The Sunday Mail
The small and medium-sized enterprises sector has an opportunity to further dominate Zimbabwe’s economy in 2015 after Government created a conducive operating environment by setting up various facilities to fund and nurture them.
Despite being allocated just US$1,9 million in the 2015 national budget, economists are optimistic that a great year lies ahead for SMEs.
They say numerous credit lines secured by Government to fund them will more than make up for the small budget.
The creation of the SMEs growth fund, the employment creation fund and the setting up of the SME incubation centre are such measures taken by Government which are expected to impact positively on the sector.
Government also successfully negotiated and signed a US$3 million Line of Credit Agreement with the Arab Bank for Economic Development in Africa (BADEA) in October for the Small and Medium Enterprise Development Corporation (SMEDCO).
According to Finance Minister Patrick Chinamasa, the loan facility is expected to be operational in the first quarter of 2015 under SMEDCO’s administration.
Earlier in the year, Government secured US$20 million and US$15 million lines of credit from PROPARCO – a developmental finance institution – and CBZ, respectively.
Some micro businesses have already started to benefit from these funds but more are expected fall in line next year.
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In addition, Treasury recapitalised the Export Credit Guarantee Corporation (ECGC) to the tune of US$2,1 million.
The move is expected to help ECGC to domestic loans accessed by small and medium-sized entities. This will facilitate main-streaming SMEs by enabling them to access formal banking services.
However, the biggest development likely to lift the sector is Government’s decision to extend the tax amnesty for companies by almost one-and-a-half years.
The development will particularly benefit SMEs as most of them – up until the first amnesty was introduced in October – were facing collapse due to huge tax obligations.
Acting chair of the Harare Chamber of SMEs Mr Shakie Museve said 2015 could be a breakthrough year for these firms.
“We are looking forward to growth in 2015, we want to see more SMEs formalising, but it is only possible with adequate funding,” he said.
“We also welcome the tax amnesty because this will lift many companies, particularly us as SMEs. We hail it because it will allow our members to be able to pay tax through planning.
“However, our main challenge remains funding, we hope the situation will change going into 2015. We do not think the US$1,9 million allocated to us is enough.”
Economic analyst and lecturer Mr Webster Gijimani said all the ingredients for SMEs to grow in 2015 were there but added that it would not be a walk in the park.
“If it was backing a cake I would say all the ingredients are there, but in business things could still go wrong because there still has to be implementation and monitoring.
“Government has done its part by negotiating several funding deals with various institutions but you might want to ask yourself how many people will be able to access these funds and use them for their intended purpose.
“To me, that is what will make the difference. It is also important to see how many businesses would have been able to formalise by the end of 2015 because it will be counterproductive for Government to provide funding to people who won’t be remitting tax.”
Experts have also pointed out the need to nature and incubate small businesses as a majority of them often fail in their infancy.
Government is trying to care of that too.
In his 2015 National Budget Statement Minister Chinamasa said most SMEs depended on direct or indirect transactions with large enterprises in the manufacturing industry hence the need to promote linkages between the two.
“We need to facilitate deepening of forward and backward linkages between established businesses and our SMEs, targeting principally creation of networks of competitive and strong companies which anchor incubation,” he said.
“The anchor company would provide to the value chain desired quality controls, technology and requisite skills to produce goods and services. Government, on its part, would extend to the anchor company such incentives as tax concessions for fostering an SME.
“Government will, through the Ministry responsible for Small and Medium Enterprises, develop and promote the incubation of SMEs by potential anchor companies.”
Minister Chinamasa said the incubation centre in Harare’s Waterfalls suburb would become operational in 2015 after delivery of requisite equipment.
The centre will train entrepreneurs in 26 disciplines, including plastic bottle manufacturing and bottle closure, cellphone assembling, fruit juice production, honey processing, dipper manufacturing, paper manufacturing, sock knitting and brick moulding.
Despite this optimism, some SMEs doubt they will benefit from these facilities.
“It is a good effort from the Government but we wait to see how some of us will benefit. There has also been talk of credit lines in the past but only a few connected ones benefited,” said Mr Melusi Mpofu, who owns a plastic bottle manufacturing company.
Researcher and lecturer in the Department of Accountancy at Bindura University of Science Education, Mr Nelson Maseko, suggested the amendment of tax laws to accommodate SMEs.
In his study on the impact of personal and compliance costs on compliance behaviour of SMEs in the country, Mr Maseko said SMEs faced different business conditions from large companies which saw them bearing onerous tax compliance burdens.
“The study then concluded that the current tax law in Zimbabwe does not cater for the special tax compliance concerns of SMEs and thus recommended that the tax law be amended to incorporate provisions that grant special tax incentives to SMEs in order to improve voluntary tax compliance by SME taxpayers,” he said.
SMEs constitute a significant proportion of all businesses, even in major industrialised economies, accounting for over 50 percent of all employment globally.
