Abstract
The Structural Adjustment Programme (SAPs) during the period 1980 to 2000 encouraged Governments to privatise non-strategic commercial activities, leading to the emergence of Small and Medium Enterprise (SME) sector, taking 95% of all trading entities and employing up to 40% of workforce in Sub-Saharan Africa.
However, majority of SMEs in Africa fail within five years of starting and few last beyond 15 years and have no capacity to compete with International SMEs particularly in the construction industry. This research was to identify the leading factor in causing failure of SMEs in construction Industry in Africa; case of Malawi and develop a strategic legal framework to enhance sustainability of local SMEs. Literature reviewed confirmed a high frequency of failure and revealed twelve factors which cause negative impact on sustainability of SMEs generally. The National Construction Industry Council (NCIC) registers and regulates SMEs in the construction Industry and from their records there were 5,000 SMEs in 2015.
Mixed methods was adopted collecting qualitative and quantitative data in three stages.
A survey by questionnaire administered to a random representative sample of 800No, and data analysed with Statistical Package for the Social Sciences (SPSS) established payment paralysis the leading factor in failure. 20SME failure cases were reached and responded to a questionnaire and interviews revealing the events and circumstances leading to payment paralysis. They posited that major drivers of payment paralysis are Corruption, Weak Contract laws, PEs skewing risks in their favour, poor bid evaluation and high bank interests. Interviews were then conducted with 5policy/opinion leaders who confirmed the major drivers of payment paralysis stated by the 20failed SMEs and gave their suggestions on contract and legal steps required to support the SMEs which were adopted in the design of the legal framework. The research findings were shared widely in awareness presentations in Malawi, Kenya and Zambia to Government, Academia, Legal Societies, SMEs MABCATA, MIE, IEK. . In 2015 Civil Engineering Contractors Association, (RACECA) appointed a team of lawyers and the author to seek solutions. In 2018 the author published these findings in the Kenya Engineer Journal.
The concerted efforts of stakeholders resulted in 5No. Bills tabled in Kenya Parliament between May 2019 and October 2020 and happily, Bill No.5 was the Prompt Payment Bill sponsored by the Government. To date two of the five drivers were targeted.