SMEs bank critical

Ms Grace Mutumbwa-Head Harare Province in Ministry of SMEs

ZIMBABWE badly requires a Small and Medium Enterprises (SMEs) bank as it is critical in availing funds to the small businesses which have the potential to transform the economy, a top SMEs ministry official has said.

Addressing delegates during an SMEs business exchange program organised by HELP Germany in Norton recently, Head for Harare Province in the SMEs ministry, Grace Mutumbwa, said a specific bank would be the answer to funding challenges rocking SMEs.

“It’s important that we give much precedence to an SME bank because that alone will help ease borrowing for the small businesses,” said Mutumbwa.

“Imagine we currently have about three million SMEs in the country and if we say let’s contribute a dollar each per month (towards establishing the bank), we would have collected US$3 million for a start.

“Yes SEDCO are giving loans but they operate like any other bank because the money is not theirs. But with our own bank we have control and flexibility because the money will be ours. We can determine our own loan durations and interest rates,” she said.

Since adoption of multiple currencies in February 2009, which resulted in the crippling liquidity crisis bedevilling the economy, banks have been availing short-term loans of between 90 and 120 day.

Interest rates have also been extremely high at between 15 and 30 percent.

Industry has slammed the interest rate regime and loan tenure saying they cripple operations which have a long turnaround period such as mining and agriculture.

Bankers Association of Zimbabwe president George Guvamatanga has in the past argued that banks cannot be flexible in giving loans because the Reserve Bank of Zimbabwe was unable to effectively play its lender-of-last-resort role.

Guvamatanga said it was unfair for people to urge banks to avail loans to everyone without first urging people to deposit money.

He argued that banks do not have money of their own but are only holding depositors’ money, which is money-on-call, which can be demanded at any time.

Meanwhile, Mutumbwa has urged SMEs involved in manufacturing to perfect their products by utilising various machines donated by the government of India under the Zim-Indo partnership.

The Indian government donated turning machines, lathe machines and die making machines to the Harare Institute of Technology and Chitungwiza Vocational Centre, among other training institutions around the country.

SMEs have literary taken over as the biggest employers in the country due to company closures since the turn of the millennium due to a number of factors including acute foreign currency shortages.

However, despite its centrality to economic development, SMEs have been severely stung by cash shortages.

Stringent collateral requirements and general paperwork have seen SMEs failing to access funds

Open economy unfair

SMEs Minister Sithembiso Nyoni

SMALL and Medium Enterprises and Co-operative Development Minister Sithembiso Nyoni has castigated the open economy policy for exposing SMEs to unfair competition.

Most products from SMEs in the country have been ignored by locals allegedly due to poor quality and workmanship. The products have also failed to appeal to other markets outside the country.

Addressing delegates at the official launch of David Chiweza’s book, “Out of the rabble”, Minister Nyoni said the open market policy has resulted in the failure of some SMEs because they do not yet have capacity to compete globally due to economic challenges bedeviling the economy.

“The ministry agrees with observation that our open economy policy has exposed our infant industries to a host of poisonous influences that have hampered the rapid development of the sector,” said Minister Nyoni.

“For example, introduction of superior technology in an environment where the local conditions are short of capital to adopt and respond to competition have resulted in a high business failure rate.

“This has left the SMEs exposed and vulnerable to global competition. Consequently, the ministry is working with other development partners to provide conducive environments for SMEs to compete globally,” she said.

In the last 10 years, often referred to as the country’s “lost decade”, Zimbabwe has failed to come up with reasonable economic policies resulting in the closure of most mainstream companies.

Close to 80 percent of formal jobs were lost following the company closures, giving birth to a multiplicity of small and individually owned entities as citizens sought to eke an honest living.

Although most SMEs are not registered and consequently not contributing anything to fiscus, Minister Nyoni intimated that they remain important because they provide a broad-based low capital investment opportunity for the development of people.

“Nomatter how much you can hate them or look down upon them, SMEs have helped to hold the social fabric of this country and that is why we do not have many beggars in the streets.

“Zimbabwe has almost four million small businesses and you can guess how many jobs they have created. Therefore, their promotion will facilitate their greater participation in mainstream economy,” said Minister Nyoni.

Bodies such as the National Aids Council (NAC) have called for the formalisation of the informal sector arguing that the move would boost revenue towards the Aids Levy, which is critical to the country’s battle against HIV/AIDS. 

Investor conference shelved

 Conferences Director Raya Hubbell

CONFUSION surrounding the possible date for holding the do or die polls expected to end the wobbly inclusive government has forced the United Kingdom-based Euromoney Conferences to shelve the third edition of the Zimbabwe Investor Conference.

The high profile conference, which is held in partnership with the Ministry of Economic Planning and Investment Promotion, was inaugurated in 2011 and was also held last year.

In the previous editions, the conference brought together potential investors from around the world to explore possible areas of investment and to understand the situation in the country first hand.

In an interview with The Business Connect from her London base, conference director Raya Hubbell said election results from the impending polls will play a big role in the date for the conference.

“… we are very much hoping to be there later this year. The elections have now been called and we will wait until after the results to decide upon a date.

“Rest assured we are still very committed to promoting Zimbabwe to the international investor. We will let you know when we have the date confirmed. Thanks for keeping a close eye on this,” she said.

At the beginning of the year, Hubbell had indicated that the Euromoney Conferences and some investors were looking forward to returning to Harare for the 2013 edition, but only after the Constitution-making process was solved. – Ends