The SIVIO Institute released a report on financial inclusion of micro, small and medium enterprises (MSMEs) in Zimbabwe and there are a lot of nuggets into the real situation on the ground in it.
One of the first things that caught my attention was the industry representation of the businesses surveyed.
We find that 22% of all MSMEs are in the retail and wholesale business whilst a further 21% are vending. Vending includes tuck-shops and flea markets.
That means 43% of MSMEs in Zimbabwe are selling stuff as opposed to making stuff. So, you ask, how many are actually making stuff? Only 3% are in manufacturing whilst 11% are in agriculture.
All this does not paint a good picture. See, it is these MSMEs that are the biggest employer in Zimbabwe. This means whatever these companies are doing is what most Zimbabweans are actually doing.
When we calculate our gross domestic product we include retail but that’s not really the kind of production we need to lift this country. We need more people to make the stuff that retailers sell.
On the ground we find that many such MSME retailers/vendors are selling imported goods. They are not villains for doing this, they would source their inventory locally if they could get the required quantities at the right prices.
However, each and every import means forex bleed. The official statistics say that we exported more than we imported in Q1 2022 but the fact remains we are importing way more than we should.
Worse still we mostly import goods ready for consumption rather than for production. Also, if we could account for the goods that are smuggled in, our imports would be much higher than the stats say.
How does this compare to the whole economy?
Manufacturing contributed 18.43% to Zimbabwe’s GDP in 2020. This means large companies are responsible for most of the manufacturing in this country as they should. Manufacturing is capital intensive after all.
Wholesale and retail contributed 19.24% that same year but bundled in that figure were repairs of motor vehicles and motorcycles. So, we can comfortably say that manufacturing contributed more than retail.
I know these are not like-for-like comparisons. I will hazard a guess that although manufacturing contributed 18.43% to GDP, the total number of companies in manufacturing is much less than 18% of all companies in the country.
This means the 3% of MSMEs in manufacturing may indeed contribute more to GDP than the 43% in retail. However, I still think 3% is too low. Not all manufacturing is capital intensive.
Especially when we consider that a medium sized company has at least 75 employees and an annual turnover of at least US$1 million. We need there to be more companies in manufacturing.
MSMEs in ICT
Only 2% of MSMEs are in the Information and Communication Technology sector whilst an additional 2% are in Graphics, Technical Design, Computer Software and Printing.
This does not reflect the amount of tech MSMEs are using in their operations. A manufacturer using high tech equipment would still count as a manufacturing company.
That doesn’t change the fact that only 2% of MSMEs are in ICT.
The government really should be using tools like tax breaks and the like to incentivise businesses to enter the ICT and manufacturing sectors.
Earlier this year we noted how the national budget does not prioritise ICT. Only 0.36% of the total national budget went to ICT. That shows how low the government’s hopes for ICT are.
Steering innovation
I mentioned tax breaks when talking about what the govt could do to steer investment in certain sectors. There’s a whole lot more they can do, chief of which is radically transforming the regulatory framework to make it easy for entrepreneurs to ply their trade.
The financial services sector should also step up and start lending to entrepreneurs in the ICT and manufacturing sectors. Again, the govt should make it worthwhile for banks to lend more to these sectors.
The reason why most MSMEs enter the retail sector is that there is a low barrier to entry. Armed with only US$10, a vendor can get a few snacks and sweets and try to work from there. If that works the hope is to graduate to being able to go to South Africa for stocks.
For as long as half our companies are in the business of selling what they didn’t make our economy will not thrive.
ICT represents the opportunity to come up with solutions to Zim specific problems, whether it be in manufacturing, agriculture or even financial services.
ICT helps businesses improve efficiency and effectiveness and the situation on the ground right now is that businesses have to import ICT solutions or develop their own.
It is difficult for a business whose competencies are in say medicine manufacture to develop bespoke ICT solutions themselves.
We saw the Justice Service Commission award an American company a US$3 million tender for an electronic case management system. ZIMDEF was recently in the news over a scandalous million dollar tender for the supply of SAP software.
Are there no local solutions these organisations could have used instead? Maybe there aren’t but is the govt being proactive in making sure those solutions come from within our borders in the future? No.
What’s the biggest hurdle?
I know most of you love tech and have been acquiring skills over the years. What is the biggest hurdle preventing you from starting that ICT business that’s been in your heart all this time?
If you could sit down with the decision makers what would you ask them to look at if more of you are to run successful businesses?
9 comments
Leonard your article may have some contradictions. See the whole purpose of ICT is to reduce the number of people or entities involved in any endeavour. That includes the ICT industry itself kkkkk. The 3% is actually inefficient😀
I agree that ICT should make any endeavour more efficient and effective, leading to fewer people doing more work. So, looking at it that way I can see how one could see contradictions in the article.
However, like you said, we are pretty inefficient right now and so we should be trying to get more people into ICT where they can help streamline Zimbabwean operations. Right now we are importing foreign solutions that are expensive and not tailor made for our crazy economy. So, we should hope for ICT representation to grow and then organically shrink as the markets mature.
That’s how I would argue its not a contradiction but I totally get your point.
ICTs are not a Zimbabwean or African phenomenon. Noone talks about unemployment due to ICTs in the developed countries where the economies and standard of living grow from strength to strength. In Africa we still believe in subsistence, and we try by all means not to include non close family people in our businesses, hence adopting ICTs with the idea of having as few people as possible. In developed countries ICTs are used to increase output and efficiency without the agenda of having was few employees as possible.
There is no opportunity for growth for ICT industry in Zimbabwe unless you are very innovative. Even in that case we hardly ever have people adopting new technologies so the safer route even for technocrats is not ICT related when they are to start a business. True there is no support but early adopters also account for success of any business even our tech giants suffer when it comes to introduction if new products
From my own perspective zimbabwe has human capital to spearhead the ICT industry but the biggest huddle the innovators and entrepreneurs are facing is lack of finances to start the business, the business environment in zimbabwe is not conducive thats why we have Zimbabweans who are doing great wonders around the globe. So l think Zimbabwean government should help these kind of people with capital and support them. Countries like China this is what they do, they make their own things themselves
I disagree on the part about the availability of human capital for ICT. Zimbabwe does have people capable of installing, running and maintaining these “imported” systems but building something from the ground up is another story. There is general lack of skills, experience & domain knowledge. We also don’t have that many good local software developers with actual experience because most of the time it pays way better to be an IT manager or something where you are not building stuff.
I disagree with you on the point of lack of human capital for building solutions. If you could take the time to go through linkedIn each year and search on pages for companies like DVT, Entelect etc from South Africa you will notice a shocking truth. So many Software Engineers leave the country every year for better opportunities elsewhere, I mentioned South African companies but you could also look through Twitter and notice how Europe and the US relocate quite a substantial amount of these skilled individuals each single year from Zimbabwe. The Talent is there but the country is failing to keep it here. I wouldn’t say there aren’t that many Good Software Engineers produced in the country, if that were True we wouldn’t have Zimbabweans working for companies like Google, Amazon, Trivago, Fauna etc all companies worth more than a Billion USD with choices to get talent from all over the world. Whatsapp had 32 Engineers when it got acquired by Facebook, Instagram had 13 employees when it got acquired, Flappy bird game was built by one developer and grossed several millions in ad revenue, sure companies like Microsoft have thousands of employees but clearly it’s still possible to build something quite substantial with just a few people, again human capital is not the problem or at least lack of it but the real issue is retention. So please kindly not look down on Zimbabwean Software Engineers, there are many talented ones, who are really skilled it’s just that other countries appreciate their skills better than we actually do here.
You say that there are good software developers but then go on to say that they are outside the country which is exactly my point. Zimbabwe is already producing too few people who can code. Then those very few are forced into alternate career paths or to seek opportunities elsewhere. What percentage of local CS graduates do you think can actually code? I would put the number at slightly less than 30%.
And let’s shelve the startup, innovation & acquisition talk when we are debating on software development as a viable career path for a grownup with responsibilities. We’ve heard it all.
If you think that there can be any serious software developers in Zimbabwe, just look at the requirements for the average job posting & then compare them to the offered compensation. It almost always pays better to be anything else in the IT space.
J