Sunday, January 29, 2023

SMEs challenged to play a role in economic diversification

Small and Medium Enterprises have been recognized to play a significant role in key-driving the sustainable economic growth in Africa over the next ten years.

In an interview with Sunday Standard, Director- Business Development at Grant Thornton, Girish Ramakrishna, noted that in the government’s efforts to diversify the economy, SMEs should highly be considered as they can make a significant contribution to diversification.

Ramakrishna observed that even though SMEs face challenges, mainly accounting problems, their contribution is significant noting that “with proper information disseminated to them on how to manage and maintain properly their books of accounts, a lot will be achieved”.

David Cutting, CEO- Standard Chartered Bank Botswana, shared the same sentiments with Thornton, noting that his bank believes that Small and Medium Enterprises in Africa account for between 30 and 60 percent of Gross Domestic Product on the continent.

“This supports the view that SMEs will be key drivers of sustainable economic growth in Africa over the next 10 years. Standard Chartered Bank recognises the significant contribution that SMEs have a critical role to play in the diversification of this economy and in the creation of new jobs and new sources of wealth,” he said.

He explained that for these reasons, they, as Standard Chartered Bank will remain committed to SMEs and continue to invest in new products and services for SMEs.

“As a result, we decided to declare the month of October as SME month across all our markets in Africa to give emphasis to our commitment to this important sector,” he added.

He explained that they have divided the month into for weekly themes, with each week dedicated to a different aspect of their ability to support the growth aspirations of the customers in the SME sector.

Sethunya Gaolebogwe, of Health Products and Segment Solutions, told Sunday Standard that SCB has many services dedicated to meeting SMEs’ needs.

“Some of our services dedicated to their needs include SME premium banking service, cross border account opening and dedicated foreign exchange team,” she said. She also noted that they offer them with short terms loans that have specific maturity period of one year or less.

Speaking at the third week SME trade workshop held this Friday, Thornton explained the importance of accounting for SMEs.

“Small and Medium Enterprises need to show the commitment to their suppliers and other stakeholders by increasing their confidence on the businesses through, most importantly, good accounting and control environment,” he said.

He also urged SMEs to have focussed vision and mission, stability, reliable quality and service delivery as well as strategic pricing and marketing noting that it is general view that vast majority of small business owners are overly optimistic about the prospects for their firms.

“Most small businesses engage in little planning. The financial management skills in most small businesses are weak. Studies of small firm failures often reveal failures in managerial competence in specific areas such as financial management and marketing and small business owners do not always have a structured pricing for their products offered.”

He further said small and medium sized enterprises should at least keep a cash book and general ledger, purchase journal and Creditors ledger, sales journal and Debtors ledger, general journal, adding that this will break away most of the challenges they face hence positioning them well in the economic diversification of the economy.


Read this week's paper