Connect with us
Advertisement

SMMES integral to economic growth

Small, Micro, and Medium Enterprise (SMMEs) are the new economic language for developing countries. Encompassing small scale business, community cooperatives, hawkers, roadside traders and medium scale businesses, SMMEs give over 30 % of Botswana workforce the breadwinner status.


Currently contributing over 20% to Botswana‘s economy the SMME sector plays an integral role in Botswana’s economic path. This observations emerged at Botswana Institute of Chartered Accountants (BICA) dinner last week in Gaborone. The same observation has also been registered at different forums.


Renowned entrepreneur and well known former corporate executive Kate Mphage labeled SMEs as a pivotal sector towards moving Botswana ‘to a developed economy status.  “There is great potential in SMMES as far as generating much needed employment and economic diversification is concerned” she said.


The former Mascom wireless executive is of the view that the nature of SMEs being businesses that are undertake by perceivably low income citizens and under privileged members of the society posse’s great ability to turn around economic status of the ordinary Batswana.
 “Imagine Botswana without the braiding, water melon selling, the roadside cooking ladies, the sewing ladies and taxi drivers. Each country in Africa has these buzzing hubs that reflect ordinary people making a living outside the formal sector,” she said.


 Mphage underscored the imperative need to develop and resource SMMEs to unleash the great economic potential of the sector. She however highlighted the business challenges that come with the nature of the sector itself: “it is very paramount to always emphasize the benefit that accrue to all other economic industries and sectors in the economy when the SMMEs sector thrives, yet the sector is faced with challenges in the area of finance, poor quality of products, access to bigger markets and simple book keeping,” she explained. Ms Mphage pointed out the need for all stakeholders from government, funders, financial advisors, among others to rally behind contributing to SMMEs flourish, noting that the country and every one stands to benefit from a booming SMME sector.


BICA’s ROLE IN ECONOMIC DEVELOPMENTS


Addressing an audience that was dominated by Botswana Institute Chartered of Accountants (BICA) members, Mphage said accountants could play a pivotal role in assisting SMMEs as they were located in important financial institutions and departments and had the necessary skills required in turning small-scale entrepreneurs’ ideas into flourishing businesses.


BICA President, Rudi Binedell said accountants have a big role to play in economic development in Botswana. He said BICA intends to be a reputable stakeholder in government’s efforts to advance economic diversification and sustainable growth. He said the accounting body increased its membership to 3 355 members by the end of December 2016, from 2 085 in 2015. Binedell said they had drawn up a new strategic plan for the years 2017 to 2021.


 The plan aims among other objectives to increase the number of qualified, professional citizen chartered accountants.  Nametso Latsheng, Head of Capacity Building at BICA observed that the current economic challenges faced by Botswana could be solved by rigorous engagement of the SMME sector.  “It is very critical now to come up with innovative ways, strategic blueprints and policy crafts that can change the situation around. We need to fast track employment creation – SMMEs sector can do wonders for our economy,” he said.


SHARING THE EXPERIENCE


In previous likeminded interactive seminars and economic forums, SMMEs have also been underscored as a critical sector for the economy. They could be used to realize the much needed diversification and sustainable growth. Renowned businessman, Dr Tiro Mampane of Boitekanelo Group of Companies which includes Boitekanelo College, observed earlier this year at First National Bank (FNB) 2017/18 Budget review seminar that trade laws and setting up business regulations need to be reviewed to accommodate more SMMEs to enhance economic growth.


He noted that Botswana must introspect on its trade and business laws. He indicated that the ease of doing business locally needed to be improved by rooting out cumbersome procedures which might end up discouraging investors. According to Dr Mampane, SMMEs must be empowered to create wealth and ensure economic survival for rural and low income people. “If you look into other businesses you will realize that they don’t necessarily require, for example a physical office to operate, thus they should be exempted from some trade licenses requirement,” he said.


GOVERNMENT FACILITATION 


In its quest to empower Batswana and realize economic diversification while also creating employment and sustainable growth the Government of Botswana has setup various business facilitation arms and also introduced a number of programs and initiatives. The Youth Development Fund under the Ministry of Youth Empowerment, Sports and Cultural Development intends to finance young people to start up medium enterprises in almost every sector from agriculture, manufacturing and ICT.


Gender Affairs Fund in the Ministry of Gender funds women in groups and partnerships to a tune of up to P350 000 to turn community cooperatives and indigenous small and medium businesses into profit making entities. The Local Enterprise Authority ( LEA) under the Ministry of Investment Trade & Industry is a co-ordinate and focused one-stop shop Authority operating as a parastatal that provides development and support services to the local industry needs of SMMEs. The Authority's key sectors are manufacturing, tourism, agriculture, and any services that support the three business sectors. In particular, LEA targets women, youth, and the unemployed.


LEA also endeavors to build competencies in quality and efficiency, and to encourage import substitution and export oriented products and services. In delivering their mandate and mainly supporting the Small Micro & Medium Enterprises LEA conduct entrepreneurship awareness workshops annually across the country to cultivate the spirit of entrepreneurship in youth and the unemployed. LEA provide capacity building incubation, training and facilitates funding and access to markets.


Adding to these efforts is the Citizen Entrepreneurship Development Agency (CEDA) which operates as an investment arm and financer to viable projects and feasible business ideas. CEDA funds various project to a tune of up to tens of millions, for SMMEs CEDA recently introduced a tailor made funding initiative for small and medium scale businesses called “Mabogo Dinku”.


 Through the program, CEDA provides subsidized loans for various micro-entrepreneurs to enable citizen participation in enterprise development. Mabogo-Dinku loan offers micro-enterprises an opportunity and enables citizen participation in enterprise development.
The loan provides micro-enterprises with funds for their business needs ranging from working capital to small asset finance. Mabogo Dinku offers short term loans from P500.00 to a maximum of P150, 000.00 per person, payable in 3-12 months to citizens who are micro-entrepreneurs to assist in the growth of their business.


INTERNATIONAL VIEWS


Strive Masiyiwa, a Zimbabwean multimillionaire is of the view that education must be provided to small medium entrepreneurs. He writes that Entrepreneurship should be taught as a subject in all schools across Africa. “By far the biggest employer of people in Africa is what is generally called the "informal sector."


“Whilst most of the people in this sector are generally literate, having been to school, there's very little in our education system that actually prepares them for a life running their own business.” According to Masiyiwa, governments should publicly acknowledge that the "informal sector" is the central activity in their economies. “Whether people are smallholder farmers, street traders, or tradesmen and women, don't be ashamed to acknowledge them as real economic players. They are contributing to the economy just like the biggest businesses that you have in your country,” he says.


Masiyiwa who owns multinational businesses agrees with Mphage’s sentiments that SMMEs importance must be recognized with action. “Acknowledge the importance of this sector by putting in place policies that enable them to prosper. When they prosper, they will grow, employing more,” he says. He is of the view that governments should introduce entrepreneurship training into the formal education curriculum.”By the time someone has completed seven years of school, they should be able to put together a basic profit and loss statement, and a basic balance sheet. They should also be able to read financial statements.

Continue Reading

Business

New study reveals why youth entrepreneurs are failing

21st July 2022
Youth

The recent study on youth entrepreneurship in Botswana has identified difficult access to funding, land, machinery, lack of entrepreneurial mindset and proper training as serious challenges that continue to hamper youth entrepreneurship development in this country.

The study conducted by Alliance for African Partnership (AAP) in collaboration with University of Botswana has confirmed that despite the government and private sector multi-billion pula entrepreneurship development initiatives, many young people in Botswana continue to fail to grow their businesses into sustainable and successful companies that can help reduce unemployment.

University of Botswana researchers Gaofetege Ganamotse and Rudolph Boy who compiled findings in the 2022 study report for Botswana stated that as part of the study interviews were conducted with successful youth entrepreneurs to understand their critical success factors.

According to the researchers other participants were community leaders, business mentors, Ministry of Trade and Industry, Ministry of Youth, Gender, Sport and Culture, financial institutions, higher education institutions, non-governmental institutions, policymakers, private organizations, and support structures such as legal and technical experts and accountants who were interviewed to understand how they facilitate successful youth entrepreneurship.

The researchers said they found that although Botswana government is perceived as the most supportive to businesses when compared to other governments in sub-Saharan Africa, youth entrepreneurs still face challenges when accessing government funding. “Several finance-related challenges were identified by youth entrepreneurs. Some respondents lamented the lack of access to start-up finance, whereas others mentioned lack of access to infrastructure.”

The researchers stated that in Botswana entrepreneurship is not yet perceived as a field or career of choice by many youth “Participants in the study emphasized that the many youth are more of necessity entrepreneurs, seeing business venturing as a “fall back. Other facilitators mentioned that some youth do not display creativity, mind-blowing innovative solutions, and business management skills. Some youth entrepreneurs like to take shortcuts like selling sweets or muffins.”

According to the researchers, some of the youth do not display perseverance when they are faced with adversity in business. “Young people lack of an entrepreneurial mindset is a common challenge among youth in business. Some have a mindset focused on free services, handouts, and rapid gains. They want overnight success. As such, they give up easily when faced with challenges. On the other hand, some participants argue that they may opt for quick wins because they do not have access to any land, machinery, offices, and vehicles.”

The researchers stated that most youth involved in business ventures do not have the necessary training or skills to maintain a business. “Poor financial management has also been cited as one of the challenges for youth entrepreneurs, such as using profit for personal reasons rather than investing in the business. Also some are not being able to separate their livelihood from their businesses.

Lastly, youth entrepreneurs reported a lack of experience as one of the challenges. For example, the experience of running a business with projections, sticking to the projections, having an accounting system, maintaining a clean and clear billing system, and sound administration system.”

According to the researchers, the participants in the study emphasized that there is fragmentation within the entrepreneurial ecosystem, whereby there is replication of business activities without any differentiation. “There is no integration of the ecosystem players. As such, they end up with duplicate programs targeting the same objectives. The financial sector recommended that there is a need for an intermediary body that will bring all the ecosystem actors together and serve as a “one-stop shop” for entrepreneurs and build mentorship programs that accommodate the business lifecycle from inception to growth.”

Continue Reading

Business

BHC yearend financial results impressive

18th July 2022
BHC

Botswana Housing Corporation (BHC) is said to have recorded an operating surplus of P61 Million, an improvement compared to the previous year. The housing, office and other building needs giant met with stakeholders recently to share how the business has been.

The P61 million is a significant increase against the P6 million operating loss realized in the prior year. Profit before income tax also increased significantly from P2 million in the prior year to P72 million which resulted in an overall increase in surplus after tax from P1 million prior year to P64 million for the year under review.

Chief of Finance Officer, Diratsagae Kgamanyane disclosed; “This growth in surplus was driven mainly by rental revenue that increased by 15% from P209 million to P240 million and reduction in expenditure from P272 million to P214 million on the back of cost containment.”
He further stated that sales of high margin investment properties also contributed significantly to the growth in surplus as well as impairment reversals on receivables amounting to P25 million.

It is said that the Corporation recorded a total revenue of P702 million, an 8% decrease when compared to the P760 million recorded in the prior year. “Sales revenue which is one of the major revenue streams returned impressive margins, contributing to the overall growth in the gross margin,” added Kgamanyane.

He further stated professional fees revenue line declined significantly by 64% to P5 million from P14 million in the prior year which attributed to suspension of planned projects by their clients due to Covid-19 pandemic. “Facilities Management revenue decreased by P 24 million from P69 million recorded in prior year to P45 million due to reduction in projects,” Kgamanyane said.

The Corporation’s strength is on its investment properties portfolio that stood at P1.4 billion at the end of the reporting period. “The Corporation continues its strategy to diversify revenue streams despite both facilities management income and professional fees being challenged by the prevailing economic conditions that have seen its major clients curtailing spending,” added the CEO.

On the one hand, the Corporation’s Strategic Performance which intended to build 12 300 houses by 2023 has so far managed to build 4 830 houses under their SHHA funding scheme, 1 240 houses for commercial or external use which includes use by government and 1 970 houses to rent to individuals.

BHC Acting CEO Pascaline Sefawe noted that; BHC’s planned projects are said to include building 336 flat units in Gaborone Block 7 at approximately P224 million, 100 units in Maun at approximately P78 million, 13 units in Phakalane at approximately P26 million, 212 units in Kazungula at approximately P160 million, 96 units at approximately P42 million in Francistown and 84 units at approximately P61 million in Letlhakane. Emphasing; “People tend to accuse us of only building houses in Gaborone, so here we are, including other areas in our planned projects.”

Continue Reading

Business

Commercial banks to cash big on high interest rates on loans

18th July 2022
Commercial-banks

Researchers from some government owned regulatory institutions in the financial sector have projected that the banking sector’s profitability could increase, following Bank of Botswana Monetary Policy Committee recent decision to increase monetary policy rate.

In its bid to manage inflation, Bank of Botswana Monetary Policy Committee last month increased monetary policy rate by 0.50 percent from 1.65 percent to 2.15 percent, a development which resulted with commercial banking sector increasing interest rate in lending to household and companies. As a result of BoB adjustment of Monetary Policy Rate, from 1.65 percent to 2.15 percent commercial banks increased prime lending rate from 5.76 percent to 6.26 percent.

Researchers from Bank of Botswana, the Non-Bank Financial Institutions Regulatory Authority, the Financial Intelligence Agency and the Botswana Stock Exchange indicated that due to prospects of high inflation during the second half of 2022, there is a possibility that the Monetary Policy Committee could further increase monetary policy rate in the next meeting in August 25 2022.

Inflation rose from 9.6 percent in April 2022 to 11.9 percent in May 2022, remaining above the Bank of Botswana medium-term objective range of 3 – 6 percent. According to the researchers inflation could increase further and remain high due to factors that include: the potential increase in international commodity prices beyond current forecasts, logistical constraints due to lags in production, the economic and price effects of the ongoing Russia- Ukraine conflict, uncertain COVID-19 profile, domestic risk factors relating to possible regular annual administered price adjustments, short-term unintended consequences of import restrictions resulting with shortages in supplies leading to price increases, as well as second-round effects of the recent increases in administered prices “Furthermore, the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices could add upward pressure to inflation,” said the researchers.

The researchers indicated that Bank of Botswana could be forced to further increase monetary policy rate from the current 2.15 percent if inflation rises persistently. “Should inflation rise persistently this could necessitate an upward adjustment in the policy rate. It is against this background that the interest rate scenario assumes a 1.5 percentage points (moderate scenario) and 2.25 percentage points (severe scenario) upward adjustment in the policy rate,” said the researchers.

The researchers indicated that while any upward adjustment on BoB monetary policy rate and commercial banks prime lending rate result with increase in the cost of borrowing for household and compnies, it increase profitability for the banking sector. “Increases in the policy rate are associated with an overall increase in bank profitability, with resultant increases in the capital adequacy ratio of 0.1 percentage points and 0.2 percentage points for the moderate and severe scenarios, respectively,” said the researchers who added that upward adjustment in monetary policy rate would raise extra capital for the banking sector.

“The increase in profit generally reflects the banking industry’s positive interest rate gap, where interest earning assets exceed interest earning liabilities maturing in the next twelve months. Therefore, an increase of 1.5 percentage points in the policy rate would result in industry gains of P71.7 million (4.1 percent increase), while a 2.25 percentage points increase would lead to a gain of P173.9 million (6.1 percent increase), dominated by large banks,” said the researchers.

Continue Reading
Weekend Post