Prioritising SMEs can transform Zim’s economy

29 Jun, 2018 - 00:06 0 Views
Prioritising SMEs can transform Zim’s economy Members of the House of Assembly in the Parliamentary Portfolio Committee on Small, Medium Enterprises and Co-operative Development watch Mr Owen Shumba a carpenter (fourth from left) mechanically smoothing a wardrobe he was making at Mashumba Business Centre in Mzilikazi suburb during the MPs tour of the SMEs at the centre in early May. — (Picture by Dennis Mudzamiri)

eBusiness Weekly

Dr Roseline Karambakuwa

Prioritising the development of Small to Medium Enterprises (SME) exports can help to improve Zimbabwe’s trade competitiveness and enable the Southern African country to reduce its trade deficit while achieving economic growth.

In Zimbabwe there are a number of institutions supporting SME exports such as Zimtrade. It is however worthwhile to explore the SMEs’ export strategies adopted internationally as this can help the country to learn and adopt new winning strategies.

India has one of the fastest growing economies at the moment and according to government estimates, SMEs contribute significantly to the country’s exports and employment. The SME Chamber of India works for SME export promotion by enabling connectivity with buyers, importers, investors and strategic business partners from abroad and also resolves SMEs issues and problems.

The chamber has presence in different countries and supports SMEs in identifying emerging businesses and collaboration opportunities. The Indian government offers services and subsidised inputs to SMEs since the sector is regarded as needing special help to overcome its weaknesses. The Indian model, after being successful for many years, has been used as a blueprint in many African and Asian countries.

Exporting SMEs in Japan receive assistance from its government in the form of subsidies and funding. As a result, a large proportion of SME manufacturers in Japan contribute to the country’s exports.

Japan’s Organisation for Small and Medium Enterprises and Regional Innovation supports SME start-ups and SME growth and development. It provides safety nets and infrastructure.

The India Japan SME business council organises trade promotional activities in India and Japan for SMEs, arranges trade missions and organises buyer-seller meetings and business matchmaking. SME owners are trained on markets, taxation and business opportunities. The council undertakes market survey and research and also organises annual activities for SMEs.

The government of Nepal exempted SMEs from paying VAT, made it easier to register and obtain licences and gave tax concessions to medium and larger industries that involved small industries in backward linkages, entrepreneurship and industries. In China exporting SMEs are promoted by a government agency called Bureau of China International SME Fair.

The agency organises SME fairs, world conferences, seminars, workshops and provide start-up loans. Government policies ensure that technology used is improved and there is restructuring, resulting in better quality products from the SMEs and improved export competitiveness.

Singapore, Hong Kong, South Korea and Taiwan have attracted international attention due to their phenomenal economic growth. In these countries, the primary mode of economic growth shifted from foreign investment to expansion of their locally grown enterprises.

For SME support in South Korea, the government established the Small and Medium Business Administration to strengthen support given to SMEs. The measures implemented by the Korean government were focused on providing financial assistance and tax incentives, technology development, fostering technical human resources, and encouraging joint research and development activities among SMEs, academia, and research institutes.

For Singapore, the government, through the Small and Medium Enterprise Agency, implemented the Small and Medium Enterprise Master Plan, which called for an integrated multi-sectoral approach to the promotion of small enterprises.

Aspects included in the plan were the provision of special financing arrangements, preferential tax treatment, establishment of support institutions, improvement of technology, assistance with exporting, and promotion of co-operation, networking and subcontracting.

The government of Malaysia, through the SME Corp assist SMEs to adopt new technology, increase productivity, automation, select appropriate technology and machinery, and update production process and production management. In Bangladesh, the economy had about 6 million SMEs that contributed significantly to employment and to about 25 percent of the Gross Domestic Product by 2010.

To foster the growth of SMEs in a balanced manner in the country, the government of Bangladesh established industrial estates through the Small and Cottage Industries Corporation and the Export Promotion Zones. Among other functions, the corporation conducted advisory and industrial promotion services including training and skills development of entrepreneurs.

Most of the Organisation for Economic Co-operation and Development (OECD) countries have created one stop shops that disseminate information about regulations and administration requirements to SMEs. The countries also focus on assisting the SMEs to export through government export credit and tax relief incentives. The European Union (EU) supports exporting activities by SMEs through export credit and non-financial assistance in the form of business support programmes and services and business incubators.

The EU gathers data for the SMEs, arranges meetings with potential business partners, facilitates commercial access to technological research and facilitates access to business and research financing. Further, it provides advice on legal, trade, and intellectual property issues and advocates on behalf of European SMEs in foreign markets.

The EU member countries also provide SMEs with officially supported export credits through private or government-supported export credit agencies. Further the EU has implemented a legal framework to support European SMEs by adopting the Small Business Act for Europe with the stated objectives to “put SMEs at the forefront of decision-making, to strengthen their potential to create jobs in the EU and to promote their competitiveness both within the Single Market and in the global markets.”

The SBA for Europe comprises several different elements designed to improve the legal and administrative environment for SMEs throughout the EU. SME development strategies in Europe focus on a more forceful promotion of international trade and developing the local economy by giving greater autonomy to local economic actors. Platforms are set where SMEs can be heard, to improve the quality and coherence of SME support, and to help small businesses in dealing with regulation issues.

Latin American countries have focused their efforts on export assistance to SMEs such that important breakthroughs have been made by clusters in Latin America. At first the Latin American countries pursued import substitution policy then later implemented export orientation to stimulate exports. Latin American countries namely Mexico, Venezuela and Argentina, Brazil, Chile and Colombia launched their initiatives in the 1960s to assist SMEs financially.

The countries worked with the aid of international agencies such as the ILO, the World Bank, and the Inter-American Development Bank, to overcome the constraints faced by small enterprises. Small exporters in Brazil managed to create links within the region as well as with other regions through the Centre for the Support of Small and Medium-Sized Enterprises (SEBRAE), which is generally seen as the most important achievement for SME development in Brazil. SEBRAE focuses on four primary areas of operation namely training, credit and capital, entrepreneurial culture, and local and sectoral development.

In Africa, Tanzania and Kenya were among the first countries to adopt programmes oriented towards supporting small enterprises, soon after independence in the mid-1960s. The majority of states in Southern Africa have programmes to support small industries whereby the support organisations are dependent on government financing and government policy.

Furthermore, small enterprise business associations seem to have developed in several African countries, encouraging government to consult with the sector on all policy issues and to provide various kinds of assistance to members.

There are various institutions responsible for the development of SME exports in South Africa. Ntsika Enterprise Promotion Agency (NEPA) was the implementation agency for all non-financial entrepreneurial services and facilitated and acted as a wholesaler of delivery programmes to support SMEs.

Khula Enterprise Finance facilitated and expanded access to finance for SME development and promoted growth and prosperity by increasing access to finance for SMEs, particularly those that were previously disadvantaged The National Small Business Council (NSBC) was established in South to promote the interests of the SME sector at national, provincial and local levels and to develop recommendations for national and provincial economic policies affecting SMEs.

As such, Zimbabwe’s government can consider some of these international strategies to increase the competitiveness of its SME exporters. Indeed the country has already implemented some of the strategies such as providing financial support and tax relief.

However, despite these efforts, the SME export sector remains underutilised. It therefore makes business sense to explore other strategies discussed such as connecting exporting SMEs with potential business partners, setting up platforms where SME exporters can be heard, improving the quality and coherence of SME export support and helping the SMEs in dealing with regulation issues.

Further, adoption of new technology and automation, and selection of appropriate technology and machinery which results in better quality products from the SMEs is necessary to improve export competitiveness. SME development strategies can therefore focus on more forceful promotion of international trade.

Dr Roseline Karambakuwa (PhD Economics) is a Lecturer for International Economics (Trade and Finance) at Bindura University of Science Education. Feedback Emails: [email protected]    and  [email protected]

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