11 February 2013

Namibia: SMEs Need to Learn in Order to Grow

IT IS an undisputable fact that Namibia has made several major strides in terms of business development: the government through the Ministry of Trade and Industry (MTI) has been providing equipment to SMEs in all regions of the country. Moreover, the SME Bank is now operational.

Most importantly the country has its first industrial policy, an achievement for which we should take our hat off to the MTI. Several investigations done in the country have time and again revealed the lack of finance as a major obstacle to SME development.

Therefore, the setting up of the bank in question has filled an important gap in our quest to develop SMEs. It is generally agreed that SMEs are an engine for economic development. Apart from the bank and the provision of equipment, the government has also pumped in billions of dollars through the Targeted Intervention Programme for Employment and Economic Growth (TIPEEG).

This has brought about a feel good factor across the nation as it has resulted in a lot of cash floating around, giving the impression of a booming economy. However, as one thinks about the current state of affairs with respect to business in the country, an inescapable question comes to mind: How long is this growth-like phenomenon, which has triggered this positive feeling, going to last?

My take on this issue, bearing in mind complaints by some business people about competition, is that if the money and the equipment are to have a far-reaching and intended impact on the economy in the long run, our SMEs and other businesses need to ensure that their operations are underpinned by knowledge and that that knowledge is managed to ensure innovation both in terms of services and/or products.

One sure way to accumulate such knowledge is through constant learning. This will not only lead to sustainability of our business entities, but also to more meaningful employment creation because new knowledge provides a basis for new products and services. What is more, if knowledge is managed, spin-offs can result from such processes.

I am well aware of the main difficulty facing most SMEs in the country: they lack the knowledge required to innovate, as reported in the Education and Training Sector Improvement Programme (ETSIP) documents.

But this is not an insurmountable problem: countries like Singapore, India and even Japan relied on knowledge from outside to enhance their industrial capabilities through learning, a strategy Namibia and Africa in general need to emulate in their relations with their foreign partners such as China and India.

There are plans to upgrade Namibia's industrial sector through the Industrial Upgrading and Modernisation Programme (IUMP), which in my view, is part of a government-led approach to industrialisation.

This approach will enable the government through the MTI and other government agencies to orchestrate the various activities geared towards achieving industrial upgrading. The adopted approach hinges mainly on formal means such as R&D and as such requires firms to be supplied knowledge by those who generate it such as universities and other technical support institutions.

However, I would argue that SMEs can also establish informal linkages to access external knowledge or technologies in addition to government efforts. Furthermore, conditions can be created within SMEs to leverage knowledge. This would be in line with concepts which regard knowledge as something we generate as we engage in work activities. In other words, learning and working are not separate.

By informal linkages here is meant business connections that local companies or individual workers initiate to acquire external knowledge

The literature on technology transfer shows that informal networks are key channels through which knowledge or technology can be transferred. Networks are relationships which firms and individual employees create and purposefully nurture in pursuit of their organisational goals by embedding themselves in international relationships. For instance, one study of knowledge flow in industrial clusters found that engineers shared 'even quite valuable knowledge with informal contacts.' However, such practice is not limited to clusters only. Companies are also reported to benefit from knowledge flow from other countries. For instance, Taiwan has upgraded her technological capabilities via a number of informal linkages.

Therefore Namibian SMEs can also be helped to create strategic links with other firms to benefit from the knowledge of the industrial fore-runners. They can search for partners, i.e. those in the same business as they are and use various strategies to learn from them. For instance, they can learn through joint-ventures, licensing agreements, visits, other exchanges, etc. This is necessary because normally SMEs do not have the resources both human and financial to generate the needed knowledge. Besides, R&D takes a long time before useful results are found. In addition, nowadays external knowledge is seen as important in driving innovation. This means that successful companies are not only relying on their own knowledge to supply them with competitive advantage. They are increasingly exploring, assimilating, transforming and exploiting external knowledge through learning processes. But integrating external knowledge in an organisation requires expertise, let alone identifying strategic knowledge. This is where our business people would benefit from working together with academics, especially those with expertise in knowledge generation, application and innovation.

Unfortunately, currently, there is some sort of polarisation between these two groups, academics and practitioners; academics are doing their own thing and so are practitioners. Such a relationship is unhealthy when it comes to the country's industrial development and needs changing immediately, if Vision 2030 is to be realised. Even if business seems to be doing well at the moment, I would argue that that is an illusion. Sustainable and tangible economic growth is a result of value creation. The latter is underpinned by knowledge. Therefore collaboration between the two parties will enable our companies to innovate, thus compete locally and internationally. However, in order for value creation to take centre stage, there is a need for a major shift: first knowledge and those who generate it need the recognition they deserve; the same applies to value which result from the use of knowledge.

Until this happens we will not only continue to compete on the basis of price but also reinforce the belief that success in business depends on mysterious forces.

Peter Senge says that "In the long run, the only sustainable source of competitive edge is your organization's ability to learn faster than its competitors."

Metusalem Nakale is a Doctoral Candidate at the University of Leicester Centre for Labour Market Studies, England. He is researching the extent to which learning and technology transfer impact companies' absorptive capacity, i.e. their capacity to recognise external knowledge absorb it and use it to innovate.

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