Please forgive me for further delaying our conversation into the imperatives of the Law of MSMEs Success Foundations-LMSF! The news that the ministry responsible for SMEs in Zambia plans to take a bill that shall concentrate on SMEs is too important not to be commented upon at this juncture!
When the UPND Alliance government took office, it was refreshing to welcome a whole ministry dedicated to taking care of all things SMEs! That was a proper “kwenyu” at least in concept! I have just noted, by the way, that the “micro” business component is missing from the current ministerial name.
Perhaps that is excusable on the assumption that the principles and needs applicable to SMEs can in reverse be vertically integrated.
Still, for a start, I recommend that the new name of the Ministry must include the micro component of business. If that is acceptable the full name of the ministry would then be Ministry of Micro, Small and Medium Enterprises-MMSMEs.
I am excited about the news of a whole piece of legislation dedicated to all things MSMEs that consequently, I propose some things for the Ministry to consider as they draft the new MSMEs bill. Of course, it may be that most of what I am proposing through this article is already in the mind and plans of the department of SMEs at the Ministry.
Apart from the small name change proposal above, I now proceed to explain my proposals for the new law on MSMEs.
In the first place, I am of the view that Citizen owned MSMEs must enjoy a legal right of first refusal for specified goods and services from all local and central government ministries, spending agencies, authorities and parastatals. Where there is proven trade cash flow related delinquency relating to any statutory body and the contract tendered for could help the MSME resolve the matter, the said MSME must not be denied a chance for lack of compliance in a non-technical or core requirement area.
To clarify the point being made, let us take an example of an MSME that missed to obtain a Tax Clearance Certificate-TCC on time and yet the same MSME is evaluated compliant technically, and the tender if awarded could assist the MSME, the governmental body in charge must not disqualify the MSME on purely statutory compliance failure alone.
Secondly, those of you who may have read my first article in this all things MSMEs series, may remember the problem of delayed payments from large corporates or public sector MSME customers and its negative effect on business growth I referred to. It is my considered view that the forthcoming MSMEs law must have sanctions against crippling delays by large and/or public sector entities in favour of MSMEs. That would put pressure on large corporates/public sector players to pay on time and assist the MSMEs to operate smoothly thereby increasing the chances of their reduced time of graduating from Local Direct Investments-LDIs to “Zambian exported” Foreign Direct Investments-FDIs!
Thirdly, it is gratifying to learn that a policy decision has been taken by the Citizens Economic Empowerment Commission as pronounced by Minister Mubanga to the effect that all target beneficiary SMEs are to be capacity built first before they are financially empowered with “money capital”. That is commendable as it speaks to sustainability and enhanced chances of supported SMEs chance of success! I wonder if there is a way of legalising that requirement? If there is a way, the drafters of the law would be legally supporting sustainability and enhanced success rates in the MSME growth so desperately needed in-country!
Fourthly, I also wish to add my “one pence” to the “broken record” story of the generational need for Flexible (structured) and affordable debt capital in the country we call our Motherland, Zambia. As for equity, Zambia is over-ripe for angel investors and private equity sources for the viable but risky projects all over the country in virtually all the sectors.
In the fifth place, I wish to also address the high compliance cost of doing business in Zambia. Any visit to any compliant business premises will show you at least 7 certifications if displayed and conservatively speaking e.g. (1) PACRA, (2) NAPSA, (3) NHIMA, (4) Workers Comp, (5) Licensing from Sector specific bodies like ZICA/ZAMRA or ZIEA, (6) Council Trading/Wholesale License, (7) Fire Certificate, (8) Occupancy certificate, etc., etc.!
Apart from the statutories, certain businesses can only have a fair chance of success if they are in the right location and yet those locations are essentially no-go areas on account of very high rentals! Just those two factors alone before any direct expenses related to the actual business model cannot allow space for growth by Citizen MSMEs.
Sixthly, outside the box structured, as in adaptable MSMEs support solutions need to be provided for. For example, allowing cautious discretion by the CEEC Management so that they provide customisable support to MSMEs. In this case I have in mind the government offering for office space in government well located buildings rent-free for one year two years etc to allow incubation and increase chances of success by MSMEs. This idea is closely related to the existential industrial yards’ program by government.
Fiscal support to MSMEs would also come from graduated income tax bands for MSMEs, PAYE-style by ZRA!
I have noted that in South Africa, for example, one can incorporate with single shareholding unlike the law out here in Zambia. It is my submission that together with the inclusion of the Micro component in the ministerial name, Zambians should like the Minister of Finance be allowed the privilege of Sole Corporation!
In any case even though the requirement is a minimum of two shareholders in Zambia, a 99% to 1% split shareholding between shareholder A and B respectively is in practice a single 100% shareholding in favour of A If A holds 99% effectively! To allow MSMEs incorporate with a single shareholder having 100% of the shares will more practically mirror the reality in the MSMEs corporate sector of Zambia!
That is my initial sevenfold proposals for consideration by the SMEs Ministry of the Government of the Republic of Zambia-GRZ as I believe the above and other measures would definitely benefit Zambian MSMEs and assist their growth and graduation into the Trade Kings/SAVENDA league of Zambia!
Napita mukwai!
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The Author is Victor PM Nyasulu T/A VICTOR NYASULU Consultants-VNC and is also a
Partner @NS-CGMA. +260955746997 or vpmn69@gmail.com
