BROAD AREA OF STUDY- PRIVATE SECTOR ENTERPRISE DEVELOPMENT IN ZAMBIA

Prior to the economic reforms undertaken in the early 1990s, Zambias economy was predominantly state driven. This was so for obvious reasons, some of which included the duty on the part of the state to provide employment, and the necessary social services that the state was obligated to soon after independence in 1964. In the quest to achieve these objectives the state formed a number of companies in which it injected a lot of capital and also had to nationalize a lot others in the program called nationalization. Born out this state initiative were companies like Mwaiseni stores, Niec stores ZCBC, united Bus company of Zambia(UBZ) indeco milling brought on board to provide goods and services to the public. But as early as 1981, the Zambian government recognised the importance of the SME sector and its contribution to economic development. At the same time, the government recognised the challenges that the sector was facing and therefore, through the Small Industries Development (SID) Act of 1981 made an attempt to enhance the effectiveness of the sectors contribution to the national economy by establishing the Small Enteprise Development Organisation (SIDO). In support of the SID Act, provisions were made for the Fourth National Development Plan of 1989 to provide infrastructure for operations of SMEs, promote access to credit by SMEs with growth potential and to improve production capacities of SMEs with the view to increase incomes and employment. The change of government in 1991 however accelerated the need to grow the Zambian economy through SMEs. This brought about many changes in the way the economy of Zambia was to be managed. The new goverment came on board with new policies totally different from the previous regime. This new era so the introduction of the capitalist way of running enterprise. The belief here was that economic growth is fostered faster and efficiently under private enterprise. Therefore all state owned companies had to be privatized, but more so the emphasis was on the creation of employment, economic growth through SMEs. This change in government brought
about radical economic reforms, from state control to an economy led by private sector development. The reforms included decentralization, privatization and liberalisation of the entire economic system.

Topic of Study-Challenges of Growing Small Businesses in Zambia

The economic climate and land scape for carrying out business for SMEs in modern society differs from country to country. As such, the appropriate policy for one country would not necessarily be appropriate for another. With the advent , in 1991 of a more liberal economy it has become increasingly difficult for local SMEs to grow and face up to competition being created by foreign companies. In view of this, the fairness of the economic policies governing the way business is conducted in Zambia on the basis of companies being local SMEs and foreign conglomerates is being questioned. The whole purpose of empowering local Zambians is being defeated because they cannot face up to competition from foreign companies in terms of capacity, quality of goods, access to financing and general management.

At present , the ZDA act does seem not to be having any impact at all on the promotion of the Zambian entreprenure through SMEs, and most SMEs in Zambia are ignorant of the provisions and powers given unto them through this act. Given the circumstance how adequate are the provisions contained in the ZDA act to empower the Zambian SMEs and what strategies and methods is the ZDA going to use to ensure that the Zambian etreprenure are aware of the various provisions and policies the act brings on board to empower them.

Although the SME in the private sector in Zambia has such great potential for economic development, equitable wealth redistribution and poverty alleviation, it faces many business constraints and challenges which hinder growth and limit its ability to contribute effectively to national economic development. According to the Ministry of CommerceTrade and Industry (MCTI) (2006), these challenges and constraints include: Limited access to markets, Limited access to appropriate technology, machinery and equipment Limited access to suitable business financing solutions Inadequate business infrastructure such as roads and telecommunication facilities

In addition to the constraints identified by Ministry of Comerce Trade and Industry, the SME sector also faces the following constraints;

Limited technical and management skills Inadequate and unsuitable operating premises that can facilitate enterprise growth. Inadequate regulatory systems Excessive competition from unregulated importation of cheap products

All these business constraints and challenges manifest themselves in the failure by the sector to grow into a viable bottom up development tool and an effective contributor to national development as is the case with SMEs in economies such as India, Central Asia, and South Africa.
Theory behind the study Development, growth models and policies, that affect SME development in any country, should be formulated on the basis of each countrys prevailing economic, social and political environment. This is for the simple reason that an appropriate policy for one country would not necessarily be appropriate for the other. Therefore, the evaluation of factors and policies that affect SME development, should be contextualized and the history of the country considered before a recommendation can be made. In particular the research will be set out to achieve the following outcomes:

To highlight and develop a profile of SMEs enterprise development and growth policies in the Zambian economy

To identify the key support structures and aspects of the support environment for Zambian Enterprise growth activities. To develop a profile of the enabling environment for the SME enterprise growth in Zambia and To highlight the broader strategic issues impacting upon SME entrepreneurs individual choices and performance as regards enterprise activities. Reason for the Study This study is being under taken to peer into various problems SMEs face in Zambia and what plausible interventions do the SMEs themselves need to under take and also what the government can do to level the playing field to necessitate tangible growth in the Zambian entrepreneur. The identification of the plausible interventions that the SMEs can put inplace will necessitate not only the growth of the SMEs themselves but the growth of the entire Zambian economy.

It is an internationally recognised fact that Small and Medium Enterprises(SMEs) play an important role in the economic development of many countries. The aggregate contribution of SMEs to national development cannot be over looked. According to UNDP (2004), SME have the highest capita employment ratio and are a source of income for a broader layer of the population. The development of SMEs is viewed as one sustainable way of reducing the levels of poverty and improving the quality of life of households through wealth and job creation. The contribution of SMEs to employment, growth, and sustainable development is a widely acknowledged fact. SMEs are believed to deepen the manufacturing sector, foster competitiveness and help in achieving a more equitable distribution of the benefits of economic growth thereby helping in alleviating problems associated with uneven income distribution. SMEs achieve this by generating more employment for limited capital investment, acting as seed bed for the development of entrepreneurial talent, playing an important role of training citizens to run enterprise, supplying the lower income groups with affordable consumer goods and services. MSMEs also act as buffers in times of economic recession. Therefore the study is important in that by identifying the various challenges faced by SMEs and proposing various solutions to these challenges it shall enhance the growth of the SMEs and hence the country will record economic growth.
The Hypothesis to be Tested The aims of this thesis are therefore, to study the different models of SME financing as we find them in different countries, and how effective are they in Zambia to Seek opinions of financial lending institutions on what would be the best was of SME financing to study the history of SMEs in the Zambian context and how their circumstances differ from other countries,

to test the opinions of a number of selected individuals or leaders of various SME associations as to what measures need to be put in place to make SMEs over come the challenges of growth. To test How effective the current ZDA policies are with regard to helping SMEs grow in Zambia To seek opinions from executive of mining conglomerates on What interventions should SMEs put in place to help them access business from these mining conglomerates To seek opinions from agencies as to what intenventions SMEs should put in place in order for them to access business from government What recommendations from stake holders on the reforms should SMEs under take or are appropriate for their growth.

Data Data will be analysed according to a frame work that will be as follows: The first part of the study will review literature from different parts of the world including Zambia and describe and evaluate different SME policies in these countries and compare them with our Zambian policies. This will be basically a desk research which will examined previous research and practices in these countries in order to map the current understanding of SMEs enterprise development and to identify critical issues The second part will critically analyse the genesis of the SMEs in Zambia focusing on the role of Government in promoting SME development. This will involve careful study and analysis of literature and documents in Libraries, at the ministry of commerce Trade and industry, Zambia Development agency, Zambia Revenue Authority (ZRA), Zambia Public Procurement Agency (ZPPA) and Patents And Companies Registration Agency ( PACRA) Data will be analysed according to a frame work that includes the following: What were the policies of government on SME growth soon after independence What guide lines did the ministry then put in place to guide the formation of the SMEs. How much emphasis did the government then put in regarding the growing of the private sector led economy through SMEs what percentage of employment ratio did the SME run companies provide in comparison to the state run companies What challenges did the SMEs face due to the heavy presence of state run companies

Thus the various stages of development towards a private led enterprise will be highlighted taking note of the various constraints encountered and the strategies put in place to overcome these obstacles for the entire SME journey in Zambia will be identified The third part will now zero in on the current policies and will be primarily qualitative in focus, employing semi structured interviews of selected executives from SME associations like the small scale miners and contractors association of Zambia, the Zambia Chamber of commerce and industry, the Economic Association of Zambia, Non Govermental organizations involved in empowering the SMEsand

foreign missions with interest in enterprise development. Other people to be interviewed will be heads of commercial departments in mining conglomerates, governments heads of procurements and business units, Government agencies established through various acts of parliament like ZDA, ZPPA, PACRA and CEEC. This will be aimed at gathering and analyzing the views, opinions and general understanding of the current liberal, decentralized and private driven economic system. This part of the research will also indicate or peer into new ways in which SMEs in an emerging liberal market can be of value to the nation by being innovative, building capacity in their operations and become competitive and grow at the same level with foreign companies

The culture of Entrepreneurship and business practice still is not well developed among Zambian citizens. This could be related to a cultural mind set of dependency and a low propensity for risk taking. This has resulted in low levels of entrepreneurial ability and business management competency among most MSMEs. These low levels of entrepreneurial skill and management competency have limited the ability of most MSMEs to grow beyond establishment phase. Therefore, for MSMEs in the sector to achieve sustainable qualitative growth and for citizens to be oriented towards business there is need to build entrepreneurial capacity through a deliberate entrepreneurship development system.

a) Devise a strategy, with the participation of the private sector, to encourage the growth of small enterprises; b) Encourage local governments to review their infrastructure services and licensing regulations so as to support small enterprises; c) Provide legislation and incentives that promote rapid growth of the MSME sector; d) Decentralize business registration to enable the MSME sector to operate efficiently and have access to incentives; and e) Review and harmonize all existing laws and regulations with a view to identifying and removing impediments to the operations of the MSME sector. Innovation is essential for maintaining competitiveness of an enterprise and of its products/services. Most MSMEs however have limitations in this area and have no access to new innovative production processes. In additions, innovations among MSMEs are not well documented and protected. Further, MSMEs have limitations in accessing new technologies which can help improve product quality and productivity

The Micro, Small and Medium Enterprise Development Policy

Development Economics and Public Policy working papers- Chiara Chiumya

University of Manchester 2004 Definition of research Topic and methodological approachReligious Education Cariculum in Zambia-unknown

The Challenges of Growing Small Businesses: Insights from Women Entrepreneurs in Africa- SEED Working Paper No. 47 by Pat
Richardson, Rhona Howarth and Gerry Finnegan
Youth Entrepreneurship: Meeting the Key Challenges- Francis Chinguta

3.2.4 MSMEs access to Business Development Services 3.2.4.1 Context Most MSMEs require guidance and hand holding to grow into independent established business entities. This support is more effective when delivered in a well-coordinatedholistic manner that can create positive impact on enterprise performance. Currentlyhowever, the Sector has limited access to comprehensive integrated businesdevelopment support. 3.2.5 MSMEs access to appropriate Business Finance 3.2.5.1 Context Business Finance is a critical input in the creation, development and expansion any enterprise. MSMEs have difficulties in accessing appropriate business finance to suit their growth requirements. It addition, the cost of finance is relatively high and is sometimes beyond the reach of most MSMEs. The terms and conditions for accessing business finance are also very demanding. The problem of MSMEs access to finance is on both the supply side and the demand side.

3.2.8 Representation of MSMEs Interests 3.2.8.1 Context Business associations and other MSMEs grouping have an important role to play in lobbying and advocating for the interests of MSMEs with government and other stakeholders and for mobilising MSMEs into a formidable force for national development. In Zambia most existing MSME business associations are weak and have

with limited capacity to effectively play their role. There is therefore need for measures for institutional strengthening associations at various levels to be put in place in order to promote the growth and stability of the MSME sector.

14. Report on the Review of the Development Agency (ZDA) Act 2006. 2007. Zambia Business Forum. 15. Small Enterprise Development Act, 1996. Republic of Zambia 16. Vision 2030 A prosperous middle income Nation by 2030, Republic of Zambia, December 2006 17. The Zambia Development Agency Act, 2006. Republic of Zambia

References (Brownbridge,1996a)