SMALL and medium enterprises (SMEs) must consider pooling their resources through internal savings and lending arrangements so that they raise more capital to grow their business, a Cabinet Minister has said.
Over the past years, SMEs were failing to boost their operations due to limited lines of credit as a result of economic hardships experienced in the country that were caused by illegal sanctions that were imposed by Britain and its Western allies.
Speaking during the official opening ceremony of Hatcliffe Extension Factory Shell, SMEs and Cooperatives Development Minister, Sithembiso Nyoni said internal savings and lending arrangements have averted the collapse of many small business initiatives in the country.
“Funding for SMEs is one of the major challenges in the country, a situation that has affected the growth of many micro businesses,” she said.
“I therefore, encourage SMEs to thwart individualism and start to work together in boosting their operations.
“In most areas where the programme has been implemented, the SMEs have managed to construct their own buildings, share skills and acquire new equipment.”
Despite poor funding of SMEs, the Zimbabwean economy has remained largely informal, dominated by SMEs, with analysts urging Government to come up with strategies to organise and generate revenue from it.
Last year, ZIMSTAT revealed that at least US$1,7 billion was generated in the sector with the bulk of the volumes earned through resale of purchased goods. However, the sector was criticised for evading taxes, a situation that has continued to constrain the economy.
In April this year, Government announced that it was working on a cocktail of measures to formalise SMEs so that they pay taxes and directly contribute to economic growth. Nyoni said there was need for SMEs to formalise their operations so that they contribute to boost the growth of the country’s revenue base through paying taxes.
She said by formalising operations, SMEs would also be easily recognisable in the mainstream economy to boost their businesses.
“SMEs should not be afraid of registering their businesses as the move has a lot of merits in boosting their profits and capital,” she said.
“If most SMEs are registered, their identity will change and become recognisable in big business operations such as getting tenders and contracts from huge companies.
“Registered SMEs are also prioritised for available funding from the Government and access to bigger markets because they have shown their high level of seriousness in growing their operations.”
At least more than 20 SMEs are set to benefit from the Hatcliffe factory shell that includes six big rooms to work from, borehole and sewer services installations.
The building that is valued at US$200 0000 was constructed by the Government in partnership with American Friends Services Committee, Zimbabwe Women’s Bureau and Silveira House.
Minister Nyoni said development of infrastructure for small business ventures was fundamental in improving the working conditions of SMEs that was affecting the quality of their products.
“My ministry identifies appropriate infrastructure as one of the major drivers for SMEs growth and development, however, as government we can not do it alone,” she said.
“These SMEs are going to be working from this factory shell which indeed is a decent workplace where their products will not be affected by the rains or the sun and is easily accessible to their customers.
“This will further improve the quality of the products of these SMEs.”
Recent surveys have shown that at least a quarter of the Zimbabwean population is employed in the informal sector estimated at 3,7 million out of the total 12,9 million, which remains an anchor of the economy.
Statistics released last year by the Poverty Income Consumption and Expenditure Survey showed that the informal sector contributed 19,5 percent to the Gross Domestic Product last year.
With challenges facing economic revival efforts in Zimbabwe, the informal sector is expected to remain shouldering the economy.