We need financial support: SMEs

The Small-to-Medium Enterprises (SMEs) sector has been facing a litany of problems chief among them, lack of access to capital and inadequate government support despite accounting for 50% of the country’s gross domestic product and employing the majority of the country’s population.

NewsDay business reporter, Fidelity Mhlanga (ND) interviewed Small-to-Medium Enterprises Association of Zimbabwe chairperson, Farai Mutambanengwe (FM) to get more insights on the sector. Below are excerpts:

ND: What are the challenges experienced by SMEs?

FM: As far as we are concerned, the challenges are lack of planning, access to markets and funding, capacity building, and some unfriendly policy impediments, lack of incentives and infrastructure and also work spaces.

ND: Are SMEs getting any support from the government?

FM: Yes, but more could be done. The government needs to craft a deliberate strategy aimed at fostering and growing the SME space on a sustainable basis, rather than react or pay attention because the economy has all but decimated.

ND: How many SMEs do we have in Zimbabwe?

FM: According to the last Finscope survey of 2012, there are 2,8 million. I think a new survey is currently being conducted.

ND: How much does the sector require to contribute meaningfully to the economy?

FM: I cannot answer this question accurately, as we have not yet conducted research on this and also because we don’t represent the entire sector. We only represent our own members.

ND: One of the main issues in this climate is that SMEs do not bank their money, how true is this?

FM: I think that is a statement overtaken by events, as the economy is now being pushed into electronic funds transfers due to lack of cash.

Previously, this was the case, as there were no incentives to bank money. In actual fact, one loses money through banking, and gets no benefits, for example loans.

ND: What mechanisms are you putting in place to encourage SMEs to bank?

FM: Our role is not to push SMEs to do anything, but rather to represent the sector. If banks are charging exorbitant bank charges and do not give loans to SMEs, then what is the motivation to bank?

SMEs are rational economic agents and they will not do an activity that does not make business sense.

ND: There are claims that over $5 billion is currently circulating in the informal sector. Can you share with us on how SMEs are currently investing their monies?

FM: Most SMEs are still growing their businesses, and, therefore, they re-invest profits into the business. The amount said to be circulating in the sector is an aggregate annual figure.

Divide that by 12, then divide by the estimated number of SMEs (2,8 million) and it translates to $148 per SME per month.

That is float money, not money that someone can say should be invested somewhere.

ND: What’s your view about SMEs investing on the Zimbabwe Stock Exchange?

FM: As stated above, SMEs are still trying to grow their business. Therefore, whatever money they have, they re-invest.

In actual fact, they are looking for more people to invest money in their businesses to achieve growth. They, therefore, cannot be investing in large companies’ shares, when their own businesses are undercapitalised.

ND: To what extent are SME’s enlightened about the stock market?

FM: I do not believe there is much that the SMEs need to be enlightened on regarding the stock market. I believe it is there for large companies and large investors. It does not affect them.

ND: What do you think should be done to encourage SMEs to list on the mooted Zimbabwe Emerging Enterprise Market?

FM: The promoters need to engage with members and understand what SMEs need and not the other way round, where someone creates something, then expects SMEs to buy into it.
We are still to be informed of the nature of this beast.–newsday