LIST OF ACRONYMS AND ABBREVIATIONS
CHAPTER 3: SMEs IN THE ZIMBABWEAN CONTEXT
3.3 AN OVERVIEW OF SMES IN ZIMBAWE
3.3.1 The location of Zimbabwean SMEs
SMEs are found in both the rural and urban areas of Zimbabwe. Though SMEs have similar characteristics, there are some differences between SMEs in rural areas and those in urban areas. The FinScope survey of 2012 reveals that 34 % of Zimbabwean SMEs operate in urban areas, while the majority of them (66 %) are located in rural areas. Rural areas, in the eyes of the government, are regarded as the ‘bedrock’ of Zimbabwe’s economic development.
128 3.3.1.1 SMEs in rural areas
Approximately 70 % of Zimbabwe’s population lives in rural areas (ZimStat, 2013a). SMEs in rural areas are mainly involved in agriculture and mining, although some are involved in other activities (Bohwasi & Mukove, 2008; RBZ, 2006a). Approximately 86 % of all Zimbabwean women live in rural areas, where they do more than 70 % of all agricultural work (GoZ & UN, 2010). Rural SMEs that are involved in agriculture include poultry farmers, market gardeners, cash crop farmers, dairy farmers, cattle ranchers, tobacco growers, cotton farmers and other plantation farmers (Bohwasi & Mukove, 2008). Rural SMEs are also involved with small-scale mining, leather processing, safari tours, brick moulding, retail shops, and peanut butter production (RBZ, 2006a). There are also some SMEs in the transport sector (Kodero, 2005). These businesses, in most cases, are owned by families.
Most rural SMEs are excluded from the financial system since commercial banks are concentrated in urban areas (RBZ, 2007b; Matunhu & Mago, 2013; Zimbabwe Economic Policy Analysis and Research Unit (ZEPARU), 2013). Approximately 83.8 % of the microfinance institutions are located in Bulawayo and Harare, and only 16.2 % in smaller towns and growth points (RBZ, 2013, cited in ZEPARU, 2013). This means that SME operators in rural areas have limited access to microfinance institutions as well.
Commercial banks are highly concentrated in urban areas and tend to avoid rural areas due to the high costs of running a rural branch, the poor communications and transport infrastructure, the fact that deposits are made on a seasonal basis, and the fact that people do not have collateral for loans (Herald, 2011, cited in Matunhu & Mago, 2013). Given that they suffer from a form of financial exclusion, it is difficult for people in rural areas to access credit from commercial banks (Chronicle, 2013). That is the reason why community cooperative banks, known as Savings and Credit Cooperatives (SACCO banks), have been established with the help of the Ministry of Small and Medium Enterprises and Co-operative Development in partnership with the Co-operative for Assistance and Relief Everywhere (CARE) International (Ministry of Women Affairs, Gender and Community Development (MWAGCD), 2012). For example, in Mubaira, in the Chegutu District of Mashonaland West Province, a SACCO bank was established in around 2000 (MWAGCD, 2012). In Chirumanzu in Masvingo Province, the Chirumanzu-Zimbabwe Women’s Savings and Credit Co- operative Society was officially opened in July 2014 (Chronicle, 2013). These small banks were established to provide development capital for SMEs. The SACCO banks have been helpful for local SMEs, especially for those owned by women and youth (MWAGCD, 2012;
Chronicle, 2013). To date, there are 329 SACCO banks across Zimbabwe with 2 096 members, and women constitute approximately 86 % of their membership (MWAGCD,
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2012). These women are also provided with basic business management training. SMEs that are supported include those involved in mining and agri-based activities (MWAGCD, 2012).
Transport and communication infrastructure is poorly developed (World Bank, 2006, cited in Zimbabwe Institute, 2007). There are gravel roads which are rarely serviced. Delivery vehicles find it difficult to transport goods to rural areas (Mambula, 2002; Kazooba, 2006).
This has adversely affected the development of rural SMEs in Zimbabwe. Some areas do not have telephone communication networks, and this affects retailers who need to order stock and have it delivered from urban areas (Mambula, 2002; Kazooba, 2006).
3.3.1.2 SMEs in urban areas
SMEs in urban areas are mainly found in the city, in high- and low-density residential areas, and light- and heavy-industrial areas. Some of them operate in wooden shelters in open spaces and designated areas. Most of these SMEs are clustered, for example those at Glen View Furniture Complex (Chipangura & Kaseke, 2012). These businesses are usually family- owned and run. SMEs in urban areas mainly concentrate on, but are not limited to, furniture manufacturing, catering, food processing, chemical manufacturing, clothes manufacturing, business services, brick moulding, retailing, engineering, motor mechanics, welding, hair salons, fence making, manufacturing and mending shoes, as well as sculpting, poultry production, market gardening, and pig production (Mbiba, 2001; RBZ, 2007a; Kutiwa et al., 2010).
Urban SMEs have formed very powerful associations that represent them to the government and assist with the dissemination of information to the member SMEs. Those who are involved in cross-border trading have formed the Zimbabwe Cross-Border Traders Association (ZCBTA); SMEs in Harare have formed the Harare Chamber of Small and Medium Enterprises (HCSME), and SMEs at the Glen View Complex have formed the Glen View Furniture Complex Association (GFCA) (Chipangura & Kaseke, 2012).
SMEs in urban areas use technology in manufacturing and providing services much more than rural SMEs in Zimbabwe (Dube et al., 2010; Mashanda et al., 2012), and ICT is used in urban areas more than in rural areas. This creates a gap between rural and urban SMEs. Therefore, geographical location plays a role in determining the type of SME and the pace of development.
130 3.4 THE ROLE OF SMES IN ZIMBABWE
Currently, SMEs are an indispensable element in the socio-economic life of Zimbabweans.
This is because they provide employment and contribute to economic growth (Chirisa et al., 2012; Zindiye et al., 2012), they stimulate competition in the market for the benefit of consumers (Chingwaru, 2014), they initiate the development of technology (Dube et al., 2010), and they provide women and youth with opportunities to participate in the economy, as well as alleviate poverty (GoZ, 2012). SMEs have also played an important part in the indigenisation of the economy (Chingwaru, 2014). Realising the importance of SMEs in the country’s economy, the Zimbabwean government has taken measures through policies, strategies and programmes to promote the sector. This section provides a description of the role of SMEs in Zimbabwe.