|Strengthening capacity of SMEs in Zim|
|Saturday, 23 June 2012 18:23|
In her foreword to the UNDP Comprehensive Economic Recovery in Zimbabwe Working Paper Series entitled “The Informal Economy, SMEs and the Missing Middle in Zimbabwe: Some Observations” Christine Umutoni posits that Zimbabwe’s “return to macro-economic stability translates into an opportunity for the country’s small-scale enterprise (SME) sector to play a leading role in employment creation, sustainable poverty reduction and contribute meaningfully towards national economic growth” (UNDP, 2010).
The SME sector definition has been fraught with the problem of definitional clarity (Simpson et al, 2010: 26- 27). For instance, the distinction between “informal or micro-sized enterprises” and small-scale enterprises has been one source of such definitional fuzziness, while the distinction between “small enterprises” and “medium enterprises” has also wrought contestation. To that extent, the SME sector in Africa has been prone to varied labelling: “micro and small enterprises” or MSEs (USAID, 1991) and “micro, small and medium enterprises” or MSMEs and also referred to as “small, micro, and medium enterprises: or SMMEs (Gelb, et al., 2009; Zimbabwe, 2002a).
However, the standard definition of the SME sector has been provided by the SME Department of the World Bank (ibid) which views small enterprises as those formal sector entities with up to fifty (50) employees and total assets and total annual sales of up to $3 million. In Zimbabwe, an MSME Policy and Strategy Framework has defined small and medium enterprises as those who are ‘registered in terms of their legal status’ and ‘employing anywhere between 6 to 100 workers’ (Zimbabwe, 2008: 20).
Various studies of the SME sector in Sub-Saharan Africa (Mead and Liedholm, 1998; World Bank, 2003; Mullei, 2003) have pointed to ‘tremendous obstacles’ which stifle the graduation of small firms to middle sized entities or the visible middle. Consequently, the world of firms in Africa is characterised by lack of a robust middle-sized enterprise sector in a phenomenon described as the “missing middle” (UNDP, 2008).
This metaphor of the ‘missing middle’ in Zimbabwe was also confirmed in the GEMINI studies conducted in the 1990s (USAID, 1991; 1994; 1998). In view of the proven contribution of this middle-sized enterprises (SME) sector to employment creation, sustainable poverty reduction and national economic growth, it is imperative that evidence-based policy and strategic frameworks be developed to create a visible middle or SME sector.
There is general consensus that there is a dearth of up-to-date metrics on the size and nature of the SME sector in Zimbabwe (UNDP, 2010: 10).
This is not surprising since the SME sector was viewed as a safety net for those retrenched in formal sector employment under Esap.
The three country-wide surveys of MSEs in Zimbabwe came up with useful statistics on the size and nature of these enterprises.
For example, the first country-wide survey conducted in 1991 established that the country had a total of 845 000 MSEs, employing around 1,6 million people in small-scale manufacturing, trade and services. Most of the MSEs sold their products directly to customers and had the proprietor as the main employee.
In fact, the MSEs sector was operating on a survivalist orientation at the time of the survey and this also marked the decline of manufacturing MSEs and saw a corresponding increase in trade MSEs, largely based on hawking and vending.
This 1994 GEMINI survey painted a bleak future about the survival prospects of the “low profit” MSEs and gave useful insights into employment creation dynamics within the sector.
The last GEMINI country-wide survey of the MSEs (USAID, 1998) confirms the missing middle phenomenon as evidenced by the low percentage of MSEs which were able to graduate to the middle over the period 1994 to 1998.
Most of the MSEs operated in easy entry, low-profitability segments and remained dominated by single-worker employment structures as was the case with the initial survey.
In a way, the three GEMINI studies highlighted a steady rise in the ‘informalisation’ of the Zimbabwean economy which persisted up to 2009.
While the Government did come up with a comprehensive policy framework as well as action plan for the SME sector (Zimbabwe 2002a; Zimbabwe 2002b), which proffered new thinking in terms of assisting start-ups as well as strengthening the longer-term growth and competitiveness of the SMEs, the lack of a GEMINI study since 1998 severely hampers in-depth analysis of the SME sector based on comprehensive and sound data of its performance over the last decade (Simpson et al, 2010: 44).
Government can come up with brilliant policy frameworks and action plans but as long as these are not informed by credible data generated through comprehensive country-wide survey in the mould of the seminal GEMINI studies, such policy frameworks will remain unhelpful in taking the SME sector to the “visible middle”.
As Simpson et al, (2010: 47) note the introduction of dollarisation and accompanying stabilisation of the economy, as well as the trade liberalisation in 2008 to 2009 have impacted both positively and negatively on SMEs, and it is important to understand the nature of such correlation.
The continued improvement in capacity utilisation in the key manufacturing sector is also bound to affect the SME sector in view of the linkages between small-scale operators and large firms and there is need for an investigation into the nature of that interface.
The increased focus on improving the “success rate” of small firms towards the middle and the enhancement of their competitiveness is informed by research into the obstacles to growth of SMEs.
There exists therefore an opportunity to conduct research on Doing Business Reform within the context of SME growth and development in Zimbabwe.
Notwithstanding the perceived political risk that continues to weigh-down the country’s potential, the formation of an inclusive Government in 2008 to 2009 has done a lot in stabilising Zimbabwe’s economy with real possibilities for recovery and growth (Hawkins, 2010).
In this schema, the SME sector is poised to play a key role, especially in employment creation and poverty alleviation.
Such baseline data was last generated in 1998.