While openly acknowledging that the sector played an important role in weathering the storm during the economic turbulence that hit the country for over a decade, the government and the private sector have left the SME sector struggling since the adoption of the multi-currency system in February last year.
In addition to providing basic goods when supermarket shelves were empty, the sector created employment at a time when large scale corporations were either closing or scaling down their operations. As the economy slowly emerges from its deep slumber, analysts note that the SME sector has been on the periphery, with economic recovery hopes premised on large-scale enterprises.
Missing link
Minister of Small and Medium Enterprises and Co-operative Development, Sithembiso Nyoni said SMEs development was the missing link in most countries. The sector has huge potential for growth as the country tries to turn around the economy, said Nyoni. It has become a refuge for many people.
Nyoni said the lack of infrastructure was limiting the SMEs from making a meaningful contribution to the economy. ZNCC president Trust Chikohora said the business body had in recent months been advocating for the establishment of a SMEs stock exchange as a core mechanism aimed at enhancing the sectors viability. Chikohora said the stock exchange for SMEs would play an important role in overcoming constraints currently hampering the growth of the sector.
The sector specific stock market would increase the integration of the informal sector into the economy, and attracting local and foreign investments in the sector. The stock exchange would provide a fair value for the small companies, he said. The SMEs sector has been the most affected by the economic downturn.
The government has over the years availed various schemes for the sector while institutions such as the National Social Security Authority, have also funded it in the past, however, little has been set aside since the adoption of the United States dollars.
Analysts estimate the SME sector to account for about 80 per cent of the countrys employable population. Plans to establish a secondary stock market have been on cards for a long time, but Zimbabwe Stock Exchange officials and government have so far failed to agree on the size of business that should be classified as SME.
The London Stock Exchange operates a subsidiary equities market – the Alternative Investment Market, which is specifically targeted at helping small companies raise capital. South Africa and India also boast of vibrant SME sectors.
Important drivers of growth
According to the International Finance Corporation (IFC) small and medium sized enterprises are important drivers of growth in economies across Sub Saharan Africa, accounting for up to 90 per cent of all businesses in these markets. Access to finance, IFC says has remained a serious challenge for many SMEs in their quest to develop.
Economic commentator Obert Sibanda says the sector has largely remained un-coordinated and hence the support given to the sector has not been effectively used. By and large, the support given to SMEs is not enough, he said. There are many organisations working with SMEs and each is coming up with a piecemeal approach. Sibanda said it was critical for the government to come up with a holistic strategy to find out and address the needs of the sector.
Not only do SMEs need capital, they also critically require training and market information for them to be able to sell their produce. A combination of the three will enable them to effectively utilise any funding that they will get, Sibanda said.
Presenting his 2010 national budget, Finance Minister Tendai Biti made no secret of his intentions to expand government revenue sources through taxing the informal sector.
More support for SMEs
Past president of the Confederation of Zimbabwe Industries (CZI) Kumbirai Katsande recently said more policies to support the sector should be put in place. Policies towards small enterprises are important and should not be seen as peripheral, said Katsande. The mentality of SMEs being treated as just vendors and tomato stalls must be done away with.
In India, the Micro and Small Enterprises (MSEs) sector plays a pivotal role in the overall industrial economy of the country. It is estimated that in terms of value, the sector accounts for about 39 per cent of the manufacturing output and around 33 per cent of the total export of the country. Global trends have suggested that small business is the biggest contributor to the economy of any country. In India it is one of the most crucial sectors of the economy in terms of the number of employments generated.
Post published in: Economy