Underfunding irks Nyoni

SITHEMBISO Nyoni, the Small-Medium Enterprises (SMEs) minister, is one of Zimbabwe's longest serving Cabinet ministers. But she has the hardest assignment in President Emmerson Mnangagwa's government – picking millions of the country's workers losing jobs and integrating them into economic activity through setting up small businesses. This week, our business reporter, Freeman Makopa (FM) had a discussion with the minister about the development of the sector. Here are the excerpts;

FM: Are you happy with the 2022 budget allocation for the small-to-medium enterprises (SMEs) sector?

SN: Treasury allocated a total of $1 447 355 000 (about US$13,2 million) towards micro, small and medium enterprises (MSME) development in 2022 as compared to $797 300 000 (about US$7,2 million) allocated in 2021. Whilst this is appreciated, the allocated budget is not adequate to fully implement the programmes to capacitate MSMEs into formalised, productive, competitive and export-oriented enterprises. Access to workspace still remains a huge challenge as there is a huge demand for workspaces induced by the rapid growth of the sector against constrained supply. In the 2022 budget, ZW$270 million (about US$2,5 million) has been set aside to facilitate construction of three projects against a proposal of ZWL$450 million (about US$4 million) to construct eight workspaces in eight provinces.

Provision of adequate and modern workspaces is very key in enhancing the productivity and competitiveness of MSMEs. There is also a huge demand for funding by start-ups, growth-oriented and export-oriented enterprises. SMEs in the productive sector also require high capital outlays to enable them to buy equipment and machinery. In terms of funding for MSMEs.

The ministry had proposed a budget of ZW$3,16 billion (about US$27 million) to facilitate funding for MSMEs in the 2022 budget throughout the country and only one ZW$1 billion (US$9 million) was allocated for funding MSMEs. The allocated budget will only support an insignificant proportion of those SMEs that require funding. To this end, the sector requires at least ZW$5 billion (about US$45 million) to fully support the implementation of comprehensive MSME development programmes.

FM: How effective is the Small-and-Medium Enterprises Development Corporation (SMEDCO)?

SN: The Small-and-Medium Enterprises Development Corporation has been pivotal in facilitating affordable funding to growth-oriented MSMEs in Zimbabwe including youth, women and cooperatives. Since the advent of the Covid-19 pandemic, which negatively affected many MSMES, SMEDCO has also been playing a crucial role in providing recovery funding products and services for MSMEs through funding from Treasury.

However, the corporation's role in advancing MSME development in Zimbabwe has been limited by undercapitalisation. The funding allocated by Treasury has not been enough to meet the prevailing demand of funding by MSMES. Capitalisation of SMEDCO will be key in enhancing its role to expand its branch network and adequately meet the high demand for MSME funding. The ministry has also facilitated the full appointment of the board and management in line with the government's corporate governance principles. This will enhance the effective management of the corporation to meet the funding needs of MSMEs.

FM: What plans do you have as a ministry for 2022?

SN: The ministry conducted its strategic planning workshop in October 2021 in Kadoma to develop plans for 2022. Relevant stakeholders from government, private sector and development partners also participated at the workshop to contribute to the ministry's plans. The following are the major programmes planned for implementation in 2022:

Finalisation of Community Development Policy and its implementation, implementation of the broad-based Women's Economic Empowerment Framework, facilitation of financial inclusion and access to markets for women's products, implementation of the National Gender Policy, Implementation Strategy and Action Plan and National Action Plan on Ending Child Marriage, implementation of the 4Ps campaign (Prevention, Protection, Participation and Programmes) on Ending GBV and Anti-Domestic Violence Council Strategic Plan.

The ministry is also looking at the presentation of the Zimbabwe 6th periodic report on Convention on the Elimination of all Forms of Discrimination against Women (CEDAW) before the CEDAW Committee in Geneva, finalisation of the National Strategy for Women in Decision Making, capacity building of MSMEs in business management and technical skills training,  facilitating access to markets for MSMEs through participating at local, regional and international exhibitions such as ZITF, Zimbabwe Agricultural Show and Expo Dubai 2020 and promoting clusters in key subsectors such as clothing and textile, leather, furniture making and light engineering among others.

FM: How many SMEs have benefitted from loans in 2021?

FM: The ministry facilitates funding to MSMEs through SMEDCO and OPEC Fund for International Development (OFID). The number of MSMEs who have benefited under these programmes are as follows: SMEDCO funded 281 MSME projects worth ZW$405 557 982,30 throughout the country in sectors which include manufacturing, agriculture and retail among others. OFID SME project funded 64 MSME projects worth US$2 402 800 in the three provinces. The MSMEs are in the sectors of finance, tourism, livestock and agriculture.

FM: What effect did Covid-19 have on the sector?

SN: Studies have shown that the Covid-19 pandemic has had serious damaging effects on MSMEs due to the characteristics and composition of the sector. Firstly, the majority of the MSMEs operate in the informal sector and most of the informal sector markets and workplaces were closed during the pandemic as they were deemed unsafe and hotspots for the spreading of the virus.

Most of the owners and players lost incomes during this period. Secondly, most MSMEs operate in non-essential sectors that were affected by government restrictive measures and these include trading, retail, services, and transport, cross border trade among others. Most of these enterprises temporarily closed their business consequently contributing to freezing of businesses, depressed demand, and disruption of supply chains and loss of perishable stock. On the other hand, the pandemic created numerous business opportunities for the production and supply of essential products and services including masks, sanitisers, water and medical equipment and innovative SMEs have immensely benefited from these opportunities.

FM: It is believed that SMEs failed to embrace e-Commerce?

SN: The Covid-19 pandemic greatly exposed a number of MSMEs implementing traditional marketing models in their operations. When non-essential markets were closed, these enterprises experienced reduced demand. On the contrary, MSMEs who had adopted and established digital marketing systems in their operations including e-Commerce, including social media thrived during the pandemic as they could access new markets and customers beyond the restricted physical markets.

The ministry has reviewed the MSME Policy Framework (2020 – 2024) and promoting the adoption of e-Commerce has been regarded as key in promoting market development for MSMEs. Various other initiatives are being undertaken to facilitate the adoption of e-Commerce and these include implementation of the Comesa supported 50 million African Women Speak Programme that will facilitate provision of up-to-date online information on local, national and regional markets. This has opened opportunities for women entrepreneurs to tap into the opportunities presented by the Comesa free trade area.

FM: Local authorities are said to be milking SMEs. Tell us about this.

SN: The nation is experiencing huge demand for MSME workspaces owing to the rapid growth of the sector. The situation is being worsened by constrained supply of workspace as a result of limited investment and spatial development and regulatory framework bottlenecks. Resultantly, the shortage creates an opportunity for property owners to seek economic rents. Government through the ministry has taken a huge step in collaborating with local authorities and development partners in constructing organised, affordable and modern workspaces to redress the existing bottlenecks.

The Ministry in collaboration with UN Women recently launched the Epworth Safe Market where over one hundred women traders have benefited from safe and decent workspace. Various projects are currently underway in Harare, Bulawayo, Gweru, Chikomba and Gwanda. In 2022, the ministry has planned for construction of MSME workspaces in Mutare, Masvingo, Bindura and Chinhoyi among other areas. Such a programme will go a long way in easing the workspace challenges.

FM: How much does the SME sector contribute to the national fiscus?

SN: According to Zimbabwe Revenue Authority (Zimra), MSMEs contribute around 23% to tax revenue. In an effort to increase SMEs contribution to the fiscus, the ministry is working with relevant regulatory authorities to enhance the operating environment for MSMEs, consequently promoting formalisation. Key strategies that are being pursued include:

Undertaking the MSME survey to assess the scope of the MSME including size, contribution to employment and GDP and challenges to guide evidence-based policies and programmes.

Formulating the Formalisation Strategy together with the Ministry of Public Service, Labour and Social Welfare to guide the efforts towards the formalisation of the informal sector in Zimbabwe.

Facilitate the review and simplification of the tax system to promote compliance among MSMEs.

Review the business registration processes to mainstream MSMEs.