Harnessing SMEs for SADC’s development

Lazarus Sauti

Small and Medium Enterprises (SMEs), which are a major source of employment creation in the Southern African Development Community (SADC), continue to face numerous challenges that include inadequate financial resources as well as restrictive regulations.

Due to their size, they are also constrained by the state of infrastructure over and above lack of effectual institutional structures.

Simone Cooper (South Africa) – the head of franchising and enterprise development at Standard Bank – concurs, saying in most economies, SMEs contribute towards a more equitable growth and job creation.

However, she adds, in South Africa and other Southern African countries, SMEs are facing challenges with access loans.

“The environment is different as there is a rising interest rates, rising municipal rates and also rising electricity rates which is compounding the expenses that small and medium enterprises have to deal with,” noted the franchising expert.

President of the Confederation of Zimbabwe Industries – an independent, self-financed, legally constituted organisation that represents and serves interests of members in a wide array of matters affecting their viability and competitiveness, Charles Msipa also says lack of cheap loans has negatively affected the SME sector not only in Zimbabwe, but most SADC countries.

“I can confirm that inadequate access to affordable short and medium funding and high cost of funding is one of the factors that are eroding viability and competitiveness not only in manufacturing sector, but for SMEs,” he affirmed.

The Southern African Development Community-Development Finance Resource Centre (SADC-DFRC) – a subsidiary institution of SADC established in July 2003 to serve as a sub-regional centre of excellence to strengthen the SADC Development Finance Institutions (DFIs) Network and to enhance the capacity of the SADC DFIs to deliver on their mandates towards the achievement of the SADC Regional Indicative Strategic Plan (RISDP) goals of economic growth, employment generation and poverty alleviation – also identifies lack of medium to long-term finance to start ups and expansions, inappropriate terms and conditions for short term credit or trade finance, insufficient financing and other instruments to support the SME sector, low capitalisation and lack of collateral and poor record keeping or financial management as constraints facing small and medium entreprises in the SADC region.  

On the business support side, the SADC-DFRC also classifies low-level investment in infrastructure that has the potential to stimulate small and medium enterprise activity, complex and cumbersome laws and regulations that control and govern the setting up and development of SMEs, regulations that favour only big business and discourage SME start up and operation, inability to market SME products and services, absence of appropriate environmental management systems that meet international standards, and a dearth of programmes and, where they exist, uncoordinated programmes that support entrepreneurship with marginal support to women entrepreneurs as hindrances facing small business in the regional bloc.

SADC member-states should, therefore, come up with strategies to stimulate the growth of SMEs into viable entities as part of boosting industrialisation.

As noted by the draft Sadc industrialisation strategy and roadmap, adopted at the bloc’s extraordinary summit held in Harare recently, the growth of small and medium enterprises is a springboard to industrial development.

Zimbabwe’s Vice President, Emmerson Mnangagwa, concurs, emphasising the need for SMEs to be competitive if the region is to achieve sustainable social as well as economic growth.

Minister of Small and Medium Enterprises and Co-operatives Development in Zimbabwe, Dr Sithembiso Nyoni, also believes regional governments through ministries of small and medium enterprises along with ministries of finance and economic planning need to identify opportunities, support SMEs and harness them to accelerate socio-economic development in the region.

To successfully harness them, minister Nyoni said government sectors in the regional grouping must facilitate the expansion of SMEs before mainstreaming them to be part of taxable business.

“Governments sectors must facilitate the growth of SMEs and ensure that their skills are improved and polished so they join the mainstream,” explained Dr Nyoni, before stating that regional political and business leaders need to establish incubation centres that benefit SMEs.

The purpose in life of incubation centres, she notes, should simply be to professionalise SMEs in a bid to mainstream them.

Deputy President of the Zimbabwe National Chamber of Commerce – a nonprofit making membership-based organisation that provides services designed to support its members in business development, Davison Norupiri, believes there is need for research on SMEs so as to adequately support them.

“SMEs – if supported adequately – can sustain economies. Therefore, there is need for research on SME if the region is to adequately support and embrace them as springboards to socio-economic transformation,” he asserted.

Japhet Moyo, the secretary general of the Zimbabwe Congress of Trade Union, urged governments to provide incentives to SMEs.

“To harness SMEs for SADC’s development, governments should incentivise small and medium enterprises. They should also create conducive environments for these businesses to flourish,” he said, adding that government sectors should focus on removing unnecessary taxes and levies that are hindering the growth of SMEs in countries within the region.

Cooper shares the same view that governments need to avail enabling environments for the flourishing of SMEs.

She added that more needs to be done in terms of policy direction for the sector to be able to reach optimum levels.

According to Cooper, SADC states must also implement simplified trade regimes to help small and medium traders to benefit from the preferential rates enjoyed by commercial traders when importing or exporting goods within Southern Africa.

The Grain Millers Association of Zimbabwe chairman, Tafadzwa Musarara, also encouraged banks to support SMEs through lower interest rates.

“The banking sector has a moral obligation to lend to SMEs at lower rates compared to those that borrow funds to import whisky and yachts,” he noted.

Sanderson Abel, an economist, agrees, adding that innovation is of paramount importance for SME financing.

Financial innovation, he asserts, can be defined as the act of creating and then popularising new financial instrument.  

Nazeem Martin, managing director at Business Partners Limited – the specialist investor providing customised risk finance, technical assistance and real estate accommodation and management solutions for small and medium enterprises in South Africa, Madagascar, Kenya and Rwanda, is of the view that a budget which includes a range of measures empowering SADC’s small and medium enterprises to expand and employ more people can go a long way in supporting small-business development.

“One of the surest ways for the finance ministers to boost job creation and economic development is to deliver small-business-friendly budgets,” he said.

Martin also indicated that implementing large-scale infrastructure roll-outs, reducing red tape for businesses, simplifying governments’ tax incentives for venture capital investments as well as encouraging the financing of start-ups could also benefit small to medium enterprises.

Director of business development in the Ministry of Small and Medium Enterprises and Co-operatives Development, David Nyakonda, believes success in harnessing SMEs and transforming the region will only come from the collective efforts of SADC member-states and their respective citizens.

Accordingly, political and business leaders as well as patriotic citizens should be dedicated and keep in mind that a region without a vibrant and sophisticated competitive small and medium enterprise sector cannot withstand cut throat competition in the over changing global business environment.