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.
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.