Call to protect, support SMES gets louder

Business Reporter

ANALYSTS have urged policymakers and stakeholders to prioritise protection and support of small and medium enterprises (SMEs) to ensure sustained economic development and stability as it is the backbone of the economy.

It comes after SMEs have continued to be unsung heroes, serving as the primary engine of growth and largest employers in the country.

According to the latest labour force survey by the Zimbabwe National Statistics Agency (ZimStat), 79,3 percent of the working population in the country is employed in either the formal or informal sector.

In its 2023 Fourth Quarterly Labour Force Survey, ZimStat says the unemployment rate in Zimbabwe is 20,7 percent.

“The informal sector (non-agriculture) comprised 43,7 percent of the employed population, and the agriculture sector, 22,3 percent,” ZimStat said.

The informal sector’s contribution to gross domestic product (GDP) is estimated at just below 50 percent, which translates to about US$17 billion if the 2023 third quarter GDP figures are considered.

ZimStat recently pointed out that 77 percent of domestic expenditure is in foreign currency, which also means billions of transactions are done in hard currency and mostly in the informal sector.

Economist Mr Tinevimbo Shava said: “With the informal sector employing such an amount of people, it means it has the capacity to drive growth in the economy, with the formal sector anchoring it. We need to move forward as a country and be innovative to include the sector in most of our planning as a country and reap rewards.”

Another analyst, Mrs Gladys Mutsopotsi-Shumbambiri, said the authorities need to establish how big the sector is and make it contribute to the fiscus.

“The informal sector is proving to be huge and Treasury has to come up with ways to tax the sector, even if it means giving them (the players) super discounted tax rates to encourage them to pay and boost our purse as a country. This will result in other sectors facing reduced taxes that are overburdening them,” she said.

Economist Dr Prosper Chitambara believes one of the key reasons SMEs are vital to Zimbabwe’s economic fabric is their agility and ability to adapt swiftly to market changes.

“Unlike large corporations that may struggle with bureaucracy and rigid structures, SMEs can pivot quickly, identifying and seizing emerging opportunities. This agility not only promotes entrepreneurship but also fosters a culture of innovation that is essential for sustained economic growth,” he said.

Mr Farai Mutambanengwe, chief executive officer of the SME Association of Zimbabwe, believes, in order to pull the SMEs to the mainstream, there needs to be growth of businesses such that they become too big to be informal.

“We need to lighten up the costs of taxes and regulations such that we loosen up the complexities of laws in the formal sector, which scare those in the informal sector. Without those adjustments, the country will continue to lose potential revenue to the heavy informalisation of industry,” he said.

SMEs are renowned for their ability to generate employment on a large scale, and with their nimble structures and adaptability, these enterprises create job opportunities in diverse sectors, including manufacturing, services and technology.

Their role in providing entry-level positions and promoting inclusivity within the workforce cannot be overstated.

“By fostering job creation, SMEs become instrumental in alleviating poverty because they empower individuals with the means to support themselves and their families, contributing to a more equitable distribution of wealth. As SMEs flourish, the ripple effect extends to local communities, driving economic growth from the grassroots level,” said Mrs Mutsopotsi-Shumbambiri.

Recognising the pivotal role of SMEs, the Government should increasingly implement policies to support their growth. Access to finance, streamlined regulatory frameworks and targeted incentives are crucial elements in fostering a thriving SME sector.

The analysts and economists agreed that safeguarding SMEs in Zimbabwe is not merely a matter of economic policy but is also an investment in the nation’s future. As the largest employers and the engine of the economy, SMEs play an indispensable role in shaping a prosperous and resilient Zimbabwe and are vital for the attainment of Vision 2030.