THE PRIME MOVER OF SMEs FOR ECONOMIC TRANSFORMATION.
Small, Medium Enterprises (SMEs) is a very fascinating subject. Other countries include Micro Enterprises to make it MSMEs.
Oftentimes people just hear mention of it with very little effort of taking time to read about it and understand what SMEs or MSMEs are. This writer being one of them. The Act Establishing SMEs in Zambia has been with us since 1996. With a bit of time on my side now I have made some effort to explore the subject of SMEs and understand what this sector is. My area of interest was to relate SMEs to the debate that has been with us since the 1990s namely EDUCATION FOR ALL.
The writer attended the first World Conference on Education For All in Jomtien Thailand in 1990 and the follow up conference in Dakar Senegal in 2000. The subject of Education For All has been of interest to the writer. Reading about SMEs has added further insights on the relevance of Education for All to the global efforts of developing SMEs.
2. SYNOPSIS OF WHAT SMEs ARE.
The best way of understanding what SMEs are is to take a global picture of how various countries understand them and the value they attach to the sector. It is out of such an understanding that one will be able to know that SMEs are in fact the backbone of the economies everywhere. In the case of Africa SMEs are the foundation of economic transformation leading to wealth creation, employment opportunities, poverty reduction and economic freedom. President Ramaphosa was right when he stated that economic transformation which benefits all people, that is, an inclusive economy, is only possible through support of the Micro, Small and Medium Enterprises. What President Ramaphosa alluded to is the fact that it is in the MSMEs that the solutions to the economic miseries we see today lie.
From the standpoint of the problems faced by SMEs in countries like ours, it is evidently clear that EDUCATION FOR ALL is one of the major strategic solutions to their success. This is the motivation why this article focuses on Education For All: THE PRIME MOVER OF SMEs FOR ECONOMIC TRANSFORMATION. The writer is of a strong view that without effective and efficient SMEs there cannot be meaningful economic transformation. Further education is the bedrock of the success of SMEs.
Available literature on SMEs from various countries brings out interesting perspectives about the central role they play in the economies of both developed and developing countries. The criteria of what constitutes SMEs vary between developed and developing countries. What is generally acknowledged to be true across all countries is that SMEs are the backbone of the well being of all economies the world over.
In the UK, SMEs are considered to be the heart of the economy and they make up 99.9% of the business population or 5.5 million small businesses accounting for three fifths of employment. SMEs in South Africa account for 91% of the businesses, 60% of employment and contributes 52% of the total Gross Domestic Product (GDP). President Ramaphosa described the entrepreneurs in the SMEs sector as the heroes of the economy, they are key to the development of the enterpreneurship spirit, innovation and the enterpreneural culture.
In Nigeria SMEs make 96% of the businesses, 84% of employment and contributes 48% of the total GDP. Kenya reports that 98% of the businesses are SMEs, they create 30% employment annually and account for 40% of the total GDP. In Malaysia SMEs including Micro Enterprises account for 97% of the businesses and 48.1% of employment. The SMEs in Ghana are defined as the backbone of the economy forming about 90% of the registered businesses with 70% contribution to the nation’s GDP.
Between 2012 and 2020 SMEs in China were considered to be one of the major forces driving the economy with an annual growth rate of 10%. The number of SMEs by 2019 in that country was 38 million. A two weeks study tour of China by the writer in 2005 was an eye open on how SMEs operate in that country. It was possible to see small gardens where farmers produce flowers, different types of vegetables, ponds for production of pearls, small industries for production of various artifacts and so on. The key to SMEs in China is specialization and commitment to quality products.
The SMEs in Singapore constitutes 99% of the business enterprises, employing about two thirds of the labour force and contributing nearly 50% of the country’s GDP. The major problem of the SMEs in Singapore is the ability to innovate inorder to meet customer demands in the digital technology economy. SMEs are under pressure to be innovative inorder to meet customer expectations and remain competitive.
Kenya and Malaysia have grouped this sector into Micro, Small and Medium Enterprises. The defining criteria of these categories in Kenya are:
Micro Enterprises: Employs less than 10 people with an annual turnover of not more than $5,000.
Small Enterprises: Employs 10 to 49 people with an annual turnover of $5,000 to $50,000.
Medium Enterprises: Employ 50 to 99 people with an annual turnover of $50,000 to $8million.
Kenya’s classification of the the MSMEs is similar to that of Malaysia.
Rwanda reports that what is driving the country’s economic growth are the Small and Medium Enterprises which accounts for 98% of the businesses and 41% of private sector employment. Rwanda’s vision 2020 gave special attention to SMEs by inviting all stakeholders namely government, development partners and the private sector to play their part in strengthening them.
Zambia has a low number of registered SMEs. The contribution of SMEs to the GDP is equally low when compared to other countries on the continent. According to available records, there are 66,000 registered business entities in the country and 99.5% are SMEs contributing 11% to the GDP. Zambia’s SME sector is indeed low when compaired to Kenya where the estimated number of MSMEs is more than 7 million and 1.5 million are officially registered.
The brief survey of SMEs can be summarized in the following statement from the Centre for Strategic and International Studies:
“SMEs are the backbone of the World economies accounting for most of the businesses across nearly every region. In the developing World, SMEs make up to 90% of the private sector and create more than 50% of jobs. In Africa SMEs provide an estimated 80% of jobs across the continent representing an important driver of economic growth. Sub Saharan Africa alone has 44 million Micro, Small and Medium Enterprises almost all of which are Micro.. “
What is generally recognized the worldover is that SMEs are the engines of economic growth, wealth creation, poverty reduction, employment generation and inclusive economies. Solutions to the challenges of high Youth unemployment, high poverty levels, high income gaps between the rich and poor and between the urban and rural areas lie in expanding and growing the SMEs. However inorder to realize these benefits of SMEs countries have to identify and vigorously address the vexing problems that hinder their growth and effective operation as business enterprises. Some of these problems are itemized below.
3. PROBLEMS FACED BY SMEs
Available literature outline several problems which SMEs face in different parts of the world. However, the magnitude and degree of the problems vary according to the unique circumstances of each country. The problems of SMEs listed here are what emerge from a general survey of the literature from various countries. These problems are:
1. Lack of favourable credit schemes and facilities.
2. Lack of information about and access to markets.
3. Inadequate managerial knowledge and skills.
4. Low or inadequate access to technology like mobile phones and the internet.
5. Lack of innovative skills that enhance productivity, quality of products and competitiveness.
6. Lack of knowledge about available government and non governmental support schemes.
7. Lack of institutions at the local level for access to training and development support.
8. Lack of stable electricity power supply.
9. Lack of schemes that promote enterpreneurship spirit and culture.
10. Poor support from stakeholders like the government, development partners and the private sector.
11. Lack of national policy and strategic plans for SMEs.
12. Lack of or outdated legislative and regulatory framework for SMEs.
12. Inadequate business development mentoring and coaching support.
13. Lack of linkages and coordination among government and other support structures.
14. Poor infrastructure facilities like roads, premises for business operations etc.
15. Lack of information about the SMEs network ecosystem.
16. Poor education backgrounds of the participants.
This list of problems SMEs face is not exhaustive. It is a pointer to the fact that SMEs are in environments that have problems which can hinder their operations. SMEs in Zambia face some of these problems and others which may not be in the list.There are many ways of tackling these problems. For example areas like financing, technology, infrastructure, management, policy and strategic planning and others can be delved into. The writer has chosen to focus on Education For All as a possible route to take in addressing the challenges faced by SMEs in Zambia.
4. EDUCATION FOR ALL AS A PRIME MOVER OF SMEs’ FOR ECONOMIC DEVELOPMENT
Apart from creating more opportunities for learning in schools another goal of Education For All as stated in 1990 is to promote learning and skills in young people and adults. The type of learning and the specific skills that should be promoted are specifically targeted to the special needs of the target group. Education For All for young people and adults who are not in formal educational institutions and can take many forms and of different durations and contents. It is mostly informal education and can be in form of seminars, workshops, on line lessons, information through radio, newspapers, or television. This is inexpensive education and can easily be accessed by anybody anywhere.
The low level of development of the SMEs in Zambia in the midst of the call for economic transformation by the national leaders demand that serious attention be given to Education For All. The following conditions have to be met if Education For All program that promotes SMEs development for economic transformation is to be successful.
1. All citizens have to acknowledge and accept the undisputable truth that economic transformation can only be acheived through greater dependency on knowledge, information and skills. This is the foundation of SMEs business of all types.
2. All human beings have in them inexhaustible resources of intelligence, innovation, creativity and enterpreneural abilities which have to be exploited for economic transformation.
3. Knowledge and skills play an important role in raising prosperity and social well being of individuals, communities and society.
4. Knowledge and skills (human or intellectual capital) of SMEs are the most powerful producers of wealth which can exploit physical capital such as land, labour, and other resources for economic transformation.
5. Serious efforts must be made to generate, share and make available to all citizens knowledge, information and skills which will bring about the much needed economic transformation through SMEs everywhere.
6. Efforts must be made to develop capabilities on the part of SMEs to identify, produce, process, transform, disseminate and use knowledge, skills and information for economic transformation.
7. Available technology and the internet are the drivers of economic transformation and all citizens must strive to be digital technology literate.
8. The world has now entered into an era of life long learning which is aided by digital technology. To acheive economic transformation through SMEs Zambia should be a learning society.
IT IS POSSIBLE TO TURN THE IMPROBALE INTO REALITY IF WE WORK TOGETHER JOHN KERRY.