16 Oct 2019

Even though considered small by virtue of their limited resources and capabilities, Small and Medium Enterprises (SMEs) have proved to be at the epitome of diversifying the economies of developed nations.

The International Labour Organisations (ILO) in its 2015 report on SME titled: Small and Medium - sized Enterprises and Decent and Productive Employment Creation, has stated that there is empirical evidence to confirm that SMEs are a major source of employment.  

However, the report also revealed that the diversity of the SME sector is making it difficult to formulate relevant policies.

Furthermore, data presented from developed countries indicates that the entrepreneurial activities and the corresponding employment creation are more closely related to the age of the enterprise.  

The ILO report says the three biggest constraints of SMEs across countries where the study was based are access to finance, access to electricity and competition from informal enterprises.

Locally, SME are equally hailed as major contributors to the development of the economy.

A study undertaken by Citizen Entrepreneurial Development Agency (CEDA) and Botswana Institute for Development Policy Analysis (BIDPA) in 2007 titled: Performance and Competitiveness of Small and Medium Sized Manufacturing Enterprises in Botswana, has established that the development of manufacturing SMEs has the potential to diversify the economy.

Despite their importance in tweaking the economy, the CEDA and BIDPA report has further revealed that SMEs performance in the Botswana economy, especially on the manufacturing of goods for export, is limited.

The study believes that SMEs contribution to the economy is specifically hampered by, among others, lack of information and publicity on the available SME programmes, administrative bottlenecks that SMEs encounter when they want to register as companies and the limited commercial banks financial support, which makes them solely dependent on government for support.

The study has also realised that ‘SMEs’ lack of access to reliable and bigger markets, which is due to their inability to produce larger output and thus satisfy large domestic and foreign markets, unless they are organised into clusters’ also hampers their growth and contribution to the economy.

However, all is not lost as the United Nations Development Programme (UNDP) has realised the significant role played by SMEs in the growth of the economy and sustenance of livelihoods and therefore established a tool aimed at addressing their challenges.

UNDP Botswana, together with its local partners, has started rolling out a Business Suppliers Development Programme (SDP) to support the private sector.

UNDP says the SDP is scripted in line with similar successful programmes implemented by the organisation in South America and Asia. The SDP is intended to capacitate SMEs in Botswana for their growth and sustainability.

UNDP Resident Representative, Ms Jacinta Barrins recently revealed at a gathering to rollout the programme in Palapye that the SDP engaged large scale companies that were potential consumers of the goods and services offered by SMEs.

The programme will facilitate a business relationship with identified and capacitated SMEs, she said.

“The idea is to assist SMEs to become valued businesses in different value chains and to be more efficient and competitive suppliers,” said Ms Barrins.

She said the five year programme would support government in its quest to diversify and sustain the economy as SMEs drive the economy.

“We must think of how to support them,” she said. Ms Barrins said the UNDP has been running the SME support programme in Southern Africa for the past 20 years.

“The programme is designed to offer unique business training to SMEs. We want to establish substantive working relationships between SMEs and large scale enterprises. They must be willing to consume products and services of SMEs,” she said.

She said UNDP must build and support a relationship between SMEs and large scale companies, adding that the programme engaged expertise of reputable business consultants to mend the relationship.

“About 30 consultants have been trained to guide the relationship of SMEs and potential consumers of their products and services. Our findings have revealed that the model will work for Botswana,” she said.

Ms Barrins said the SDP would focus on the sectors of mining, projects (Infrastructure), agro-processing, leather works and textile and fully explore their value chain for the benefit and growth of SMEs.

“Since the inception of the programme 18 months ago, she said, the focus is now on mining.

Through our consultants, we have identified SMEs providing services and products relating to the industry and have linked them with different mines in the country, she said.

“As UNDP, we want to continue working with the government of Botswana, through the SDP to support growth of SME, diversify and grow the economy, promote consumption of locally produced goods and cut on imports,” she said.

Ms Barrins said to date the SDP had trained and linked 46 SMEs with seven companies in mining as well as trained business consultants who were assigned to link SMEs with different sectors in the value chain of the identified sectors.

She said SMEs under the programme were happy with the benefits of the programme and that UNDP was also on working on establishing a working relation between SMEs and financial institutions as it had been identified that they had a challenge of accessing funds to grow their businesses.

Officiating at the event, Minister of Mineral Resources, Green Technology and Energy Security, Mr Eric Molale said government was committed through formulation of relevant policies and financial support programmes to assure the growth of SMEs.

He applauded the UNDP for establishing a programme that would not only link SMEs with potential consumers of their products and services, but was also in line with government’s efforts of promoting the consumption of locally produced goods and services, also increasing on their quality and thus satisfying exportation to the global market.

Mr Molale said the SDP represented a dawn on the future and the economy of the country, which would be driven by the knowledge of its people rather than relying heavily on the resources.

He said the people must use their knowledge to grow and sustain the economy.

He also applauded the programme of linking SMEs with the mining industry.

“The mining industry, when its value chain is fully exploited, can produce multimillion Pula SMEs in twelve months. Let us join hands and build a robust growing and sustainable economy by 2036. It is possible.

Most of the world billionaires started operating from the back yard,” Mr Molale said.

He said President Dr Mokgweetsi Masisi encouraged people to fully utilise the land they possess to diversify the economy, adding that land must be viewed the primary source of wealth.

“Let us give SMEs the leverage to become creative and grow,” he stressed.

SDP Project Manager, Ms Tumi Mbaakanyi said Botswana Chamber of Mines had played a significant role in linking the SMEs with the mines that are now consuming their products and services.

“We started the programme with the mining industry, and our next attention will be on leather and textile industries, Ms Mbaakanyi said, adding that the programme was based on a tripartite approach involving the SMEs, business consultants and the consumers of local products and services.

She said the SDP sought to establish an effective supply chain to ensure sustainability of SMEs and also focused on projects with the potential of adding value to the business sector they are in, able to create employment and diversify the economy.

She said the SDP also empowered youth and women owned projects.

Common findings of the SDP are that SMEs in Botswana have the biggest challenge of accessing financial assistance, while cash flow, expansion capital and profitability are some of the challenges for SMEs.

Ms Mbaakanyi said access to market was also a hindrance for the local SMEs and therefore the SMEs attached under the programme were guaranteed a market for their goods and services.

“Consistency in producing quality goods and services is also a challenge for SMEs,” she said.

Botswana Ash (Botash) Managing Director, Mr Kangangwani Phatshwane said the company spent around P900 million annually on procurement of goods and services.

Mr Phatshwane said suppliers attached to Botash through SDP in the past 18 months had benefited P3.5 million.

He said the programme was directed at addressing challenges of SMEs. ENDS