SMEs: Experts urge Govt action for economic growth

Tapiwanashe Mangwiro

Analysts have urged policymakers and stakeholders to prioritise the protection and support of Small and Medium-sized Enterprises (SMEs) to ensure sustained economic development and stability as they are the backbone of the economy.

According to the latest labour force survey by the Zimbabwe National Statistical Agency (ZimStat), 71,3 percent of the working population in Zimbabwe is employed in either the formal or informal sector.
In its 2024 First Quarterly Labour Force Survey, ZimStat says the unemployment rate in Zimbabwe is 20,5 percent.

“The Informal sector (Non-agriculture) comprised 41,3 percent of the employed population, and the Agriculture sector, 22,9 percent,” ZimStats said.

The informal sector contribution to Gross Domestic Product (GDP) is estimated to be just below 60 percent, which translates to about US$18 billion using the 2023 third quarter GDP figures. ZimStat pointed out that 80 percent of domestic expenditure is done in foreign currency, which also means that billions of transactions are done in hard currency and mostly dominated in the informal sector.

Small to Medium Enterprises Association of Zimbabwe (SMEAZ) president Farai Mutambanengwe said most SMEs are operating in the informal sector, as opposed to the proper and registered small and medium sized enterprise sector.

Mutambanengwe said the most of the jobs in the informal sector are not decent “because you find that the wages there are well below any stipulated minimum or, the agreed amounts according to the National Employment Council (NEC)”.

“So we need a more functional economy, in other words, we need to create stability, we need to create a functional currency, we need to reduce the cost of using formal platforms, because now people are not even banking, because it is too expensive,” he said.

The Zimbabwe Economic Policy Analysis and Research Institute (ZEPARI) believes that while the Government has made commitment to support the SME sector over the years, there has not been a comprehensive intervention programme that recognises the need to support SMEs for meaningful contribution to the economic development of the country.

This has mainly been a result of lack of resources which have continued to affect the sector for many years. However, it is worth noting that there is no shortage of institutions supporting SMEs.

“The most notable ones are the Small Enterprise Development Corporation (SEDCO), among others and the turnaround of the Zimbabwean economy calls for a more vibrant holistic approach building on these existing institutions so as to realise sustained growth and overall economic performance across the board,” ZEPARI said in response to Business Weekly.

The SMEs sector, while playing a critical role in economic growth and development is confronted with a number of challenges. These challenges are diverse and relate to the policy, regulatory, institutional and capacity issues and these are stifling their development and growth.

“We need a proper functional macroeconomy, first and foremost, and then we need also a good quality environment, so that formalising does not become distancing oneself to get people to speak. Because right now, most people, if they try to operate according to the law, they would have to close down business,” Mutambanengwe added.

The SMEAZ boss believes that at the moment, increasing funding is not going to help much, because the environment itself is not conducive.

He said most people have been reduced to buying and selling.

“I am sure if you look at the CBD right now, you can see the big formal businesses are closing down.

“What is coming up are what we call malls, which is more buying and selling and when it is buying and selling, there is not much training, there is not much enhancement that you can do to buying and selling,” he concluded.

ZEPARI believes that there is also a great need for innovative means of financing SMEs.

Considering situations in the past where money loaned to SMEs for working capital has been diverted for other noncore activities, there may be a need to look into other options.

“An example would be direct payment to the suppliers of SMEs. This would ensure that the money is directed towards purchasing inputs required solely for business purposes,” they said.

Consensus among experts was that there is every benefit to be derived from fostering an environment which is friendly to SME development.

“It is important, because economic growth can only come out of the SME sector, as it is the sector that creates new products, new value.

“It is also the sector that creates more jobs than the formal large firms’ sector,” Mutambanengwe added.