The role of small, medium and micro enterprises in Lesotho's economy.
Kanono, Bolaoane T.
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A vibrant industrial sector that includes growing small and medium-sized enterprises is a boon to any economy. By increasing output and incomes, providing jobs for unskilled labourers, and improving prospects for efficiency and technological development, growing small firms offer both immediate and long-term benefits. These words by McCormick et aI, (1997) say it all. The theme of this study is growth, development and promotion of industry through small, medium and micro enterprises (SMMEs). SMMEs are cherished because of their resilience to economic setbacks, their flexibility, innovative capability and above all, their labour-intensive character. Lesotho is currently faced with a major problem of joblessness (i.e. a huge number of labour force is unemployed). The formal sector, (i.e. public sector or government, private sector and parastatals) is unable to absorb these multitudes of unemployed labour. Moreover, this sector accounts for only 44 percent of employment in the country while the rest must be absorbed in the informal sector. The industrial sector is very small if not nonexistent. Henceforth it has been recognised that SMMEs' sector can make a huge· contribution to Lesotho's economy through employment and income generation. Most importantly SMMEs' sector is regarded as a stepping-stone to the industrial sector of the country. With agricultural production steadily declining and continuing mine workers retrenchments, the informal sector becomes the employment of last resort. In addition, Lesotho being an economy that is in the mist of restructuring and privatising, entrepreneurship through SMMEs offers an alternative route to employment and growth. This study is therefore concerned mainly with small-scale manufacturing enterprises. The primary aim is to discover the income and employment generation effects ofthese entities. Other aspects to be explored include value addition potential and demand effects of SMMEs. The study has discovered that SMMEs' sector forms an important employer and income source in the country. Most entrepreneurs depend on the income earned from their enterprises as the main source of income to support more than two dependants. Monthly average income generated by most enterprises ranges from 1000 to 10000 Maluti. However there are some exceptional businesses that make more than 20000 Maluti per month. These enterprises have a potential to expand and increase their value addition and since demand for their products is high, there exists better prospects for employment and income generation. Small-scale sector was responsible for about 12 to 20 percent of industry in the country before the 1990's. Currently it accounts for 66 percent of industry. The difference proves the importance of having this sector in the economy. Employment in small-scale sector makes up to 20 percent of total labour force. Small-scale manufacturing sector (SMMEs) in Lesotho compnses the following categories: (1) Sewing and Knitting (2) Metal and Leather works (3) Woodworks (4) Handicrafts and Pottery (5) Weaving and Tapestry (6) Electronics (7) Food Processing (8) Candle and Toiletries making. Most SMMEs in the manufacturing sub-sector are in the activities of sewing and knitting followed by woodworks and leather works. Concentration of activity depends on the level of entry barriersl . Sewing and knitting is headed mostly by women entrepreneurs. There are numerous problems facing SMMEs and their performance is thus retarded. The most frequently cited problem is tinance and working capital. This is followed by the market problem though most business owners pointed out that their products are highly demanded. Lack of finance, especially loan financing makes it difficult for the enterprises to expand or grow into prominent business ventures. I EntIy barriers here maily concerns the costs of starting the particular enterprise. The Government objectives towards SMMEs sector as stated in the Sixth 5-year National Development Plan are: • To provide incentives for SMMEs development and growth • To assist them in acquisition of better management and technical skills 8 To identify growth sub-sectors of SMMEs in order to secure donors and other means offinance for them • To strengthen the capacity of support institutions which assist SMMEs in acquisition ofloans and in marketing plus capacity building through management training. However, none of these plans has ever been effectively implemented. What is lacking is devising appropriate tools that will enable government to carry out its plans. The following strategies are henceforth proposed in the study: 1. To actively support skills and management training programmes, especially because the government can secure funds in the form ofgrants or soft loans. 2. To co-ordinate with support institutions so as to establish linkages between government and these institutions and with small-scale and large-scale firms. 3. To expand the share of small-scale products in the market through publicity, market and financial support. Most importantly, government must accept tenders from SMMEs or make exclusive purchases from SMMEs. 4. To enforce a policy that lists products reserved for production by small-scale sector only. 5. To improve productivity and enhance quality through establishment of ISO 9000 quality standards. 6. To Promote specialisation in production and export-oriented SMMEs 7. To transfer technology through the media, for example, T.V programs and published materials such as newsletters and magazines. 8. To increase provision of well-serviced industrial sites, appropriate for the needs of SMMEs. .