SMEs in tourism need overhaul

Bernard Gwarada

Correspondent

Before Covid-19, tourism was one of the fastest growing economic sectors in Zimbabwe and according to Government’s Transitional Stabilisation Programme it was projected to generate US$5 billion in receipts and to create over 300 000 jobs directly and indirectly by end of 2020.

Tourism, because of Covid-19 is also considered the most vulnerable industry compared to other sectors. This is evidenced by the current situation where the industry was grounded to a halt when the pandemic started spreading to Africa.

SMEs which are known to be mostly small and with a hand-to-mouth operations, suddenly found themselves without any income.

The SMEs operators contributed before the pandemic, more than 75 percent of Zimbabwe’s tourism economic output in areas such as restaurants, travel agents, lodges, safaris, entertainment and curio shops.

Research has revealed that this pandemic is causing economic despair through worsening the country’s unemployment, loss of revenue to the Government and increase of poverty levels in the country.

In an effort to mitigate the impacts of coronavirus on tourism industry, the Government has allocated a US$20 million stimulus package.

This Government’s intervention to alleviate the bloodbath is a positive development for the sector. It is now up to the industry players to re-invent the sector.

The aim of this article is to find out how the Government and the industry players can co-operate to mitigate damages from the pandemic. The discussion shall revolve around the following areas;

Digitisation

This is an option that SME players in the industry cannot afford to overlook. It is acknowledged that the SME category is a broad one as it encompasses businesses which vary in size and financial resources.

However, within this continuum there are SMEs for whom it is feasible to start contemplating on the need to digitise their operations and product offerings if they are to continue to survive. In other words, this calls for a shift to virtual tourism which implies that tourists can consume a company’s products in Zimbabwe while they are in other parts of the world.

It is noted that digitisation may not be implemented in one fell-swoop. However, a start has to be made somewhere. For example, in the travel subsector, holiday and travel bookings can be made online without the need to visit brick and mortar buildings.

Some countries have opened up their skies without the traditional face-to-face interaction with service providers. The Government can also play a catalytic role to ensure that digitisation begins to take route in the SME tourism sector through online education and training of players in this sector.

Domestic tourism

The over-reliance and dependency on foreign tourists has had some negative consequences on the tourism sector. The impact of the pandemic has more than ever dramatised the need for the tourism sector to reinvent itself by giving due weight to domestic tourism.

There is need to revisit the Government’s blueprint on domestic tourism and where appropriate spruce it up in line with the prevailing tourist situation on the ground since the emergence of Covid-19. It is envisaged that once the lockdown is lifted, inter-city and provincial travel will commence thus providing the much needed boost to domestic tourism.

Tourist resort places like Victoria Falls should adjust, embrace and encourage local tourists. Analysts predict that the shutdowns, lockdowns and international flights ban in Zimbabwe’s main tourism source markets such as China, the US and some Western countries makes it difficult for people to imagine travelling in the next 12 to 24 months.

Leadership

Traditionally players within the economy including the tourism sector, are used to competing against each other. While competition is good and healthy since it encourages the development of the best possible product offerings to the customer, this competition can be harmful if it is done at the expense of positive collaboration. Players in the SME sector need to put their heads together and identify areas where they can work together to increase their bottom line in light of the Covid-19 pandemic.

This means that players need to be resourceful, agile, innovative and proactive in order to scout for opportunities that can be converted into viable projects.

From the above, it can be seen that there are areas that need the attention of SMEs and Government to turn around this sector. Where someone saw a mere wheelbarrow, someone looking at the same contraption saw a mode of transport.

The question then is, in the light of Covid-19, what do SMEs see in the tourism sector? Every crisis brings with it opportunities and it is therefore up to the players in this sector to ferret and take advantage of these opportunities and reimagine the tourism sector.

Bernard Gwarada is a tourism industry player and a research candidate in international usiness at University of Pretoria’s GIBS Business School. He writes in his own capacity. Feedback: blgwarada@yahoo.com

Economic value of sport in Zimbabwe

                                                     

                                                     

 

                                                       Bernard Gwarada 

The sports sector has a pervasive influence in the lives of people either directly or indirectly.

In my previous article, I focused on football as a potential source of economic dividends, not only to the individual participants, but to the nation as a whole.

However, if justice is to be done to this important area, it is critical that the potential economic value of sport be looked at holistically.

This will enable stakeholders and decision-makers to focus on sport as a source of income generation and associated benefits such as putting Zimbabwe on the global map and positioning the country to benefit from sports tourism.

It may be asked, how Zimbabwe fares in terms of treating sports across the board as a potential source of economic rejuvenation. The answer to this question will emerge around a discussion of the areas listed below.

Sports value

It is heartening to note that the Government adopted a national Sports and Recreation Policy in August 2016 which was inclusive in its orientation and acknowledged the importance of sport as a mega business.

The policy acknowledged that the world sporting industry was worth US$620 billion in 2016.

This implied that as a country we had to put in place measures to ensure that we also benefited from this amount.

This policy was to be reviewed after five years. However, three years down the line, it cannot be said to be unfair if one was to ask how much progress sport has made in terms of benefiting from the US$620 billion industry?

In Zimbabwe and when national teams (of various disciplines) are playing, the stadiums are usually packed to full capacity, thus giving the impression of a thriving sector.

In this sense, sport may be said to be thriving and yet the missing ingredient is that it is yet to realise its full potential as a significant player in the country’s development plans and as a contributor to GDP.

A key problem with the aforementioned sports policy is that, no monetary targets were put in place to aim at so that after the five-year review period, one could assess in an objective way whether or not the set targets had been met. There is also need to put a value on Government’s investment in sport and the expected return in monetary value.

For instance, research reveals that in Ireland for every €100 the government invests in Irish sport, the sports industry creates up to €195 in tax revenue.

Policy

Policy is an important variable in the activities of an organisation or country. This is because it provides guidance and direction as to what may need to be done for set goals to be achieved. In 2018, the Ministry of Youth, Sport, Arts and Recreation contributed 6,9 percent to the country’s Gross Domestic Product (GDP).

The problem is that this ministry is made up of four arms and the specific contribution of sport is buried in the global contribution of this creative and cultural industry.

Given that sport has become a mega business worldwide, and Zimbabwe wants a share of this cake, it is vital that the contribution of sport to the GDP be clearly spelt out as a matter of policy so that it becomes a basis for decision-making.

An important cornerstone of the sports and recreation policy seeks to ensure that the country has representations in various international sports bodies.

For example, Mr Tommy Sithole has been a member of the International Olympic Committee (IOC) and has represented the international sports community at the United Nations as director and deputy representative at IOC Observer Mission to the United Nations in New York. He was also secretary-general of the Association of National Olympic Committee of Africa.

Dr Philip Chiyangwa is the current Cosafa president. The current Minister of Sports Kirsty Coventry is former Olympic swimmer, a world record holder and the most decorated Olympian from Africa.

Top Zimbabwean match official Felix Tangawarima sits on the Confederation of African Football’s referees committee. The above sportspersons, through their various assignments, raise the profile of the country and generate interest from potential investors and tourists who visit the country.

A case in point is when Dr Chiyangwa invited UEFA president Mr Aleksander Caferin to Zimbabwe in January 2020. The UEFA president reportedly pledged to use his links to promote Zimbabwe as an investment destination.

Governance

Sound governance is an important precondition for the success of any institution, including those in the sports industry.

The area of governance has been one of grave concern in the sports industry in general.

For example, Cricket in Zimbabwe is currently on a resurgence following years of wrangles and allegations of maladministration.

Zimbabwe cricket has a glorious past which the current administration is seeking to redeem. It must be stressed that allegations and counter allegations of maladministration are not good for the sports industry as this often leads to withdrawal of sponsorship which sports organisations need.

In conclusion, sport is an important component of the socio-economic development of a country. It is regrettable that data on the economic value of sports as an industry in Zimbabwe is not available. Such data can assist both the Government and investors to make strategic decisions.

Bernard Gwarada is a research candidate in International Business at University of Pretoria’s GIBS Business School. He is a co-owner of former Premier League club, Douglas Warriors FC and a former ZIFA board member.   Feedback: blgwarada@yahoo.com

How football can contribute to Zimbabwe’s economy

                                

                                      

Football has shown its great potential to generate income from the match day ticket sales, broadcasting and commercial sources such as sponsorship and merchandising.

  Bernard Gwarada 

Over the years and worldwide football has evolved from being a social activity into a commercial venture with the potential of impacting on a country’s Gross Domestic Product, resulting in job creation and poverty alleviation.

Football has gone global as a business which requires that it be studied in its own right as a field of economic endeavour just like any other industry.

Indeed, sports management is now a respectable field of study at University level across the world including Zimbabwe.

Football has shown its great potential to generate income from the match day ticket sales, broadcasting and commercial sources such as sponsorship and merchandising.

The impact of football on a country’s economy can be staggering.

For instance, in the UK and in the 2016/2017 season alone, the premier league made a contribution of £3.3 billion in taxes and also the league created 100,000 jobs.

The phrase “football economy” shows the acknowledgement now given to football as an important source of economic and commercial activity.

In stark contrast, and in the developing world, football has not been run commercially as a business.

Closer to home, research has shown that over the years, football in Zimbabwe has not been run professionally and commercially due to incessant wrangles for positions and poor governance.

This has undermined the country’s ability to enjoy the potential benefits that can accrue from the running of a sport such as football in a sound, professional and commercial manner, so that it contributes to the country’s GDP.

There are many areas that can assist in bringing about sanity in football administration in Zimbabwe.

However, this article explores only five such areas that can contribute to the turning around of football management and its fortunes as shown below.

Investment in the sport industry

Sport infrastructure is critical for the development of football and its running successfully. At its most basic level, local footballers will have the opportunity to train in facilities that reflect world class standards.

Furthermore, such infrastructure can benefit other economic sectors such as tourism, real estate and retail.

World class teams can be attracted to come to Zimbabwe for off-season training camps, thus boosting tourism.

For example, Manchester United has got slots for games in South Africa during its off-season period. If the football infrastructure was poor in South Africa, it would not have been possible for this arrangement to come to fruition.

Sound infrastructure will assist in the country’s bidding for the hosting of international football tournaments.

A successful bidding has got massive implications for revenue generation and creation of employment, for example in the construction industry.

However, the government must formulate a football policy in terms of running football in the country and should also be in a position to provide the requisite guarantees to support the bids.

In order to attract corporate football sponsorship, the government may consider giving special tax incentives to ensure an active development of the game.

The current ban of all stadiums in Zimbabwe by CAF from hosting international matches was because the stadiums did not meet required international standards.

The CAF ban shows an apparent lack of seriousness in the way in which football is administered in Zimbabwe. The country has not lost only the opportunity to host the games, but also the economic benefits arising from the hosting of such games.

It is, however, encouraging to note that the government has released $13 million to be used for refurbishing parts of Barbourfields and $22 million for the National Sports Stadium.

Development

Club licensing is part of football development aimed to raise minimum standards in football governance. In other words, it is a template for the meeting of certain prescribed standards for the development of football clubs.

The template incorporates areas such as sporting, infrastructure, administrative, personnel, legal and financial.

However, clubs in Zimbabwe have failed to wholly meet the set standards in the respective areas of concern due to a lack of resources and to some extent ineffective leadership and maladministration.

The bottom line is that such failure negatively affects the professionalisation and development of football in Zimbabwe.

The onus, no matter how onerous, still remains on the club leadership to ensure that the set standards by FIFA and CAF are met if local football is to come out of the woods and become a viable commercial proposition which will benefit not only the clubs but the nation as a whole.

Again, for the football to develop, it is my view that there is need to take advantage of the existing structures such as the school system were football should be part of school curriculum.

Football academies should receive funding since it’s the place where junior footballers start from to become professional players.

In Bulawayo, Bantu Rovers produced our current UK based top player Marvellous Nakamba, while BN academy in Harare has been bringing into the country top European coaches to Zimbabwe for school holiday training camps, and this has resulted in four teenage players going for trials in Germany.

Former player Alois Bunjira is running Alban academy in Chitungwiza assisting children to achieve their dreams.

Effective business strategies

Football can learn from business and business can also learn from football. This is because there are a number of similarities between football and business.

For instance, for both to succeed they require competent teams, both need to understand their strengths and weaknesses and those of their rivals.

As pointed out earlier, commercialisation has pervaded the game of football at a global level. Commercialisation is also an intrinsic part of business.

Both football and business have set goals which need to be met. However, for this to happen there is need to put in place well thought out strategies supported by the requisite resources.

With regard to football in Zimbabwe, such strategies should exist at a number of levels such as ZIFA, Sports and Recreation Commission, Ministry of Sports, football clubs and Ministry of Tourism.

The government and ZIFA need to seriously consider commercialisation and internationalisation of the senior national teams as a game changing strategy.

Such a strategy has worked well elsewhere.

For example, the Nigerian Football Federation partnered AS Roma a top Italian team. AS Roma and the Nigeria Federation agreed to work together on areas of common interest such as player development, football administration as well as technical and operational support.

Unity of purpose

Unity of purpose is a prerequisite for the success of any organisation. When things are not right and there is continuous wrangling, (as is happening in Zimbabwean football at national level) this tends to detract from goal achievement.

Zimbabwean football will not develop to the required potentially beneficial levels as long as it is characterised by animosity and struggle for power and positions.

If people stick to the rules of the game and the constitution, there would be no need for the wrangles that have poisoned the football game and stunted its development in Zimbabwe.

The recent lifting of bans on senior football officials perceived to be enemies of football is a welcome development.

The ZIFA President has taken a commendable step.

Accountability

Goal achievement in football involves the participation of various stakeholders.

In that regards it becomes critical that areas of accountability be clearly spelt out so that progress is not undermined or stalled because it is not clear who should be doing what.

A case in point is the CAF stadium ban where parties tried to run away from the responsibility.

However, it is heartening to note that it has now been agreed that the Ministry of Sport will take over the ownership and management of the National Sports Stadium.

Media reports have revealed that at ZIFA, there are some responsibilities that are supposed to be carried out by the secretariat but end up being done by the executive committee.

Such a state of affairs also undermines accountability and governance and tends to discourage would be sponsors.

It is refreshing to note that FIFA now provides funding to participating national teams for tournaments on its calendar. Lack of funding has been a constraint to ZIFA over the years.

However, ZIFA would still need to forge strategic partnerships with sponsors to support its other areas of economic need such as player bonuses. Such an endeavour can only succeed when ZIFA is able demonstrate good marketing acumen backed up by a solid corporate governance record.

Bernard Gwarada is a research candidate in International Business at University of Pretoria’s GIBS Business School. He is a co-owner of former Premier League Club Douglas Warriors FC and a former ZIFA Board member. He writes in his own capacity.  Feedback: blgwarada@yahoo.com

Survival strategies for Zim SMEs

Businesses in Zimbabwe are operating in an unstable environment, and in such an environment, SMEs tend to be victims particularly when the economic crisis becomes prolonged. Research has shown that such an environment offers both threats and opportunities to different types of businesses, including SMEs.

The million-dollar question, therefore, is: what can SMEs do to remain relevant and successful in such a debilitating environment?

This article discusses some survival strategies relevant to SMEs in Zimbabwe which they can adopt in order to continue to survive and prosper.

In general terms, any business, including an SME needs to have answers to the following two key questions around which a number of strategies can be framed; are we still relevant in this environment as a business and, how do we compete in this environment as a business? With reference to the current scenario in Zimbabwe, the following are the strategies that can be recommended for the survival of SMEs.

Costs control

It is vital that under such an environment, an entrepreneur makes it a habit to review the cost structure of the organisation with a view to bringing the costs down. The aim should be to increase productivity while at the same time reducing production costs. Organisations can look into the following areas; freezing on recruitment and ensuring the available human capital is fully utilised through employee multi-skilling, managing of utility bills, especially those for telephone and internet bills. There is also need for the owner of a SME to be exemplary through a modest and not flamboyant lifestyle. Embracing of digital technology should be seriously considered by SMEs as a way of cutting on costs. The use of social media for example can cut traditional advertising costs incurred through the use of billboards, TV and radio advertising.

Differentiation

Differentiation is a strategy based on distinguishing a product or service from those of competitors. SMEs need to consider adopting this strategy, which is innovation driven and leads to the introduction of new products and services at lower cost, but without compromising on quality.

In this respect, examples abound in the Zimbabwe fuel sector, where multinational companies ride on their brand names and differentiate their products focusing on customer values and quality.

On the other hand, indigenous fuel players (SMEs) differentiate their products through targeting price sensitive segments of the market.

In the transport sector, due to the current extreme shortage of cash, some operators became innovative by introducing swipe machines and mobile money services in their buses for passengers to pay for their ride.

Customisation

In order to ride the storm of economic adversity, SMEs need to consider customising their product and services to offer tailor-made solutions. Tailor-made solutions are important because they are designed around the unique needs of a customer and thus promoting customer loyalty. This strategy is particularly important in the current environment of economic vicissitudes where a customer may be tempted to switch to another service provider or supplier.

Diversification

Diversification within the context of economic problems allows an SME to spread its risks by pursuing new lines of products and businesses.

It helps the organisation to build stability. For instance, in the travel and tourism industry sector, an entrepreneur can consider diversifying into related fields such as airline operation, lodges, gift shops, and restaurants.

Mind-set of owners

Research has shown that a tenacious mind-set predisposes owners of SMEs to succeed even in periods of economic difficulties and hardships. Such owners do not easily give up and remain focussed on driving the organisation relentlessly to success. This is the reason why some SMEs have expanded and grown during such a crisis ridden period.

Networking

Getting involved with an entrepreneurial community (as opposed to remaining isolated) is a good strategy for the survival and success of a SME.

This is because it allows the entrepreneur to leverage on the social capital that exists among people on the same journey through, for example, SMEs International Expo, Zimbabwe Cross Border Traders Association, SME Association Zimbabwe, Zimbabwe Informal Traders Association, Zimbabwe Miners Federation and Zimbabwe Women Association.

An SME needs not pursue any one of the above mentioned strategies to the exclusion of others. Where a multi-pronged approach is taken, this puts the SME in a stronger position to survive and succeed.

There are also other strategies that some SMEs have adopted which have resulted in their apparent success and prosperity.

This article first appeared in The Herald.  https://www.herald.co.zw/survival-strategies-for-zim-smes/

Why SMEs in Zim should consider global markets

Zimbabwe's 2020 National Budget  Statement was presented by Professor Mthuli Ncube

The 2020 National Budget projects the economy to grow by three percent, but in recent years it has not grown according to expectations.
Such a trend is reflected through company closures, retrenchments, liquidations and a stagnant market.
This stagnant market is the major reason why Small and medium enterprises (SMEs) in Zimbabwe should consider entering regional or even international markets.
The stagnant market implies that SMEs in Zimbabwe are fighting for a dwindling piece of cake.
Furthermore, there is a tendency in the SMEs sector for a worker to leave their job and start competing with their erstwhile employer for the same piece of cake.
Zimbabweans have developed what may be called an entrepreneurial mindset which refreshingly leads to shunning of formal employment.

While this is a positive development (in that for example this may lead to employment creation and poverty reduction), this however, only serves to intensify the competition for a vanishing piece of cake.
Established SMEs cannot match prices charged by such businesses which have very low overhead costs.
According to the first report of the 2016 Parliamentary Portfolio Committee on SMEs, about 10 000 graduates are rolled out annually from tertiary institutions and universities.
A significant number of these graduates are likely to end up self-employed and again competing for the same business with established SMEs.

There is also the threat from foreign firms which compete by offering better products or lower prices. All these are reasons why SMEs in Zimbabwe should seriously consider investing across the borders.
Internationalisation entry strategies
The first step for the SME is to assess its preparedness and readiness to enter a foreign market.
This can be done through the identification of the company’s capabilities and core competencies that can be used to create a unique market position in a foreign market.
It is on the basis of such a review that the SME can convince itself if it is ready to enter the foreign market with its superior products and services. The issue of the perceived superiority of SME’s products and services cannot be overemphasised.
This is because a firm with inferior products and services will stand no chance in the foreign market.
A case in point is when aviation executives from another African country were impressed by a certain product available at Robert Gabriel Mugabe International Airport in the restaurant sector.
They invited the local entrepreneur to their own country and asked him to consider setting up a similar business venture at all international airports.

The second critical step for the SME to enter into a foreign market is choosing the entry mode between a non-equity mode and an equity-based mode.
These modes vary according to costs involved, the risk involved and the level of business control.
The non-equity modes category includes export and contractual agreements. Export entry mode involves directly or indirectly exporting to a foreign agent or distributor.
For instance, a manufacturer of spices in Zimbabwe can appoint an agent or distributor in a foreign country.
Contractual entry modes involve for example licensing and franchising. The equity mode category includes for example joint ventures, mergers and acquisitions, and foreign direct investments (FDI).
Barriers to entry
There are barriers to contend with when contemplating entry into a foreign market such as language, local legislation and regulations, infrastructure (roads, telecommunication), the geographical distance (travel and logistics), the economy (currency volatility, inflation and interest rates).
An SME has to do its research to identify barriers and solutions. For instance, the Internet is now an important source of business. It is therefore critical that telecommunication infrastructure is in place to support business.
Government’s role
For SMEs to successfully internationalise, the support of the Government of Zimbabwe is required to lower the barriers through a conducive regulatory framework and policies.
The SMEs can in part conduct market research by exploiting relevant Government databases concerning the targeted foreign markets. SMEs in Zimbabwe can also acquire market intelligence through platforms such as the Harare Agricultural Show and the Zimbabwe International Trade Fair (ZITF).

The Government benefits from internationalisation through an enlargement of the tax base, increased employment opportunities for local citizens through export promotions and a reduction in poverty.
Expanding business in foreign markets requires that the SME remains focused and knowledgeable in its area of endeavour. Above all, it must be driven by a sense of conviction with regard to the superiority of its products and services.
This is a potentially profitable strategic option for SMEs in Zimbabwe to consider, notwithstanding any challenges they may encounter along the way.
Bernard Gwarada is a research candidate in International Business at University of Pretoria’s GIBS Business School. He writes in his own capacity. Feedback: blgwarada@yahoo.com

This article first appeared in The Herald   https://www.herald.co.zw/why-smes-in-zim-should-consider-global-markets/

Why SMEs in Zimbabwe fail

WHEN a business fails, this does not adversely affect the owner only, but such failure also negatively affects the Government which has an inherent interest in employment creation and poverty reduction.
The Government is also responsible for creating a conducive macro environment for SMEs to sprout and thrive.
Some scholars have pointed out that most SMEs which fail tend to blame Government policies as opposed to factors to do with the shortcomings of the owner.
Researchers have identified a number of common factors that act as obstacles to the success of SMEs such as lack of planning, insufficient capital, competition and mismanagement of tax affairs.

However, Zimbabwe is a country with its own dynamics and therefore this article will dwell on the following seven factors that reflect the current peculiarities of the socio-economic and political environment.

Lack of entrepreneurial mindset
Some Zimbabwean SMEs have folded because of a conscious or subconscious preference to conduct business in a comfort zone. However, without some degree of risk taking, no business can develop and let alone flourish.

On the other hand, an entrepreneurial mindset is able to propel the entrepreneur forward even in a situation of very limited resources and adversity.
The “hand-outs” mentality leads to the constant blaming of institutions such as banks and the Government for not providing the required financial assistance.
Self-made billionaires Bill Gates and Oprah Winfrey are famous failures who refused to give up. They have proved that risk taking can yield great rewards.

Managerial incompetence
As an SME grows, it is not possible for the owner to be a jack of all trades. Expertise in areas such as people management, planning, financial management and marketing is required for the effective running of SMEs.
In a number of cases, owners of SMEs may fail to adjust to the demands that are triggered by the growth of their organisations, resulting in the owner of the SME continuing to operate in roles where he or she lacks specialist skills or knowledge.

Without such knowledge and skills, the SME is likely to encounter obstacles in its operations that could have been easily avoided and this becomes a hurdle to the success of the SME.
It should however, be noted that, even where the SME is at its initial stages of development, it is incumbent upon the owner of the SME to take steps to improve his or her skills levels.
When this is not done, the SME is likely to be run in a haphazard manner, leading to failure sooner than later.

As an SME grows, it is not possible for the owner to be a jack of all trades. Expertise in areas such as people management, planning, financial management and marketing is required for the effective running of SMEs.

Lack of industry experience and knowledge

The owner of a SME must take time to understand the industry in which he or she is operating.
The entrepreneur must be able to answer the following questions;
what is the core business of the industry,

Who are the players in the industry?
What are the characteristics of the players in the industry?
What are the opportunities available in the industry? and
What are the challenges and how may these challenges be overcome?
When such fundamental questions are not asked and honest answers given, then the SME is doomed to fail.
There is a tendency in Zimbabwe where a “herd mentality” is apparently in operation. This is whereby almost without thinking, someone rushes to open a business in a given area because this appears to be fashionable at that time.

A case in point is the breeding of quail birds (zvihuta) which hit a crescendo in 2015, but fizzled out when it turned out not to be a profitable venture.
Similarly, some people without a mining background have poured their hard-earned savings into artisanal mining ventures and have come out with nothing.

Poor control systems
SMEs that do not have control systems in place are likely to fold because they do not have control over the organisation’s operations.
The areas of concern include the control of company assets, the control of financial resources, the control of information resources and the control of human capital.
For instance, in the transport industry, some companies failed to scale greater heights because they had no full control over the whereabouts of their vehicles. However, digitised tracking system has assisted in mitigating this challenge.

With good control systems in place, goals are clearly set and performance standards are easily visible and enforceable.
Some people have tried to conduct farming while they are based away from the farm, and usually in towns. This leads to a situation where the owner of the farming enterprise has little or no control over what happens at the farm.
Some SMEs have failed because they extended too much credit to customers who then failed to pay back.
Self-discipline is another key pillar in entrepreneurial success.
Some SME owners are in the habit of “taking from the till” either for themselves or for some relatives. Some even abuse facilities from banks, resulting in massive loan defaults. Such practices lead to the collapse of the business sooner or later.

“Tenderpreneurship”

There are SMEs that rely on tenders for them to continue to exist. In essence, these are briefcase SMEs.
The problem with these SMEs is that their death is inbuilt in their practices in the sense that tenders at some point may run dry.
Most of these companies skip the important stages in the business lifecycle as they jump straight into the maturity stage and this is not sustainable. Such SMEs do not have any production that they create as they gallivant from one tender to another in virtually all spheres of economic activity. When the tenders are no longer available, such SMEs are likely to close shop.

Failure to exploit digital technology

Some SMEs have failed to make use of digital technology and its attendant benefits.
There are some transactions that can be done through digitised platforms and do not require the physical presence of someone at a particular place.
However, some SME owners have been slow in embracing such technology.
The owner is used to the traditional way of conducting business that requires his or her physical presence at a particular geographical place.
SMEs are failing to take advantage of the time which is a precious commodity that can be made available to them when they utilise digital platforms to conduct business.
Such time can be used by the owners of SMEs (for example at Mupedzanhamo or Glen View Area 8 complex) to attend to some other pressing issues instead of spending time in queues at banks or any other place.
In this way, the SMEs can greatly minimise chances of failure and improve chances of success.
Economic policies
While it is important and even necessary for the Government to announce its polices from time to time, this has in some cases negatively affected operations of SMEs leading to some closing shop because of their inability to adjust to the new prevailing economic regime (market distortions) and the cost implications thereof.
For example, on February 20, 2019, the Government liberalised the trade of foreign currency and declared the RTGS dollar as the local currency.
Another case in point is the Supreme Court of Zimbabwe’s landmark judgment involving Zambezi Gas Zimbabwe (Pvt) Ltd and NR Barber (Pvt) Ltd on January 20, 2020, which declared that all foreign currency debts incurred before February 22, 2019, are to be paid in RTGS at the rate of 1:1.
In conclusion, it can be seen that there are a number of factors that can lead to the failure of SMEs.
While government clearly has a role to play in the success or failure of SMEs, there are also other factors that are largely within the control of SMEs in terms of determining the success or failure of these types of organisations.

Bernard Gwarada is a research candidate in International Business at University of Pretoria’s GIBS Business School. He writes in his own capacity.
Feedback: blgwarada@yahoo.com

This article was first published in The Herald!   https://www.herald.co.zw/why-smes-in-zimbabwe-fail