IN RECENT YEARS, ZAMBIA HAS JOINED THE REST OF THE WORLD AT THE DINING TABLE WHERE ENTREPRENEURSHIP FOR DEVELOPMENT IS ACTIVELY DISCUSSED. VARIOUS INTERVENTIONS HAVE BEEN PUT IN PLACE BY THE PUBLIC AND PRIVATE SECTOR TO FACILITATE THE GROWTH OF ENTERPRISES AS WELL AS BY INDIVIDUALS THEMSELVES. THIS PHENOMENON IS LARGELY AS A RESULT OF THE HIGH UNEMPLOYMENT LEVELS IN THE COUNTRY AND THE LACK OF SUSTAINABLE JOBS.
THE PUBLIC SECTOR
As starting an enterprise begins with registering that enterprise, the Patents and Companies Registration Agency has made it easier for businesses to register their businesses. By digitalizing their operations and having an active website, people can now easily register their organizations, thereby decongesting the PACRA offices. What used to take hours to do, now takes significantly less. In addition, PACRA has synced their system with that of the Zambia Revenue Authority. This makes it easy for a registered company to get registered to pay their taxes.
ZRA has gone a step further and created an amnesty period where people and companies could pay their taxes without having to pay their penalties on late or no tax filing. This waiver of penalties has increased the revenue that the ZRA is getting from SMEs and also served as an incentive for SMEs to pay their taxes and also file their monthly returns on time. Like PACRA, ZRA has also digitalized some of their services and has an active website thereby decongesting the offices and allowing tax affairs to be done in a much more timely manner.
Other government agencies such as the Zambia Development Agency have signed Memoranda of Understandings with various banks and other financial institutions to facilitate access to finance for Small and Medium Entreprizes (SMEs). They have gone the extra mile to even facilitate market linkages between small and medium enterprises and large chain stores and supermarkets. In addition the Agency trains SMEs in capacity building and provides traid support to those that wish to enter international markets having notably facilitated the exhibition of 30 Zambian companies to the Democratic Republic of Congo in 2016.
The Bank of Zambia, has also rose to the occasion. In May this year, they announced their decision to lower the Policy Rate from 14% to 12.5%. This would in effect lower the lending rates and increase access to credit while lowering default rates in the private sector. We hope to see a significant change in borrowing statistics following this change.
THE FINANCIAL SECTOR
Despite all signs showing that there is an urgent need to stimulate the growth of the SME sector and diversify Zambia’s economy; banks may have not yet realized that the relationship between the formal financial sector and SME’s is symbiotic. In order for the SME segment to grow and become profitable; the banking sector needs to provide them with debt funding. SMEs in Zambia fail to secure significant working capital that can support growth from the banking sector. While banks in the Sub Saharan region continue to receive banking revenues of in excess of $12 billion in a sector that is growing at an average rate of 20% per year, banks in Zambia still focus on individuals and corporate; rarely lending to entrepreneurs who have no formal job or collateral. When the banks do lend, they lend without developing an understanding or the business or establishing relationships that extend beyond the terms of an immediate loan transaction thereby offering little or no capacity building support to expand the productivity and growth of the enterprise.
Consequently, most SMEs; even those with realistic growth ambitions struggle to realize their potential resulting in a dysfunctional lack of trust between the banking sector and SMEs and a stagnant SME segment that is not achieving its potential growth. Needless to say; it is time for banks to become more SME-centric in their operations and develop relationship banking models with entrepreneurs and their organizations.
Even with that said, a study by the African Development Bank found that banks in Zambia are keen to engage with SMEs and are changing their internal systems and actively pursuing SME clients. The SME market is considered open, with high potential and the desire to grow the market is present despite the current challenges that are being faced.
THE PRIVATE SECTOR AND INTERNATIONAL PRIVATE SECTOR DEVELOPMENT AGENCIES
The private sector and international agencies have played key roles in the past few years in facilitating entrepreneurship. For instance, the Nyamuka Zambia competition (funded by the United Kingdom’s Department of International Development and other partners) recognizes that in order for Zambia to truly stand up economically; it is important to encourage healthy competition among young entrepreneurs. The competition offers cash prizes to the top 20 entrepreneurs and usually brings out the best ideas in young Zambians who manage to apply. Such initiatives facilitate entrepreneurship and bring the missing piece – innovation into the picture. The thing I love the most about Nyamuka Zambia is that they actively involve other partners such as formal financial institutions as well as the public sector which changes the narrative of the conversation. All sectors come together to support a common goal.
Other notable business competitions are the Tony Enemelu Entreprise Program and the Total Start Up Competitions. These are regional African competitions that allow Zambians to compete on a regional level and may boost confidence in their abilities. We are increasingly becoming a country that has entrepreneurs who create local but compete globally.
On the debt lending hand, the Development Bank of Zambia also set aside 30 million dollars for lending to SMEs in the country which were meant to create stable employment, empower citizens, develop infrastructure and contribute to Zambia’s economic growth. The funds came from a concessional loan from the China Development Bank. Companies that were eligible to borrow from these funds were those within the agricultural, mining and manufacturing sectors that were able to cover cash collateral of equivalent to 20% of the loan. The cash collateral itself reduced the target market significantly but it still gave more entrepreneurs access to funding that was otherwise unavailable.
INNOVATION IN ENTREPRENEURSHIP
The public, private and financial sector are encouraging entrepreneurship but the key component of innovation is generally missing in Zambia’s entrepreneurial landscape. While the Zambia Information and Communications Technology Authority does try to facilitate young innovators and nurture them, their efforts are not enough. There are very few tech hubs in Zambia unlike our counterparts in countries such as Kenya, South Africa or Rwanda. Zambia needs to push for innovative entrepreneurship rather than retail entrepreneurship or what is commonly known as tenderpreneurship. We need to begin to use ICT for development in our SMEs if we are to compete with other entrepreneurs.