Time to revisit the SME policy, promote SME development

Mugove Hamadziripi

MICRO, Small and Medium Enterprises (MSMEs) play a formidable role in national development, and can propel a stronger recovery from the Covid-19 pandemic, due to their innovative and opportunity-seeking nature, but they need more support to enable them to navigate the turbulent waters.

SMEs constitute the backbone of the global economy, accounting for two-thirds of employment globally and between 80 and 90 percent of employment in low-income countries. At the same time, they are disproportionately affected by pandemic-related shocks and they are over-represented in non-essential services sectors hardest hit by confinement measures. In the process, many of these enterprises have been dealt a heavy financial blow, with the majority calling it a day.

However, their smaller size allows them to be flexible and adapt to new environments such as the one created by Covid-19. Not only can they help overcome previous constraints related to lack of productive capacities and economic, but also enhance a strong and sustainable recovery. SMEs play an important role on both social and economic fronts. All things being equal, the sector proudly constitutes roughly 90 percent of all firms outside the agricultural and mining sectors. They are also one of the biggest sources of domestic employment, providing a livelihood for almost 75 percent of Zimbabwe’s workforce, especially youths, women and recent graduates.

As Zimbabwe slowly recovers from the Covid-19 pandemic, there should be a concerted push in support of SME growth and competitiveness. In fact, the pandemic has induced a return to “the fundamentals”, calling for a renewed focus on SMEs. This renewed focus and shift should be complemented by Government budget allocations, as well as support from the private sector.

Now is the time for all Zimbabweans, to share good practices on enhancing the role of entrepreneurship and SMEs.

Special focus should be on revisiting such documents as the “Indigenisation and Empowerment Act” (IEP), the Indigenisation and Empowerment Policy (IEP), and the Zimbabwe Industrial Development Policy (IDP). The Government should put in place programmes to support the SMEs in the form of capacity-building programmes, monitoring and evaluation programmes, research and development as well as financial assistance.

Due to the Covid-19 pandemic, it can be deduced that the conventional sources of employment are shrinking due to the closing down of multi-national companies across the world, (and Zimbabwe included), formal employment opportunities in Zimbabwe are becoming very scarce and the MSMEs are increasingly filling in the gap hence their pivotal contribution to the economy of Zimbabwe is of paramount importance and significance.

The contribution of SMEs to the economic development of Zimbabwe should be regarded as crucial for the achievement of broader development objectives, these objectives directly include poverty alleviation, spreading employment to rural areas, improving the situation of women and increasing ownership of investment in the economy.

As of today, Zimbabwe SMEs face a plethora of challenges including poor infrastructure, poor institutional structures, lack of access to affordable finance, cumbersome and monotonous processes of setting up the business, limited formal avenues for pursuing interest-bearing investment options.

Government commitment is key to the success of SMEs. Local authorities and the private sector should complement the Government efforts thereby holistically help in reducing the higher failure rate of SMEs.

As of now, our SMEs are lacking a robust policy support, and as a country we can draw a few examples from other countries like Bolivia, Nigeria, the Far East and the United States, on how Government support has directly influenced SME’s. This support can be in the form of financial support measures like Government guarantees, loans, and Government equity on SME’ overall performance. It should be noted that Government financial guarantees and Government equity have a direct impact on SME’s performance.

Past policies, notably the indigenous policies, which was geared to redress the dominance of the multinational companies, was a great move, as it brought with it some positive results. These results included an increase in the establishment of SMEs as well as the direct and the involvement of the indigenous Zimbabweans in entrepreneurship programmes and initiatives.

However, the policy framework had some shortcomings as it failed to establish SMEs as the backbone of the economy. It is against the backdrop of this indigenous policy implementation gap that the Government need to revisit the document and come up with a fresh strategic framework that aims to improve the performance of SMEs.

The development of home-grown strategic framework that will act as a blueprint for SME development, should therefore be seen as one of the key economic drivers meant to boost SMEs performance.

However, it can be deduced that the Zimbabwean indigenous policies have managed to empower the black people, but to a greater extent failed to achieve their major objective of turning the SMEs into an economic hub of Zimbabwe.

As such, there is every need for the Government including local authorities and non-State actors, to rethink and come up with a practical strategy that is easily accessible to all SMEs, a new home-grown strategy that is all inclusive should be introduced.

The Government need to craft a new SME policy, and that should be done through a rigorous and extensive consultative process of all the stakeholders involved in the SME sector. The Government has to go to the communities (Human Rights Based Approach to Programming), carry out the needs assessment, hold meetings in all the provinces and districts. The findings should be incorporated into the new envisioned SME Policy Framework.

This process will help produce a Zimbabwean home-grown SME policy which would be owned by both the government and the SMEs.

The resource mobilisation process has to be extensively done by the Government in order to provide financial resources for the SMEs. The Government can introduce an SME Levy programme (just like the Aids Levy), which will solely be used to promote the growth and development of the SMEs. Fiscally, the national budget should allocate adequate resources as a sustainable measure.

In line with the changing global trends, the SME sector need to come up with a robust research and development arm. Research and Development is important for businesses because it provides powerful knowledge and insights, leads to improvements to existing processes where efficiency can be increased and costs reduced. It also allows businesses to develop new products and services to allow it to survive and thrive in competitive markets.

Should a robust SME Policy get formulated and implemented, Zimbabwean SME have the potential to awaken from their slumber and directly contribute towards national development. Yes, the time is now.

-Mugove Hamadziripi writes about and consults on Development, Media, Urbanism, Communications, Community, Policy/Politics, Sustainability and the environment. He consults with the Centre for Impact Evaluation and Research Design and Erongo Consulting Group. He can be reached at [email protected].