Ngoni Dapira Business Correspondent
THE formalisation of the Small to Medium Enterprise sector in Zimbabwe is critical for economic growth under the ongoing indigenisation and empowerment drive, business analysts have said. This was said during a Steward Bank Business Banking workshop for SMEs held in Mutare on Tuesday.
Business analyst and director of PFT Consultant Consortium, a business consultancy firm, Mr Aaron Mushoriwa, said for there to be economic growth under the Zimbabwe Agenda for Sustainable Socio-Economic Transformation blueprint, there was need for SMEs to formalise and come out of the woodwork.
He said because SMEs had taken over from the big manufacturing companies that are folding and used to subsidise the fiscus through taxes, they need to step up and formalise to fund Government by paying taxes.
“At large, Government gets money from taxes, which is why back in the 1990s when industry was properly operational, industry would remit a lot of money to the fiscus and Government coffers were well resourced for developmental projects.
“Basic economics will tell you that Government relies heavily on taxes. Ironically everyone in business is crying to Government to fund this and fund that, but paradoxically we do not want to pay tax. Where will the money come from?
“Yes, people argue that the money is being stolen and abused by corrupt officials, but the bottom line as we now go all out for economic growth it is important for us to follow the laws of the land and support Acts in place like the SMEs Act,” said Mr Mushoriwa.
He added that in the modern world no economy was operational without SMEs.
He advised Government to simplify the SMEs Act and publicise it to the grassroots for buy-in.
“30 years ago, South Korea economy was depressed, but SMEs drove the economy to become the leading market economy it is today.
“We talk of India and China, all of them now called the emerging economies are being driven by SMEs that are formalised and contribute immensely to the fiscus and the Gross Domestic Product,” he said.
Steward Bank’s chief executive officer, Mr Kwanele Ngwenya, said the workshop was meant to stimulate SMEs to formalise and know the benefits of formalisation.
He said the Mutare workshop was the first but the aim was to have countrywide workshops with SME players.
“Our economy is under pressure, but we will come out of this depression.
“As a bank this is our first step to engaging SMEs to become formalised and develop a relationship with banks and become bankable,” said Mr Ngwenya.
He also urged banks to develop relationships with their depositors to avoid the increase in non-performing loans.
He said non-performing loans were high not because people do not want to pay but because the economy was depressed.
Asked on the way forward to rebuild banking confidence, Mr Ngwenya said already the Central Bank and the Ministry of Finance and Economic Development had reinforced structures to protect depositors.
“Perception risk is a challenge in the banking sector. The Zimbabwe dollar hyper-inflation era destroyed people’s banking confidence, but this is being rebuilt.
“We have a new Governor of the Central Bank (Dr John Mangudya) and the Monetary Policy announced this year in January seems to create hope for the revival of the banking sector in the near future.
“With Dr Mangudya’s sharp knowledge and vast experience in the banking sector I see us tackling the perception risk.
“And with the RBZ as the lender of last resort the liquidity constraints are soon to change. We just have to work together as a nation and have a positive mindset,” said Mr Ngwenya.