World celebrates MSMEs . . . spotlight on role, challenges

The world celebrates MSMEs week against the backdrop of the marauding coronavirus that has assumed different variants with Sub-Saharan Africa disproportionately bearing the brunt of the pandemic.

The MSME Day came into force through resolution adopted by the United Nations General Assembly in April 2017. June 27 was the day set aside to commemorate and raise awareness about the role played by micro, small medium enterprises in all the economies in the world. The resolution passed by the UN General Assembly was to recognise the importance of MSMEs, encourage them to build formal businesses that participate on international trade platforms and to foster good business ethics, principled responsible business practice and investment.

The MSME week focuses on their performance and the challenges they face in an economic environment of Covid-19 and climate change, coining the term Lockdown Economy.

The WTO ITC MSME Competitive Outlook Report 2021 outlines the challenges faced by MSMEs and offers solutions that may be considered and adapted to reflect domestic environment. This report is quite encouraging in contrast to the ITC Competitive Outlook Report of 2020 that anticipated liquidation of 1 in every 5 MSME entities by end of 2020.

The MSMEs are the means through which countries will be able to deliver on the 2030 Agenda of Sustainable Developmental Goals and yet these are the businesses that rarely benefit from stimulus packages as a cushion against shock induced by a turbulent business environment.

MSMEs are largely led by youth and women in an environment where the social construct and embedded cultures impeded their economic advancement and equal access to resources. Policies that do not promote the growth and resilience of MSMEs risk perpetuating the already existing inequalities which is a direct conflict of what SDG 5 stands for.

MSMEs do not present a basket case scenario on the contrary these entities are laden with opportunity hence the reason why they have become significant contributors of employment creation.

In Zimbabwe, MSMEs’ role is acknowledged although more still needs to be done. The AfCFTA comes with competition and creation of regional value chains hinged on an export strategy. The new normal rewards increased online presence and key business fundamentals in an average business entity including MSMEs. The mentioned areas present will require retooling and capacity building for the MSMEs

The liberalisation of 90 percent tariff lines will see business that are imports heavy face stiff competition from cheaper imports from the region while the importation of raw materials will enable those businesses that are export-oriented to ride on a competitive advantage. As a matter of fact, duty on raw materials have always been significantly low in relation to duty on finished products.

It is during this phase that MSMEs need to be sensitised on the implication of liberalisation of tariff lines and how this will impact the business depending on the business model.

The AfCFTA has created a lot of beyond the Africa Continent. This interest may point to increased participation by investors from beyond Africa. The stringent requirements for goods to qualify as of Zimbabwe origin or Africa origin requires our MSMEs be conversant with processes that will enable goods to have a qualifying origin.

Value chains and value addition will become the hall mark of manufacturing soliciting increased conversations around rules of origin including global value chains.

Emerging in trade talks is the debate between LCD direct exports and GVCs for value chains as a sustainable export strategy. The debate is occurring among the members of the WTO of which Zimbabwe is also a member.

This debate is being driven by the critics on benefits from trade preferences who posit that “unconditional preferences can dilute the case for policy reform at home and lure beneficiaries into sectors where they do not have a comparative advantage”.

Debates such as these should not be ignored, but need to be followed for the benefit of correct positioning of our MSMEs be it under the AfCFTA or under the General System of Preferences.

Research has been unanimous in its findings that MSMEs face numerous challenges in African economies. The priority sectors identified by the AfCFTA namely transport, tourism, communication, financial services and business services should present MSMEs with minimal entry barriers, however, access to finance and digital presence have always been a stumbling block.

These sectors have been liberalised and the challenges encountered should be shared widely at different platforms so that the Government can intervene after consultation with financial institutions proffing innovative ideas in order to assist MSMEs.

The MSME week or day becomes a time that we cast light on the role of the MSMEs in economies together with the challenges they continuously face.

Statistics reveal that more than 50 percent of women in the whole Africa are found within the MSMEs and that in times of crisis, it is these businesses that are forced to close permanently. In Zimbabwe we celebrate the Zimbabwe Women’ Bank, however it is opportune for all the stakeholders to look at promoting an inclusive entrepreneurial ecosystem that will see MSMEs become resilient entities that can absorb unpredictable shocks synonymous with the business environment.-herald.cl.zw