Sunday, June 13, 2010

Youths at the Afore:Economic Recovery through Innovation and Competitiveness

By Clive Siachiyako

Globally, economies are working-out smarter ways of completely eliminate effects of the recent economic recession and gear-up for economic recovery. They are finding ways of applying institutional changes inherent to innovation and competitiveness to stimulate productivity, economic development and long term improved livelihood for citizens.

Economic trends show that innovation is a foundation for competitiveness, industrial and technological upgrading, balancing economic growth with wealth redistribution and effective provision of essential public goods and services. Innovation helps countries deal with structural changes in their economies and enable them respond to external challenges better.

Innovation is about the production, diffusion and use of new and economically useful knowledge. It is about creating domains for identifying and nurturing enterprising faculties and building globally competitive national economies. Innovation is a base for competitiveness. It is a back-borne for formulating institutions, policies and factors that determine sustainable productivity levels in an economy.

Determined to promote innovation and competitiveness, Zambia is pursuing comprehensive economic reforms that led to the establishment of Zambia Development Agency (ZDA) and other key institutions and programmes like the Private Sector Development Programme, to pioneer and facilitate private sector led economic development.

To re-emphases its determination to enhance innovation and competitiveness, this year’s Zambia International Trade Fair (ZITF) is anchored on: “Economic Recovery through Innovation and Competitiveness.” The theme conforms well to ZDA’s initiatives that promote and support innovation and competitiveness through research, market development, establishing economic zones, and micro, small and medium entrepreneurs (MSME) development via business linkages, training and business voucher programme.

Through research, ZDA provides essential information on market offers for Zambian products and investor perceptions on the business climate in the country, including pledged investment implementation. Information on investor perceptions is vital in designing investor friendly policies that consolidate domestic and foreign investment. The information helps the country determine the magnitude, source and direction of private capital flows and stocks.

Such information is also key for domestic and external policy formulation, evaluation and complementing the country’s fiscal and monetary policies to bring overall macroeconomic stability. It improves the compilation of national statistics, which serve as an early warning system for preventing external shocks such as the recent world economic crisis. These proactive measures are essential for economic competitiveness and reliability.

To provide updated information on investment, ZDA monitors pledged investment actualisation in the country. Currently, 195 companies with investment licences have been monitored out of 700 companies with licences. These companies pledged US $ 1.3 billion investment and 14 000 jobs. US$624 million of that investment has been actualised, resulting into 9 500 local jobs, representing 47 percent implementation rate.

The monitoring process helps ZDA ascertain whether an investor invested the pledged amount, employed the pledged number of people or failed to implement the project and reasons for failure. Information on skills sharing, training for employees and other savvy transfer mechanisms is also acquired for determining how much innovation is assimilated in the domestic economy to improve productivity and service delivery.

The ZDA further research on market offers for Zambian products and foreign market offers. Since information is the premium of today’s knowledge driven economies, ZDA equips exporters and importers with pertinent information for identifying ripe markets for their products. It also helps importers easily tap necessary imports miles away.

Beyond investment and trade, ZDA facilitates business linkages between MSMEs and transnational corporations (TNCs). Business linkages provide demand led business solutions for both TNCs and MSMEs. They provide MSMEs an opportunity to upgrade their technologies, business practices and technical skills and ultimately become more productive and competitive.

Currently, ZDA and cooperating partners such as the International Labour Organisation and the United Nations Conference for Trade and Development, have facilitated four business linkages between MSMEs and TNCs. The four are between Zambia Breweries, Taj Pamodzi Hotel, TATA Tannery and Picky n Pay Group, with various MSMEs in similar businesses with these TNCs.

To foster entrepreneurship in the country, ZDA trains MSMEs in business and financial management, effective preparation of balancing sheets and prudent costing and pricing. Since entrepreneurs are pulled (model after parents/ friends) and pushed (circumstantial entrepreneurs), the ZDA initiatives for MSMEs are aimed at creating a pool of entrepreneurs that can innovatively earn a positive cash flow backed by sound business systems and processes.

With its mission statement combining investment and trade promotion, MSME development, competitiveness and innovation, ZDA also facilitates the establishment of multi-facility economic zones (MFEZs) to catalyse industrialisation and value addition to Zambian products to boost their competitiveness locally and abroad.

MFEZs are fundamental factors to rapid and sustainable economic development. They are a base for sustainable prosperity and making an economy more competitive, which Zambia aims to use to create value-addition bases and implant high spirited small and medium scale entrepreneurs in them to increase the economy’s competitiveness and innovation levels.
The ZDA considers the extent and quality of entrepreneurship available in Zambia as an important matter for innovativeness, since entrepreneurs play the role of originators and coordinators of innovative activities. Thus, creating enabling conditions that promote small and medium entrepreneurs has the potential to increase innovation activities and more effective innovation. It can make Zambian products very competitive and the general economy more viable and most rewarding.

With the current status Zambia has earned in most global rankings such as the World Competitiveness Report, Ease of Doing Business, Technology Readiness Ranking, and Ease and Access to Credit, ZDA is hopeful that the combination of the country business reforms will make the economy more competitive to capital, thus becoming a hub for innovation, job and wealth creation and sustainable development.

The ZITF’s theme: “Economic Recovery through Innovation and Competitiveness” has set the mood for enhanced competitiveness and innovation to speedup economic recovery and gear-up for sustainable economic growth and development. With combined efforts, Zambia can gain more. Visit ZDA at the ZITF and learn more on how to get the right support to enable your business grow to its full potential and increase its economic contribution.

SMEs: India’s Economic Heroes, Lessons for Zambian Youths

By Clive M. Siachiyako
For all its current economic strength, India remains a beacon of small and medium entrepreneurialism. Indian entrepreneurs are making waves across the world. Its micro, small and medium business firms are making acquisitions abroad and spreading their tentacles in various corners of the globe. They have flourished under globalisation and have proved all doomsday prophecies wrong.

Thus, India’s economy has been one of the stars of global economics in recent years mainly due to its robust SME sector. With its growth being supported by market reforms, rising foreign exchange reserves, both an information telecommunications (IT) and real estate boom, and a flourishing domestic direct investment (DDI) and capital market, India offers rewarding economic lessons to Zambia’s micro, small and medium enterprises (MSMEs) sector.

According to the 2009 Economist Report on entrepreneurship, India is the ninth in the Global Entrepreneurship Monitor survey of entrepreneurial countries. It is the highest among 28 countries in Necessity Based Entrepreneurship, while second among all nations in Total Entrepreneurship Activity. The country has been registering about US$3.6 billion annually from the ICT sector alone from SMEs prior to the economic crisis. The mobbed SME heroes of India were transforming small start-ups into global giants every year. They created business minded societies in several Indian cities by engaging in a frenzy of networking through partnerships and joint ventures.

India improved the growth of the SME sector after liberalising the economy in the 1990s by linking education and the industry. The country’s universities/colleges became its economic engines with proliferating science parks, technology offices, business incubators and venture funds. This helped to create a business minded class of graduates. The tradition entrepreneurship dates-back to basic and high schools in India. The trend has significantly boosted India’s DDI profile.

The country’s higher education system has also been designed to discover and develop first-class entrepreneurial skills. The system does not only inspire graduates to strike it rich, but to play their part in forging a new India with a double-digit economic and GDP growth and low levels of poverty. And through linking the education system to the industry, India began to reverse the brain drain. The country’s prodigal children were summoned home by economic offers of the native soil. For instance, from 2003-2005, some 5,000 industrious Indians returned home from America. They trekked home to kick-start the country’s entrepreneurial economy and increase the DDI flow.

These Indian transplants from the Diaspora promoted SME growth through mentoring, networking and education. Today their network has 12, 000 members and operates in 53 cities in 12 countries. The transplants helped to fill some of the skills gaps created by India’s recent boom. They also reinforced the country’s existing links with high-tech countries in the West like America and in Europe.

The Indian SME sector growth model offers various fundamental lessons for Zambia’s MSME sector. The linking of the education system to the industry is essential to the ZDA, TEVETA and ministry of education strategies meant to strengthen entrepreneurship levels in the country. By collaborating with human resource training institutions, citizens will obtain an entrepreneurship spirit and learn the art of sustaining business at the appropriate age. They will thus grow up with an entrepreneurial mindset. Such a phenomenon can result into a knowledge-based economy, where the use of knowledge is the main driver of growth, wealth creation and employment across all sectors without much dependency on foreign investors.

Picking it from the Indian model, several skills training institutions under TEVETA, government run colleges and universities and those in the private hands can be a haven of entrepreneurial savvy and breeding grounds for businesses. The public-private partnership initiative can be a hallmark of linking the education system to the industry beyond public educational institutions. Business incubator programmes can be rooted into these institutions to blend business mindsets in students at the right time. The trend can descend further to basic schools and high schools in order to overhaul the Zambian mindset towards business. The strategy is paramount in enhancing government’s numerous programmes meant to meet long term developmental goals of attaining middle income status by 2030 among others.

Information telecommunications (ICT) is another significant parametre Zambia can tap from the India SME growth model to improve MSMEs’ business prowess. India’s enterprising heroes like Azim Premji transformed Wipro from a vegetable-oil company into a software giant. After liberalising the ICT sector, many Indian SMEs ventured into the sector. The cost of doing business equally reduced drastically. Internet use, calling rates and other related expenses fall. The sector became a lucrative business web.

With the ICT policy in place and other initiatives aimed at improving infrastructure, MSMEs can achieve and contribute greatly to the economy. Strategies such as multi-facility economic zones (MFEZ) meant to have necessary infrastructure in place for improved productivity can help transform dormant small enterprises into economic giants. Grounding MSMEs with competencies on how to utilise ICT to improve business efficiency is key in developing and discovering first-class MSMEs that can creating a strong buffer zone for the local economy. The current business reforms government is implementing fits well in promoting the MSME sector and the local economy as a whole.

The MFEZ initiative can help create a pool of MSMEs in various businesses. Various networks can sprout from these zones and help to uproot start-ups by providing them with key information on market offers and other business etiquettes. The start-ups can be both supplies and part of the global supply chains. With business linkage and joint venture initiatives already in place under the ZDA, Zambia can easily propel its DDI flow to supplement FDI. The net effect of such a combination will be increased economic growth, job and wealth creation as well as poverty reduction.

With well watched pace and coordinated policy strategies, Zambia can realise many new entrepreneurs onto the business sphere. The entrepreneurial spirit will begin to breathe new life into Zambia’s public and private sector and greatly revolve the economy. Zambians in the Diaspora will see the need to invest back home and translate Western ideas into local ideologies, combining them with acquired technological advances to drive economic growth. With such an economic atmosphere, Zambia, like India will be hopeful of having a brighter economic future.