Small and medium enterprises (SMEs) play a crucial role in Namibia’s economic growth and development, especially when it comes to the creation of jobs, which remains a significant problem across the country.
The significance of the SME sector in Namibia cannot be ignored as it provides livelihoods and incomes for a large population of the country, most of whom are self-employed – more than half of women.
The SME sector is the means of survival for many Namibians. The unemployment situation in Namibia has deteriorated markedly over the years. It should be noted that this very high figure of unemployment probably includes a large part of underemployment in rural areas.
Small businesses and self-employed workers are crucial to the growth and development of economies if adequately supported SMEs can effectively contribute to the structural transformation of economies and drive inclusive, sustained and equitable economic growth and jobs. SMEs have the potential to transform the economies and the country as a dynamic force in the international arena.
Furthermore, if policymakers can draft very good policies, this will help businessmen and businesswomen to ensure that their business flows with minimum challenges.
As we are aware, 60% to 70% of women are involved in business and the cross-strait area. And therefore, if the laws are well-drafted and could favour women, women could do their business very well.
The private sector plays a critical role in the development of Namibia, and hence strategy ensures businesses across the country have access to tools and partnerships, they will be able to play a key area in creating a resilient environment in the future.
Research carried out by economists revealed that SMEs provide some form of employment and income to 160 000 people, representing approximately one-third of the nation’s workforce.
In terms of full-time employment, this sector currently employs about 60 000 people. In Namibia, the majority of SMEs are mainly found in the retail sector selling food and household products, with no real value-addition activities in most cases. Therefore, the contribution, which small businesses can make to the national economy and wealth creation needs to be recognised by the government from the beginning and be considered as part and parcel of the economic development process. The need for a simplified business registration process that can lead to an increase in the number of businesses registered in Namibia cannot be over-emphasised.
Furthermore, across all regions, SMEs do more than create employment. They are also engines of economic growth and social development. SMEs contribute more than 12% to the gross domestic product. Some global estimates put this figure as high as 70%. This contribution varies across sectors and is particularly high in the service industry, where SMEs account for 60%.
SMEs are a vital lifeline in a country, as they represent the grassroots that keep the local economy going by encouraging growth, employment and income.
SMEs are a vital engine in the Namibian economy. They drive growth, create employment and spearhead innovation. They can leverage their agility to design and incubate new technologies and business models to build a better future.
SMEs have the potential to become large corporations and need to continue on their path to growth and prosperity. It is imperative, therefore, that efforts to protect SMEs move with speed and decisiveness not only to cushion the worst of the impacts of the crisis on livelihoods, but to help ensure a swifter recovery for the broader economy.
Moreover, it is, therefore, necessary to devise a coordinated plan to mitigate the impact of the pandemic and geopolitics on SME. Namibia has responded accordingly, as was the case in many other countries around the world. The stakeholders continue to support the expansion of the SMEs sector and to boost economic growth through numerous approaches, such as the deferred payments programme and the funding for a lending programme.
The Bank of Namibia and the Ministry of Finance and Public Enterprises re-launched the SME Economic Recovery Loan Scheme on 2 February, with a share capital of N$500 million. The first scheme was launched in November 2020 but failed due to stringent qualifying criteria and the lack of well-represented information across the 14 regions.
The re-launched SME Economic Recovery Loan Scheme is a revamp of earlier loan schemes and is designed to provide SMEs access to government-guaranteed loans to help their businesses recover from the impact of Covid-19, among other things.
We should understand that the lockdown has reduced economic activity significantly. Supply chain disruption has caused SMEs to face a longer cash conversion cycle. SMEs also need to continue paying recurrent costs for their business continuity, such as office rental costs and salaries to their employees.
As a result, SMEs are incurring losses and delaying debt payments. Some of SMEs shut down their doors and unemployment increased.
The SMEs’ immediate financial needs have been sharply increasing to minimise the negative impacts of business disruptions and retain employment as well as take precautionary measures for the uncertainty.
As an independent economic and business researcher, I want to take a moment and thank the Bank of Namibia (BoN)and the Ministry of Finance and Public Enterprises for re-launching the SME Economic Recovery Loan Scheme. Furthermore, to access the loan scheme, SMEs can apply through their banks.
The purpose of the scheme is to enable banks the ability to provide cheaper credit to SMEs so they can recover, restore and invest in the future. The banks will be facilitated a loan amount from N$50 000 to N$10 000 000, based on the SME’s balance sheet and subject to the banking institution’s credit assessment, according to BoN.
Promoting digital innovation will help build a resilient digital infrastructure supported by inclusive regulatory frameworks, which can create conditions to better serve vulnerable and underserved groups.
At the same time, it is important to address and mitigate the potential risks arising from digital technologies and innovation. This is crucial to help smaller businesses overcome their challenges and to support a sustainable and inclusive economic recovery, which provides new employment opportunities.
To this end, it is clear that SMEs are the lifeblood of the country, and so is funding for them. Partnerships between SMEs and supportive lenders can help grow this crucial sector of the economy and aid Namibia’s economic growth. Therefore, we need a more professional and entrepreneurial ecosystem that will help alleviate unemployment and economic growth – and SMEs may be the answer.
- Josef Sheehama is a banking industry professional with 20 years of experience. He writes in his personal capacity.
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