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Enhancing Capacity in MSMEs

Enhancing Capacity in MSMEs

Sanderson Abel

It is indisputable that micro and small to medium enterprises (MSMEs) now comprise a predominant share of private sector economic activities in the country. Key stakeholders need to come up with a holistic framework outlining how the sector can be natured so that its contribution to economic development can be harnessed and increased.

Who are these stakeholders?

The key stakeholders comprise of the Government, the Financial Services sector, the Non-Governmental sector, local authorities, the SMES players themselves among others. The intertwined roles among these stakeholders should be clearly spelt out so each player is able to play their own role successfully. The ability of the various players to contribute to the matrix could be a success factor for the MSMEs.

What are the capacity gaps?

The main assets for MSMEs are their human capital assets. The operations of the majority of these MSMEs are labour intensive. MSMEs face the problem of limited management and operational capacity, which has been shown to further slow the performance and growth potential of MSMEs. Therefore, for any serious efforts of enhancing productivity in the sector capacity development of MSMEs is important.
Some of the basic necessities that MSMEs need to be equipped with include affordable access to localized and customized business management information, interactive tools, and training.
SMEs often lack capabilities and infrastructure to make the most of their human capabilities – and as a consequence tend to have lower levels of training and skills development. A number of different factors drive the need for training activities for MSMEs. These factors can be pegged at different levels and some are outlined below:
• For firms, it is the market, the need to remain competitive in what is offered to customers;
• For employees, it is acquiring skills that can lead to better jobs and remuneration;
• For communities, the driver is to create dynamic industrial and labour markets that survive economic downturns and provide a variety of employment opportunities and increased local development.
What really needs to be done?
Fostering capacity development in the MSME sector will assist in ensuring the competitiveness and growth possibilities of already existing enterprises as well as supporting the creation of new ventures. Government and other interested stakeholders should ensure that MSME managers are equipped with the skills they need to successfully run and develop their companies in a complex world and significantly transform them significantly into sustainable engines for growth.
For the country to benefit from the sector there is need for all stakeholders to pose certain questions and proffer solutions. Some of the most important questions that need to be put on the table are:
• Can skills formation in MSMEs be increased through ways other than formal tertiary education and training?
• How can business planning activities, for example, be used to reinforce a more systematic approach to skills development in MSMEs?
• What are the appropriate roles of Government and industry associations in designing and delivering more flexible SME-centered business support, information, and training packages?
Solutions to the above questions are of utmost importance because they can assist in developing relevant capacity development initiative for the sector. It should be noted that formal training programmes within firms, such as learning circles, and job rotation, exchanges or secondments have limited participation by MSMEs (probably due to their lack of critical mass), which suggests that these firms could benefit from a network approach to this type of learning, such as that more commonly utilized by large firms. For example, several MSMEs could join together to organize learning circles or exchanges of personnel within an industry cluster or value-chain. This is mostly likely to be effective once MSMEs are able to become organized and form industry bodies for those in the same lines of trade. Such arrangements offer opportunities for the Government and other supporting institutions to come aboard and assist them.

The banking sector is also prepared and well equipped to chip in with training for the MSMEs. Not only are individual banks endowed with staff that can impart financial skills to the MSME sector, but infrastructure such as that provided by the Institute of Bankers of Zimbabwe can be appropriately leveraged to conduct training seminars for participants in the MSME sector to upgrade basic financial skills. The banking sector thus can play a major role in driving financial and business literacy for this important sector.

The country can register improved development when capacity building is linked to MSME access to markets and access to finance. There is need for the various stakeholders to come together and develop capacity development programs that create linkages between MSMEs and large businesses. These linkages create powerful incentives for MSMEs to build managerial and operational capacity within their own operations. By accessing new markets more effectively, MSMEs create opportunities for long-term financial sustainability which can lead to increased job creation.
The need to capacity develop MSMEs is very clear given that they support the building of systemic productive capacities. They help to absorb productive resources at all levels of the economy and contribute to the establishment of dynamic and resilient economic systems in which small and large firms are interlinked. They also tend to be more widely dispersed geographically than larger enterprises, support the development and diffusion of entrepreneurial spirit and skills, and help to reduce economic disparities between urban and rural areas.

Sanderson Abel is an Economist. He writes in his capacity as Senior Economist for the Bankers Association of Zimbabwe. BAZ expressly invites players in the MSME sector to give their valuable comments and feedback related to this article to him on abel@baz.org.zw or on numbers 04-744686 and 0772463008