The State Of SME Competitiveness In Botswana

Last night I read the recently released Botswana SME Competitiveness Survey report, a research paper which was put together through a combined effort between the International Trade Center(ITC),  a joint agency of the World Trade Organization and the United Nations, Ministry of Investment, Trade and Industry (MITI) and the Local Enterprise Authority (LEA). For the paper, 616 Small and Medium-sized Enterprises from across the country were surveyed.

"Small" enterprises according to the report refers to businesses that have a workforce of between 5 and 19 people whilst "medium" enterprises are those with a workforce of between 20 and 99 people. These enterprises contribute significantly to the country's economic activity as they make up 90% of all business in the country and their activities make up a third of the country's GDP. SMEs also employ a significant amount of the population and are also responsible for initiating and growing new economic activities.

Despite their clear contribution to the economy, SMEs, according to the report, are still faced with numerous problems which significantly stunts and stagnates the growth of the sector. Because of these challenges, most of the SMEs in the country are not reaching their potential with most on average reaching only 58% of their potential. The report goes on to expound on some of these challenges as well as offering policy recommendations which should be considered by the government and other legislators to improve the doing-business environment for these SMEs.

The first challenge identified in the report was the low rates of certification to various standards amongst local SMEs. Local and international certifications are important to the life of these enterprises because they offer a stamp of approval for the products and services produced by the SMEs and allow them to be legally accessible to a wide variety of markets. These certifications include one by the Botswana Bureau of Standards (BOBS), the South African Bureau of Standards (SABS) as well international ones like the International Standards Organisation (ISO).

According to the report, 75% of local SMEs admitted to not having any sort of standards certification, be it by a local, regional or international agency. This presents a problems for the SME sector because it means that most of the enterprises are not export-oriented despite the growing size of the export market which will be aided by the recently ratified Africa Continental Free Trade Area.

Another challenge facing local SMEs according to the report is lack of infrastructure which severely limits the ability of these enterprises to not only produce but also access markets. The agriculture sector, especially in rural areas, is worst hit by infrastructure limitations with 53% of the surveyed businesses saying that they have trouble with accessing markets as a result of poor infrastructure.

Lack of financial inclusion by lending institutions is another problem facing SMEs in Botswana. According to the report, remote and youth-owned enterprises who are involved in agricultural businesses are the worst hit by the financial bias as lending institutions consider them too high of a risk. The good news, however, is that there seems to not be too much of a gap between male and female-run businesses who get funding from lending institutions which may be a sign of the strides the country is making in ensuring gender equality in entrepreneurship.

Limited skills in the available job pool is another factor limiting the competitiveness of SMEs in Botswana with a mere 43% of surveyed businesses saying that they are impressed by the skilled manpower available for them. Services companies, however, seem to be more impressed by the available manpower with 65% of them saying that the job pool meets their companies' demands.

Lack of access to crucial utilities like water and electricity was another factor identified by the report to limit the growth of local SMEs. 73% of surveyed enterprises said that they were not impressed by either the availability or the amount charged for water whilst 68% were not happy with the availability and tariffs for electricity.

Despite all the numerous challenges identified by the report, local SMEs are doing well in some aspects including reducing their carbon footprint with 40% of surveyed enterprises stating that they actively take measures to reduce their carbon footprint. Most of the SMEs also follow professional management processes except women and youth-led enterprises which seem to be lagging behind in that aspect.

From the numerous challenges identified in the paper, several policy recommendations were then made to remedy those problems faced by local SMEs which include investing in management and accountancy training for youth and women-led companies. Support in the form of IT infrastructure for service sector companies was also identified as a way of boosting the companies' ability to export their services to a growing worldwide market.

Making SMEs more competitive can help Botswana achieve its development objectives in many ways including helping in the creation of jobs and diversification of the country's economy. SMEs can also go a long way in helping the country achieve some of the Sustainable Development Goals like Goal 1 which is ending poverty, Goal 8 which is promoting decent work and full employment as well as Goal 9 which is fostering inclusive industrialization and innovation.

It is therefore imperative for policymakers to architect policies that will support the operations of these SMEs and create an enabling environment for their success which will make them competitiveness not only within the country's borders but regionally, continentally and worldwide. Effective policies will require the constant and continuous collection of information and data on the challenges facing these SMEs.