The dichotomy within the institutional Framework of SMME

The dichotomy within the institutional Framework of SMME development in Botswana 23 October 2008

SMEs make up 95% of all companies in Botswana Annual turnover Employment > P 5 m > 100 Medium 1. 5 m-5 m 25 – 100 Small 60 k-1. 5 m 6 – 25 Micro < 60 k <6 Large 2

SMEs contribute 42% to total GDP. 5 % (Large 58% (Large Enterprises) Enterprise) 42% (SMMEs) 95% SMMEs Firms 3 Contribution to GDP

Institutional Framework SME Development • Local Enterprise Authority (LEA) • Citizen Entrepreneurial Development Agency (CEDA) • Rural Industries Promotions Company (RIPCO) Cross Cutting Mandate • Botswana National Productivity Centre (BNPC) • Botswana Bureau of Standards (BOBS) • National Development Bank (NDB) • Botswana Technology Centre (BOTEC) • Botswana Tourism Board (BTB) Dr. Gordon Murray: University of Exeter Large Enterprises Development • Botswana Development Corporation (BDC) • International Financial Services Centre (IFSC) • Botswana Export Development and Investment Authority (BEDIA)

Current SMME Participatory map Botswana Policy Formulation & legislation Implementing policy Finance Credit Accreditations Standards Training Technology Investment Support Infrastructure (space provision) Beneficiary Ministry of Trade and Industry Ministry of Finance and Development Planning Ministry of Agriculture Ministry of Labour and Home Affairs Ministry of Communications Science and technology Ministry of Local Government Ministry of Education CEDA, LEA, BECI, NDB, BDC, BEDIA, BNYC, BOBS, BNPC, BOTEC, NFRTC, RIPCO (B), UNIVERSITY, JAB, BOTA Venture Capital, The Business Clinic WFHB Consultants BIDPA District and town councils SMME Enterprise Botswana Advocacy BOCCIM SEPROT

Local Enterprise Authority • LEA was established in 2004 with the following broad functions; • provide business development services e. g. screening, business planning facilitation, training and mentoring. • identify business opportunities for existing & future SMMEs • promote domestic and international linkages, especially between SMMEs and Government, large business entities and other SMMEs • Encourage exploitation of government & large firm procurement opportunities • facilitate access to finance, standards via competitive improvement programs e. t. c, infrastructure, and changes in regulations • facilitate technology adoption & diffusion • promote general entrepreneurship and SMME awareness. ”

Deliverables of LEA foster citizen entrepreneurship and empowerment, achieve economic diversification, promote exports, encourage the development of a competitive and sustainable SMME community, • create sustainable employment opportunities, • promote the development of vertical integration and horizontal linkages between SMMEs and the primary industries in agriculture, mining and tourism and • improve efficiency in the delivery of services to businesses. • •

Deliverables • • • The deliverables of LEA are broad, cross cutting and demand a wide implementation span. Based on a comparison between the expected deliverables and the functions there is a disequilibrium in the continuum of implementation for the achievement of results. The challenge therefore is, “how do we structure the institutional framework within Botswana to bring equilibrium and also ensure effective implementation of SMME development strategies? ”. LEA is charged with the overall development of the SMME sector in Botswana and it is housed in the Ministry of Trade and Industry. In the implementation of its mandate it is expected to collaborate with other key players as shown in the participatory map of SMME in Botswana. These key players are located in different Ministries guided by their own statutory obligations and mandates.

Current Challenges • While this may appear an acceptable institutional scenario, this poses considerable challenges, these being; 1. 2. 3. 4. Lack of coherence in implementing SMME specific interventions. Inability to prioritise targets and strategic focus Inefficient and ineffective service delivery lack of a national coordinating mechanism in the development of the SMME sector. 5. Weak institutional relations and synergies resulting in silo effect. 6. Narrow policy framework

A comprehensive & integrated approach is required Finance Product Devt/ Technology Training BOTA/UB/LEA CEDA/NDB/LEA Marketing RIPCO/BOTEC/LEA Advocacy BOCCIM/BEMA/LEA 10 BTB/BEDIA/LEA

Chile SMME Participatory Map

Chile Experience • • • In Chile the SMME Agenda is coordinated by the Chile Economic Development Agency (CORFO. ) It is responsible for policy advice, coordination and implementation. CORFO develops and implements SMME development strategies and coordinates activities of institutions who play a role in SMME development in Chile. CORFO also serves as a good source of important information and the main data point for SMMEs. This well coordinated and focused delivery framework and strategy has resulted in Chile achieving a high rating in terms of entrepreneurship and SMME development.

Thailand SME Participatory Map

Thailand other Countries experience • • • In Thailand the Office of Small and Medium Enterprises Promotion (OSMEP) is responsible policy development, coordination and the development of strategies for SMME promotion and development. While not an implementing agency it coordinates all the SMME implementing agencies. The Small Business Administration in the US plays an implementing, coordinating and advocacy role.

LEA suggested SMME Participatory map for Botswana Policy Formulation & legislation Implementing policy Finance Credit Accreditations Standards Training Technology Investment Support Infrastructure (space provision) Beneficiary Ministry of Trade and Industry Ministry of Finance and Development training Ministry of Agriculture Ministry of Labour and Home Affairs Ministry of Communication Science and technology Ministry of Local Government LEA (Implement, Coordinate and Ensure Delivery of SMME Development) CEDA, BECI, NDB, BDC, BEDIA, BNYC, BOBS, BNPC, BOTEC, NFRTC, RIPCO (B), UNIVERSITY, JAB, BOTA Venture Capital, The Business Clinic WFHB Consul tants BIDPA District and town councils SMME Enterprise Botswana Advocacy BOCCIM BMO & Associations SEPROT

Way forward • • • Our experience on SMME development in Botswana is that a lack of well coordinated SMME development agenda makes it very difficult to efficiently and effectively serve the SMMEs. Countries that have a well coordinated SMME development Framework like Chile, Thailand, Taiwan, Netherlands and South Korea consistently achieve higher TEA and FEA in the Global Entrepreneurship Monitor (GEM) reports. We believe that SMMEs can be assisted more effectively through a one-stop-authority, of a similar nature to OSMEP in Thailand CORFO in Chile. This Authority should be responsible for SMME development strategies, implementation and coordination of all SMME development activities in the Country. A streamlined and well coordinated framework will make it easier to Monitor and evaluate performance and effectiveness of all institutions and programmes. We are currently proposing changes of similar nature to our SMME participatory map. This will also make it easier to mainstream entrepreneurship and SMME issues within the government policies.

Thank You