His Excellency, President Mugabe in his state of the nation address (SONA) called for concerted efforts across Government arms, private sector and other stakeholders like development partners to unlock potential of Small to Medium Enterprises (SMEs).  This week’s discussion focuses on one how SME’s

potential can be unlocked through the provision of necessary supporting institutions.

The SME Export Development and Promotion Agency is one such institution which can help to unleash SMEs potential. True to His Excellency’s observation, SMEs and Micro Small and Medium Enterprises (MSMEs) have become the Zimbabwe’s new economy.  The estimated number of SME owners in Zimbabwe is about 2,9 million (sum of all those from provinces). Of these, Harare has the highest number (541 456), followed by Manicaland (393 274) and Matabeleland (136 841) has the least.

The majority of SMEs owners (68,4 percent) are individual entrepreneurs that are entrepreneurs who work for themselves or who rely much on the spouse and children in the place of employees to do their business while 32,6 percent employee people in their business.  Basing on the definition of SMEs by number employed, about 1 percent are medium sized business, 4,1 percent small enterprises, 26,7 percent micro enterprises and 68,4 percent individual business.

A reasonable number (35 percent) operate their business from residential premises (garage, home, by the gate) as they have no space for their business activities indicating lack of available or affordable working facilities or by choice as most SMEs operate informally or due to the volume of business attracted.
About 28 percent operate from their farms or plots; mainly those involved in horticulture (flower, horticulture and other agriculture produce), 25 percent operate from designated industrial sites (SMEs industrial areas eg Magaba, Glenview 7 Furniture Complex, Kuwadzana Furniture Complex etc) and 12 percent operate from other locations such as undesignated places in urban areas, Growth Points and streets. The majority of SMEs constituting 77 percent are in agriculture and wholesale and retail business.

This is mainly driven by garden marketing, flowers and other agriculture produce and wholesale and retailing of clothing and artefacts (machira, madhoiri, zvivezwa, mitsvairo).

Agriculture, wholesale and retailing are also easier to start and requires less capital compared to other forms of businesses and there is a ready market for such products in neighbouring countries, with other markets already established before exports (more specifically for flowers).  A few (11 percent) of SMEs are in manufacturing, mining and construction because of the capital required in these businesses and the legality involved in doing such businesses in foreign countries such as South Africa, Botswana, Zambia and other countries. The service sectors include those in the transport involved in cross border routes and tourism.

Interestingly, active players in the SMEs in the global market are construction, food and beverages, pharmaceuticals, mining, agriculture, transport, textile, computer and office equipment and furniture. These are the same sectors which Zimbabwe’s SMEs are operating in. What it means is that opportunities for match making, partnerships and joint ventures exists!  International experience has shown that SMEs are significantly contributing to economic development.

Statistics from the Organisation for Economic Cooperation and Development (OECD) shows that MSMEs contribute on average 60 percent to global Gross Domestic Product, 50 percent of global employment and over 40 percent of global exports. For specific countries like the European Union, MSMEs constitute 99 percent of total businesses, that is, 23 million in total.  Japanese MSMEs constitutes 99,7 percent of total businesses, that is, 3 850 000 in total.
The message from these numbers is that SMEs is the economy.
All these big economies we envy so much are driven by SMEs.

The secret to the full realisation of the SMEs potential in unleashing economic development in the global economy is institutional support! These successful countries established a MSMEs export promotion agency whose mandate is two — fold, the international business linkages and export promotion. The international business linkages programme outlines target international linkage areas that Export Promotion Agency could forge in pursuit of facilitating exports.

Export promotion on the other hand entails issues of export marketing, trade and investment missions, participation in international fairs and expositions, trade agreements, training and seminars and export market information dissemination and search tools. The European Commission, for example, works on broad policy issues affecting entrepreneurship and SMEs across Europe, and assists SMEs through networks and business support measures.

It helps existing and potential entrepreneurs to grow their businesses, giving special attention to women entrepreneurs, crafts and social economy enterprises.
The Small Business Act for Europe (SBA) embodies the EU’s commitment to SMEs and entrepreneurship. Member States have committed to implementing the SBA alongside the European Commission in an effort to make the EU a better place to do business.

Since SMEs have to be supported at local level, the Commission helps Member States and the regions to develop policies aimed at promoting entrepreneurship, assisting SMEs at all stages of development, and helping them to access global markets.

The identification and exchange of good practices are key elements of this policy. The European Small Business Portal gathers together all the SME-related information provided by the EU, ranging from practical advice to policy issues, from local contact points to networking links. As indicated above, Zimbabwe has experienced growth of SMEs after the collapse of the formal economy. What is disheartening though is the fact that although Government has come up with various measures to support SMEs the results on the grounds does not reflect that we are wining.

Many stakeholders had been shy to support the SMEs but would be rather be comfortable to call them informal sector yet these are the same businesses which command European Economies. To make matters worse, big companies compete with SMEs instead of forming business linkages that will result in a win-win situation.

Zimbabwe must come up with Small Business Act which compels the setting up of SME Export Promotion Agency. SME Export Promotion Agency will focus entirely on the SMEs while ZimTrade concentrate on big established companies.  The form of specialisation will bring better results.

SMEs can be the answer to Zimbabwe’s worsening trade deficit. Zimbabwe’s foreign trade has always experienced a deficit with an increase in demand every year for foreign goods for national development as well as for consumption and with a static trend in export growth. SMEs Export Promotion Agency will consider export promotion as one of the key initiatives and strategies to reduce the volume of trade deficit between Zimbabwe and its trading partners.

Its mandate is to take all such measures to support the SME sector in its effort to develop and promote export of various products and services from Zimbabwe.
It will then come up with various mechanisms which include development of an Export Promotion Programme which is intended to guide the delivery of its SME export promotion interventions.

The Export Promotion Programme will be intended to facilitate penetration of SME products and services into the global markets and facilitate international Business Linkages. The Export Promotion Programme, which will be in line with the Small Business Act, is twofold, the international business linkages and export promotion. The international business linkages programme outlines target international linkage areas that Export Promotion Agency could forge in pursuit of facilitating exports.

Export promotion on the other hand entails issues of export marketing, trade and investment missions, participation in international fairs and expositions, trade agreements, training and seminars and export market information dissemination and search tools.

SME’s export promotion services will focus on the following:

  • Facilitating international market access and penetration of SME goods and services through their participation in Contact Promotion Programmes, Trade Fairs and Exhibitions, Trade Missions, Buyer-Seller meetings and Conferences and Group-Marketing Schemes for the SMEs.
  • Facilitating export marketing of SMEs through display of their products in Zimbabwe Permanent Missions and External Trade Offices.
  • Organising sub-contracting production/supply schemes; establishment of Export Production Village Schemes, technical advisory services to facilitate product and market development as well as supply chain management.
  • Operating Export Training Programme that delivers short term product development, market development and specialized trade development courses for export companies, trade facilitating agencies and businesses to upgrade their skill in export marketing.
  • Organising workshops, forums, conferences, and seminars for both facilitators of export services and the exporting companies.
  • Identifying products with export potential and adapt them for the export market.
  • Guiding local enterprises to prepare export marketing plans tailor made to their respective operations
  • Facilitating participation of SMEs at international trade fairs and expositions;
  • Undertaking Trade Missions;
  • Undertaking external market intelligence;
  • Undertake advocacy services for bodies involved in exports;
  • Advocating for the review of Policies and Legislation impacting negatively on export facilitation;
  • Disseminating export market information
  • For Zimbabwe, under the current environment coupled with the structure of our MSMEs which largely run by households with limited information about markets and lack of critical mass, it is difficult to unleash SMEs/MSMEs potential without necessary institutional support.
  • The relevant arms of Government for a long time now have been considering setting up SME Export Promotion Agency.
  • This is the critical moment to establish the SME Export Promotion Agency in support of the SONA.

Dr Mugano is an Economic Advisor, Author and Expert in Trade and Competitiveness. He is a Research Associate of Nelson Mandela Metropolitan University. Feedback: +263 772 541 209 or [email protected]

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