THE Finance deputy minister Samuel Undenge has revealed that our traditional economic model, which was dominated by large businesses, has changed. It has given way to one driven by small-scale players.
This is not a surprising development considering the history of the economic structure, the recent events that emerged after the imposition of economic sanctions by the West and the Zimbabwe government’s introduction of the indigenisation programme.
From a historical perspective, the government industrial policy has always supported the small to medium-scale enterprises (SMEs) as a vital economic sector. The SMEs have been a viable, yet subsidiary sector that complemented big business by supplying goods and services.
The presence of the SME sector has been made possible by the government’s investment in practical subjects and entrepreneurship. Its emergence as a primary sector has been further catalysed unwittingly by the imposition of economic sanctions on Zimbabwe.
The economic sanctions forced many big companies into liquid ation and viability problems leading to widespread shutdowns or scaling down of operations, forcing retrenchment of tens of thousands of employees. Some of those who lost their jobs started their own businesses such as small-scale mining and farming, initiatives promoted by the government and aimed at benefiting Zimbabweans.
Beyond the consequences of economic sanctions, the emergence of this new economic structure is a result of a strategic industrial policy established by the government. It set to establish an economy that integrates Zimbabweans as key economic players and provides them with livelihoods.
It is most likely that the government will henceforth promote the SME-based economy as its preferred economic model because it aligns with the objectives of the indigenisation programme.
When the government introduced indigenisation, it took a step further, which did not only want to see Zimbabweans integrate into the economy, but own and control the economy.
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It might be difficult to understand the points outlined above if one cannot visualise policy as a force that organises, influences and structures people’s activities into certain short or long-term behaviours.
It is not a catastrophe that the structure of the economy has changed from one dominated by large businesses to one dominated by SMEs. What changes is, among other things, the scale of the businesses and the governance and policy framework, which will require to be altered to suit the new dominant sector.
SMEs possess the capacity to attract foreign investment and to improve technology, products and services. The sector will continue to access international markets thus earning the country foreign currency from exports.
SMEs now become the dominant sector which is responsible for providing the government revenue. The government needs to avoid revenue leakages from this sector by ensuring that it reforms and implements an appropriate and effective governance and tax collection system. The current level of revenues should be seen partly as a struggle by the government to collect taxes from an SME sector still adapting to a major economic structural change.
As we transition to an established and viable SME sector that drives the entire economy, it is expected that the large tax base, traditionally provided by big business will affect public finances through potential revenues lost.
However, that potential revenue loss would likely be temporary. As SMEs become more competitive and get a tighter grip of the economy, and as the new SME-based tax structure reaches and incorporates a majority of SMEs, revenue will likely improve. Importantly, the government will need to be more financially prudent so that their expenditure does not lead them to levy higher taxes to SMEs.
It is important that SMEs do not fail. Besides the fact that restructuring an economy causes major disruptions, SMEs provide jobs and sources of livelihood for Zimbabweans. Research shows that SMEs have huge benefits; they retain wealth within communities, and do not relocate to other countries when times are bad; they stick it out.
SMEs provide an opportunity to many ordinary people who would not have had a chance to start their own businesses. Numbers stated by Undenge substantiate this point. He said that small scale tobacco farmers have grown to 90 000 from 2 000.
The challenge for the government is to support these business activities and the responsibility for entrepreneurs is to establish a vision of growing and maintaining sustainable SMEs.
Educational and professional training institutions should enhance their efforts in providing relevant professional and technical skills courses that assist aspirants and owners of SMEs establish and sustain viable operations. The SMEs should be driven by principles of a knowledge-based economic model.
The new SME-based economy is here to stay and the old economy as we know it is gone. It will not come back and therefore it will be helpful to adapt to this new reality.
