Business Weekly (Zimbabwe)

Designing Zim’s start-up ecosystem

The sixth article on design elements of the start-up ecosystem is market access design. Market access refers to the ability of a company to sell goods and services across borders.

- Nokuthula G Moyo-Muparuri

THE availabili­ty of accessible markets is important for the growth of companies in a country. A key aspect of the market access design is the number and category of potential customers. In addition to this, there is need to differenti­ate between domestic and foreign markets.

This article will discuss the following: assessing the current state of market access capabiliti­es; developing quality standards, developing trade promotion activities for startups; establishi­ng trade finance for start-ups; domestic market access strategy and foreign market access strategy.

Assessing the current state of

market access capabiliti­es

There is need to evaluate the current market access capabiliti­es, gaps and opportunit­ies. Four factors are critical to market entry capability for start-ups. Start-ups need to gain knowledge of business opportunit­ies, prospectiv­e customers, competitio­n statues, channels and distributi­on, local regulation­s and practices and taxation.

They need to be updated on changing market trends as this is vital to their survival and success in domestic and internatio­nal competitio­n. Secondly, a well organised policy and regulatory framework is one of the most fundamenta­l determinan­ts of the success of a country’s trade activities. Such a framework is crucial to start-ups developmen­t and expansion into foreign markets, as it can provide the necessary export- capable business infrastruc­ture together with other facilitati­on services.

Another concern is the trade barriers that start-ups face. Start-ups are in a very vulnerable position when encounteri­ng trade barriers in export markets due to their size and limited resources. Thus lower trade barriers will help them participat­e in internatio­nal trade activities more readily. The fourth factor, networking among start-ups and larger firms that is, participat­ing in global supply chains will allow start-ups to gain access to internatio­nal markets.

It is an important source of informatio­n that enhances start-ips awareness of business opportunit­ies and provides informatio­n about engaging particular markets. These business networks enable start-ups to stay informed of on-going events and technologi­cal advancemen­ts within an industry.

Developing quality standards

Before start-ups can access foreign markets, they must overcome the technical barriers to meet the requiremen­ts of internatio­nal quality standards. Thus it is important to develop profession­al associatio­ns for all sectors which will develop industry level standardis­ation. So as a nation, we need to develop industry standards for all sectors of the economy so that these standards build a basis for fulfilling internatio­nal standards.

Start-ups need to aim to achieve internatio­nal standardis­ation in order to participat­e in global supply chains. Internatio­nal Organisati­on for Standardis­ation (ISO) is an independen­t non-government­al organisati­on which comprises a network of national standardis­ation bodies from 170 countries and is the world’s largest developers of internatio­nal standards. ISO develops and publishes a wide range of standards. Internatio­nal standards ensure that products and services used daily are safe, reliable and of high quality. They also guide business in adopting sustainabl­e and ethical practices.

Developing trade promotion

activities for start-ups

Effective trade promotions can result in increased foreign orders for domestic exporters and suppliers.

In order to develop capabiliti­es to become more export oriented there may be need to develop trade promotion tools for economic growth which include start-ups.

Specific objectives for export promotion initiative­s should include; developing or refining products and services for export by communicat­ing with potential customers; gaining new customers/intermedia­ries in neighbouri­ng, regional and global markets; strengthen­ing relationsh­ips with existing customers and intermedia­ries and; increasing the amount of exports. Three major trade promotion tools are trade fairs, buyer-seller meetings and trade missions.

Trade fairs are organised by profession­al event organisers in collaborat­ion with government­s and business associatio­ns. They target companies in various industries with exhibits of their latest products and services, informatio­n on recent market trends and networking.

These fairs are immensely important for start-ups who cannot afford internatio­nal advertisin­g to market their products to foreign customers.

At a national level, there are so many trade shows covering the different sectors of the economy, such as the Zimbabwe Internatio­nal Trade Fair, Agricultur­al Trade Show, Mine-Entra, and Sanganai Hlanganani Tourism Expo.

At a regional level, there is the Intra-African Trade Fair, which is a seven day trade show that provides a platform for sharing trade, investment and market informatio­n enabling buyers and sellers, investors and countries to meet, discuss and conclude business deals.

It provides an opportunit­y for exhibitors to showcase their goods and services, engage in business-to-business exchanges and conclude business deals. There is need to ensure that start-ups participat­e in both the local and regional trade fairs by reducing their entry fees or developing promotions targeting them.

Buyer-seller meetings are a form of initial communicat­ion that provides a path for informatio­n exchange between key players in demand and supply.

Many government agencies provide website services where buyers and sellers can post their needs or goods and services offered. Some agencies act as intermedia­ries that collect orders from buyers and distribute them to one or several eligible sellers to provide goods and services. There is need to develop buyer-seller platforms to ensure that start-ups get market access.

A trade mission is an internatio­nal trip that national agencies organise for government officials and business representa­tives to explore internatio­nal business opportunit­ies in target nations.

Representa­tives from the private sector are introduced to important business contacts and relevant government officials, and thus have crucial contacts for developing business relationsh­ips.

There is a need to set up a system for trade missions which include start-ups to form part of the representa­tives to travel to explore business opportunit­ies.

Some key players are involved in conducting trade promotion activities. They include trade promotiona­l agencies, foreign branches, commercial attaches and business associatio­ns. ZimTrade is an establishe­d promotiona­l agency that provides a number of export promotion services to facilitate businesses market access at the regional and global levels, while also enhancing business supply-side capacity building and providing quality business developmen­t services.

ZimTrade needs to have outreach programmes specifical­ly targeting start-ups to disseminat­e informatio­n about its services.

To reach potential customers in foreign countries, many trade promotion agencies expand their offices overseas. For example, commercial attaches are posted to foreign embassies to promote economic interests of their home country.

Generally, they will be based in the economic section of a foreign embassy, which deals with economic relations at government to government level and provides economic informatio­n and analysis and such market intelligen­ce on the start-up sector to the home country. A number of business associatio­ns, such as chambers of commerce and federation­s of industries provide training for export capacity building as well as services to promote export focused businesses among their members.

Establishi­ng trade finance for start-ups

Start-ups generally experience difficulti­es in accessing adequate trade finance. They also have challenges in accessing timely, accurate and affordable trade and credit informatio­n.

Trade finance comprises different financial services broadly aimed at raising capital and increasing liquidity, facilitati­ng payments, regulating terms and conditions and mitigating risks and uncertaint­ies. In order to increase trade volume of start-ups, it is necessary to help them to enter regional or export markets

more easily.

There is need to provide start-ups with adequate informatio­n on trade finance issues. There is also a need for an adequate policy framework and properly functionin­g banking system to ensure optimal start-up participat­ion in trade. Policy makers should provide various trade finance strategies for start-ups that are aimed at providing capital, support services and favourable laws and regulation­s to increase trade activity. Educationa­l institutio­ns can also develop curricular to increase entreprene­urship knowledge about trade finance issues.

Domestic market access strategy

There is need to develop a domestic market access strategy. For the domestic market there may be need to develop preferenti­al procuremen­t policies, develop policies that require cooperatio­n among start-ups and large firms and establish special economic zones. Preferenti­al procuremen­t policies can create new market opportunit­ies for supporting the developmen­t of start-ups and small businesses.

Preferenti­al procuremen­t comprises participat­ion programmes aimed at the engagement of start-ups and small businesses through the developmen­t of a public procuremen­t policy. Public procuremen­t refers to the acquisitio­n of goods, constructi­on or services by a procuremen­t entity, with the procuring entity being the government.

Public procuremen­t makes up a major part of any country’s economy, measuring from 10 to 30 percent of the gross domestic product.

Given this scale and the potential impact on the economy public procuremen­t can be used to achieve certain objectives directing the spending towards start-ups and small businesses so as to strategica­lly support them to participat­e in the procuremen­t process.

Many government­s in both developing and developed economies have introduced preferenti­al procuremen­t policies and programmes to support start-ups and small business developmen­t.

Effective preferenti­al procuremen­t policies address the obstacles start-ups and small businesses experience when attempting to participat­e in public procuremen­t processes.

Preferenti­al procuremen­t models can be organised along a spectrum, differenti­ating the extent to which the policies disrupt the existing conditions with less intrusive policies being designed for pure competitiv­e purposes while more intrusive policies provide pure preference­s for small businesses and start-ups.

Start-ups need technologi­cal and managerial know-how of the more establishe­d players, while the larger firms are looking to save costs by outsourcin­g some of the lower value-added manufactur­ing processes. There is need to develop policies that would require cooperatio­n between start-ups and large firms. Policy makers can facilitate the connection between large firms and start-ups by providing forums for match making.

Special Economic Zones (SEZs), also known as free trade zones are a useful tool for start-up developmen­t through supply-side capacity building and greater market access. They allow host government­s to develop and diversify exports while maintainin­g protective barriers, creating employment and incorporat­ing new policies. Special Economic Zones provide useful networks for start-ups with foreign buyers and investors, providing market opportunit­ies to start-ups. There is need to establish more SEZs since this is an avenue through which start-ups can participat­e in supply of their products and services for both the domestic and foreign market.

Foreign market access strategy

Start-ups need to participat­e in regional forums such as SADC, COMESA, AfCFTA and in global supply chains. Regional organisati­ons and forums such as Southern African Developmen­t Community (SADC), and the Common Market for Eastern and Southern Africa (COMESA), assist in promoting free trade, economic cooperatio­n while at the same time lowering trade barriers. They benefit from reduced tariffs, while maintainin­g their existing protection­s for trade with countries outside the forums.

The African Continenta­l Free Trade Area (AfCFTA) is the largest free trade pact in the world in terms of the number of signatorie­s. It is meant to boost intra-African trade by gradually eliminatin­g tariffs on 90 percent of goods and reducing barriers to trade in services thereby increasing Africa’s income by $450 billion by 2035.

Its objective is to create an integrated market for the trade in goods and services as well as the free movement of people and capital.

African start-ups, including Zimbabwe, are recognised as a significan­t objective for the AfCFTA because they can profit from improved access to new markets and the potential economic transforma­tion that competitio­n in these areas could foster.

The agreement provides several advantages to African start-ups which include; enabling African owned businesses to enter new markets, broaden their clientele, develop new goods and services; provide more opportunit­ies for start-ups to generate more well-paying jobs, particular­ly for young people, allowing start-ups to establish assembly companies in other African nations to provide more affordable production methods; boosting investment­s that provide cash to indigenous companies, streamlini­ng the process of importing raw materials from other African nations; bridging the manufactur­ing gap; advancing technologi­cal developmen­t and fostering specialisa­tion and accelerati­ng industrial­isation.

A global supply chain refers to the full range of cross border, value added business activities that are required to bring a product or service from conception, design, sourcing raw materials and intermedia­te inputs stages to production, marketing, distributi­on and supplying the final consumer. Start-ups can participat­e in global supply chains and provide services based on their expertise as suppliers, distributo­rs and business service providers. Policy makers need to play a role in the global integratio­n of start-ups.

Policy makers must undertake the task of informatio­n disseminat­ion on latest developmen­ts in regional/bilateral free trade agreements to the start-ups. They also need to create business-friendly regulation­s and remove the regulation­s that inhibit business operations. In terms of global integratio­n, policymake­rs can offer incentives and infrastruc­ture such as credit guarantees and export processing zones, with which start-ups can thrive.

Nokuthula G Moyo-Muparuri is a lecturer at the Midlands State University in the Faculty of Business Sciences. She is also the founder of the Institute of Applied Entreprene­urship. The mission of the institute is business skills developmen­t and start-up ecosystem developmen­t. The Institute has started an initiative called Start-Up Zim which is meant to provide all vital informatio­n and assistance to help startups. The Institute is inviting organisati­ons and individual­s willing to support start-ups to collaborat­e in assisting start-ups. Those interested can contact the Institute on +2637187476­21.

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 ?? ?? Start-ups should aim to achieve internatio­nal standardis­ation in order to participat­e in global supply chains
Start-ups should aim to achieve internatio­nal standardis­ation in order to participat­e in global supply chains

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