Smme in Botswana

10 October 2016

In its effort to diversify the economy away from dependency on the mineral sector, the government of Botswana realised the importance of supporting Smmes in fostering economic growth and creating jobs. Over the past two decades, targeted financial support as well as advisory programmes to help the people of Botswana to establish their own enterprises was introduced and implemented at different levels.

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In the initial stages, “the programmes were set up more in response to specific problems encountered than as the basis of a comprehensive and more focused government policy on Smmes” (RB, 1999). However, in recent times the landscape has since changed with government and the private sector pulling resources together in a crusade to assist the local Smmesector. The purpose of this chapter is to provide an overview of the Smme sector by reviewing the initiatives undertaken by government. Such initiatives include policy formulation and the implementation of programmes intended to assist the Smme sector in Botswana.

A review of the literature on definitions and categorisation of Smmes indicates that there is no single and standard definition for Smmes. It is in this regard that the Government of Botswana accepted the criteria proposed by the Smme Task Force of 1998 in defining the three categories of enterprises, using annual turnover and the number of employees. A micro enterprise is defined as a business with the number of employees not exceeding six and a maximum annual turnover equal to or less than BWP 60,000. 00. A small enterprise makes an annual turnover of between BWP 60, 000. 00 and BWP 1. 5 million and employs not more than 25 people.

A medium enterprise is defined as a firm that has a maximum number of 250 employees and an annual turnover of between BWP 1. 5 million and BWP 5 million (RB, 1999). The Smme Policy (1999) notes that, even though the categorisation is retained as a guide for broad policy purposes, the Policy leaves room to consider more specific definitions such as when a particular government policy on e. g. taxation or direct assistance programme is developed. It has been an observation that many small business owners fail to realise the importance of the accounting function and as a result cause the failure of the business (Stone, 2003, preface).

Mason et al in Buckland and Davis (1995) in conjunction with the latter, observe that entrepreneurs often have difficulty in convincingly conveying their specialized knowledge to a bank manager. In Great Britain banks are a recognized source of start-up and working capital. According to Hughes and Storey (1994) they are however, not a particularly easy source, putting a priority on security/collateral and for intervention of the state. Thus, Smme require support if they are to survive and grow.

According to Miroslav and Drnovsek in Kirby and Watson (2003), one of the obstacles that hindered the creation of new ventures in Slovania includes lack of capital financing for small business initiatives on the part of banks and other financial institutions. Banks were reluctant to lend to small businesses and practically no venture funds existed. New entrepreneurs primarily obtained the requisite resources from family members and friends (Kirby and Watson, 2003). The absence of, or at least poor access to finance, was an important negative factor affecting SMMEs in Romania and Bulgaria.

According to Kirby and Watson (2003), in 1998, just 8-10 percent of the firms in Bulgaria had access to bank loans. The rigid requirements of the commercial banks for serving the loans(e. g. collateral and terms) extend to firms as well as the high cost of debt (Kirby and Watson,2003). In South Africa the White Paper on National Strategy for the Development and Promotion of Small Business (1995) reinvented the wheel for the Smme sector. The Small Business Development Act of (1996) indicates that up to 78 percent of the small businesses started in South Africa eventually failed.

It is therefore necessary for the South African government to adopt specific economic and social policies to stimulate Smme development as an essential part of the economic and social development of the entire country. It is though important for entrepreneurs to help themselves and find ways to improve the organisation of their businesses, and the skills of their employees. They also have to find the adequate means to adapt to the market requirements if they are to survive.

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