SMEs: Prospectives and Challenges

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By Clemens H. Kashuupulwa

Local small and medium entrepreneurs are under threat, as it is now becoming tough to compete with foreign business investors in Namibia.

Some small and medium enterprises [SMEs] have already closed, lending their business complexes to potential foreign business competitors of transnational manufacturing companies of South Africa, the European Union and Asia-pacific traders who are attracted by Namibia’s laisser-faire economic order, an international acceptable economic system of free market enterprises that currently dominates global business markets under the capitalist way of development the world over.

The free market economy, also known as a mixed economy, is a social economic order in which “government intervention is kept to a minimum and market forces are allowed to prevail”, on which Namibia’s economic system is based under Namibia Constituency’s Article 98, subsection 1.

This opinion mindset is an attempt to delve into the business sector to enlighten SMEs to find amicable shortcuts to survive competitive challenges in the business sector, and build on strengths and opportunities while using the business demand gap to innovate the growth of SMEs, while addressing the existing threats and gaining strength by using the existing business structures set up by the government to engage in joint ventures and mergers to interact in the revamp of the economic growth and industrial drive of Namibia, without compromising the government policy of foreign investors and principles of a laisser-faire market in Namibia.
1. Laisser-Faire Market

The laisser-faire economic system is a constitutional provision in Namibia that allows foreign business companies to invest in Namibia, subject to the provisions of Namibia’s Investment Policy “of securing economic growth, prosperity and life of human dignity for all in Namibia”.

However, this policy is also encouraging local business owners to interact in the business sector. SMEs need to enter into joint ventures with potential foreign investors with immovable and movable assets for industrial development, job creation and economic growth.

This process started long back with many foreign investors establishing themselves well economically in all spheres of business sectors in partnership with the public and private sector in the country.

However, there is still much to be done to bring former disadvantaged local business entrepreneurs into the mainstream of the business sector to benefit and contribute to the economic growth of the country.

In any country, behind the economic growth in the struggle for economic independence, local people must be involved as the forces for the economic drive of that country. Namibia’s struggle for economic emancipation cannot be an exception.

Local SMEs have a critical role to play in the steering process of economic independence just as they participated in the political independence of this country.

The demand of some existing and the new business entrepreneurs for inclusion in the business sector is justifiable. The government has already put in place mechanisms for potential local business entrepreneurs to be in the system to meet the demands of former disadvantaged local business people for inclusion in Namibia’s business sector.

Many of them have been already potential entrepreneurs who dominated the market on competitive business advantages with foreign business competitors. Others have climbed already the business ladder with successes, while a few of them are facing serious challenges in global business competition that led to their businesses being closed for numerous reasons that can be identified through strength, weakness, opportunities and threats [SWOT] marketing analysis, to be actively engaged again in the business sector.

2. The Government

The Government of the Republic of Namibia has created the Ministry of Trade and Industry [MTI] “to be responsible for the development and management of Namibia’s economic regulatory regime on the basis of which the country’s domestic and external economic relations are conducted”.

It is also accountable for the economic growth by ways of formulating and implementing regulatory policies “to attract investment, increase trade and development and expand the country’s industrial base” under investment promotion, manufacturing ventures, and growth and development of SMEs in line with the Namibian Government’s Policy of Free Enterprises for economic diversification and growth.

MTI’s central role is “to strive to facilitate development of the private sector through the creation of a business friendly environment and stimulation of private sector development” by ways of putting regulatory legislation, industrial infrastructure, export and import investment promotion as well as affordable credit facilities for potential entrepreneurs under its system of the Namibia Investment Centre, Directorate of Industrial Development, Internal Trade and International Trade to meet the government’s economic independence.

This shows that the government has created an enabling business environment that is beneficial to local business entrepreneurs and foreign investors. Namibia’s Investment Centre [NIC] in particular has been in existence since 1990 with the promulgation of the Foreign Investment Act of 1990 that calls for foreign investors to come to Namibia “to help stimulate economic growth and expedite the industrial transformation of Namibia”.

The Act provides liberal foreign investment conditions, equal treatment of foreign and local investors, and openness of all sectors of the economy to foreign investment, full protection of foreign investors and granting certificate status of investment under the economic policy zone [EPZ] while excluding local participation in the EPZ system.

The Directorate of Internal Trade in particular is responsible for “the promotion, regulation and facilitation of domestic trade” and is mandated to promote all local entrepreneurs in the business sector by ensuring quality and corrective trade transactions as it administers registration of companies, close corporations, designs and trade marks.

Being responsible for internal trade, MTI initiates and reviews appropriate legislation in the area of legislation and industrial properties.

3. Namibia Chamber of Commerce and Industry

The Government of the Republic of Namibia through the Namibia Chamber of Commerce and Industry [NCCI] has created an enabling business environment that is beneficial to local business entrepreneurs and foreign investors. It started with the Namibia National Chamber of Commerce and Industry [NNCCI] as a central structure chamber that was transformed into the Namibia Chamber of Commerce and Industry in 1998, as a credible business organization.

It serves the interests of local entrepreneurs at regional level by ways of representing them and rendering services to SMEs, targeting to create an environment that is conducive to encouraging and stimulating the private-sector growth and development in Namibia under its long-term strategic objective to promote prosperity for all SMEs in Namibia by “ensuring a balanced private sector growth enterprise development and global competitiveness”.

NCCI is mandated “to represent the interests of the private sector, while advocating and lobbying to an enabling environment, by influencing policy legislative debates and providing relevant services for facilitating business growth and development”.

It established its regional offices closer to its members in Windhoek, Rehoboth, Walvis Bay, Rundu and Ongwediva that are organized through local and regional councils and business forums.

Local entrepreneurs who are members of the NCCI have greater opportunities “to remain informed on issues and development which affect their businesses and the economy of the country”.

Among many of its main duties are to link business information and facilitation with larger corporate institutions and rendering advisory services on small business planning, development and referrals as it is the authentic voice of organized, commerce and industry in Namibia.

4. Small and Medium Enterprises

The development process of any country is not introduced by the public sector alone. The private sector plays also the central role in partnership with the government. The private sector is thus the right arm of the government for industrial development, economic growth and job creation.

In a mixed economic system like Namibia, the government interacts with SMEs to set up light and heavy manufacturing industries with appropriate technologies to create a favourable business environment to which SMEs can have access to appropriate technologies in joint venture with foreign investors to utilize its untapped resources in the region for mass production job creation and exports to other countries.

SMEs over many centuries the world over have contributed immensely to the growth and development of many countries. Being the role players in the economy of every country, SMEs have successfully been a role model in stimulating the growth of the economies of many countries the world over.

SMEs have also been active in many developed African countries as the growth of large corporations has slowed down, and innovative and creative business have created additional needs and new markets to add value to the growth of the SMEs in those countries.

In advanced and developed countries, SMEs and large national and international business organizations have made strides in determining the growth of the state economy and thereby created mass job opportunities through an industrial drive that was created in those countries. This means that in any country, when there is growth in the economy more employment creation is also made.

South Africa’s economy experienced a decline over 20 years [1973-1990] when sanctions against the apartheid regime put pressure on the growth of the economy that ushered in the country’s economy decreasing to 2.2 percent with no growth in 1990.

However, the end of the apartheid regime brought prospects in the economic growth of South Africa in 2004. The Gross Domestic Product [GDP] has increased to 4.5 percent and rose to 4.9 percent in 2005.

Though the economic growth of South Africa slowed down by 4.2 in 2006 and 4.0 percent respectively in 2007, South Africa’s GDP [the total annual production of the country’s geographical boundaries] is projected to be robust by 2010 as a result of the Soccer World Cup that will support both the public and private sector’s domestic expenditure.

“Namibia’s GDP growth was 6.6 percent in 2004 and slowed down to 4.2 percent with a moderate increase of 4.6 percent in 2006 and 4.8 percent in 2007.”

This means that Namibia is in the process of economic growth to put the country on a higher sustainable growth – the trend it pursues currently to reduce poverty.

What local SMEs needs to do is to change their business attitudes of sole trading to put resources together by forming large enterprises to shift from a retailing business market to manufacturing in the agricultural sector – the backbone of Namibia’s economic growth. Rallying behind NCCI, SMEs in Namibia will find better strategic business direction to revive and innovate some of the existing enterprises that are decaying. There is no other shortcut to survive competitive business with foreign inventors than to follow this in the business sector.

How do local SMEs go about to be updated with strategic information on business competition if they are not coming together to share challenges that are facing the business sector? Where do you get innovative business capital and training programmes if SMEs are not attending NCCI meetings?

Commercial banking institutions in many circumstances find it also difficult to ‘eke out’ some SME business enterprises that are heavily indebted to supplier companies and have lack of capacity to innovate enterprises that are not profit driven and whose products and services are not demand and market oriented.

Namibia needs manufacturing technologies to process raw materials into finished products.

With an anti-foreign business bout, how are the Namibian SMEs going to merge with manufacturers outside the country to transfer business manufacturing technology in Namibia?

The existing worsening business competitive environment between Namibia’s SMEs and foreign business owners if it is not handled with care, may violate the development cooperation Namibia has entered into with China, Spain, Germany, Sweden , United States of America, Japan, European Union, Iceland and SADC member states.

Now, the question remains as to where are we heading with the economic independence of the country if we are to become an island of a business village in Namibia? People in the world are thinking of a global business concept involving the world over.

In Namibia some SMEs are driving the country backwards, while others are moving forward. This is indeed unfortunate and regrettable.

Strengths and Opportunities

In terms of strengths local entrepreneurs in Namibia are catered for by the Ministry of Trade and Industry for growth and development. The Ministry has set up the Small Business Credit Guarantee Trust [SBCGT] to support the successful development and growth of small enterprises in Namibia to access commercial loans from financial institutions to overcome security [collateral challenges] by accessing commercial loans for all potential entrepreneurs and new entrants in the business sector.

The Trust has already signed memoranda of agreements with five commercial banks [Bank of Windhoek, Standard Bank, First National Bank, NedBank and the Development Bank of Namibia]. The commercial institutions agreed “to grant loans to small business entrepreneurs while the Trust undertakes to guarantee up to 80 percent of the principal loan provided”.

The Government of the Republic of Namibia has set up the Development Bank of Namibia [DBN] to provide capital and advisory services to medium and large-scale public and private projects [businesses] with positive business impact as well as the Namibian Chamber of Commerce and Industry whose role is “to assist entrepreneurs in starting, growing and sustaining their businesses to become competitive and grow” in the business sector.

NCCI, since it was established on the 15th July, 1990 has a mandate “to advocate the interests of its members and to provide a wide range of services to the business community in and outside Namibia to improve the effectiveness, competitiveness and ultimately the profitability of businesses in the country”.

Members of NCCI are always updated with essential information on global trends that affect their businesses, industrial best practices on competitiveness, improvement on internal business efficiency and productivity and information on government policies and their impact on businesses.

In terms of strengths in the business market, the existing local business entrepreneurs and the new entrants in the business sector, have a wide range of business opportunities in Namibia. This depends to what kind of business demand gap one has established in the business’s career development without being threatened by competitive business ventures by foreign investors.

The Ministry of Trade and Industry and the Namibia Chamber of Commerce are there to assist with the necessary information leading to successful business operations among other business rivalries in the business sector.

The Development Bank of Namibia plays a vital role in funding viable business facilities after it is provided with business project plans.
4.2 Weaknesses and Threats

For the past 18 years now, the business sector in Namibia has grown at a level where local SMEs have been facing numerous challenges to compete with foreign investors in the country as Namibia found herself at an advanced level towards the global business competitive stance that forced some SMEs to demand government’s local business protection against foreign entrepreneurs’ business competitors.

This has becoming a big challenge for many local business entrepreneurs some of which have already closed their businesses and are now lending their businesses to foreign competitors. However, other business entrepreneurs are still thriving well as they are in constant contact with the MTI, NCCI, DBN and other commercial institutions for sustainable business innovations and strategic marketing management to create value for the growth of their businesses.

The growth of a business enterprise is a complex marketing issue that involves customer needs, target market focus for customers to satisfy their needs, integrated marketing to keep customer’s best interests in the business products and services and the business to pursue consistent profitability, diversification and increased sales promotion on a sustainable basis.

Many local business enterprises have closed down because of some of these weaknesses and above all because of the threats caused by rivalry business ventures in the business market.

Some of the weaknesses attributed to local business entrepreneurs are related to a lack of business capital, management, accounting, marketing, advertising, sales, promotions and inappropriate pricing of products and services.

All this information is available at NCCI centres regionally to members. The big challenges that are facing local businesses whose enterprises are closed are not members of the NCCI.

In conclusion, if SMEs in Namibia are facing challenges in the business sector, they have a forum, the NCCI, through which they can seek audience with the MTI for possible solutions.

The current anti-foreign business bouts that are being organized by certain business individuals in the north every Sunday are of great concern and can scare foreign investors in the central northern regions. This is unacceptable as the move is in conflict with the laisser-faire market in Namibia.

Improvement of SMEs in the business sector in competitive business ventures between suppliers and buyers can be easily addressed through the NCCI without threatening foreign investors.

If this move of anti-foreign business organizations in Namibia is a genuine issue the NCCI has the capacity to address it. However, if it is a process of xenophobia or a politically-motivated move against foreign investors, then it is incompatible with the principle of Namibia’s mixed economy of “securing economic prosperity and life of human dignity for all in Namibia” and against international laws on foreign investment to which Namibia subscribes under Article 99 of the Namibian Constitution.

– Clemens H. Kashuupulwa is the Governor of Oshana Region.

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