IN Zimbabwe, a micro enterprise is defined as any enterprise that has an annual turnover not exceeding US$30 000 per annum and employs a maximum of five people, while a small enterprise is defined as having between six and 30 employees and an annual turnover of between US$30 001 and US$500 000.
Medium enterprises are defined as having between 31 and 75 employees and a turnover of between US$500 001 and US$1 million.
The exceptions are the mining and quarrying sectors which have thresholds of US$50 000 for micro enterprises, US$1 million for small enterprises and US$2 million for medium enterprises.
The Small and Medium Enterprises (SMEs) Act does well to provide these thresholds, which are not bad in as far as our context is concerned.
The Act provides for the establishment of the MSME Fund and the Small and Medium Enterprises Development Corporation (SMEDCO) as well as the SMEDCO board.
The Act itself is not comprehensive, neither does it recognise start-ups, nor does it provide much guidance to the actors other than those defined above.
This probably is why there is an all-round misdiagnosis of SMEs and how they ought to be harnessed for greater economic impact.
One gets the impression that when policymakers, the development community and other actors are referring to SMEs, they are loosely referring to micro enterprises in the livelihoods space as well as in the informal quarters rather than high growth potential SMEs actively participating in the mainstream economy.
- Business opinion: Brand modification against rebranding of SMEs
- Handling scenarios not covered by IFRS
- Destination branding by tourism operators
- African mass food markets as bases for business identities
Keep Reading
Everyone talks about SMEs and what SMEs need except for the SMEs themselves.
The financial architecture in Zimbabwe is not optimised for innovation, neither is it optimised for the growth of SMEs.
We have seen the proliferation of micro lenders and micro banks that on paper are focused on youth, women, and SMEs.
However, these offer impatient and often expensive finance that by no means can enable growth.
In the absence of VCs, we expect a functional financial architecture to allow a pathway for MSMEs to emerge from micro lenders to banks, from banks to private equity and from private equity to going public.
Our tax regime does not discriminate, neither does it give breathing space to the vulnerable, under-funded and under-supported SMEs and most recently start-ups.
There are no tax incentives nor tax holidays for growth potential SMEs.
Special Economic Zones enjoy the conditions that are earnestly desired by SMEs.
Our learning content and programmes generally fall short of the bar, often assuming everyone is seeking to merely survive rather than create legacies.
We have seen so many superficial programmes that turn SMEs into idea replication factories, each one churning the same thing with little innovation and value addition.
None of these survive beyond the fads, whether it’s backyard chicken rearing, making dishwashing liquid, soap, farming potatoes in sacks, rearing quails (zvihuta) or making masawu or baobab juices etc.
That SMEs are moving backwards into the informal sector is no secret, why is there an incentive for them to deformalise?
Answering this sets us on a path towards inclusive growth.
Competitions often feature SMEs pitching for very small investment tickets or grants.
There are no tickets that match the needs of SMEs as defined by the thresholds, hence the entrepreneurs end up as the commodities in superficial ecosystems.
Those who can compromise on their ideas to meet the “written in stone” requirements are often the ones who get the money, hence the term pitchpreneurship. Our solutions lie beyond the superficial.
We need to rethink how we view SMEs. We need vibrant entrepreneurship policies that appropriately characterise SMEs, support innovative entrepreneurship, foster participation, and nourish high growth potential SMEs and start-ups.
After all, SMEs already contribute over 50% to the country’s GDP.
Imagine what impact they would have if appropriate support measures were in place, we would really have a functional entrepreneurial ecosystem.
https://convowithtrevor.com/icwt-newsletter-issue-60/
- Prechard Mhako is an emerging board leader, entrepreneur, strategist, coach and consultant who helps entrepreneurs and enterprises start, run, and grow. He can be contacted on chad@abiyedu.co.zw.
