Tuesday, October 20, 2020

Gov’t should speed up the process of setting up SMEs ministry

The time has come for us to take an in-depth look at the impact of COVID-19 on our SMEs — particularly the assistance needed amid this pandemic. We should do this mainly because SMEs are crucial to the economy, and if they are not assisted to survive the Covid-19 pandemic, our country will surely feel the wider socio-economic consequences in no time.

Whether we aware or ignorant about this fact, most of our hard-working SMEs need our support immediately. If we fail to give them the necessary support now, we just speeding up the repercussions that will come if this vital economic driver loses its momentum.

Globally, the scale and depth of the challenges facing small businesses vary but the root cause of the problem appears to be similar: the funding simply does not go the same direction as the business needs.

As history literature would show, some 66 years ago, one of the countries that lead the world in development of entrepreneurs – the United States of America (USA) established what they call the U.S. Small Business Administration (SBA). In short, the U.S-SBA helps Americans start, build, and grow businesses.

Mind last year I was fortunate to visit the US and meet Allen Gutierrez – Associate administrator of the Entrepreneurial Development, Small Business Development in Washington D.C.

His office’s mission is to help small businesses start, grow and compete in global markets by providing quality training and counselling needs of small business.

In Botswana the equivalent of US’s SBA is the Local Entrepreneurial Authority (LEA) whose mission is also similar to that of the latter. The big difference between the two entities (both funded by their respective governments) is that the American one can   guarantee loans made to small business by commercial banks and other leading financial institutions while LEA currently doesn’t.

The SBA provides an array of financing for small businesses from the smallest needs in micro lending to substantial debt and equity investment capital.

“While SBA itself does not make loans, it does guarantee loans made to small businesses by private and other institutions’, Gutierrez told me and other journalists who visited the US mid 2019.

As he said those words, I could recall how back here at home, small businesses while some have benefited from LEA’s incubation programmes, they at the same time continue to face serious challenges with the regard to access to finance and market penetration.

Even our central bank has in the past admitted that limited access to finance remains one of the key constraints to business growth in the domestic economy.

The Bank states in one of its annual reports that Botswana’s Development Financial Institutions including LEA are of small size of their portfolios and they also face challenges in raising funding.

Another challenge facing FDIs like LEA which are to help SMEs is that of governance. Infact in 2019 – Bank of Botswana’s director of the Department of Research and Financial Stability – Dr Tshokologo Kganetsano called on government to “let go” of the governance at the FDIs. We fully agree with him because in general, autonomous institutions are more successful compared to those that are run with active government involvement in governance.

So to be effective and have the desired impact, the scale of operations and resources availed to FDIs like LEA and CEDA should be much larger than current levels. This is so because a higher level of funding is needed to support large scale industrial projects and businesses, which might also involve infrastructure development.

It is given, Covid-19 has changed the business landscape in our country in many ways. However, maximising the potential of SMEs to contribute to job creation, strengthening our communities – both rural and urban and building the economy can only be beneficial to the country now and in the near future.

As it stands it appears like the attention given to SMEs remain sporadic and piecemeal, instead of strategic and transformative. From where we stand, key elements are needed to help our SMEs to climb out of recession and return to previous levels of positive economic growth. Of all these elements, the most important one is to have a one-stop shop for handling across-the-board SME policy and financial needs. That is why the #Bottomline is that the government speed up the process of splitting the Ministry of Trade and Investment and consider establishing a standalone ministry that can help indigenous citizens establish enterprises including at an SME level. Our future economic growth is within our people and their enterprises – whether small or big.

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The Telegraph October 21

Digital edition of The Telegraph, October 21, 2020.