Abstract

The main aim of this research was to establish the vibrancy for Cameroon enterprises so that they can play expected vital role as an engine of growth and development efforts. The specific objective of this study was: To determine the effects of managerial skills, finance and leadership style on the growth of enterprises in Molyko-Buea. The researcher employed a descriptive research design in collecting the data from the respondent. The researcher uses 60 enterprises from the population of Molyko-Buea. Random sampling was used because it gives all the elements in the population equal chance and helps to avoid biases. A carefully crafted questionnaire was constructed and piloted in order to delete any ambiguities. The responses to the questionnaire were complimented with personal interviews. The findings indicated that majority of the correspondence answered the questionnaire to the researcher expectation with 77%, 15% were not returned while 8% were received but rejected because they did not meet researcher sets standards. The research concludes that access to finance is not the greatest problem facing enterprises in Molyko-Buea. The key setback is managerial capacity in view of the result finding it is recommended that entrepreneurs should be trained so that they are well equipped to spearhead their enterprises to higher echelons. The government should develop entrepreneurship training center and government should also come up with policies that are friendly among others finally further research should be conducted.

CHAPTER ONE

INTRODUCTION

1.1 Background Of Study

There are a lot of problems that bedevil enterprises and stunt their growth. Although there are some problems peculiar to a particular country, the challenges faced by enterprises in different countries and geopolitical divisions are basically the same. For instance, a survey of Turkish SMEs by Organisation for Economic Cooperation and Development (OECD) in 2004 showed that they were suffering the consequences of policy inconsistency, poor access to finance, insufficient know-how and low level of technology, lack of managerial skills and so many others. SMEs are considered the engines of growth in developing countries. In Cameroon SMEs account for over 90% of the country’s economy and contributes 34% of GDP yet only 20% receive a credit line.

The growth of enterprises in Africa requires adequate supply of financial capital. However, lack of finance has termed as an impendent to such growth

(Fjose et al, 2010) In fact, lack of access to finance or credit is universally recognised problem facing enterprises.

In Africa it is agreed among researchers that inability to access finances remains a major hindrance to SMEs survival and growth (Ariyo, 2004; Cook, 2001; Horn, 1998; Mambula, 2002). Lack of access to external financing is considered a major challenge to the growth of SMEs and it has accounted for high rates of failure among those SMEs.

According to Shah et al (2013), financial institutions behave more cautiously when providing loans to SMEs, and SMEs are usually charged comparatively high interest, high collateral and loan guarantees. Krasniqi (2007) finds that loan policies and collateral requirements discourage firms obtaining loans from banks. In consonance with Berger and Udell(1998), Galindo and Schantiarelli (2003) find that in both developingand developed countries, small firms have less access to external financing, which leads small firms to be more restrained in their operations and growth compared to large firms. A recent study did by Beck et al (2005) in developing countries provide further evidence that SMEs faces greater financing obstacles than large firms do. Ayyagari et al (2006) show that financing, crime and political instability directly affect the rate of growth of small firms, with financing being the most significant constraint affecting small firm’s growth.

Small and Medium size enterprises are owned by one person or a small group of people and managed by their owners, who with all management usually with the other little help. In our country most of Micro and Small enterprises launches without a feasibility report. Moreover, wherever such reports were prepared, the purpose was to use them as advice to obtain institutional finance than to serve as a plan to make the unit a success. Though majority of the entrepreneur posse production skills, there are weak in aspect of managerial skills.

Lyles (2004), evaluate managerial competencies as measured by the education of the founder, managerial experience, entrepreneurial experience, start- up experience and functional area experience versus new venture growth. The results show that relative profits tend to be high when an entrepreneur has more education and experience in the line of business.

Welter (2001), found that managerial competencies as measured by education managerial experience, start- up experience and knowledge of the industry positively impact on the growth of new SMEs.

According to Katz (1974), There are three managerial skills that every manager needs these are; Technical skills which is the ability to perform the given job. The low level managers require more technical skill; Human Relations (Interpersonal) skills or the ability to understand, communicate and work with people. Human relations skills are required by all managers at all levels of management. The reason for that is all managers have to interact and work with people; Conceptual skills being the ability to see the big picture, to visualize the organisation as a whole. It includes analytical, creative, problem solving skills. The top level managers requires more conceptual skills and less technical skills.

According to King and McGrath (2002) good education and training empowers SMEs managers to be successful in their businesses. Specific skills and training in management and information technology is essential for leading and controlling, functions that are critical to SMEs proper functioning, survival, sustainability and growth. The process of management will also not be complete unless competent and qualified staff is put in place.

According to Tomlin (2008), economists argue that the resources smaller companies direct towards tax compliance are resources that could otherwise be used for investment, facilitating future growth. Hence there is believed that taxes and a complex tax system put disproportionate pressure on smaller businesses. Small taxpayers under the regular system of taxation are discriminated against, since the compliance requirements, cost of compliance and tax rate are the same for both small and large enterprises.

An overly complex regulatory system and tax regime or one opaque in its administration and enforcement makes tax compliance unduly burdensome and often have a distortionary effect on the development of SMEs as they are tempted to morph into forms that offers a lower tax burden or no tax burden at all (Masato, 2009) and this results in a tax system that imposes high expenses on the society. A poor executed tax system also leads to low efficiency, high collection changes, Waste of time for taxpayers and the staff and the low amounts of received taxes and the deviation of optimum allocation of resources (Farzbad, 2000). Existed empirical evidence clearly indicates that small and medium sized businesses are affected disproportionately by these costs: when scaled by sales or assets the compliance costs of SMEs are higher than for large businesses (Weichenrieder, 2007). Among the factors militating against SME tax compliance whichare: high tax rates, low efficiency, High collection charges, waste of time for taxpayers and the staff, and the low amount of received taxes and deviation of optimum allocation of resources (Farzbod, 2000). Others according to Yaobin, (2007) are double taxation, no professional tax consultancy, weak tax planning, high taxation cost.

Uzor (2004) believes that the constraints faced by SMEs in developing countries are not only accentuated with ineffective policy design, but also by market failures in the region, lack of information technology and knowledge of automation is gradually being reduced given that they serve as contractors for larger firms particularly the foreign manufacturing firms. (Aderemi, 2003) also added that there are problems of unsound accounting system and lack of full financial disclosure.

Areetey and Ahene, (2004) buttressed this assertion by listing lack of access to land, Utility installation and services and import procedures as constraints to SME growth summarily, these problems make SMEs a high risk venture. The above reasons are in and of themselves problems that impede SME growth because not only do they become obstacles in accessing financing, they are capable of hindering growth on their own.

1.2 Statement Of The Problem And Justification Of Study

The SMEs in Cameroon has not performed creditably well and hence has not played expected vital and vibrant role in economic growth and development of Cameroon. This situation has been of great concern to the government, citizenry, operators, practitioners and the organized private sector groups’ year-in-year-out. The government through its budget allocations, policies and pronouncement have signified interest and acknowledgement of crucial role of the enterprise sub-sectors of the economy and hence made policies for energizing the same. There also have been fiscal incentive, grants, bilateral and multi-lateral agencies support and aids as well as specialized institutions all geared towards making enterprises sub-sectors vibrant. This sub-sectors need to be approached and given seriousness it deserves because it is part and parcel of employment and great contributor to the economic vibrancy.

Despite the efforts by various stakeholders, the sub-sector still faces challenges because there are no proper policies in place and documented information for those who want to venture in to it or find more about it. Perhaps this research seeks to add and enrich the available data and information by investigating the factors leading to growth of small and medium size enterprise industries.

The poor performance of SMEs in the face of numerous policies by different groups like governments, Non-governmental organizations and other donor countries means that if Cameroon wants to achieve an appreciable success towards attaining the vision 2035 goals then one way would be to vigorously pursue the development of its SMEs properly. The underperformance of SMEs may indeed make Cameroon’s vision be a mirage unless there is a turnaround of our SMESs fortunes sooner than later. The time is now to do something surgical operation to the situation of our enterprises given the aggravating level of poverty in Cameroon and the need to meet up with the vision 2035 goals.

1.3 Research Question

1. To what extend do managerial skills affects the growth of Small and medium size enterprises in Buea?
2. How does finance affect the growth of small and medium enterprises in Buea?
3. What is the effect of leadership style on the growth of small and medium size enterprises in Buea?
4. What are the general challenges faced by SMEs in the Buea municipality?