Cash crisis threatens SMEs

THE current cash crisis, high rental costs, and lack of funding are threatening the survival of small to medium enterprises (SMEs) in the country.

By Fidelity Mhlanga

The cash crisis and steep overheads are dragging down SMEs, making it difficult to stay afloat.

The cash crisis and steep overheads are dragging down SMEs, making it difficult to stay afloat.

SME operaters who spoke to businessdigest feel the cash crisis and overheads are dragging down their businesses, making it difficult to stay afloat.

Overhead expenses include accounting fees, advertising, insurance, interest, legal fees, labour burden, rent, repairs, supplies, taxes, telephone bills, travel expenditures, and utilities.

Phillip Zengeya, a marketing executive of Moushtex Steel which operates in Harare’s Willowvale complex said they are failing to meet their targets because money is stuck in the bank.

“Where we buy steel and metal they need cash,” he said.

Zengeya said his company has embraced the use of plastic money, a development that has increased sales by 50%.
The company specialises in producing fireplaces, garage doors and has two branches in Harare.

Zengeya said the company was facing financing problems as banks are not lending.

He said if all goes to plan, the company will expand to Marondera, Bulawayo, and Gweru next year.

Asked about the coming of bond notes, he said, “It’s better for the bond notes to come so that we increase our sales, maybe our business will grow”.

Also affected by the cash crisis is Jacqui Gowe, director of Maungwe Honey.

“We will have problems that to get money in the bank is now controlled such that you have to apply to get cash so that we cater for materials we need,” Gowe said.

She said her company needs funding to expand business through building a big honey processing plant in Harare.

“I have never accessed any loan from the bank. I fund everything from my pocket,” she said.

Gowe said she has already managed to export six tonnes of honey to Japan, adding that she had applied for funding to be European Union-listed so as to export to that market.

Problems are dogging SMEs despite government commitment in the 2016 budget to pay close attention to this sector with a view to resolving the perennial challenges such as financing, infrastructure, technology, management and entrepreneurial skills as well as marketing.

Despite government saying the Zimbabwe Stock Exchange has also developed a regulatory framework and other supporting structures to embrace the SME market which was supposed to be finalised in the first half of 2016, nothing has materialised yet.

If this is to see the light of day, it would probably help them raise affordable capital by issuing more shares to investors to purchase.

Despite being plagued by a myriad of problems, SMEs, according to the 2016 budget statement, play a key role in the economy, employing about 60% of the country’s workforce and contributing about 50% of the country’s Gross Domestic Product.

Enock Manhuna, who runs his informal business under Manhuna Furnitures, said he prefers to operate informally as he cannot meet the requirements of operating formally.

“Business is down. Money is not circulating, rentals are very expensive. We are not receiving any government support either in cash or kind. The challenge for Zimra to tax us is that we can’t afford to pay tax because we have other expenses to meet. Rentals are high, sometimes we have gone for three months without paying rent. So I cannot accommodate and meet the demands of being registered ,”

Manhuna added that the cash crisis buffeting the nation is worsening the situation. “We are accepting payments via mobile money or bank transfers but the problem is money cannot be accessed in the bank. Right now we cannot keep money in the bank. I queue at the bank till I get all my money.”

Speaking at the SMEs International Expo, Vice-president Emmerson Mnangagwa urged small-to-medium enterprises to register their businesses in order to attract local and foreign investors.

He said registering businesses would also give SMEs the leverage to penetrate foreign markets.

“Most SMEs are not registered and lack accounting records of their operations, making it difficult for the would-be investors to evaluate businesses and make decisions about investing in them,” he said.

Economist John Robertson said government should ease the business licensing regime in the country for SMEs to remain in business.

“There is need for a relook on the licensing process. These make their business lose because the licences are expensive. We need to press government to make licensing affordable,” he said.

Precision Armour Doors, which specialises in steel armour doors, steel doors and gates, co-owner Delight Makotose said his dream to set up a manufacturing plant was being hampered by lack of cheap lines of credit.

Makotose, who imports semi-assembled products from South Africa for full assembling in Ruwa, said the fact that government did not specify the type of doors listed on SI 64 of 2016 was causing problems when importing steel armour doors at the border post.

Robertson added that , while SMEs face business risk on the flip side they were also grappling with political risks hampering the viability of their businesses.

“Some SMEs also face political risk to close down if they fail to contribute to political activities happening in the country,” he said.

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