Ministry pushes for SME legislation 

Source: Ministry pushes for SME legislation –Newsday Zimbabwe

Sithembiso Nyoni

THE Women’s Affairs, Small and Medium Enterprises (SME) Development ministry wants lawmakers to align regulations with SME targets, after a central bank survey valued the sector’s gross domestic product (GDP) contribution at US$8,6 billion.

Various micro, small and medium enterprises (MSMEs) have complained that the existing regulations are crippling the sector.

In an interview with NewsDay Business, Women’s Affairs, Small and Medium Enterprises Development minister Sithembiso Nyoni said the regulations should be supportive of growth for the sector.

“The majority of MSMEs have indicated that existing regulations are not favourable for them. The ministry has been engaging the relevant ministries, departments and local authorities to facilitate review and align regulations in line with the growth of the MSME sector in Zimbabwe,” she said.

According to the Reserve Bank of Zimbabwe’s recent FinScope MSME survey, the MSME sector is a key growth pillar of the economy.

Based on the statistics in the survey, 3 344 261 people work in the sector. This number includes 1 334 200 individual entrepreneurs and 305 607 other business owners with 1 704 454 employees.

The survey found 1 639 807 MSME owners who own 1 954 202 MSMEs which have a combined annual revenue of US$14,2 billion.

“The MSME sector continues to be a key pillar for economic growth (GDP) and employment creation showing an increase in the estimated number of employees and profit (GDP) contribution of the sector up to US$8,6 billion post the COVID-19 pandemic. It continues to absorb more female adults which is key to addressing the gender gap,” part of the survey read.

In a sector breakdown of this GDP contribution, agriculture/farming takes up 39,2%, wholesale/retail (37,3%), tourism (5,3%), manufacturing (4,9%), other service activities (4,7%), business services (3,7%), community and household (1,7%), construction (1,8%), and natural resources and mining (1,5%).

“More individual entrepreneurs (were) recorded in 2022 indicating the sector as a source of income for many adult Zimbabweans characterised by low personal monthly income. However, this segment is also key for new entrepreneurs bringing innovative products and services with most of these (55%) being in the start-up and growth phases,” part of the survey read.

“Over time, growing this sector will grow the other micro, small to medium segments. However, the sector is currently dominated by individual and micro-enterprises most of which are female business owners.”

The rate of formalisation has remained stagnant at 14% over the past decade, with the lowest rates being found in sole proprietorships and very small businesses.

Usually, a company’s size prevents it from registering, either because it’s too modest or because it doesn’t have enough capital.

Thus, business owners express a desire to formally register their companies if doing so would not cost them anything and the company would be adequately educated on the advantages of doing so.

“Compliance has largely been linked to formalisation as the benefits of formalisation have been mostly to comply with the law and to avoid harassment from authorities,” part of the survey read.

“This stigma unfortunately stifles formalisation and its benefits to the business owner or enterprise. Business support is key to enterprise development, growth and sustainability. Awareness of support institutions is high; however, usage is significantly lower.”

The survey found that efforts to improve awareness of the Chamber of SMEs and SMEDCO, among others, should be prioritised.