Same promises, same old story for SMEs

While 2016 gave hope to small and medium enterprises (SMEs) in Malawi, the sector continues to dance to the same old tunes.

Despite various programmes to improve the sector, there was nothing concrete done in 2016 to turn around the fortunes of most SMEs.

With only 195 000 out of 1.1 million SMEs registered by the Registrar General’s office, access to finance did not improve in the year just gone.

Despite the ongoing challenges, chief among the encouraging aspects was the launch of the Buy Malawi Strategy (BMS) and the expectation that SMEs Policy will start being implemented.

Need for more businesses

In the years, the Indigenous Businesspersons Association of Malawi (Ibam) president Mike Mlombwa, asked government to award 70 percent of contracts to local business as one way of empowering them.

Minister of Industry, Trade and Tourism Joseph Mwanamvekha had retaliated government’s commitment to supporting local firms in ensuring that they become empowered, thereby contributing to the country’s growth.

“Government has already taken a step on that plea through the Buy Malawi Strategy where Malawian companies are entitled to a minimum of 30 percent of government business.

“This is just a minimum, it can even go up,” he said. Mwanamvekha called on procurement

officers and private sector to exercise “emotional intelligence” when dealing with this matter.

Malawi Institute of Procurement and Supply (Mips) acting president Bernadette Maele said while it is possible to fully implement the strategy, there are few things that need to be done if it is to succeed.

Maele observed that apart from putting deliberate policies, there is need to empower local businesses to familiarise themselves with bidding preliminaries, market strategy and etiquette.

“BMS may not work because Malawian firms cannot compete favourably with foreign firms and their production capacity is small because we have infant industries. As a result, foreign firms are dumping their products here by way of selling their products,” she said.

In his remarks, controller of government stores Fredrick Mzoma  said there is need for practitioners, while targeting 30 percent of government contracts to be given to local suppliers is possible,  to put up a proper enabling environment and institutional frameworks.

Ben Kaluwa, an economics professor at University of Malawi’s Chancellor College, said the growth of SMEs could help in job creation and increase the government’s tax base helps the country meet some of its obligations with ease.

On the other hand, the business climate has been punitive for small enterprises coupled with high bank lending rates, leading to a rise in production costs. Coupled with that, there is also an increase in transportation costs due to high fuel prices, utility and communication costs, which have all hampered operations in SMEs.

Frequent power outages also negatively affected the operations of the sector in the year.

Some SMEs that have applied to be connected to the national grid are waiting years on end with no joy.

“The absence of an active and favourable SMEs Policy also compounds problems that SMEs face. It is good news that one policy may be implemented soon,” said Small and Medium Enterprises Association (Smea) president James Chiutsi.

He said financing for SMEs has been difficult, save for a few institutions.

Low participation for SMEs and businesses in national and regional initiatives has continued to hinder industrialisation and industry policy, according to Common Market for East and Southern Africa (Comesa) business council policy advocacy officer Kudzai Madzivanyika.

Then there was the Business Linkage Matching Fund (BLMF) with its potential to create huge companies out of SMEs if well implemented.

Looking into the future, Smea maintains the view that to develop SMEs, the Department of SMEs in the Ministry of Industry, Trade and Tourism needs to be fully capacitated, saying this will ensure that issues affecting SMEs are not dwarfed by large players that also demand attention of the ministry.

“We must seriously consider industrialisation if Malawi is to realise the Buy Malawi initiative and become an exporting nation instead of being a perpetual importer,” he said. n