Many governments and aid agencies believe that small businesses can contribute to promoting more equitable development, as well as enhancing the competitiveness of local industries within a global economy. While small, micro, and medium-sized enterprises (SMEs) may have a role to play in creating jobs, and generating and redistributing wealth, they need to overcome many obstacles. This article stresses the importance of understanding the specific context, establishing priorities among competing policy goals, and distinguishing between the actual and potential roles of different kinds of enterprises (by sector, size, and geographical location). Only on such a basis is it possible to identify the resources and policies most appropriate for each goal and each type of enterprise. These arguments are illustrated with reference to South Africa, whose government has sought simultaneously to promote SME development, Black Economic Empowerment, and global competitiveness.
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