Before its independence in 1980, Zimbabwe was ruled by the British Colonial Government. The main features of the colonial system were a clear separation of power, wealth and status between the whites and the blacks. This demarcation was evident in every sphere of life. The colonial government perpetuated the economic status of black people at a level below that of white people in the then Rhodesia. The sharp contrast in entrepreneurship development between white and black people were caused by the colonial policies that were biased towards the whites.
The colonial policies favoured the white minority population and did not consider the development of the black people. Strict laws and regulations such as the Town and Country Planning Act of 1946, the Vagrancy Act of 1960, the Urban and Council Act of 1973 and the Vendors and Hawkers by-laws of 1973 restricted growth of the SMEs before independence (Dhemba, 1999). In all these historical developments the blacks were not considered as equal partners in the development of the economy, infect their participation was restricted to provision of manual labour and this promoted the colonial agenda. It is against this backdrop that the post independent Zimbabwe embarked on black empowerment policies aimed at addressing racial, economic and social imbalances hence the crafting of the Zimbabwe Industrial Development Policy (IDP) (2012 -2016) and the Indigenisation and Empowerment Policy (IEP) (2008) became the benchmarks of black empowerment through SME development.
Government Policies Support SMEs
Nurul (2016) advocates that Government policy constitutes the blueprint that emphasizes the government plan and initiative to their course of action and the effective government policy therefore, would facilitates the access towards tangible and intangible economic open innovation. The government therefore has the power to craft policies that support the performance of SMEs. Mac an Bhaird (2010) adds that the realization of the significant economic contribution of SMEs has resulted in increased attention to the sector from policy makers, as well as academics. Policy-makers appreciating the benefits associated with more internationalizing SMEs support initiatives that reduce barriers to SME development (OECD, 1998; Bridge et al., 2003; DTI, 2004). The Asian Development Bank (2016) acknowledges that Government policy and the government itself exert a strong influence on the innovation capacity of SMEs and the government has a critical role to play in every sphere of innovation including access to finance and technology, capacity building and human resources, market linkages, availability of research facilities, and access to key information, among others, via different policies and schemes.
The government support policies for SMEs vary from country to country and from advanced nations to developing countries due mainly to the level of industrialization, cultural context (Eniola & Entebang, 2015; Quy, 2016). Governments of most countries, especially developing nations have invested so many efforts and resources in establishing policies geared toward improving and SMEs (Oni & Daniya, 2012; Quy, 2016; Shariff et al., 2010). Cases in point are Brazil, China, Malaysia, Nigeria, and Saudi Arabia (World Bank, 2014). Eniola & Entebang (2015) found government support policy as having a significant impact on the competitiveness of SMEs. Equally, Hadiyati (2015) suggested government support policy on SMEs for efficient performance, and (Shariff et al, 2010) confirmed government policy as having an important role as a full moderator on SMEs performance.
The creations of Government policies for SMEs vary from advanced economies to developing countries and from country to country attributed to variations in social and custom values, the extent amount industry and business settings (Naudé, Szirmai, & Goedhuys, 2011). Sathe (2006) in particular argues that Government regulations and their bureaucratic procedures can hinder as well as facilitate entrepreneurship activity such as new business origination. The Government can occur up with policies that can boost and support the growth of novel technologies, products, and solutions and on the other hand, Government can likewise seem to hinder SME firm performance when it introduces policy which can restrict the autonomy, as well as the entrepreneurial freedom of some variety (Eniola: 2015). The Zimbabwean government in coming up with an indigenisation policies, had the empowerment of the blacks through promotion of the SME performance as the main agenda hence this study seeks to establish the extent to which this broad objective was achieved.
The Indigenisation Policy – the tool to empower the disadvantaged people
The indigenisation policy has been adopted worldwide as a process of correcting the political, economic and social imbalances that have been caused by the colonial settlers. McNeil and Shauneen (2014) state that indigenisation acknowledges that the oppression through colonial domination and subordination prevailed for some time and should be eradicated through positive transformation. Columbia Centre on Sustainable International Investment (2014) states that, motivated by the increase in local content from 49% to 63% between 2009 and 2010, Indonesia modified its legislation from an initial target of 35% to higher rates. For example, the offshore oil and gas drilling, local content targets have been raised from 35% to 45% and for land drilling to 70%, to be implemented in 2016. Companies offering shipping services have seen an increase in the sourcing of their components from 35% to 75% (Global Business Guide Indonesia (2014). Esteves et al. (2013) states that in its 2014 Law on Hydrocarbon, Mexico has fixed a domestic content target of 25% for 2015, to be gradually increased to 35% by 2025 for shallow water projects. CCSI (2014; 2015; 2016) confirm that in Bolivia, the National Constitution guarantees preference in acquisition of materials from micro and small enterprises and productive community organisations. In this view the principle of indigenisation has been successfully implemented by the cited nations hence the adoption of the indigenisation and empowerment policy by Zimbabwe was a noble idea to empower its local people. The Black Economic Empowerment (BEE) provides a successful example where the indigenous policies were used to empower the black people.
The Black Economic Empowerment (BEE) of South Africa
The South African version of indigenization, Black Economic Empowerment (BEE), in the 1990s and 2000s provides a broad and successful literature of indigenisation (Southall, 2007). DTI (2011a) describes the Broad-Based Black Economic Empowerment (B-BBEE) Programme as “the economic empowerment of all black people including women, workers, [the] youth, people with disabilities and people living in rural areas through diverse but integrated socio-economic strategies”. The main aims of the B-BBEE according to DTI (2011a) are as follows:
- Increasing the rate of black men and women-own businesses and increasing the number of the black population in the management structure of existing and new initiatives as well as increased access to financial and human resources;
- Promoting investment programs with the aim of achieving broad-based and impactful participation of the black population in the South African economy the purpose of which is ensuring sustainable development and wealth creation for the populace;
- Empowering rural and local communities by empowering access to economic activities, land, infrastructure, business ownership and skills development; and
- Promoting financial access for the economic empowerment the black population.
This was in an effort to alleviate any imbalances of the poor masses that have been kept from any economic uplifting and engagement (South Africa, 2004). All these B -BBEE aims were established under the umbrella of indigenisation.
Small and medium-sized entities (SMEs) are the key drivers of the economy and the sustainable development of every nation, (Moore et al., 2008). The development of SMEs is a basic requirement for the sustainable development of developing economies (Mudavanhu et al., 2011). According to Storey and Westhead (1994), SMEs are considered as the seed-bed for the development of large companies and are the life blood of commerce and industry at large. SMEs have been identified as sources of innovation and business evolution (Wynarczyk et al., 1993). It is against this backdrop of the significance of the SMEs in the economy of the nations that Zimbabwe has placed great emphasis on the SMEs. The policy environment which is set by the government has a great influence on the performance of the SMEs.
Zimbabwe’s policy environment does not support the growth and development of SMEs in order to achieve high performance. The government does not have any programmes in place to support the SMEs. There are no capacity building programmes, monitoring and evaluation programmes, research and development and financial assistance given to SMEs. These sentiments were echoed by Majoni etl (2016) who state that:
Zimbabwe’s policies are less supportive resulting in higher failure rate of SMEs. SMEs lack the access to business finance, skills and technology shortage, inadequacy or improper infrastructure, lack of managerial skills and SME failure is high in Zimbabwe because of poor training and monitoring of the sector by Government. The registration process for one to be considered an official SME in Zimbabwe is hectic and the requirements are difficult to meet.
In this regard, Zindiye et al (2008) further laments that there is urgent need to address the challenges faced by SMEs and an effective implementation of effective measures will result in an increased performance of SMEs which will lead to the achievement of both economic and social objectives of SMEs. If such a policy environment is not addressed, SMEs will not realise their goals hence the need to come up with a more focused strategy to turn around the economy of Zimbabwe.
Globally, Small to medium enterprises are rated highly for their pivotal role in advancing the economic growth and equal access to the resources within the SMEs (Munyanyiwa, 2009). Researchers have highlighted that in the USA and EU countries it is estimated that SMEs contribute 40-60 percent to Gross Domestic Product and 30 to 60 percent in exports. It is also noted that Asian Tigers such as India, Indonesia, China, Malaysia, Japan and South Korea also have high performing SME sectors contributing between 70 to 90 percent in employment and an estimated of over 40 percent contribution in their respective GDPs (SBC, 2015).
In Africa the economic power houses which includes South Africa, Egypt, Nigeria and Kenya, the SME sector is estimated to contribute over 70 percent in employment, and 30 to 40 percent contribution to GDP (Munyanyiwa, 2009). The statistics indicate that the role of SMEs in the economy of any nation as a key driver of the economy is of great importance. In the Zimbabwean situation the empirical evidence according to Mbendi (2003) indicates that SMEs in Zimbabwe contribute less that 5 percent to GDP. Despite the great contributions of the SMEs to employment creation and GDP in other nations, the situation in Zimbabwe shows that the SMEs are facing huge challenges in terms of performance.
The Zimbabwe Industrial Development Policy (IDP) (2012 -2016) and the Indigenisation and Empowerment Policy (IEP) were enacted in order to improve the economy of the country by supporting the SME sector. This led to an increase of SME population which is non-productive as elaborated by Majoni et al., (2016) that SMEs in Zimbabwe comprise approximately 94% of the business population but contribute only 50% of the country’s gross domestic product.
The economy of Zimbabwe has drastically deteriorated and Zimbabwe is a country with a failed environment for the establishment of SMEs. No studies have been recorded to unpack the challenges being faced by SMEs which are the prime target of the government to turn around the economy through the indigenous policies as a tool for the black empowerment. Therefore, this study aims to evaluate the extent to which the Zimbabwean indigenous policies have empowered the local people to improve the economy of the country.
The Objectives of this paper are to determine the extent at which the Zimbabwean indigenous policies supported the local people to participate in the growth and development of the economy and how the indigenous policies impacted the performance of SMEs. The primary research question in this study is stated as follows: Have the government policies and resources improved the performance of SMEs in Zimbabwe?
Zimbabwe Indigenous Policies
Evolvement of SMEs in Zimbabwe since 1980
It can be argued that Small and Medium Enterprises (SMEs) in Zimbabwe have evolved through three phases from the time it attained its independence in 1980 to date. The first period is between 1980 and 1990, during this period the policy environment on which SME sector was operating was highly restrictive. During this period Majoni et al, (2016) states that the government made some effort to address some of the institutional concerns through the establishment of the Small Enterprise Development Corporation (SEDCO), Venture Capital Company of Zimbabwe (VCCZ) and the Credit Guarantee Company of Zimbabwe (CGCZ). During this era the SMEs were overshadowed by the large scale manufacturing industries that were the backbone of the manufacturing sector. The multinational companies like the Anglo American, Lever Brothers and American Motor Industry were set up by the British colonisers and dominated the industrial sector.
The second phase is characterised by the advent of the Economic Structural Adjustment Programme (ESAP) in 1991 which mainly focused on employment creation. When government launched the Economic Structural Adjustment Programme (ESAP) in 1991 it introduced policies that were meant to attract investment in the country. In this regard the SMEs were an integral part of ESAP and were earmarked to contribute to the creation of employment. The major policy statement of ESAP was to improve the status of SMEs as it clearly mentions that the informal and the small to medium scale formal business sectors of the economy together have the potential to make a major contribution to wealth and to employment creation (GOZ, A Framework for Economic Reform 1991-1995) This drive proposes the positive intention of the government to push forward the agenda of the SMEs but not much was achieved. This was caused by the fact the government focused more on the existing industries which had over a century of existence and had long developed a culture, strategy and vision which could not be easily changed over a short period of time.
The third and final phase of the SMEs which was born out of the Indigenisation policies shifted all the economic focus to the SMEs which were seen as the vehicle of black empowerment. Gukurume (2018) states that these policies were anti-investor economic policies as they led to the closure and downsizing of the manufacturing sector which was followed by a decade-long economic crisis (1999–2008). This view was echoed by Manyati (2015) who state that the indigenisation policies led to unprecedented growth of SMEs. It is important to note that at this point the SMEs were now considered as a major industrial institution that would replace the multi-national companies that had since relocated to the neighboring countries.
Zimbabwe Indigenisation Policies
The Zimbabwe Industrial Development Policy (IDP)
The Zimbabwe Industrial Development Policy (IDP) (2012 -2016) was enacted in order to improve the economy of the country by supporting the SME sector. The IDP is the government’s blue print of what the government intends to implement in order to develop the SMEs. The Zimbabwe Industrial Development Policy (IDP) (2012 -2016) states the following key strategies for the development of SMEs:
- The Government will priorities the promotion and support to Small Micro Medium Enterprise (SMEs) which are viewed as an important engine for employment creation and economic growth. Given the sector’s high labour to capital ratio there will be need to use the sector as strategy for quick turnaround of the economy at a relatively cheaper cost than that of conventional larger industries.
- The Government intends to develop and strengthen existing parastatals like the Small Enterprises Development Corporation (SEDCO) to be able to offer more support to SMES.
- Other strategies to be adopted by Government during this period include Infrastructural support; Technology upgrades; Quality Control and Improvement; Research and development, Market access and Financing facilities.
- Cluster development including the provision of capacity building for skills training of employees and setting up of common facilities e.g. testing laboratories, common use machinery e.g. lathes, grinders and industrial saws
These policies were deliberately enacted in order to empower the SMEs. The Zimbabwe’s new economic era was now targeting the black entrepreneurs to drive the economy. It implies that a lot was expected from the SMEs in terms of job creation, production of goods and services and improving the economy of the country.
The Indigenisation and Empowerment Policy (IEP) of Zimbabwe
The IEP of Zimbabwe was enacted into law in order to empower the Zimbabweans to control the economy of the country. The Indigenisation and Economic Empowerment Act (IEEA) Chapter14:33, Act 14/2007 provides the blueprint of the indigenisation process of the Zimbabwean natives. The aims of the IEP are as follows:
- At least fifty-one per centum of the shares of every public company and any other business shall be owned by indigenous Zimbabweans;
- promote equitable access to the wealth of the economy by indigenous Zimbabweans through establishment of SMEs;
- To nurture and develop a skills base for the economic empowerment of indigenous Zimbabweans;
- Promote the use of local raw materials and value addition in economic activities;
- To provide financial assistance to indigenous Zimbabweans for any of the following purposes—finance for business start-ups, rehabilitation and expansion
The concept of empowerment which was adopted by both Zimbabwe and South Africa is based on the idea that resources and opportunities should be deliberately made available to the local people so that they can participate in the growth and development of the economy. There are a lot of similarities between B-BBEE and IEP which are essential to this study. Both policies focus on economic empowerment of black people, increased access to financial and human resources, access to economic activities, land, infrastructure, business ownership and skills development of indigenisation people whose past has been disadvantaged by the colonial settlers. The indigenisation policies of the two countries mainly focus on economic empowerment hence Zimbabwe can draw a lot of lessons from the B-BBEE programme.
The same principle that was applied by the policy makers in other African states to come up with the indigenisation policy was adopted by Zimbabwe when the IEP was made into law on March 7, 2008. The policy carries the same mandate and objective as those carried by the indigenisation processes of Columbia Indonesia, Bolivia. Canada, USA, India, South Africa, Russia and China as examples. However, the differences are in the periods of implementation, the timing of the programme and the performance of SMEs hence this research will investigate how such a noble cause of helping the local people who have been disadvantaged to participate in the building of their economy through SMEs can be harnessed into a productive development in Zimbabwe.