Importance of Investing in SMEs in Zambia

30 Jan

Importance of Investing in SMEs in Zambia

Small businesses are everywhere. They range from your neighbour who has a small shop to relatively bigger firms that you see at the local shopping mall and they are not limited to one specific line of business. They range from agro products and health centres to consultancy firms. Why? Because they are just as the name dictates; businesses. Only difference from bigger firms is that they are small in size, production capacity, number of employees or in terms profits. The truth is these are everywhere and they employ thousands in the country. Some say they are the backbone of developing countries such as Zambia. This implies that they are vital to the catapulting developing countries to a point of [economic] self-dependence. Sadly though, many people underestimate the value of the SMEs, viewing them simply as small businesses which they do not give much attention to. They choose to support well known and established Brands instead of one their own locals. This blog is meant to discuss the importance of SMEs and why we must invest in them as a country.

‘imiti ikula empanga.’

A Bemba proverb goes ‘imiti ikula empanga.’ This can be loosely translated to mean ‘the trees that grow, make the forests/bushes of tomorrow.’ On first glance, you, the reader, probably have that confused face like o_O and you are probably wondering what this has to do with the title stated above. Well think about it; all the large businesses, the multinational corporations and the giant conglomerates that rule the world industries. Think of Samsung, Toyota, Etihad Airlines, Standard Chartered Bank, Apple and countless others. Did they begin and become multinational companies? No. They all have humble beginnings. They all started as small businesses. People invested time, energy, and resources in these small businesses. In time they grew and eventually came to be worldwide brands of success that can be recognised from anywhere in the world. So as can be seen, investing in Small businesses is crucial. Borrowing from the logic of the proverb above, ‘the small businesses of today are what will make the industries of tomorrow.’ The question now is how so? There are numerous ways in which investing in these SMEs can benefit the country as a whole.

Economic Growth: Although overlooked, SMEs actually generate substantial amounts of money. Let’s imagine 100 small businesses, each with an annual output of K1000. That means annually, these businesses produce K100,000. Now imagine a scenario where the people of the country took it upon themselves to invest in the small businesses. How?  Most people think of money whenever the word Investment is brought up. There are actually various ways in which investment can be done. Investing can range from actual funding(monetary), support by providing business development services that can help them increase their performance and get better results, as well as in them as well as just supporting them and their products (something that can be done by the majority of the people). Instead of buying products from multinational conglomerates, consideration can be given to the local products and so forth. (This is a lengthy discussion which will be covered by our next article on How we can Support Small Businesses). Most small businesses have the will to grow but lack the funding and proper structures to go with it. As a result, most of them die off within a few years of operation. With proper investment however, they can increase their production. If properly invested in, Small businesses have the capacity to grow to an extent that they add even more to the country’s total output. Increased revenue can then be used to further expand the business products, to improve the quality of the products and so forth so much that it grows even further. Due to something called the trickledown effect, the benefits felt by the company’s growth are also felt by the country’s people as a whole.

Employment: Another reason that we should support Small businesses is because of the employment that they offer. The 2010 Micro, Small and Medium Scale Enterprises Survey revealed that the sector employs the vast majority of the labour force. The survey estimated that 88% of Zambians in employment work for informal enterprises in the micro, small and medium scale enterprises (SMEs). This means that only 12% of the country’s workforce is engaged with the larger corporations. When I talk to clients about this topic, I usually start by asking “How many people do you have working for/with you at your firm?” I remember one client answered 10. I then asked him saying ‘What would happen to those 10 if you woke up tomorrow and decided to shut down your business?” A distinct smile appeared on his face. That’s how important that small businesses are to the employment. If this business owner were to go out of business, it isn’t only him that would be affected by it. But his employees (…Or more accurately, his Ex-employees), their families and so forth. When you invest in small businesses, you are not giving money to a company boss to take bigger and longer holidays overseas . What you are doing is investing in the future industries, the families of the business owners.You are helping a parent to buy his child new shoes or a young man to afford a college education. Without the small businesses in Zambia, hundreds of thousands would be jobless and unable to afford the basic needs to survive. The few who are privileged to be business owners have also taken the initiative to employ countless others who in turn are able to earn a living to support their families. So even regarding employment, the trickledown effect still applies

As a business owner, you are thus very vital to the growth of the country. Without you, there would an extra 5 or 10 jobless people on the streets.

Infrastructural Development: Apart from employment and economic growth, investing in small businesses leads to infrastructural development. When a business starts to grow, it needs more features to support its growth. Imagine you grow maize. When you started out, you had two drums to store the grain. As your output increased, the two drums eventually became two warehouses. As your business grew further, you built four more in another part of the country and so forth. In doing so, you are contributing to infrastructural development. If these warehouses were located where the road is poor, you would invest in improving the condition of the road leading to your warehouse. While it is for your direct benefit, others will be spill over effects and many more will benefit from it. Warehouses, transport networks, better communications and many more. As a result, infrastructural development is a one of the direct results that come from investing in Small Businesses.

There are many more benefits that have not been outlined in this blog. You are welcome to add more in the comments section. The task that now remains to be answered is Whose responsibility is it to invest in the small businesses and how can they do so? That will be answered in our next blog, on How we can Support Small Businesses. Also, please like and Share our blog on Social Media, Ndalama Insights!

Business TypeSole Trader

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