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THE indigenisation and empowerment drive should not only focus on equity, but a sound procurement system to boost Small to Medium Enterprises, an economist has said. Addressing stakeholders in Mutare recently during a consultative workshop on formalisation of SMEs, economist, Dr Gift Mugano, said sound procurement policies were the missing link to buttress brisk business opportunities for SMEs in the wake of the country’s indigenisation and empowerment laws.
He said Zimbabwe should take a leaf from South Africa’s 75 percent procurement quota on how to give leverage to local industry and give it competitive advantage.
In 2012, South Africa crafted a procurement accord which was ratified in line with the country’s Preferential Procurement Policy Framework Act of 2000.
The regulation entails South African state enterprises to ensure that only locally produced services, works, goods or locally manufactured products with a stipulated threshold for local production and content are procured.
“Local industry is currently struggling due to an influx of cheap imports, but the reality which should be addressed is that 70 percent of cost of every business is procurement. If we have sound local procurement policies like in South Africa we will be talking about different statistics especially for our SMEs sector,” said Dr Mugano.
He, however, said procurement quotas would only be effective to SMEs in a framework of formalisation.
Dr Mugano said for the formalisation of SMEs to be successful, Government should focus on five key areas, sectoral registration, labour formality, financial inclusion, market linkages and pricing as well as formalisation of their work-spaces (informal traders).
He said those would be the key areas which needed redress during the ongoing consultative process.
Minister of State for Manicaland Provincial Affairs, Cde Mandi Chimene in a speech read on her behalf by the director in her Office, Mr Luck Bhasopo, said the consultative process was important given the growing significance of SMEs and their contribution to the economy.
“The formalisation document that will be produced after this consultative process will map out the policy direction and strategies to address the challenges faced by the SMEs sector. This is in recognition of the strategic role of SMEs in the economic development of our nation,” said Cde Chimene.
According to the Finscope survey, 84 percent of the total employed in the country is in the informal sector.
Dr Mugano added that the untraceable nature of businesses in the informal sector best explained the reason why the World Bank statistics assume that there was over 80 percent unemployment in Zimbabwe.
“The problem is that when SMEs are not formalised, they cannot be recognised by the State or get a voice to air out their concerns which is why we want them to formalise. But Government should also be pragmatic in dealing with this group, particularly on taxation issues, which have been the biggest stumbling block in enticing them (informal traders) to register and formalize operations,” he said.
Speaking during the same meeting, Standards Association of Zimbabwe Manicaland chief inspector, Mr Eugen Mtetwa, said the formalisation drive was in line with their programme of improving competitiveness through standards.
Manicaland SMEs chairman, Mr Andrew Ngondonga, welcomed the consultations, but called on the Ministry of Small to Medium Enterprises Development to seriously adopt the contributions of SMEs.
“We do not want surprises when the final document comes out. We are the people on the ground and know what is best to steer this formalisation drive. In past blueprints we were shocked to see the final content contrary to our submissions. Formalisation is a good idea, but it has to be viewed on a sectoral approach and taxation should not be insensitive but realistic to incentivise the initiative,” he said.
Zimbabwe Progressive Airtime Vendors Association chairman, Mr Godspower Hamandishe, also supported the initiative, but called for more support from Government in incentivising formalisation.
Fears of high tax charges remain the biggest barrier to fully realise the formalistaion of the informal sector. Presently the tourism sector is loudly condemning 15 percent value added tax on accommodation citing that business has been on the downward trend since it was reintroduced.
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