• We have already discussed what SMEs are and why they are important to the Zimbabwean economy in a previous topic
  • You might want to check this post before proceeding.
  • In this post, we will look at some of the problems that SMEs in Zimbabwe face
  • Small and medium enterprises (SMEs) in Zimbabwe face a number of challenges, including:
  • Access to finance: SMEs in Zimbabwe often struggle to secure funding from traditional sources such as banks, due to a lack of collateral, financial history and other factors.
    • Often SMEs are informal businesses started by people who use their own savings in order to raise capital
    • They often do not have fixed immovable assets like houses that they can use as collateral to seek loans from the bank
    • A lot of SMEs also do not have banking accounts when they start even when they are profitable and successful they often find it hard to prove this when applying for loans with banks
  • Economic instability: The Zimbabwean economy has been characterized by high inflation, currency devaluation, and instability, making it difficult for SMEs to plan and grow.
    • In times of recession, SMEs tend to be the most affected due to the fact that they live hand to mouth, do not have any savings and are not prioritised by policymakers
    • Inflation and currency devaluation are demanding on all businesses but they are the hardest on SMEs because they are often run by people who are not experienced in the management
  • Lack of access to markets: Many SMEs face challenges in reaching customers and accessing markets due to poor infrastructure and limited marketing and distribution channels.
    • For example, vendors are often denied access to pavements where they can easily reach customers, this type of vending is considered illegal and yet larger businesses can set shop in the CBD as they can afford to pay the rentals
    • SMEs often have a smaller distribution channel limited to a given neighbourhood and will find it hard to reach customers in other areas
  • Corruption and red tape: Corruption and bureaucratic obstacles can make it difficult for SMEs to obtain licenses and permits, as well as comply with regulations.
    • Business laws are often made with only larger formal businesses in mind and tends to be onerous and difficult for smaller SMEs to follow or comply with
    • There is also the red tape involved with SME owners being asked to jump through hoops in order to get approvals and licences
    • Sometimes government officials take advantage of this and demand bribes from those seeking to speed up the process or even subvert the law
    • Ultimately this gives pressure to all SMEs to engage in corruption as those that don’t are now at a disadvantage
  • Skilled labour shortage: A shortage of skilled labour in Zimbabwe can make it difficult for SMEs to find and retain the talent they need to grow and compete.
    • Often SMEs lack the resources to acquire, retain and remunerate skilled labour. While it might seem like Zimbabwe is teeming with skilled workers those who are skilled often demand remuneration that is beyond what most SMEs can pay as potential employees would rather join the gig economy than become underpaid employees
    • This means that sometimes former employees with knowledge of the SME’s operations and clientele list can quickly become competitors
  • Political uncertainty: Political instability and uncertainty can create a challenging operating environment for SMEs, making it difficult for them to make long-term plans and investments.
    • Zimbabwe has seen episodes of political turmoil in the past and these turbulent times are often not good for business
  • Poor electricity and power supply: SMEs in Zimbabwe often face power cuts, leading to reduced productivity and increased operating costs.
    • While Southern Africa generally has power shortages, Zimbabwe’s problems are more acute and predate those of the whole region
    • Powercuts often last for hours with the peak recorded powercuts being 18 hours long leading to a lot of lost production hours for manufacturing SMEs
    • Some are forced to make their employees work at night when there is power and thus incur overtime
    • Others are forced to install solar at great cost or use generators which require fuel which is expensive
  • High operational costs: The cost of doing business in Zimbabwe is high, with high taxes, high costs for inputs such as raw materials, and high labour costs.
    • The issue of costs is exacerbated by the fact that the country makes use of the US dollar which is stronger in the region and leads to higher operational costs compared to other SADC countries
  • Lack of technology: Many SMEs in Zimbabwe lack access to the latest technology, which can limit their competitiveness and efficiency.
    • Often SMEs are too small to enjoy technological economies of scale
  • Limited access to training and support: SMEs in Zimbabwe often have limited access to training and support programs that can help them improve their skills and grow their businesses.
  • Competition from larger firms: SMEs in Zimbabwe face competition from larger firms, which have greater resources and can offer lower prices and better products. This can make it difficult for SMEs to compete and grow.

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