufacturing enterprises. Against this backdrop, it has been argued that small enterprises can create more jobs per unit of capital invested and have more intimate contact with the poor. Based on these arguments developing countries have been encouraged to change their national policies and procedures in favour of the development of small enterprises. Unless the limited supply of investment capital is spread more widely than in the past, it is argued, the vicious circle of poverty will persist. Since most claims made for small enterprises are political and moral and often not based on scientific inquiries, this research sets out to examine whether small enterprises under the forces of free market are more demanding of the labour of the urban poor in the Nigerian circumstance of the 1980's. This is made possible by examining, within a historical framework, the various models of development and the structure of employment and income in Nigeria. A model of development based on small enterprises, the evolution and changing roles of small enterprises in Nigeria arc also examined. This is, however, supplemented by a survey of 96 manufacturing enterprises of different sizes in some cities of Northern Nigeria. The field work which was spread between 1988 and 1990 involved in-depth data collection, observations and questionnaire administration. The findings of this research differ significantly from those offered by sponsored projects, and have therefore policy implications on the existing anti-poverty strategies.