ACCESS TO FINANCE STILL CHALLENGE FOR MSMES

MBABANE - The Credit Bill under the Consumer Credit Act of 2021 should strengthen the micro-business sector to access meaningful financing for business sustainability and expansion.  

The Southern Africa Research Foundation for Economic Development (SARFED) Regional Coordinator and Senior Policy Advisor Dr George Choongwa said through the Credit Bill, government can consider liberalising the stringent business sector, which mainly restricts most of the micro and small business survivalists. 

“If well managed, this would serve as one of the most cost-effective social safety nets with a balanced cost-benefit scenario,” said Dr Choongwa.The economist stated that the economy of Eswatini has the potential to grow at a rapid scale due to its strategic geopolitical space in the Southern African Development Community (SADC), Southern Africa Customs Union (SACU), and the Common Market for Eastern and Southern Africa (COMESA) protocols, access to financing is still considered a huge hindering milestone for most people, especially those in the informal sector, mainly characterised with women, youth and people with disabilities.

He said in spite of its growing trends across many sectors with an average annual growth rate of 3 per cent with the aim of attaining the regional benchmark of about 7 per cent by 2030 and beyond, the country continues to face several multi-dimensional challenges in various strategic areas. He said this was breeding to a relatively high unemployment rate of about 37 per cent and roughly 54 per cent with youth aged between 15 and 35 years.  

Development

The economist highlighted that in a bid to address some of these challenges, the country has invested heavily in infrastructure development in areas like improved road networks, establishment of factory shells for investment, as well as technological advancement. He said the second area of heavy investment that the country has taken includes the advancement of human capital through improved education and healthcare systems.

  “However, with persistent increases in the cost of living mainly caused by drastic increases in food and medical commodities on the global market due to increased levels of uncertainties brought about by geopolitical wars between major exporting economies like Russia and Ukraine, prices for basic goods continue to increase, causing hyperinflation, hence  disadvantaging emerging economies like Eswatini, among others as they suffer from a considerable reduction in the purchasing power of these essentials,” said Dr Choongwa.

He added that though the implications of the increased cost of living could be globally induced by exogenous factors like climate change, the industrial revolution and wars just to mention a few, the Government of Eswatini can remain resilient by doing business unusual. Liberating the domestic market is one of the most immediate interventions.

Firms

He noted that Eswatini is still one of the fastest growing economies in sub-Saharan Africa with a sizable human capital and strategic market linkages to both Mozambique and South Africa. He said in spite of the upcoming private sector economy, this sector is still narrow and characterised by wide linkages between the informal, micro and large-scale institutions.

He said that fuelled by high uncertainties in climate change and geopolitical wars, the global markets continue to remain unpromising, leaving most of the small firms vulnerable to both domestic and external shocks. “However, through increasing incentivised access to funding, most of the indigenous entrepreneurs will be able to remain resilient to  unexpected market shocks,” he said.

The economist further made recommendations that government may consider the following and this include:

• Provide credit incentives for micro and small businesses;
•  Strengthen the basic education system for strengthening the country’s entrepreneurial ecosystem;
• Explore market linkages with exceptional trade facilitation for regional and global coverage for emerging indigenous firms;
• Prioritise investment funding in green economic initiatives.  

Guarantee

In a recent interview with this publication, the Minister of Commerce, Industry and Trade, Manqoba Khumalo, said as government, they are also concerned about the issue of access to finance for local SMEs. He said in order to address that, they are working closely with the Ministry of Finance to make it easy to access initiatives like the Small Scale Enterprise Loan Guarantee Scheme (SSELGS).

He noted that in the past, such was only accessed through commercial banks, but now they are making it easy to access such through other non-banking financial institutions (NBFIs). Khumalo further highlighted that the establishment of the Eswatini Agricultural Development Fund (EADF) was also another brilliant idea, as emaSwati venturing into agriculture will have this specific fund to assist them financially.

“We are also looking at EswatiniBank as to how they can improve their portfolio of offerings so that more SMEs can access the much-needed funding,” said the minister.

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