PIP Empowerment Factsheet 5

Micro, Small And

Medium Enterprise
(MSME) Sector
INTRODUCTION

1. The Micro Small and Medium Enterprises sector

is a key component of Zimbabwe's economy
which is estimated to constitute 70% of the
economic activity.
2. Micro Small Medium Enterprises (MSMEs) are
found in manufacturing, retail and transport,
mining, energy, transport, construction and
service sectors of the economy.

The definition of MSMEs is based on the number of

employees, asset base and the legal structure as follows:
i. For all sectors a business with less than 5
employees is considered as not relevant and
informal;
ii. Any business with more than 5 employees is
considered to be an SME;
iii. However, in Zimbabwe, an informal enterprise
is defined as one whose operations are not
registered in terms of the Company Act
(Chapter 190) and the Factory and Works Act
(Chapter 283).
iv. Therefore, small and medium enterprises are
those who are 'registered in terms of their legal
status' and 'employing anywhere between 6 to
100 workers' (MSME Policy and Strategy
Framework);
3. According to the Ministry of Finance, the sector
employs more than 60% of the country's
workforce and contributes about 50% of the
country's Gross Domestic Product (2013
National Budget Statement).
4. An estimated 70% of the MSMEs sector is micro
1
RBZ, Monetary Policy, January 2012.
and informal, leaving 30% to be small to medium
enterprises.
5. It is estimated that about 76% informal and 67%
small and medium enterprises are owned by
women.
6. In terms of representation, several associations
for instance, the Zimbabwe Cross Border Traders
Association (ZCBTA), has 6000 registered
members of which 72% are women.
7. Empowerment groups represent the sector for
example Affirmative Action Group (AAG), Small
Enterprise Development Corporation (SEDCO)
and United Indigenous Pressure Group (UIPG).
8. There are 157 registered microfinance institutions
1
in Zimbabwe .
STATUS OF ECONOMIC EMPOWERMENT
IN THE SME SECTOR
9. In terms of ownership, the MSME sector is
already indigenised with 95% of informal/micro
enterprises, 75% of small enterprises, and 65% of
medium enterprises owned by indigenous
entrepreneurs. F
E
10. Conversely, estimates reveal that 5% of the micro, B
25% of small and 35% of medium enterprises are R
owned by foreigners. U
A
11. Indigenous MSME entrepreneurs are not R
economically empowered, facing serious lack of Y
capital and industrial shelter.
2
12. The current savings and investment options are not
0
favorable to MSMEs as banks promote mobilization 1
3
 of money from the small enterprises and
redistribute it (through loans) to large entities, via
stringent lending conditions.
13. Major challenges faced by MSMEs include limited
access and cost of finance; lack of proper and
adequate infrastructure; use of old low-tech
technology; information asymmetry; lack of
marketing skills and market knowledge; inadequate
management and entrepreneurial skills and a hostile
regulatory environment.
14. According to the Reserve Bank of Zimbabwe, as at
May 2012, total loans that were extended to SMEs
by the various institutions amounted to a paltry
$164, 4 million out of total loans that stood at $2,8
billion, accounting for just above 5% of the total
2
loans.
ECONOMIC EMPOWERMENT
STRATEGIES IN THE SME SECTOR
15. Formalization of the entrepreneurs in the
informal sector.
16. Enterprise development and preferential
procurement.
17. Facilitate workspace for SMEs through Private
Public Partnerships to construct vending stalls,
sanitary facilities, factory shells.
18. Promote linkages of SMEs with established
entities and develop strong business linkages and
business development services (BDS).
19. Capacity building of SMEs through training and
development programmes.
20. Create awareness of regional and international
markets.
21. Facilitate access to technology by SMEs.
22. Promote the development of an SMEs focused
bank or fund to improve access to capital.
23. Targeting special groups including women,
youth and disabled in SME development.
24. Enacting regulations that treat MSMEs
separately from the formal sector on aspects of
IEE, especially on issues of finance,
procurement and enterprise development.
25. Creating a comprehensive national data base on
MSMEs following the carrying out of a census,
with the assistance of the Zimbabwe National
Statistics Agency (ZIMSTAT), to guide planning
for the sector's development.
26. E s t a b l i s h i n g a n M S M E E c o n o m i c
Empowerment Fund.

2
Newsday,” SMEs defy the odds”, 23 August 2012

This factsheet is one of 16 sector-specific empowerment factsheets produced by Ruzivo Trust under the Policy
Influencing Project (PIP). Ruzivo Trust extends its appreciation to stakeholders who provided input into the
compilation of the factsheets.

Ruzivo Trust, 28 Greendale Avenue, Greendale; P.O. Box MP167, Mt Pleasant, Harare, Zimbabwe
Website: www.ruzivo.co.zw Email: information@ruzivo.co.zw
Office numbers: +263 773 853 641 / +263 773 855 554