26 March 2008

Namibia: SME Definition Unsuitable - Study

Windhoek — A market study of Namibian small and medium enterprises in the construction sector has recommended a review of the small and medium enterprise (SME) definition.

The current SME definition, according to the report, is unsuitable for the sector because it is based on the number of workers and turnover. Experience in the sector is that a higher turnover is generated as often each contract exceeds a turnover of N$250000 while the business needs many labourers to complete such contracts.

However, the report said newly established small and medium enterprises could move out of the SME bracket by obtaining one contract yet they face problems that are faced by other SMEs. It says the danger would be that a contractor who gains more experience and gets bigger contracts could be overprotected through enjoying preferential conditions relevant to SMEs, which could hinder new contractors to access the market.

These recommendations are included in the study that was conducted among 379 companies that employ 7150 people, of which 3503 are permanent, 1039 work part time while 2608 are contract employees. The study's main findings are that 45 percent of the companies are involved in building, 21 percent in finishing and interior construction including technicians, plumbers, joiners, roofing and insulation, 12 percent are in road construction and maintenance, 10 percent are manufacturers, merchants and suppliers to the construction industry while eight percent are in civil engineering.

Khomas, Erongo and Oshana regions have the biggest number of businesses involved in construction and road maintenance, while Kunene, Oshikoto and Omusati have the smallest number of companies operating in the two areas.

The study said 80 percent of the contractors operated as micro businesses and 85 were registered with the Ministry of Trade and Industry. But according to the official definition, 61 percent unlike 80 percent qualify as SMEs. It also found that the sector is characterised by a big contrast in skill levels. The companies had very small numbers of skilled and qualified personnel against a large number of unskilled labourforce.

"This explains why lack of trained and skilled labour force is seen as an important constraint, but not the most important," the report said.

"Relatively few businesses indicated that lack of management skills is a problem to them, although in public opinion the lack of management skills in Namibian businesses is being seen as one of the major constraint of SMEs," it added.

Shortage of skills among small and medium sized constructors, lack of professional training and access to capital were identified as main problems facing the industry.

According to statistics, the industry contributed 3.9 percent to the Gross Domestic Product in 2006 and is the second largest employer of unskilled workforce in the country. The Construction Industry Federation (CIF) launched the study and contact database for small and medium enterprises of the Namibian construction sector last week. The study was commissioned by the CIF and the Namibian Association of Small Contractors (NSCA). It was supported by the German Technical Cooperation (GTZ) programme "Strengthening of Institutional Development in the Road Sector".

The database, containing economic and trade-related information of over 350 Namibian small and medium enterprises will enable stakeholders in the sector to research and contact businesses in order to form business cooperation or joint ventures in the construction sector.

This will expose the small and medium enterprises to market-relevant stakeholders and enable them to market their services beyond traditional channels.

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