8 February 2007

Zimbabwe: SMEs' Importance to Economy Continues to Show


Harare — THE importance of small to medium enterprises to the Zimbabwean economy has continued to show in recent years.

SMEs hold enormous potential to eradicate poverty in Zimbabwe as well as on the African continent.

Most of them provide a buffer for those who lose their jobs in the formal market or cannot get them in the first place.

As such, their contribution to the growth of various economies in the world cannot be overemphasised.

SMEs, because of their nature, can enhance competition and entrepreneurship, and hence have spill-over effects on innovation, efficiency and productivity growth that translate into increased value-added output.

This is due to the expansion of SMEs that can boost employment more effectively than large firms because they are more labour intensive.

The effects of SMEs in terms of poverty reduction are manifold. SMEs are considered the nucleus for creating new business in any flourishing economy.

A recent survey of developing countries showed that SMEs accounted for up to 90 percent of the total number of enterprises in these economies.

Data for developed economies such as Japan and emerging economies such as Malaysia, the Philippines, Brazil and India show that more than 60 percent of all companies in those economies are SMEs.

An official in the Zimbabwe Allied Banking Group's business banking unit responsible for SMEs, pointed out that a poor micro-economic environment, expensive capital working facilities coupled with lack of

collateral and technical and management skills are some of the challenges dogging the sector notwithstanding the ovation it received during its inception in the late 90s.

"It is helpful that the nation has enjoyed a benign economy through the early years of the new millennium to provide the environment and encouragement for people to establish their own businesses (indigenisation).

"But despite the welcoming words uttered by politicians, the bureaucratic hurdles placed in the path of prospective entrepreneurs are daunting.

"The growth in small business has been matched only by the expansion in red tape, regulations and rules," she said.

Although the Government has pledged to uplift the sector, results on the ground show that nothing concrete has been done to alleviate the plight of the indigenous businessperson.

Less than $3 billion of the $16 billion revolving fund released last year to SMEs has been obtained as a result of restrictive measures put in place by the commercial banks.

The acting Minister of Small and Medium Enterprises Development, Engineer Munacho Mutezo, said Government was prepared to work with willing entrepreneurs in turning around the economy.

"As a ministry we are here to help SMEs grow from micro to small, small to medium and medium to large companies.

"It is also our responsibility to advise them on how to participate in international fairs and expand their market base through export development and capacity building programmes," he said.

Engineer Mutezo emphasised that Zimbabwean SMEs can take advantage of production methods that will develop them to a stage where they enhance economic growth and reduce poverty.

He said this could be done by taking advantage of possible competitive sources that offer price discounts on the raw materials and inputs they need for their production processes.

"The imminent reduction of tariffs in line with WTO requirements and the creation of different sources for SME raw materials, such as the EU and US through the Free Trade Area agreements, offer ideal possibilities for SMEs to buy raw materials for value addition at reduced prices," said Eng Mutezo.

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