Africa is worlds second-largest continent with abundant natural resources. Despite of this, many countries remain poor and underdeveloped. With the impact of globalization these underdeveloped and developing countries are emerging out of economic doldrums and meeting the challenge of becoming potential economic powerhouses. This positive drive has enabled potential indigenous people to open up micro, small, medium and large enterprises.

These enterprises have immensely contributed to the economic growth of both developed as well as developing countries. Most of the SMEs operate in countries that have low to middle level of income, thus the development of SMEs has gradually increased the rate of employment and income in many countries.

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This research is a theoretical framework that introduces the concept of entrepreneurship, small and medium enterprises (SMEs) and their contributions towards the country. Along with that, it discusses on some of the developing countries in Sub-Saharan Africa, such as Nigeria, Zimbabwe and Tanzania.

1. INTRODUCTION

For hundreds of years entrepreneurship has been in existence around the world. Although this concept has been in existence in some of the countries, with the unstable economic situations in many parts of the world, entrepreneurship has become an alternative way of earning a living. In the importance perspective, SMEs play an essential role in the community. Small businesses have flourished in both developed and developing countries which have contributed in boosting the economy of many countries.

2. INTRODUCTION TO ENTREPRENEURSHIP

Entrepreneurship is a process allowing individuals to seek opportunities, be innovative, enable them to manage resources and create value. There are various reasons which encourage individuals to go into entrepreneurship, some of them being; enthusiasm towards ownership and economic and demographic factors.

An entrepreneur can be defined as, “A person who assembles and then integrates all the resources needed to transform the invention into a viable business”. (Barringer and Ireland, 2008, p. 5).

According to the Organization for Economic Co-operation and Development, “An entrepreneur is someone who creates and exchanges value through identification and employment of changes in resources, opportunities and/ or innovation”. (OECD, 2007)

Joseph Schumpeter, one of the economist, wrote in his book, “The Theory of Economic Development”, whereby he defines, ‘An entrepreneur as a person who applies innovation as well as implements change in the economy’. According to Schumpeter, an entrepreneur plays a vital role in boosting the economy through introducing new products, opening new market. (Sobel R., 2008)

For an effective and successful business, it is important that entrepreneurs have the primary characteristics namely; Passion for the business, Product/ Customer focus, Tenacity despite of failure and Executing intelligence. Other characteristics include are; creativity, willingness to take risks, dedicated, enthusiastic, committed and motivated.

In today’s world many countries are encouraging entrepreneurship since it helps in generating economy through investment, job opportunities, variety in products and services.

SMALL AND MEDIUM ENTERPRISE (SME) PERSPECTIVE

3.1 Introduction to small and medium enterprise (SME)

An enterprise is a business segment that can either be micro, small and medium, or large, depending on the number of workers employed, their sales and assets. Small and medium enterprises are small businesses often founded by entrepreneurs. These can be found in almost all the countries. (Appendix 1). The SME sector can be categorized into two; micro enterprises as well as small and medium enterprises, hence some countries refer it as SME whereas others refer it as MSME that is; micro, small and medium enterprise. SMEs are also categorized in terms of formal – those which are registered or informal – those which are not registered.

There is no universal definition for small and medium enterprise given that the criteria used may differ between countries and international institutions. The criteria used when defining SMEs are number of employees, total assets and total annual sales.

For example, in terms of employment, SMEs are classified according to their cut off. One country might define SME as having their cut off at 250 employees thus known as SME-250 whereas another country would define SME as having employees ranging from 100-500. However many countries define an SME to have a cut-off range between 0-250.

Alternative Definitions of small and medium enterprises

A number of economists and scholars have come up with various ways to define SMEs. According to the research done by Tom Gibson and H. J. Van der Vaartindeed they have suggested SME to be, “A formal enterprise with annual turnover, in US dollars, between 10 and 1000 times the mean per capita gross national income, at purchasing power parity, of the country in which it operates.” [Khrystyna Kushni, 2010]