Understanding SME Financial Resilience and Survivability in Africa

The unprecedented economic crisis created by the COVID-19 pandemic has renewed the debate on SME resilience in dealing with such pandemics and other business shocks. SME resilience largely depends on the financial capability of the SME as well as the presence of various environmental factors serving as coping mechanisms. This financial capability supports the ability of the SME to adapt to both internal and external shocks, which usually forms an integral part of an organisational resilience strategy for survivability. Adopting a deductive research approach, this study has adopted a longitudinal research design using twelve 12-year data on five (5) predictors of financial resilience, namely public policy, specific tax policies, SME training, R&D, and accounting and assessment services for 20 African countries. Multiple linear regression was executed to test five hypotheses relating to SME financial resilience in Africa. In analysing the research evidence on SME resilience in Africa through the strategic factor market theory, we found that effective public and tax policies, R&D, and accounting and assessment services significantly promote the financial resilience of SMEs in Africa. However, SME tailored training is statistically insignificant in creating financially resilient SMEs. African governments are therefore expected to augment training and capability programmes towards the creation of sustainable SMEs because African SMEs are financially fragile due to the weak institutional and technological environments in which they operate. It is, therefore, recommended that African SMEs build their internal capacities, particularly in developing their human resource capacities for effective decision making, which is crucial during pandemics and business shocks. This study has implications for the theory and practice of SME financial resilience and survivability in Africa.