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(NEWZIMBABWE) Wanted: Value creating SMEs in Zimbabwe economy

Wanted: Value creating SMEs in Zimbabwe economy
09/06/2012 00:00:00
by Tafirenyika Makunike

ZIMBABWEANS wherever they are located, are by and large political animals. If you really want to get them going, just throw them a political bone. Before you know it, they would be all scrambling all over to mauling it.

For the large Zimbabwean diaspora community, the advent of technology means much of this mauling is largely an intellectual armchair engagement. It is orchestrated on the social network and in chat rooms but ultimately change is linked to what actually happens on the ground.

Like the rest of my country folks, I am also quite passionate about politics too but over the years I have tended to see it as a decoy to keep us away from the real livelihood issues. Politics is important but it is not the answer to all things.

One route which leads to a better life to many people is enterprise development. In a country with a widening gap between the rich and the poor, I believe it can be activated in that widening gap between the rich and poor to create fruitful economic activity.

It is good that in Zimbabwe we have a ministry of Small to Medium Enterprises (SMEs) but that in itself will not bring the desired result. Unfortunately, as a nation, we never made sufficient definitional demarcation of what constituted an SME in the Zimbabwean context. How then can we promote something we have not defined?

It is not surprising then when Sithembiso Nyoni, the Small to Medium Enterprises and Co-operative Development Minister, spends a good part of her time having bilateral engagement with Killer Zivhu of the cross-border traders fame all in the name of SMEs.

It strikes me that we are not willing, or unable to clearly define the animal we are dealing with – one moment we refer to small, medium and micro enterprises (SMMEs) and the next we are talking about small to medium enterprises (SMEs) interchangeably. For the sake of perspective, when I write about SMEs in the Zimbabwean context, I am referring to formally registered distinct business entities with full time employees ranging six to 80, operating in any sector of the Zimbabwean economy and with an annual turnover falling between $100,000 to US$5 million.

It is unfortunate that multilateral organisations and a myriad of donor organisations have steeped us in this poverty alleviation mindset. Zimbabwe is crying out for favourable conditions for enterprise development. Enterprise development is not a poverty alleviation lever but wealth creation. Poverty alleviation is a social function.

A sole trader at Mupedzanhamo selling second hand clothing (maziche) is not really an SME, but a survivalist. If we have to take our economy from a survivalist economy to a growth economy, then the mindset has to change.

I understand in Zimbabwe SMEs now have a legal framework to guide emerging businesses following the gazetting of the SMEs Act. While everyone acknowledges the crucial role of SMEs in the creation of decent work opportunities and overall success of the economy, our actions are not supportive. SMEs provide a vehicle for people with the lowest income and formal training to gain access to economic opportunities and lift themselves from poverty.

The flexibility of small businesses allows them to respond quickly to challenges and take advantage of opportunities. Zimbabwe needs to provide a framework which simplifies the procedures for forming a company; reduces the cost of forming a company and maintaining its existence; promotes innovation and investment by providing for flexibility in company formation and operation; provides for a predictable and effective regulatory environment; encourages transparency, efficiency and high standards of corporate governance; and makes company law compatible with best practice internationally.

There is a need to promote collaboration between SMEs and large producers to create joint ventures, market access and buy-back arrangements, as well as promote skills transfer, technology development and marketing expertise. This will increase small business access to procurement opportunities and include them in the government supply chain. These opportunities will provide experience and income for local small businesses and thus enhance their potential for growth, development and employment creation.

I looked through the results of the largest sugar producer in Zimbabwe listed on the Zimbabwe Stock Exchange which is part of a larger JSE listed entity. There is a tacit acknowledgement that a growing number of small to medium sugar farmers are contributing significantly to the bottom-line and are going to be an important part in future growth.

Our last national budget mentioned the Old Mutual supported US$30 million Youth Empowerment Fund, and another proposed jobs fund. The Distressed and Marginalised Areas Fund (DiMAF) – a five year collaborative Facility with a seed capital of US$40 million from the Government and Old Mutual Zimbabwe, of which both parties are contributing US$20 million – was also thrown into the mix. NASSA also had its own.

In the last budget speech the minister of finance Tendai Biti identified potential for development clusters such as diamond processing, cutting and polishing; soft and hard wood cluster; resources base; livestock cluster; cotton, sugar and ethanol clusters; iron ore cluster; energy and hydrocarbon clusters; gold; tourism cluster and offshore financial hub; and horticultural hub.

To date, how many SMEs have been created by these initiatives? We are not getting enough direct taxation mainly due to the limited number of formal enterprises registered with ZIMRA. To expand the tax base in future, it is important to actively nurture a culture for enterprise development.

We have to promote SMEs that will actually create and add value. We need SMEs that will manufacture and beneficiate agro-products. Assuming a national budget of $3.5 billion of which 60% is allocated to personnel costs, it would leave $1.4 billion as a national procurement lever. How has it been spent in 2012? If we just dedicate 30% of this budget to SME procurement spend, then we would have $420 million supporting businesses in the forgotten middle of the economy.

The government has to put its money where its mouth is. They can start by dedicating all procurement below $15,000 to Zimbabwe-registered SMEs registered as tax payers with ZIMRA. Another way to accomplish this is to publish statistics across all government departments on the money spend on our own SMEs.

Eventually, this can be extended to other parts of the economy. As the SME base widens this middle ground can be the future bedrock of Zimbabwe’s accelerated economic growth.

Tafirenyika L. Makunike is the chairman and founder of Nepachem cc (www.nepachem.co.za), an enterprise development and consulting company. He writes in his personal capacity

Labels: SMEs

posted by MrK @ 5:00 PM