Micro and Small Enterprises...Wealth Creation Strategy for Youths.

By Clive Siachiyako
MSEs: A Precursor to Vision 2030’s Goal of Wealth and Job Creation
Zambia’s long-term development objective, as articulated in the National Vision 2030, is “to become a prosperous middle income country by the year 2030.” The associated goals call for policies that accelerate and sustain economic growth, and which enable the poor to participate in, and benefit from, the growth process. The theme of the Fifth National Development Plan is achieving Broad Based Wealth and Job Creation. The aim of the programme is to stimulate investment, entrepreneurship and employment creation within the micro, small and medium enterprise (MSME) sector.
The Broad Based Wealth and Job Creation programme has a mix of interventions that focus on specific sub-groups in the MSME sector. It is based on a systemic enterprise development approach, which recognises the need for interventions at micro, medium and macro levels. In the process, the programme aims to better coordination of United Nations support on private sector development in Zambia. It is led by the International Labour Organisation on behalf of the UN System in Zambia. It consolidates and strengthens the activities of multiple United Nations agencies including United Nations Conference on Trade and Development, United Nations Development Programme and the United Nations Global Compact, within the context of the UN Development Assistance Framework and the recommendations of the High Level Panel report on United Nations System coherence at the country level.

Situation AnalysisThe Zambian economy has recorded impressive growth over recent years, but this positive development is yet to translate into broad-based wealth and employment creation. Wealth creation is limited to a minority of the population (particularly in urban areas) and income inequalities are rising. The Fifth National Development Plan (FNDP) notes that “the improved economic performance since 1999 has not significantly reduced poverty”, due to weak linkages between the capital intensive sectors which have driven growth and the rest of the economy. Neither has growth translated into a commensurate increase in jobs. Of the 6,184,000 people in the labour force, only about 700,000 are formally employed, and the remainder is either engaged in the informal economy or unemployed. This lack of opportunities for decent employment holds back human development, perpetuates inequality, exacerbates poverty, and limits the prospects for achieving Millennium Development Goals.

These issues are notably pronounced among women, young people and people with disabilities. These groups face particularly acute challenges in relation to technical and business management skills; market access and information; and access to capital including collateral. This situation is incompatible with Zambia’s long-term development objective, as articulated in the National Vision 2030, of becoming a prosperous middle income country by the year 2030. Private sector development initiatives by Government and its development partners are yet to fully unlock the potential of MSME as the main engine for broad-based growth and employment creation. ngoing interventions to exploit the potential of large-scale businesses are brokering business linkages between MSMEs and large companies, to provide a market for MSMEs, as well as opportunities for upgrading through technology and knowledge transfer, and enhanced access to finance. In Zambia, these opportunities have not been fully exploited. The institutional framework tends to reinforce a disconnect between efforts to attract large investors and to encourage MSME development respectively. The establishment of the Zambia Development Agency (ZDA), which incorporates the functions of the former Small Enterprise Development Board as well as the Zambia Investment Centre, offers an opportunity to resolve this disconnect. Links to Development FrameworksThis BBJWC programme is a direct response to Zambia’s Fifth National Development Plan and a contribution to Zambia’s development objective, as articulated in the National Vision 2030, of becoming a ‘prosperous middle income country by the year 2030.”

The programme particularly relates to the Employment and Labour chapter of the FNDP, and to the Private Sector Development Reform Programme, which is described in the FNDP as the main instrument for improving the business and investment climate in Zambia during the FNDP period. The programme is also in line with the ZDA Act on Micro and Small Businesses. It works closely with the ZDA as its internal structures and capacities are defined and developed, in order to maximise synergies between the ZDA’s various elements and service offers. The programme particularly seeks to build alliances between the current ZDA’s MSE Division and the Investment Division in relation to business linkages by supporting a structured approach to pro-poor investment promotion and facilitation.
The programme also supports the implementation of aspects of the Citizens’ Economic Empowerment (CEE) Act. It works closely with the CEE Commission to ensure all programme activities are aligned with the framework of the CEE Act; monitor the impact of the Act on the MSME sector through collaboration with business associations including Zambia Chamber of Small and Medium Business Associations, identifying and recommending measures to enhance impact; and develop the capacity of the Commission through the provision of policy advice, drawing on international best practice.

The programme supports the Ministry of Commerce, Trade and Industry’s efforts to develop an MSME Development Policy, which relates to business development service support structure, entrepreneurial training, market facilitation including linkage programmes, and MSME financing. It is in line with the ministry’s policy proposal and planned intervention in support of Local Economic Development. All these interventions are meant to unlock the potential of MSMEs and enable Government attain its wealth and job creation targets.

Export Development Plans: Catalysts of Export Promotion and Finance
Endowed with rich-natural resource, but limited in financial and technical base to seize export opportunities the market offers, Zambian exports have been for long struggling to penetrate the global market. However, due to Zambia’s strategic advantages in exportable wares that are extractable from its rich-resource, a foundation has been laid for the establishment of export promotion strategies.

In the past few years, there have been a number of efforts aimed at increasing Zambia’s, exports especially non-traditional products. Consequently, a number of projects have been initiated to broaden Zambia’s export basket. Among these export facilitation initiatives is the Zambia Export Development Fund (ZEDEF). The Zambia Export Development Fund is a European Union funded project which succeeded the second phase of the Export Development Programme (EDP II). The EDP II programme ended in 2007 after running for five years from 2003 to the end of 2007. The activities of the EDP II were based on three pillars: the first one was the export financing facility that provided credit and grants to exporters through their respective producer associations.
Following the end of EDP II project in 2007, the fund was handed over to the Zambia Development Agency (ZDA), which is currently managing it under Zambia Export Development Fund. The core of ZEDEF is to assist in the expansion of Zambian non-traditional exports. The current beneficiaries from the fund include horticulture, floriculture, wood, leather, organic products, and crocodile industries. The fund’s parametres will be broadened in future with line with Zambia’s export diversification programme.
The EDP II project has been continued under the aegis of ZEDEF due to the successes that it scored. The mandate of ZEDEF is to expand non traditional exports to further the previous projects economic strides. ZDA’s Export Promotion and Market Development Division manage the Fund, which is operating as a loan funded and administered to Zambian registered producer associations.
The other export development initiative meant to bolster Zambia’s non-traditional exports is the Production Finance Technology (PROFIT). PROFIT is a five year USAID Private Sector Development Programme. It began operations in 2005. The programme centres on four key principles. These four pillars include export growth for the nations development; agriculture, natural resources and tourism which are the pillars of Zambian economic growth; export growth is also a major engine for Zambia’s development; and the private sector is a principle drive of sustainable growth. Although not directly linked to exporting, the project provides financial assistance business enterprises in terms of production inputs and also technology for use in the production chains.
The strategic goals of PROFIT are to improve inter-firm relationships and cooperation within industries in which it works and the development and improved functioning of critically important support markets. It also aims at creating an environment where its interventions can lead to greater confidence and credibility in agricultural market mechanisms. PROFIT sees lack of confidence and credibility in the market place as damaging to the participation of smallholders, a trend detrimental to the general growth of the agriculture sector. The programme generally operates under the broader agricultural economy and primarily through three grants.
The major focus of PROFIT grant programmes was on the development of the Zambia Agricultural Commodities Exchange (ZAMACE), which involved out of the initiative’s intention to support the development of a warehouse receipting system. The ware house receipting system is meant to create a transparent agricultural marketing structure which can foster the development of a platform that enhances market credibility.
By 2006, PROFIT grants were dedicated to the conservation farming unit, with the goal of providing direct and indirect training on a large scale to upgrade smallholder farmer sustainable production capacity. It also focused on the agribusiness forum. This is aimed at providing a level of support to the agribusiness forum to establish itself as an industry think tank on matters pertaining to the engagement of smallholder farmers and producers in commercial high value. Further, PROFIT grants aims to position the Zambia National Farmers’ Union in the rural economy as respected and strong advocacy body with the reputation for independence and lack of bias with diverse membership base and large geographical footprint to fill the critical gap in the Zambian market for farmers.
The other area of interest of PROFIT is the development of the Forest Fruits incentives internally and improving the honey value chain through improved technologies. The grant focuses on the Forest Fruits company, which engages about 5, 000 producers in North Western province and exports organic honey to Europe and United States of America. The programme also promotes proactive marketing through mobile phone technology by the agricultural retail sector using crop serve as a model to show farmers that cell phones can be tools to their business. The project was done through africannect sms system and savanncom.
The mission of PROFIT is turning competitive advantage into competitiveness. It just needs both donor and government distortionary activities, management and trust issues between market players and inexperience in dealing with a smallholder market at which the private sector can take on.