SMEs are key to fighting unemployment and enhancing economic growth

By Josef Kefas Sheehama

SMEs play a crucial role in Namibia’s economic growth and development, especially when it comes to the creation of jobs which remains a significant problem across the country.

The significance of the SME sectors in Namibia cannot be ignored as they provide livelihoods and incomes for a large population of the country, most of whom are self-employed of which more than half are women. The SME sector is the means of survival for many fellow Namibians. The unemployment situation in Namibia has deteriorated markedly over the years. It should be noted that this very high figure of unemployment probably includes a large part of underemployment in rural areas. Small businesses and self-employed workers are crucial to the growth and development of economies if adequately supported, SMEs can effectively contribute to the structural transformation of economies and drive inclusive, sustained, and equitable economic growth and jobs. SMEs have the potential to transform the economies and the country as a dynamic force in the international arena.

Furthermore, if policymakers can draft very good policies, this will help businessmen and businesswomen to ensure that their business flows without challenges. As we are aware 60% to 70% of women are involved in business and the cross-strait area. And therefore, if the laws are well-drafted and could favor women, women could do their business very well. The private sector plays a critical role in the development of Namibia, and hence strategy ensures businesses across the country have access to tools and partnerships, they will be able to play a key area in creating a resilient environment in the future.

Research carried out by economists revealed that SMEs provide some form of employment and income to 160,000 people, representing approximately one-third of the nation’s workforce. In terms of full-time employment, this sector currently employs about 60,000 people. In Namibia, the majority of SMEs are mainly found in the retailing sector selling foodstuffs and household products with no real value-addition activities in most cases. Therefore, the contribution, which small businesses can make to the national economy and wealth creation needs to be recognized by the government from the beginning and be considered as part and parcel of the economic development process. The need for a simplified business registration process that can lead to an increase in the number of businesses registered in Namibia cannot be over-emphasized.

Furthermore, across all regions, SMEs do more than create employment. They are also engines of economic growth and social development. The SMEs contribute more than 12% of GDP, and some global estimates put this figure as high as 70%. This contribution varies across sectors and is particularly high in the service industry, where SMEs account for 60%. SMEs are a vital lifeline in a country, as they represent the grassroots that keep the local economy going by encouraging growth, employment, and income. SMEs are a vital engine in the Namibian economy. They drive growth, create employment, and spearhead innovation. They can leverage their agility to design and incubate new technologies and business models to build a better future. The SMEs have the potential to become large corporations and need to continue on their path to growth and prosperity. It is imperative therefore that efforts to protect SMEs move with speed and decisiveness not only to cushion the worst of the impacts of the crisis on livelihoods but to help ensure a swifter recovery for the broader economy.

Moreover, it is, therefore, necessary to devise a coordinated plan to mitigate the impact of the pandemic and geopolitics on SMEs. Namibia has responded accordingly, as was the case in many other countries around the world. The stakeholders continue to support the expansion of the SMEs sector and to boost economic growth through numerous approaches, such as the deferred payments program and the funding for a lending program. The Bank of Namibia and the Ministry of Finance and Public Enterprises have re-launched the SME Economic Recovery Loan Scheme on 02 February 2023 with a share capital of N$ 500 million. The first scheme was launched in November 2020 but failed due to stringent qualifying criteria and the lack of well-represented information across the fourteen regions.

The re-launched SME Economic Recovery Loan Scheme revamp of earlier loan schemes and is designed to provide small and medium-sized businesses access to government-guaranteed loans to help their businesses recover from the impact of COVID-19 amongst other things. We should understand that the lockdown has reduced economic activity significantly. Supply chain disruption has caused SMEs to face a longer cash conversion cycle. SMEs also need to continue paying recurrent costs for their business continuity, such as office rental costs and salaries to their employees. As a result, SMEs are incurring losses and delaying debt payments. Some of SMEs shut down their doors and unemployment increased. The SMEs’ immediate financial needs have been sharply increasing to minimize the negative impacts of business disruptions and retain employment as well as take precautionary measures for the uncertainty.

As an Independent Economic and Business Researcher, I want to take a moment and thank the Bank of Namibia and the Ministry of Finance and Public Enterprises for a great job by re-launched the SME Economic Recovery Loan Scheme. Furthermore, to access the loan scheme, SMEs can apply through their banks. The purpose of the scheme is to enable banks abilities to provide cheaper credit to SMEs so they can recover, restore, and invest in the future. The banks will be facilitated a loan amount from N$50,000.00 and N$10,000,000.00, based on the SME’s balance sheet and subject to the banking Institution’s credit assessment, according to Bank of Namibia.

Promoting digital and innovation will help build a resilient digital infrastructure supported by inclusive regulatory frameworks, which can create conditions to better serve vulnerable and underserved groups. At the same time, it is important to address and mitigate the potential risks arising from digital technologies and innovation. This is crucial to help smaller businesses overcome the challenges and to support a sustainable and inclusive economic recovery, which provides new employment opportunities.

To this end, it is clear that SMEs are the lifeblood of the country, and thus so is funding for them. Partnerships between SMEs and supportive lenders can help grow this crucial sector of the economy and aid Namibia’s economic growth. Therefore, we need a more professional and entrepreneurial ecosystem that will help alleviate unemployment and economic growth – and SMEs may be the answer.