Are busi­ness link­ages ef­fec­tive in Lesotho?

Lesotho Times - - Leader - Cut­ting Edge

IN­TER­NA­TIONAL prac­tices in small en­ter­prise de­vel­op­ment (SED) show that small busi­ness growth could be boosted by part­ner­ing with big com­pa­nies and gov­ern­ment de­part­ments for out­sourc­ing and sub­con­tract­ing ar­range­ments.

This helps the cor­po­rate clients to tap into the small busi­ness’s ex­per­tise, en­abling the for­mer to fo­cus on its core func­tion. It af­fords the small busi­ness the chance to de­liver the right prod­ucts or ser­vices to clients, at the right time, and at the right price.

Many coun­tries have vig­or­ously pro­moted the busi­ness link­ages be­tween gov­ern­ment de­part­ments at all lev­els and the small busi­ness sec­tor (par­tic­u­larly the lo­cal ones), and have en­cour­aged the pri­vate sec­tor com­pa­nies to fol­low suit and do busi­ness with the lo­cal small busi­nesses.

For ex­am­ple, the mu­nic­i­pal­ity of Mo­dena in Italy prides it­self as “The En­ter­pris­ing City”. Mo­dena en­gages the lo­cal busi­nesses and pro­fes­sion­als as sup­pli­ers and ser­vice providers for most of its needs. In the process, the small busi­nesses are able to up­grade their ca­pac­ity, skills and re­sources, and in­crease the num­ber of em­ploy­ees. They pay var­i­ous taxes, such as VAT, PAYE, In­come Tax and mu­nic­i­pal rates and taxes, and these taxes are used by na­tional and lo­cal gov­ern­ment struc­tures to fur­ther the de­vel­op­ment needs of the com­mu­nity, the lo­cal gov­ern­ment and the state.

Mo­dena leads by ex­am­ple, and fos­ters the spirit of en­trepreneur­ship amongst its com­mu­ni­ties by em­ploy­ing the lo­cals, procur­ing from lo­cals, and pays in time for prod­ucts and ser­vices de­liv­ered.

Also in the mu­nic­i­pal­ity of Mo­dena, the main mo­tor man­u­fac­turer, Fer­rari, fol­lows a Just-in-time method in the pro­duc­tion process of its world renowned ve­hi­cles. Most of its com­po­nent sup­pli­ers are small busi­nesses based in the city of Mo­dena, and the small busi­nesses have syn­chro­nised their op­er­a­tions and de­liv­ery times such that the de­liv­ered com­po­nents ar­rive at the time they are needed in the pro­duc­tion process. This elim­i­nates the need for stor­age, and saves Fer­rari a lot of money. The com­pany also set­tles the SMME sup­pli­ers’ in­voices just-in-time, so as to boost their cash flows.

In South Africa, sim­i­lar ef­forts were put in place in the year 2000. For an ex­am­ple, in Rusten­burg an SMME de­vel­op­ment in­sti­tu­tion there pro­moted busi­ness link­ages be­tween the min­ing com­pa­nies and the lo­cal small busi­ness com­mu­nity.

South African In­ter­na­tional Busi­ness Link­ages (SAIBL) Pro­gramme was also launched in 2002 on a sim­i­lar mis­sion. These un­leashed many sup­plier and out­sourc­ing op­por­tu­ni­ties, and mil­lions of rands flow­ing into the small busi­nesses.

This cre­ated hun­dreds of sus­tain­able jobs, and a for­mal Sup­plier De­vel­op­ment Pro­gramme was ini­ti­ated to match cor­po­rate busi­ness needs, their ca­pac­ity re­quire­ments, and need for bridg­ing fi­nance. Pay­ment terms to small busi­ness sup­pli­ers were ne­go­ti­ated and re­duced from 30 days af­ter in­voice to 21 days, and later 14 days to 7 days. The cash flow of small busi­ness sup­pli­ers in­creased sharply as the lo­cal banks pro­vided fund­ing based on the ne­go­ti­ated con­tract pe­ri­ods rang­ing from 12 to 36 months. This boosted the lo­cal econ­omy mas­sively.

In re­cent years, small busi­ness sup­pli­ers in Lesotho have been abused by both the gov­ern­ment and the pri­vate sec­tor. For an ex­am­ple, many sup­pli­ers have re­ported re­ceiv­ing pay­ments for the prod­ucts and ser­vices af­ter 120 days, and oth­ers af­ter al­most 365 days. The im­ple­men­ta­tion of the IFMIS, though hailed as a so­lu­tion, failed to do just that. In­stead of sup­pli­ers be­ing paid af­ter seven days, it still took on av­er­age 60 to 90 days to get paid. In sim­ple terms, the gov­ern­ment has con­tin­ued to kill small busi­nesses in­stead of help­ing their cash flow.

The big busi­ness sec­tor has taken ad­van­tage of the sit­u­a­tion. Some have jumped on the band­wagon of “de­vel­op­ing and sup­port­ing” small busi­nesses, but have abused them ter­ri­bly, by not pay­ing them on time. Con­tracts signed in­clude clauses stat­ing pay­ments will be ef­fected within seven days or at the most within 30 days, but 60 to 120 days elapse be­fore SMMES re­ceive their pay­ments.

If we are se­ri­ous as a coun­try that the small busi­nesses are in­deed the cor­ner­stone of our eco­nomic de­vel­op­ment, cre­ator of wealth and jobs, we need to de­clare Lesotho as a de­vel­op­ment-ori­ented na­tion.

We need to put in place in­stru­ments such as pol­icy di­rec­tives that pro­mote en­trepreneur­ship and small busi­ness de­vel­op­ment; that fos­ter mu­tu­ally-ben­e­fi­cial busi­ness link­ages be­tween big busi­ness and small busi­nesses and be­tween all spheres of gov­ern­ment and lo­cal small busi­nesses; that mo­bilise fund­ing for small busi­ness de­vel­op­ment; and that open mar­kets for growth. And the pri­vate sec­tor must toe the line in se­ri­ously pro­mot­ing small busi­ness. But the gov­ern­ment must lead by ex­am­ple. Small busi­ness is in­deed a vi­able ve­hi­cle that can set Lesotho on a growth path in a self­sus­tain­ing way. Mr Molopi is a Small Busi­ness De­vel­op­ment con­sult­ing in Hlotse. He can be con­tacted on 63291988/59709115 or moloidaniel@hot­mail.com

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