Govt injects US$7m to stem SMEs carnage
THE Small and Medium Enterprises Development Corporation (SMEDCO) has injected close to US$7 million to stem a potential catastrophe in the micro, small and medium enterprises (MSMEs) sector following the Covid–19 outbreak, a cabinet minister told businessdigest this week.
Women and Youth Affairs minister, Sithembiso Nyoni, who also presides over small to medium-scale enterprises (SMEs), said the sector was at a crossroads in the aftermath of the pandemic-inspired hard lockdowns.
She said urgent measures were key to keeping the sector, estimated by the International Monetary Fund (IMF) to be controlling about 60% of the country’s gross domestic product, running.
She said SMEDCO released ZW$114 762 472 (about US$1 million) to 223 MSMEs in 2020, before sending out a further ZW$405 557 982 (about US$3,6 million) to 281 projects this year, with a further US$2,4 million flowing from external funders.
However, Nyoni said current interventions were not enough to address capital requirements of an industry that had relapsed into funding chaos well before the pandemic exploded in March last year.
However, the minister attributed SMEs’ resilience to the bailouts.
At least 5,7 million Zimbabweans have switched to SMEs since de-industrialisation hit the country about 20 years ago, and massive efforts have been underway to formalise the sector’s operations in order to give it capacity to expand and absorb millions of unemployed Zimbabweans.
Although perennially underfunded, SMEDCO is seen as the heartthrob of the development of SMEs.
“SMEDCO has been pivotal in facilitating affordable funding to growth-oriented MSMEs in Zimbabwe including youth, women and cooperatives,” Nyoni told businessdigest.
“Since the advent of the Covid-19 pandemic, which negatively affected many MSMES, SMEDCO has also been playing a crucial role in providing recovery funding products and services for MSMEs through funding from Treasury. However, the corporation’s role in advancing MSME development in Zimbabwe has been limited by undercapitalisation.
“In 2020, SMEDCO disbursed a total of ZW$114 762 472 to 223 MSME projects affected by Covid-19 pandemic. This year, SMEDCO has disbursed ZW$405 557 982 to 281 SMEs projects throughout the country in sectors which include manufacturing, agriculture and retail among others. The funding allocated by Treasury has not been enough to meet the prevailing demand of funding by MSMES.”
She did not say if funds sent out to SMEs were part of a ZW$18 billion stimulus (about US$160 million) package announced by President Emmerson Mnangagwa in May last year.
But she said bailouts were extended to over 500 SMEs, the bulk of which were imploding.
“Capitalisation of SMEDCO will be key in enhancing its role to expand its branch network and adequately meet the high demand for MSME funding,” she said.
The ZW$18 billion package became the subject of extensive debate in Zimbabwe after the government, in a spirited propaganda campaign, claimed that drawdowns were taking place, while industrialists said they had received nothing.
“Companies indicated that no funds were accessed under the rescue package,” the Confederation of Zimbabwe Industries (CZI) said during the confusion.
“More focus was on ensuring minimal disruptions to business operations with what was available on hand. Other players have made indications to their bankers but they have not received responses yet — no funds are available. This is perfectly understandable given the need to maintain very tight RTGS liquidity. As we have often said at CZI, the best stimulus that industry can have is a stable economy,” the CZI said.
The Zimbabwe National Chamber of Commerce (ZNCC) said at the time that banks were treating state guarantees extended under the package with caution.
It warned the country to brace for extensive de-industrialisation in the absence of fresh bailouts.
Mnangagwa’s intervention came after it became clear lockdowns would cripple firms which were already battling to forestall a gruelling crisis before the pandemic struck.
“The ZW$18 billion stimulus package cannot be an affair between banks and private sector players alone,” the ZNCC said in its submission for the 2021 National Budget.
“The credit guarantee arrangement with the government is not offering enough comfort to banks to lend to the private sector. Government has to offer significant tax relief to businesses or set up a fund for drawdown by businesses,” the ZNCC said.
Governments worldwide last year announced and honoured a combined package of over US$5 trillion to keep firms running, with England undertaking to pay up to 80% of companies’ wage bills as firms faced multiple bankruptcies.
• See full interview on Page 12.