CHAPTER ONE

INTRODUCTION

1.1 Background of the study

Cameroon might be referred to as giant of the central African sub-region when it comes to economic potentials and viability but the reality on the ground and the fact as a reflection of the country’s development ratios show a conflicting picture.

The global entrepreneurship and development institute (GEDI) in their 2019 report makes this picture clearer by stipulating that enterprises are a pivotal base for economic growth and without enterprise and entrepreneurs ’innovation, productive growth and job will be found wanting.

Understanding the context and the entrepreneurship ecosystem which is a blend of a country’ attitudes, resources and infrastructure, the GEDI through an annual index using 14 pillars, measure the health of entrepreneurship ecosystem of 137 countries as well as the benchmark ecosystem against each other.

Cameroon has been ranked 121 out of 137 countries by GEDI using the GEI, coming behind the likes of Tunisia, Botswana, South Africa, Morocco, Egypt, Gabon, etc. (GEDI Report, 2019). This ranking is not very surprising because since post-independence Cameroon as a state has put very little or no priority on entrepreneurship, acknowledging in the current vision 2035 that for the country to grow and obtain a double-digit economic growth, there is need for business and entrepreneurship ecosystem to improve. Paradoxically, the vision in itself still doesn’t give entrepreneurship a place of priority since it was rolled out in 2010.

The GEDI through her 14 pillars will give Cameroon a clear picture of the weaknesses and strengths of the ecosystem that needs more work so as to enhance the role of entrepreneurs and their impact on the growth and the development of a country in general. To collaborate and gain inside of the entrepreneurship ecosystem, business in Cameroon, the training economic online sites and the world bank in 2019 report on the ease of doing business, Cameroon has been ranked 167 out of 190 countries falling behind one place to the previous rating with a score of 46.1 through outranking countries like Gabon, Equatorial Guinea, Congo, Chad and the Central African Republic all in the CEMAC zone. Just like GEDI usage of 14 pillars to rate countries ecosystem, the word bank uses 10 indicators with Cameroon only showing a positive improvement on I indicator which is “access to credit information.”

This further gives us a clear view of the business and entrepreneurship ecosystem; how bad the ecosystem is and how urgent the system needs fixing which will go a long way to boost and rekindle the spirit of entrepreneurship in the economy with the multiplier effect being a rapid growth needed to catalyze and attain vision 2035 of being a medium-income country and an emerging economy by 2035.

 1.2. Statement of the problem and justification of the study

The success of many small businesses in Buea municipality has been identified as a tool for economic development. Cash as an important asset in business enterprise, keeps them running continuously (Arinaitwe, 2006) therefore its management is not a matter of choice but something that must be undertaken in any business organization. Many owners of business enterprises do not plan for their cash requirements.

They have slow cash inflow generation procedures with a high rate of cash outflow, limited skills of handling cash balances and do not strategically invest surplus cash (Joseph, Hannington, 2011). Many of small-scale business owners do not understand the significance of proper management of business resources and tend to believe that the business will get better on its own.

The owners of the business have put strict controls over cash by insisting that all cash received is banked, a receipt issued after sale of goods, proper debt collection procedures put in place and anyone suspected of fraud/ embezzlement dismissed (Tong; 2011).

Despite all the measures employed to manage cash, there is a slow growth rate of small-scale business in Buea market. In Buea, small businesses cannot be the platform for growth and development if they are not profitable and sustainable. One possible reason for this prevalence is that small business owner are not equipped to identify the problem areas within their businesses due to the lack of necessary skills and tools to increase profitability and sustainability.

Likewise, many small business owners do not perform many cash management practices simply because they feel they are not necessary and are very time-consuming (Debt 2005) yet in a developing country like Cameroon; cash management is the lifeline of every small business.

Cheatham, Dunn and Carole (1989:1-2) indicate that one of the most dangerous misconceptions is the common belief among entrepreneurs that adequate profit will automatically result in adequate cash flow. The lack of cash management knowledge and skills prevent small business owners to adequately manage their cash flow. This research therefore targets to investigate the effects of cash management on the financial performance of small-scale businesses, Sunday and Eliabu, (2013).

1.3 Research Questions

The main research question this research will attempt to answer is: what is the rate at which small-scale businesses are growing in the Buea market?

1. What are the cash management practices adopted by owners/ managers of small-scale businesses in the Buea market?
2. What is the relationship between cash management and the growth of small-scale businesses in the Buea market?
3. What are the challenges SMEs face in implementing effective cash management practices in the Buea market?

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