INTRODUCTION
1.7 Aim of the Study
informal sector activities have become strategic for Zimbabwe since they enabled the country to survive the worst economic crisis through providing livelihoods to the mass population.
With research supporting that SMEs are major drivers of economic growth (Abor and Quartey, 2010; Chidoko, Makuyana, Matungamire and Bemani, 2011; Muriithi, 2017), observe the rate at which SMEs have been failing, have been increasing at a very high rate with significant negative impact having been witnessed on economic growth. Cronje and Smith (1992), highlight that the survival of SMEs in Asia, Latin America and West Africa is 50% while in Southern Africa (inclusive of Zimbabwe) and Eastern Africa it is 10%. This shows evidence of major discrepancies in the manner in which SMEs are managed, especially in Southern Africa.
Chigwenya and Mudzengerere (2013), argue that many African governments have failed to revamp this sector with the majority of them just giving what they call ‘lip service’. In Zimbabwe the informal sector, although being the larger employer, lacks recognition, low levels of coordination and organisation, lack of adequate financing, lack of networking and accessibility to markets, and poor infrastructure and technology and lack or inadequate government-initiated programmes to assist the informal small enterprises hindering them from achieving their full potential (Njaya, 2015). However, the potential of informal SMEs has to be transformed, nurtured and supported in order to get most of them from informal activities so they can become formidable forces in many ways such as contributing to economic growth, employment generation and a major source of livelihood for the majority of the people, that way alleviating poverty (Chidoko et al., 2011). The situation in Zimbabwe calls for a locally-driven solution to improve employment generation and economic growth and development.
c. To assess the role of informal manufacturing SMEs in economic growth and development in Zimbabwe.
d. To assess the role of informal manufacturing SMEs in employment creation in Zimbabwe.
e. To develop a business model for unlocking informal manufacturing SMEs’ potential in Zimbabwe.
1.7.2 Research Questions
The researcher was guided by the following broad questions:
What are the challenges faced by informal manufacturing SMEs in Zimbabwe?
Do economic programmes/initiatives by the government effect the development of informal manufacturing SMEs in Zimbabwe?
What is the role of informal manufacturing SMEs in economic growth and development?
What is the role of informal manufacturing SMEs in employment generation in Zimbabwe?
What does the business model look like for unlocking informal SMEs in Zimbabwe?
1.7.3 Significance of the Study
Studies conducted on SMEs progression in many developing nations (Rasmussen, 1992; Tevera, 1998; Migiro, 2005), have mainly focused on problems such as financial, social, and institutional with much negligence on the contribution of informal SMEs to the developing economies, especially the important role played by the informal manufacturing industry in an African economy.
Africa needs to increase the research output capable of producing information relating to the essential contribution of the informal manufacturing SMEs and strategies on how their full potential can be realised. According to Becker (2004), suitable policy frameworks and models aimed at informal sector development must be developed without disturbing the role of the informal sector towards employment generation and economic growth. Chen (2012) argues that the informal economy is crucial to sustainable economic growth and poverty reduction.
This study extends the literature on the informal sector development and economic growth and also develops a model/framework that will harness informal sector potential now and prevent the
The study is timely and significant given the slow growth rate of informal manufacturing SMEs converting into formal SMEs and the many challenges faced by the informal sector in Zimbabwe (Buguit, 2015). Similar studies have been done in the Southern African Development Community (SADC) region and in Africa at large to explore the challenges faced by informal manufacturing SMEs but no studies have been done with a view of coming up with a business model that can be used to unlock their value. In addition, Joubert, Schoeman and Blignaut (1999), concluded that the fact that the informal sector in many African countries is labour-intensive, the promotion of the informal manufacturing sector would result in the generation of higher levels of employment and would overall give rise to the level of knowledge and skills required in the Zimbabwean economy.
1.7.3 Scope of the Study
There is growing and renewed interest in the informal economy globally. The renewed interest emanates from the realisation of the connections that exist between informality and growth and also the interlinkages between informality, poverty and inequality (Daniels and Ngwira 1993;
World Bank, 1993; World Trade Organization, 1998; Mitullah, 2003; Katua, 2014). The informal economy has significantly grown in size worldwide and also started in new guises and unexpected places especially in Zimbabwe. Globally, this is because the world was hit hard by the global recession which indirectly led to the expansion of informal employment (Horn, 2009).
The study covered the period of SMEs that started from 1980 to 2016 and was limited to informal SMEs in the manufacturing sector (Appendix 1: Categories of the Informal Manufacturing SMEs), officials from the Ministry of SME and Cooperative Development, officials from Small Enterprises Development Co-operative (SEDCO), representatives from the Informal Business Association in Zimbabwe (IBAZ), officials from National Informal Sector Association (NISA), officials from the Zimbabwe Chamber of Informal Economy (ZCIEA), representatives from
this study seeks to capture about the fact that a significant portion of the informal global economically active population. SMEs that adds to the world-wide economy operates below their maximum capacity, face serious challenges and also remain outside the protection and regulation of the governments, and Africa is no exception.