By Clive Siachiyako (ZDA Fellow)The Prince of Wales once said “no business can survive for long as an island of wealth, in a sea of poverty.” According to the Prince of Wales, this phrase stresses the importance of business linkages for any enterprise to survive the business tornados. It is about the strength gained by businesses when they forge stronger ties into the domestic economy. It is about how much business linkages can contribute to the growth of the domestic economy and induce additional Domestic Direct Investment, which is a vital component of national development.
The micro and small enterprise sector’s significance to poverty reduction and wealth and job creation is current gaining momentum cross-cuttingly. As the champion of the sector’s growth, Zambia Development Agency with cooperating partners is brokering business linkages for micro and small enterprises (MSEs) with trans-national corporations (TNCs) to enhance MSEs’ contribution to the economy. The United Nations Conference for Trade and Development (UNCTAD) and the International Labour Organisation (ILO) play a crucial role in the formulation of such business linkages. This initiative in one way of increasing market access for MSEs via forward and backward linkages – being suppliers and buyers of services and products induced by the linkages from TNCs.
And recognising the central role of a dynamic SME sector in local economic development, many companies are taking SME development and linkage programmes beyond their own value chains in the country. TATA, Zambia Sugar, Zambia Breweries and Zain are some of the companies that are joining forces with government to present supplier opportunities to MSEs.
The business linkages initiative may seem unattainable to some MSEs. But Zam-Vizwear (Z) Limited recently attested to its viability when it clinched a multi-dollar project
with Lumwana and Marli Investments (Z) Limited to undertake Jatropha Curcas Linn seedling farming and supply the Linn-seedlings to Lumwana Mines.
The micro and small enterprise sector’s significance to poverty reduction and wealth and job creation is current gaining momentum cross-cuttingly. As the champion of the sector’s growth, Zambia Development Agency with cooperating partners is brokering business linkages for micro and small enterprises (MSEs) with trans-national corporations (TNCs) to enhance MSEs’ contribution to the economy. The United Nations Conference for Trade and Development (UNCTAD) and the International Labour Organisation (ILO) play a crucial role in the formulation of such business linkages. This initiative in one way of increasing market access for MSEs via forward and backward linkages – being suppliers and buyers of services and products induced by the linkages from TNCs.
And recognising the central role of a dynamic SME sector in local economic development, many companies are taking SME development and linkage programmes beyond their own value chains in the country. TATA, Zambia Sugar, Zambia Breweries and Zain are some of the companies that are joining forces with government to present supplier opportunities to MSEs.
The business linkages initiative may seem unattainable to some MSEs. But Zam-Vizwear (Z) Limited recently attested to its viability when it clinched a multi-dollar project
with Lumwana and Marli Investments (Z) Limited to undertake Jatropha Curcas Linn seedling farming and supply the Linn-seedlings to Lumwana Mines.In the agreement, Zam-Vizwear (Z) Limited is undertaking the project under the out grower scheme initiative with Marli Investment Zambia. This has broadened the Zam-Vizwear’s market base. Primarily, Zam-Vizwear’s core business has been the supply of industrial safety requirements, protective clothing and reflective materials to the mines on the Copperbelt and North Western provinces. The new deal with Lumwana Mines and Marli Investments thus means new business avenues for the Zam-Vizwear.
Apparently, Zam-Vizwear has been experiencing poor cash flow due to poor performance of the mining sector amid global economic uncertainties. To that effect, the company opted to venture into agro-related project such as Jatropha seedling farming and selling. The project is located in Kapiri Mposhi in central province. In that vain, Zam-Vizwear acquired a 10 hectares land for the project at an estimated total investment of US$38,000. The US$38,000 covered expenses for land acquisition and preparation, creation of a water reservoiur, designing and laying-out the irrigation system, purchase of Jatropha seeds, water pumps and two horse power engines for irrigation.
Apparently, Zam-Vizwear has been experiencing poor cash flow due to poor performance of the mining sector amid global economic uncertainties. To that effect, the company opted to venture into agro-related project such as Jatropha seedling farming and selling. The project is located in Kapiri Mposhi in central province. In that vain, Zam-Vizwear acquired a 10 hectares land for the project at an estimated total investment of US$38,000. The US$38,000 covered expenses for land acquisition and preparation, creation of a water reservoiur, designing and laying-out the irrigation system, purchase of Jatropha seeds, water pumps and two horse power engines for irrigation.
To kick-start the project, Zam-Vizwear purchased 10×25kg bags of Jatropha Curcas Linn seeds from Marli Investments (Z) Limited with each bag containing 40,000 seeds at a total cost of US$5,454. Further, the company acquired some more 10×25 bags of seed, bringing the total seeds to 800, 000 which require 800 hectares of land for planting after the nursery period. And upon satisfactory production of the seedlings in accordance with the terms of reference and specifications, Marli Investment (Z) Limited bought the entire Jatropha seedlings off the nursery on behalf of Lumwana Mines at US$290,909.09.
However, the market value for the seedling is projected to change by up to 20 percent as most farmers are closely following up the bio-fuels in the agro-sector. This follows the country’s projected land use of 2,000,000 hectares. This requires a substantial number of farmers for the country to meet its bio-fuel targets. Therefore, as a contingency plan, Zam-Vizwear is currently doing a comprehensive documentary on the nursery to ensure the wider farming community is not only well informed but also strategically market themselves to the potential prospective clients in the area of out grower schemes.
The Jatropha project is Zam-Vizwear’s diversification strategy from its initial business of supplying industrial safety requirements, protective clothing and reflective materials to the Zambian business community and the surrounding Sub-Saharan African countries. With such a business boost, Zam-Vizwear aims to establish a reliable bio-fuel business that will provide a wide range of bio-fuel services to the Zambian community and to the sub-region.
Taking advantage of supportive agro-schemes and services industry in the country, the company’s strategic business plan will strengthen its financial base. The company considers both Zambian and regional agro-schemes and services industries’ support for bio-fuel was on the exponential increase. And since the new business initiative with Lumwana Mines and Marli Investment will be implemented with great ties and re-financing, the potential market reputation for the regional area is expected to definitely undergo exponential growth.
This entails reinforced business resilience and more wealth and job opportunities for Zambians. Procurement, distribution, and sales benefits also accrue. These linkages thus allow MSEs and TNCs to reduce input costs while increasing specialisation and flexibility. They also increase domestic business integration and stimulate positive social and economic impacts in the wider community. Diversification becomes more viable with such linkages in effect, let alone economic gains.
Many large firms are, in principle, interested in developing relationships with local SMEs. However, such relationships can also be costly to form and maintain, and as a result, they rarely develop easily or smoothly. A large firm’s tendency to form linkages is a function of firm- and industry-specific risks, costs and benefits; firm-level perceptions and strategies, such as domestic or export market orientation; government incentives and requirements; and the availability of qualified SMEs. According to UNCTAD, the latter is often a key obstacle.8 SMEs may have limited access to market information and financing, lack management skills or production expertise, or be unable to match product quality requirements or to scale up quickly. Nevertheless, some companies have moved ahead despite these challenges, working either on their own, collectively with other companies, or collaboratively with a variety of other stakeholders.
A joint research project by UNIDO and Harvard University has identified six main types of mechanism through which large companies are partnering with each other 
or with other stakeholders to support business linkages and SME development, often with the explicit goal of overcoming some of the obstacles listed above. These mechanisms include: partnerships along individual company value chains; groups of companies in the same industry sector or location working collectively together; traditional trade and industry associations enhancing their capacity to better serve SMEs; joint public-private financing mechanisms; dedicated small enterprise support centers; and multistakeholder public policy structures.
These companies’ business linkage efforts have varied not only in the “how,” butalso in the “what.” For instance:• Many companies have forged SME linkages within their own value chains, usually complemented by supplier and/or channel development measures of various kinds.• Some companies have, either in addition or instead, focused on SME development and linkages beyond their own value chains.• And finally, some companies have taken action to strengthen the enabling environment for SME development and linkages.
or with other stakeholders to support business linkages and SME development, often with the explicit goal of overcoming some of the obstacles listed above. These mechanisms include: partnerships along individual company value chains; groups of companies in the same industry sector or location working collectively together; traditional trade and industry associations enhancing their capacity to better serve SMEs; joint public-private financing mechanisms; dedicated small enterprise support centers; and multistakeholder public policy structures.These companies’ business linkage efforts have varied not only in the “how,” butalso in the “what.” For instance:• Many companies have forged SME linkages within their own value chains, usually complemented by supplier and/or channel development measures of various kinds.• Some companies have, either in addition or instead, focused on SME development and linkages beyond their own value chains.• And finally, some companies have taken action to strengthen the enabling environment for SME development and linkages.
Large firms operating in developing countries can forge linkages with local SMEs in many different areas of their own value chains. As the UNIDO-Harvard research outlines, these opportunities may include procurement, agricultural outgrowers schemes, manufacturing subcontracting, outsourcing non-core functions and services, distribution and retail, franchising and leasing, and sales offinancial services, information and communications technologies, and other productive inputs and tools.10 Key to these programs is developing the capacity of SMEs to meet the needs of the large firm. Recognizing the central role of a dynamic SME sector in local economic development, many companies are taking SME development and linkage programs beyond their own value chains. Often they do this for public relations or corporate social responsibility reasons, such as demonstrating their commitment to the community and thereby strengthening their license to operate, or mitigating social risks from the viewpoint of investors. Companies engaged in large infrastructure projects or mining activities may support “beyond the value chain” SME development and linkages in order to reduce dependence in the local economy and soften the blow when they leave. A company restructuring or privatizing maysupport such activities to compensate for massive job cuts inside the company. Companies can also choose to support such activities for the enhanced stability and opportunity a vibrant local economy offers over the longer term.
In addition to undertaking SME development and linkage programs, or prior to doing so, some companies are taking steps to increase the effectiveness of those programs by influencing some of the environmental factors that facilitate or hinder their work. It is quite common, for example, for companies to make social investments – of money, employee volunteer time, or both – in education and training in order to build a qualified local workforce.
Another common strategy is to promote the growth and development of organizations that help build the social and economic assets and infrastructure on which SMEs depend. These include schools and vocational training institutes, local non-profit or for-profit business
service providers, credit bureaus, entrepreneurship organizations, small business associations and chambers of commerce, linkage“brokers,” and government agencies. Government capacity-building is gaining particular attention, as agencies’ efficiency in matters like business licensing, taxation, and regulatory enforcement can be critical to small business success. Linked to this, a third strategy for strengthening the enabling environment for linkages is to engage in public policy processes. Large firms are starting to explorechannels for dialogue on the kinds of policies, programs, and regulations that affect SMEs’ ability to incorporate, grow, and form linkages with larger firms. 
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