Economic Empowerment through MSME Development

Introduction
Zambia’s long-term development objective, as articulated in the National Vision 2030, is “to become a prosperous middle income country by the year 2030.” The associated goals call for policies that accelerate and sustain economic growth, and which enable the poor to participate in, and benefit from, the growth process. The theme of the Fifth National Development Plan is achieving Broad Based Wealth and Job Creation (BBWJC). This programme aims to contribute to this objective, in particular by stimulating investment, entrepreneurship and employment creation within the micro, small and medium enterprise (MSME) sector and through pro-poor business models.

The programme has a mix of interventions that focus on specific sub-groups in the MSME sector and emphasise on innovative tools and delivery approaches. It is grounded in a systemic enterprise development approach, which recognises the need for interventions at micro, medium and macro levels. The BBWJC programme aims to deliver interventions at each of these three levels, with focus particularly on the medium level in order to develop the capacity of local institutions. In the process, the programme aims for better coordination of United Nations support on private sector development in Zambia. Led by the International Labour Organisation (ILO) on behalf of the United Nations System in Zambia (including both resident and non-resident agencies), the programme consolidates and strengthens the activities of multiple United Nations agencies including United Nations Conference on Trade and Development (UNCTAD), United Nations Development Programme and the United Nations Global Compact, within the context of the United Nations Development Assistance Framework and the recommendations of the High Level Panel report on United Nations System coherence at the country level.

Situation Analysis
The Zambian economy has recorded impressive growth over recent years, but this positive development is yet to translate into broad-based wealth and employment creation. Wealth creation is limited to a minority of the population (particularly in urban areas) and income inequalities are rising. The Fifth National Development Plan (FNDP) notes that “the improved economic performance since 1999 has not significantly reduced poverty”, due to weak linkages between the capital intensive sectors which have driven growth and the rest of the economy. Neither has growth translated into a commensurate increase in jobs. Of the 6,184,000 people in the labour force, only about 700,000 are formally employed, and the remainder is either engaged in the informal economy or unemployed. These statistics reflect a pervasive lack of employment and entrepreneurial opportunities throughout the Zambian population. The apparent breadth of the definition used by the Citizens Economic Empowerment Act (2006) to describe a ‘targeted citizen’ for empowerment underlines this. The lack of opportunities for decent employment holds back human development, perpetuates inequality, exacerbates poverty, and limits the prospects for achieving the millennium development goals (MDGs). Such Decent Work deficits are highlighted in Government’s National Employment and Labour Market Policy; given prominence in the fifth national development plan, and are at the core of the Zambia Decent Work Country Programme, which includes employment as one of its four pillars.

These issues are particularly pronounced among certain sections of the population, notably women, young people and people with disabilities. These groups face particularly acute challenges in relation to technical and business management skills; market access and information; access to capital including collateral; and must often overcome barriers related to confidence and social status. Over half of women in the labour force are unpaid family workers, while 34 percent and 12 percent are self-employed and paid employees respectively. 77.7 percent of the female labour force works part-time. In contrast, 51 percent of the male labour force is self-employed and 22 percent are paid employees, and 67.4 percent works part-time. Under-employment among employed people is highest among the 15-19 age groups (88.8 percent) and female workers have higher under-employment rates than their male counterparts in all age groups.

This situation is incompatible with Zambia’s long-term development objective, as articulated in the National Vision 2030, of becoming a prosperous middle income country by the year 2030. The associated goals call for policies that accelerate and sustain economic growth, and which enable the poor to participate in, and benefit from, the growth process. The focus of the FNDP is hence on pro-poor, growth-oriented sectors that create employment and income opportunities for the poor, under the theme of “Achieving Broad Based Wealth and Job Creation”.

Private sector development initiatives by the Zambian government and its development partners are yet to fully unlock the potential of MSME as the main engine for broad-based growth and employment creation. While some ongoing programmes do have a focus on MSME, few of them use labour-intensity as eligibility criteria, and few of them deliberately aim at unlocking the full potential of women entrepreneurs as a driver of growth. To enable the poor to participate in, and benefit from, the growth process in Zambia, there must be a focus on MSME development, and within the target market to further focus on sub-groups with untapped growth potential and with high employment creation potential, and on innovative mechanisms to release creative entrepreneurial energy.

Ongoing private sector development interventions are yet to fully exploit the potential of large-scale businesses as strategic partners in the development of MSME. Business linkages between MSMEs and large companies, whether foreign or domestic, can not only provide a market for MSMEs, but also opportunities for upgrading through technology and knowledge transfer, and enhanced access to finance. In Zambia, these opportunities have not been fully exploited. The institutional framework tends to reinforce a disconnect between efforts to attract large investors and to encourage MSME development respectively. The establishment of the Zambia Development Agency (ZDA), which incorporates the functions of the former Small Enterprise Development Board as well as the Zambia Investment Centre, offers an opportunity to resolve this disconnect.

The Broad Based Wealth and Job Creation programme thus aims to address these development challenges by stimulating demand for business development services at enterprise level; developing the capacity of facilitators and providers of business development services; and developing national capacity for strengthening policy development, dialogue, coordination and implementation. In the process, the programme aims for better coordination of United Nations support on private sector development in Zambia.

Links to Development Frameworks
This programme is a direct response to Zambia’s Fifth National Development Plan, whose theme is ‘Achieving Broad Based Wealth and Job Creation’. It is a contribution to Zambia’s long-term development objective, as articulated in the National Vision 2030, of becoming a ‘prosperous middle income country by the year 2030.”

The programme relates in particular to the Employment and Labour chapter of the FNDP, and to the Private Sector Development (PSD) Reform Programme, which is described in the FNDP as the main instrument for improving the business and investment climate in Zambia during the FNDP period. Of the various Private Sector Development reform areas, the programme relates most closely to Citizens’ Empowerment, whose objective is to “unlock the growth potential of citizens through business development support and empowerment initiatives.” Further, the Fifth National Development Plan notes that the “main purpose of the Empowerment Policy and legislation is to provide a durable and sustainable foundation for achieving a significant level of citizen participation in business and the economy in general so as to contribute to the attainment of the desired sustainable and balanced economic growth.”

The programme is also in line with the Zambia Development Agency (ZDA) Act, particularly Part V (Micro and Small Businesses). The programme works closely with the ZDA as its internal structures and capacities are defined and developed, in order to maximise synergies between the ZDA’s various elements and service offers. In particular, the programme seeks to build alliances between the current ZDA’s MSE Division and the Investment Division in relation to business linkages and by supporting a structured approach to pro-poor investment promotion and facilitation.

The programme also supports the implementation of aspects of the Citizens’ Economic Empowerment (CEE) Act (2006). It works closely with the CEE Commission to ensure all programme activities are aligned with the framework of the CEE Act; monitor the impact of the Act on the MSME sector through collaboration with business associations including Zambia Chamber of Small and Medium Business Associations, identifying and recommending measures to enhance impact; and develop the capacity of the Commission through the provision of policy advice, drawing on international best practice.

The programme supports the Ministry of Commerce, Trade and Industry’s efforts to develop an MSME Development Policy, which relates to business development service support structure, entrepreneurial training, market facilitation including linkage programmes, and MSME financing. It is in line with Ministry of Commerce, Trade and Industry’s policy proposal and planned intervention in support of Local Economic Development.

The Broad Based Wealth and Job Creation programme is basically in line with many government ministries’ programmes even those of the Ministry of Labour and Social Security’s National Employment and Labour Market Policy, which highlights promotion and support to MSMEs, and identification and support for job and business opportunities for men and women. Furthermore, the programme will contribute to the development of a labour market information system, which has been recognised as a priority by Ministry of Labour and Social Security.

Ultimate beneficiaries
The ultimate programme beneficiaries are potential and existing micro, small and medium scale entrepreneurs (MSME). The following targeting criteria will be applied:
• Sector focus: The programme has a focus on MSME sectors with untapped high growth potential and characterised by high labour intensity, including but not limited to agriculture.
• Geographic focus: Main, but not exclusive, emphasis is on MSME located in rural areas, and in selected provinces of the country.
• Legal status: The programme explicitly cover both informal and formal businesses, and encourage the graduation from informal to formal status where appropriate, bringing with it the benefits of increased market access and extending protection and rights.
• Sex of the owner-manager: The programme applies affirmative action towards female entrepreneurs.
• Disabilities: The programme also applies a level of affirmative action towards entrepreneurs with disabilities by encouraging business development service providers to develop business development service products that enable people with disabilities to work their way out of poverty.
• Business size: The programme further emphasises on micro and small-scale businesses as intended beneficiaries of technical support. However, it engages directly with medium and large-scale enterprises as a means to creating linkages, and these enterprises enjoy the associated benefits as a by-product.
The priority sectors and target provinces are selected at the outset of the programme in close consultation with local stakeholders. The ultimate objective and goal of the broad based wealth and job creation programme is to stimulate investment, entrepreneurship and employment creation within the micro, small and medium enterprise (MSME) sector and through pro-poor business models that can lead to bolstered economic growth and development.