50% SMES MIGHT SHUT DOWN NEXT YEAR –SARFED

MBABANE - Government’s reluctance in sustaining struggling SMEs might result in a 50 per cent shutdown of the sector.

This is the feeling of the Southern African Research Foundation on Economic Development (SARFED).  This will not only contribute to reduced economic activity, but a reduction in gross domestic product (GDP) as well. SARFED Regional Coordinator George Choongwa said due to the impact caused by the COVID-19 pandemic on the small and medium-sized enterprises, his organisation projected that more than half of Eswatini-based SMEs might go out of business by next year.

Strategy

“Therefore, we call upon government and its strategic stakeholders to facilitate a conductive environment which would save the struggling sector,” said Choongwa. He said research suggested that about 43 per cent of the SMEs in the country  were least developed as they were characterised by low or poor performance management mechanisms which resulted in them having less supportive facilities like basic technology,  poor electricity, poor financing, poor capacity building,  as well as poor record management. “Furthermore,

Choongwa went on to further outline some of the implications which might severely affect the Eswatini economy in the short and medium term, if the fears were to be confirmed.

They include loss of human capital development.
“The SME sector is known to be an innovative sector whose social benefits would include the development human capital, but with the failed system, we see this benefit not achieved in Eswatini in the post-COVID-19 era. SMEs have the potential to dominate and expand certain industries when exposed to favourable conditions of trade and investment. However, this might be a challenge as COVID-19 would have compromised the entrepreneurial ecosystem of the country,” said Choongwa.

Other implications cited by Choongwa included reduction in government revenue, broadening of the poverty gap and loss of regional and international trade competitiveness, among other things.
“Eswatini’s determination for economic growth through SME development plays a vital role in creating opportunity for a country’s competitive edge in both the region of Africa and the international market. Therefore, this would be great loss if these economic players were not re sustained from the current COVID-19 crisis both in the short and long term periods.

Sector

 “Though the close of some SMEs in the given industry has the potential to lead, other sector also close down and eventually increase levels of unemployment as most SMEs would wish to reduce operating cost by scaling down the cost of human labour, hence resulting in increased unemployment,” he said.
Choongwa suggested several interventions to avert the possible crisis.  They include reducing the cost of doing business and broadening the supply chain. “This would help most of SMEs to subsidise their operating costs and remain afloat in business,” he said.
Choongwa said SMEs should build closer customer relationships by using technology to facilitate and inform product and service development. This would help them maintain their customer base as well ideal profit margin.

“Government and stakeholders must facilitate the adoption of SME use of smarter workplace technology to reshape processes, improve agility and make efficiencies. The key behind this concept is that through the promotion of technology for SME development, it would help in making them benefit from the ability towards innovation.

Capacity

“There is need for a constant capacity building process for SMEs to adapt and transform. This would close the digital divide at the same time prepare the SMEs for embracing the expectations of the new normal.
This would also foster the full potential of talented individuals by using technology to empower employees and develop creative thinking which would make the SMEs more resilient during and after the COVID-19 turbulent times,” he shared.

SARFED said broadening of the supply chain of goods and services would not only stimulate the local smarket, but also in stimulate local based products which would promote industrialisation and revenue collection in the long run. The country would even take advantage of advancing its regional and international commodity market competitiveness.

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