SMEs Overtake Formal Market
Monday, August 13, 2007
The small and medium enterprises (SME) sector has greater potential to create much-needed jobs than the country’s large businesses given its labour intensive nature and the use of natural and local resources, according to Herbert Jauch from the Labour Resource and Research Institute (LaRRI). Windhoek, Aug 13, 2007 (New Era/All Africa Global Media via COMTEX) — The small and medium enterprises (SME) sector has greater potential to create much-needed jobs than the country’s large businesses given its labour intensive nature and the use of natural and local resources, according to Herbert Jauch from the Labour Resource and Research Institute (LaRRI).
He said the SME sector is estimated to be growing by about 16 000 jobs per year compared to 3 000 to 4 000 jobs in the larger business sector. The SME sector is estimated to provide over 100 000 full-time jobs at present, which makes it a very significant sector in terms of employment creation, he said.
More than half of the operators in the informal sector are women. Unemployment in Namibia stands at 37 percent and mainly affects women and the youths. Experts have anticipated that the impact of small and medium businesses on unemployment would even be bigger if this sector could receive the necessary financial support it largely lacks.
“Provided that the SME sector receives adequate support and/or protection, its impact on unemployment could be more significant than that derived from foreign investment in Namibia,” Jauch said.
Financial support for enterprise development is still a barrier for many women in the country. In addition, national and cultural barriers such as land rights and loans prevent women from getting direct access to resources needed for them to become active entrepreneurs.
This, coupled with complicated bureaucratic procedures for licensing, registration and other transactions, discourage the creation of new businesses.
Despite the challenges, the growth and expansion of the informal sector, according to Jauch, can be attributed to many factors such as the inability of the economy to achieve substantial growth, and jobless growth, which is a direct result of adopting capital-intensive technology over labour-intensive technology.
While national labour laws are supposed to cover all workers, the SME sector workers do not enjoy the protection of such laws due to lack of knowledge of the available rights and their highly vulnerable economic position.
Less than 10 percent of the informal economy workers are members of any labour union, although they are open to recruitment.
However, they also lack information about unions. The trend is more prevalent among women.
Countries such as Zimbabwe and Ghana have their trade unions involved in the SME sector. Unions organised both the operators and workers through associations, Jauch said. In Namibia, the idea is still at its infancy stage. Considering that operators in the SME sector do not have adequate skills due to lack of training, Jauch said most of the training provided to workers in this field is of short duration.
“This is not necessarily due to unwillingness of employers to provide more systematic training, but could also be an indication of a lack of suitable training facilities for SME workers,” he added.
Although the SME sector has relatively low salaries and does not mainly have fringe benefits, most workers in this sector are satisfied with their jobs, said Jauch.
Key challenges in this area remain improvement of salaries and benefits, and adherence to minimum conditions as set out in the Labour Act and Social Security Act.
Continue reading “SMEs Overtake Formal Market“