INTRODUCTION
1.6 Statement of the Problem
and its commitment to the SME sector development is demonstrated by the establishment of the Ministry of Small and Medium Enterprises and Cooperative Development (Chivasa, 2014).
In conclusion, to the unlocking of potential for the informal manufacturing SMEs, Qotho Microfinance Advisory Limited (2009), highlights that the panacea to Zimbabwe’s economic problems is to support the informal sector since historically it employed and supported the majority of the people. All stakeholders must work towards achieving this crucial aim for the economy to grow.
inferior in comparison to modern industrial development (Uribe-Echevarria, 1993; Helmising and Kolstee, 2000). The dominant discourse among the majority of the people in the 21st century is that the indigenous people’s way of doing things are outmoded, archaic and out of tune with the modern-day world. However, Zimbabwe, like many other African states have neglected the contribution of the informal SMEs to the advancement of the manufacturing economy (Sibanda, 2005) with the notorious Operation Murambatsvina being directed at pulling the informal economy into formal economy violently.
At independence the Riddell Commission (1981), acknowledged the potential role of the informal sector in employment generation and economic development and prescribed to the new Zimbabwe to promote the sector in order to improve the living standards of the majority of the citizens of Zimbabwe, since urban poverty was on the increase, and many people could not be absorbed by the formal sector. This is despite the Government of Zimbabwe adopting policies such as ESAP, ZIMPREST AND MERP that continued to stifle and suffocate the growth of the informal sector post-independence in 1980.
The post-independence government came up with policies and strategies to deal with the informal sector as enunciated in various policy documents such as ZIMPREST, Framework for Economic Reform (FER) and Economic Recovery Programme (ERP). In addition, the government attempted to address some of the informal sector concerns with the establishment of organisations such as Venture Capital Company of Zimbabwe (VCCZ), Small Enterprise Development Corporation (SEDCO) and the Credit Guarantee Company of Zimbabwe (CGCZ); however, the majority of the policies and initiatives did not turn out to be successful as a result of the unstable macroeconomic environment. In addition, after independence, the Government of Zimbabwe only recognised registered co-operatives and formal SMEs regarding accessing financial support while the majority of individual informal businesses had serious challenges in qualifying for government programmes/funding. As a result, the Government of Zimbabwe has not been able to
Zimbabwe Women Finance Trust (ZWFT); however, the criteria for the selection of the beneficiaries were very rigid and beyond the reach of many informal SMEs owners (ILO, 1985).
Ncube and Phillip (2006) state further that, with over 80% of formal unemployment and with the majority of people (over 80%) are living below the poverty datum line and the informal sector contributing over 60% of GDP in 2005 in Zimbabwe. The informal SMEs can, therefore, be used as a strategy for driving economic growth and development in the country.
The National Policy and Strategy for SMEs in Zimbabwe is a policy document developed by the Ministry of Industry and International Trade with the assistance of the Ministry of Youth Development, Gender and Employment Creation in 2007, which did not manage to realise its aims and objectives because of political, economic and social challenges leaving the informal sector shrinking.
Despite the important functional role performed by the informal sector in employment creation and economic growth, the Government of Zimbabwe, on the other hand, had been marginalising the informal sector, looking at it as useless economic activities, whose contribution to the economy is very negligible. This is evidenced by the nationwide clean-up campaign known as
‘Operation Murambatsvina / Restore Order’. Little recognition for their participation in the national economy was given (Chigwenya and Mudzengerere, 2013). In addition, many government institutions are usually underfunded by treasury (Maunganidze, 2013). As a result, the informal SMEs are often constrained by a number of challenges including but not limited to legal and regulatory requirements and difficulties in accessing finance. The Government of Zimbabwe needs to appreciate the efforts of the informal sector rather than to ignore or thwart the efforts as was the case during the past 30 years where informal economic activities have proliferated at an unprecedented rate as a response to the many socio-political and economic challenges and have become a default position to escape poverty (Ndiweni and Verhoeven, 2013).
Taking into account that informal SMEs significantly contribute to the respective economies globally despite their scanty recognition in Zimbabwe (Gombarume and Mavhundutse (2014), unlocking their potential would improve the struggling and ailing Zimbabwean economy.
Furthermore, the adoption of the multi-currency system by the Zimbabwean government brought about the rapid deterioration in the overall performance of the economy hitting harder on the
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.