LIST OF ACRONYMS AND ABBREVIATIONS
CHAPTER 3: SMEs IN THE ZIMBABWEAN CONTEXT
3.7 INSTITUTIONS, POLICIES AND STRATEGIES TO ADDRESS SME CHALLENGES CHALLENGES
3.7.2 Government partnership with other countries and non-governmental organisations organisations
The Zimbabwean government realised that they could not successfully promote the growth of SMEs alone, and have therefore partnered with other governments and NGOs. Assistance rendered to SMEs in Zimbabwe has been in the form of equipment, finance, and training, and countries that have been instrumental in supporting Zimbabwean SMEs include China, India, and France (GoZ, 2008; Dube, 2011; NewsDay, 2011a; ZMIC, 2011; Kazunga, 2013;
Mandizha, 2014). The UN through Empretec have played a critical role in promoting SME growth in Zimbabwe (Empretec, 2011). Foreign development financial institutions that have funded Zimbabwean SMEs are the China Development Bank (CDB), the Arab Bank for Economic Development in Africa (BADEA), and Promotion et Participation pour la Co- operation Economique (PROPARCO) (Dube, 2011; GoZ, 2015).
3.7.2.1 Government partnerships with other countries
Zimbabwe and India signed a Memorandum of Understanding in 2006 in which the Indian government promised US$5 million for the development of SMEs in Zimbabwe (GoZ, 2008).
Equipment to the value of US$4 million was procured from India to be used by SMEs. The project was initiated by the GoI, and was embraced by Zimbabwe (ZMIC, 2011). The project aims to achieve technology transfer through the introduction of new technologies in the areas of carpentry and metal fabrication, and also aims to give SMEs access to machinery that individuals cannot afford. The Indo-Zimbabwe technology centres were first established at the Harare Institute of Technology, the Bulawayo Polytechnic College, and SMEDCO’s Chitungwiza factory shells (GoZ, 2008; Kangondo, 2012). More technology centres have been established in Chinhoyi, Harare, Bulawayo, Gokwe, Marondera, Magamba, Plumtree, and Lupane for the purpose of assisting SMEs in product development (ZMIC, 2011).
The training centre at the Harare Institute of Technology offers SMEs the opportunity to access training in technology programmes to improve their skills and knowledge affordably
163
(GoZ, 2008; Kangondo, 2012). The GoI dispatched a team of experts to assist with training and to ensure the proper transfer of technology to SMEs in the manufacturing sector. The quality of the products manufactured by SMEs, like furniture and grinding mills, has significantly improved (ZMIC, 2011), and companies are going to the Indo-Zimbabwe Technology Centre (Harare Institute of Technology) to source spare parts for machinery. This is in line with the Medium-Term Plan (2011–2015), which seeks to establish industrial incubation centres to enable the development of innovations in collaboration with universities and research institutions.
The GoZ, through the MSMECD, has also entered into an agreement with India’s NSIC to establish an incubation centre (Daily News, 2012; Mandizha, 2014). The incubation centre is worth US$2 million and is intended to transfer technology to SMEs (Kazunga, 2013;
Mandizha, 2014; Maromo, 2015). This agreement was mentioned in the 2013 National Budget Statement in which the Ministry of Finance indicated that the government was working jointly with the GoI in facilitating the transfer of technology through incubation (Daily News, 2012). For the establishment of the India-Zimbabwe Africa Incubation Centre (IZAIC), the GoZ has contributed US$1 million and India has contributed the same amount (Mandizha, 2014). Mandizha (2014) observes that the centre is meant to promote technology transfer in southern Africa, and focuses on manufacturing SMEs (Maromo, 2015). The incubation centre covers 27 disciplines whose projects include baking, manufacturing toilet paper, canning tomatoes, drying vegetables, making plastic containers, and making solar panels (Kazunga, 2013; Mandizha, 2014; Maromo, 2015). Such a facility reduces the cost of starting a new business, and reduces the chances of the business failing, as advisory services are provided and SMEs are introduced to world-class technology (Tsai et al., 2009;
Kangondo, 2012; NewsDay, 2012). Studies conducted in the U.S. reveal that 87 % of businesses that go through an incubation process persevere and ultimately succeed in business (Kangondo, 2012).
In 2011, the China Development Bank (CDB), a wholly Chinese government-owned financial institution, extended a credit facility of US$30 million to the IDBZ for the support of SMEs in Zimbabwe (Dube, 2011). Such assistance is a result of socio-economic and political co- operation between the governments of China and Zimbabwe. US$10 million of the loan was intended for capital expenditure that benefits SMEs, while US$20 million was intended for working capital (Dube, 2011; NewsDay, 2011b). Loans were disbursed to SMEs at an interest rate of 10 % per annum for a period of five years. The repayment period provided SMES with a form of long-term finance. However, the bank requirements were so stringent that some SMEs could not access the loans (Dube, 2011). Dube (2011) further notes that SME owners
164
loyal to the ruling party, ZANU PF, were the ones who were able to access the loans.
Therefore, SME owners who were non-partisan or were inclined towards the opposition could not access the loans. This excluded SMEs that could effectively contribute to the country’s economic development.
3.7.2.2 Government partnership with non-governmental organisations
Another strategy that has been adopted is the creation of strategic partnerships with NGOs to support the SME sector, after the government realized it could not effectively address all the challenges faced by SMEs alone. According to the MSMECD (ZMIC, 2012), resources are being mobilised through partnerships with the private sector and NGOs in an endeavor to address the financial challenges confronting small-scale farmers and agri-businesses. SME support has become the shared responsibility of the MSMECD and TechnoServe in relation to the provision of financial support to the small-scale farmers and agri-businesses (ZMIC, 2012).
Further partnerships have also been forged with Empretec Zimbabwe, an NGO that was established in 1992 (Empretec, 2011) by the UNDP and the GoZ. As explained in its policy document, the mandate of Empretec is to develop an entrepreneurial culture among the people and to work closely with the relevant government ministries (UNCTD, 2012). Empretec is engaged in the entrepreneurship development process in Zimbabwe and is always in dialogue with ministries such as the Ministry of Economic Planning and Investment Promotion, the MSMECD, and the Ministry of Education. Empretec Zimbabwe has assisted women in the arts and culture sector to penetrate foreign markets through designing proposals for women- empowerment programmes (Empretec, 2011).
In its efforts to assist SMEs in Zimbabwe, Empretec has achieved spectacular successes that includes the training of 15 000 entrepreneurs (85 % of whom have established vibrant businesses or have expanded them, and 35 % of whom are exporting goods), and creating over 20 000 jobs (Empretec, 2011). Therefore, since 1992 many of the entrepreneurs who are successful today have passed through the hands of Empretec Zimbabwe. Empretec has started training youth aged 18–35 years so that they can impart entrepreneurial skills. The partnership with Empretec has therefore managed to yield meaningful results. Therefore, this strategy can be considered a success (Ncube, 2013).
Some foreign development finance institutions have partnered with the Zimbabwean government to support the SME sector. PROPARCO, a French development finance
165
institution which is owned by the French Development Agency and some private shareholders, has provided financial resources for the development of Zimbabwe’s SMEs (GoZ, 2015). In 2014 the institution provided loan facilities to the National Merchant Bank of Zimbabwe Limited (NMB) and the Central African Building Society (CABS) worth US$20 million for the support of SMEs (GoZ, 2015). The loan facilities, which are five years in duration, have provided much needed long-term financing for the growth of SMEs.
The Zimbabwean government has also sourced funds from foreign international financial institutions in order to fund SMEs. One such institution is the Arab Bank for Economic Development in Africa (BADEA). BADEA is an independent international financial institution that is owned by eighteen Arab countries in the League of Arab States. In February 2011, the GoZ entered into an agreement with BADEA for a loan facility of US$5 million (GoZ, 2015). The government and the Commercial Bank of Zimbabwe (CBZ) were to contribute US$5 million each to the SME fund so that the amount available for loans to SMEs would be US$15 million (GoZ, 2015). At the end of September 2014, SMEs received a total of US$7 884 204 from the loan facility (GoZ, 2015). Table 25 below illustrates the distribution of the funds to SMEs per sector.
TABLE 25. DISTRIBUTION OF BADEA PARTNERSHIP LOANS TO SMES PER SECTOR
Sector Amount (US$)
Agriculture 4 954 704
Manufacturing 1 172 500
Services 835 000
Distribution 372 000
Tourism & hospitality 345 000
Construction 205 000
Transport
Total amount 7 884 204 Source: CBZ Limited, cited in GoZ (2015: 59)
166
The information in Table 25 indicates that the agricultural sector received the largest portion of the amount, which could be considered appropriate since the Zimbabwean economy is agri-based and 65 % of the population is located in rural areas where they depend on the land for survival (ZimStat, 2012). In the urban areas, the government is placing a great deal of emphasis on the manufacturing sector to boost the economy. Therefore, SMEs in the manufacturing sector received more than the other sectors operating in urban areas. The transport sector could not benefit from the loan facility. Table 25 indicates that the GoZ’s partnership with BADEA has assisted SMEs through funding.