Unlocking informal small-to-medium enterprises’ potential in an African economy. a case study of the manufacturing sector in Zimbabwe.

Abstract

Entrepreneurship in Small to Medium Enterprises (SMEs) which include informal and micro business globally remains innovative and perform to the extent where the economies of countries resolve around the employment and income that the above sector provides. The study aimed to formulate a suitable and innovative business model for unlocking the potential of the informal manufacturing SMEs in Zimbabwe, Africa against a background of the various challenges faced by the informal manufacturing SMEs and a shrinking formal economy. It extends the literature on the theoretical and conceptual frameworks of informality in an African context with specific reference to Zimbabwe, a developing country. The study adopted a mixed-method research design since usage of both qualitative and quantitative methods research enriches the strength of one method while complementing the weaknesses of the other. The study population entailed informal manufacturing SMEs in food, bakery and confectionery processing, toiletry making, textile and garment making, leather and rubber production, engineering and metal fabrication, timber and furniture making and representatives from the various informal business associations. A total of one thousand (1000) questionnaires were administered to respondents in the informal manufacturing SMEs in the five (5) cities of Harare, Bulawayo, Gweru, Masvingo and Mutare in Zimbabwe, and 832 questionnaires were returned indicating an 83.2% response rate. Proportionate stratified random sampling was used for the quantitative research to ensure that at least one observation was picked from each stratum. For qualitative research purposive random sampling was used to ensure that there was a fair representation of all the informal manufacturing SMEs in this study. Five (5) focus group interviews were also done in the above cities. Quantitative data was analysed using SPSS 22.0 while qualitative data was analysed using Microsoft Word and Excel. The results revealed that there are more male entrepreneurs (56.15%) than female (48.85%) involved in the informal manufacturing SMEs sector in Zimbabwe. Most of the participants have at least achieved a diploma (41.7%) and had an average revenue of between US$10 001-US$30 000 per annum and employed an average of between 1-20 employees and are involved in the food, bakery and confectionery processing (25.2%) industries. The findings also indicated that there is a statistically significant agreement that accessibility to finance is the greatest challenge (M=4.2568); that there is significant disagreement that government-initiated programmes have been effective in informal manufacturing SMEs development (M=2.9357). Recommendations include that government through the relevant Ministry/Departments should consider the establishment of an SME Development Bank; that institutional legal and regulatory frameworks reforms need to be done, and the government should consider the formation of business and inter-firm linkages. In conclusion, the study was driven by the desire to formalise the informal manufacturing sector and have it under the ambit of the formal economy and formal banking institutions.