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The Experience of the Zambia Association of Chambers of Commerce & Industry (ZACCI)
Webby Mate


Small Business Development in Zambia

The role of small businesses in national development world-wide has become a very important topic on the development agendas of most governments. Even the developed countries of the North are paying a lot of attention to issues of small business. In fact it has been stated that in many of these developed countries almost 60% of their economies are made up of small-scale enterprises.

The developing countries of the South cannot afford to neglect or ignore issues relating to small business as these businesses have the potential to significantly contribute to national development.

All over the world participation by the small business sector in various sectors of business is rising steadily year after year. Statistics in countries such as South Africa indicate that participation by the small business sector in almost all sectors of the economy has been rising consistently.

In Zambia, the Government started pursuing the development of the small business sector in the late 70s when it was becoming quite clear that the large business sector, which continues to be predominantly mining, could not absorb all those in need of employment.

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At the time, the country also faced the problem of people migrating from the countryside to the urban areas in search of formal employment.

In order to reverse this trend Government started by creating the Village Industry Service (VIS) in 1978, which was meant to encourage as well as provide support to rural communities to develop and utilise artisan craft skills and thereby produce crafts that could be sold in exchange for money. Later in 1981, through an Act of Parliament, Government created the Small Industries Development Organisation (SIDO), which through an amendment of the Act during 1996 is now known as the Small Enterprises Development Board (SEDB). This organisation was meant to provide larger volumes of support to those venturing into small businesses.

However, although Government provided legislation and an institutional as well as a policy framework in the initial stages of the development of small businesses, it may not necessarily be the best executor. While successes have undeniably been scored by the two organisations, viz. SEDB and VIS, their performance over time has become constrained by the scarcity of resources.

As a result the two organisations, though still in existence, are finding it difficult to adequately cope with the increased demands of the small business sector, as they are still dependent on Government handouts.

Definition of SMEs

The definition of a small business enterprise in Zambia, as defined by the Small Enterprises Development Act of 1996 is as follows:

„any business enterprise -

  1. whose amount of total investment, excluding land and buildings, does not exceed
    1. in the case of manufacturing and processing enterprises, fifty million Kwacha (K50 million) or (US$ 25,000) in plant and machinery; and

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    2. in the case of trading and service providing enterprises, ten million Kwacha (K10 million )or (US$ 5,000);

  2. whose annual turnover does not exceed eighty million Kwacha (K80 million) or (US$ 40,000); and

  3. employing up to thirty ( 30 ) persons;

provided that the values under paragraphs (a) and (b) may be varied by the Minister, by statutory instrument."

Legal Framework

Legislation recognising and supporting the development of the small business sector has been enacted through the Small Enterprises Development Act of 1996, which is an improvement on the Small Industries Development (SIDO) Act of 1981. The new act lays out the following:

  • incentives to micro and small enterprises in terms of tax exemption on income for up to five years

  • provision for manufacturing enterprises to operate without a manufacturing license as required under the law for up to five years

  • exemption from the payment of licensing fees required for such an enterprise under the law

  • exemption from the payment of rates on factory premises for five years

  • the Trades Licensing Act shall not apply to an enterprise registered under the Small Enterprises Act

  • secure incentives through relevant authorities for any financial institution which undertakes to finance or develop an enterprise registered under the Act

However, it is still necessary to have more legislative provisions that would facilitate the SME sector’s development even more. This calls for continuous research so that legislation can be improved from time to time.

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Another important factor is that even where these incentives exist, very few small businesses will take advantage of them if there is no framework on the ground to sensitise these businesses on the availability and interpretation of such incentives. Sometimes there are no delivery mechanisms to enable the sector utilise or access the incentives. For instance while the Act is in existence not all incentives provided can be accessed due to bureaucratic hindrances.

Institutional Framework

While previously government was pursuing the development of small businesses single-handedly, it has now recognised that there is need for others to play a role, particularly after the prodding by the donor community. Consequently, other stakeholders are now actively involved in the development of the small business sector. These stakeholders include private and non-governmental organisations (NGOs).

Presently, a number of organisations are providing support to the small business sector. Some are government and quasi-government, others are private and non-governmental organisations. The support provided by most of these organisations ranges from training in business and management skills, consultancy services in business, technical assistance, marketing assistance, provision of credit, lobbying, etc.

However, due to lack of capacity in some of these organisations, only some of these services are being provided. For example, in the past SEDB and VIS were unable to recover more than 50% of the loans they disbursed within the stipulated time periods mainly as a result of poor credit management systems. Over time, the loan funds meant for onward disbursement to the small business sector were tied up in uncollected debts. Eventually, this type of service ceased to be available.

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Below are some of the small business support programmes that are run by different organisations in Zambia:


Services Provided

Area Covered

Type of Organisation/ Date established

Small Enterprises Development Board (SEDB)

Training, technical support, operating premises, marketing support, lobbying and credit, consultancy

All the provinces of Zambia

Quasi-government, 1981

Village Industry Services (VIS)

Training, technical support, operating premises, credit, consultancy

All provinces of Zambia except Copperbelt

Quasi-government, 1978


Training, consultancy, lobbying

All provinces, but based in Lusaka

Private sector, Donor funded, 1997


Training, consultancy, lobbying, information dissemination, trade exhibitions

Lusaka based

Private sector, Donor funded, 1995

YWCA-Small Business Centre

Training, consultancy, information dissemination, exhibitions

Lusaka, Kitwe

NGO, Donor funded, 1995


Training, credit, consultancy

Lusaka, Livingstone

NGO, Donor funded, 1995

Ministry of Commerce, Trade & Industry-Support to the SMEs

Policy formulation, trade exhibitions

All provinces, but based in Lusaka

Government, Donor funded, 1996

Credit Management Services

Credit, training

Kabwe, Lusaka, Ndola, Rural

Private sector, 1995

More private sector organisations are also involved in the provision of credit. Through the support programmes delivered by the above and other support organisations, the small business sector has continued to grow, particularly along the line of rail. However, a lot more still needs to be done to facilitate more growth. The present support arrangement undeniably is faced with a host of daunting tasks, some of which might be difficult to overcome.

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It must be stressed however that like in the case of government funded organisations, support for these NGOs has also been short-lived as the programmes designed are dependent on donor funding which is normally for specific time frames. This tends to highlight one important factor, i.e. the private sector in this country might not yet have adequate resources to support the small business sector and would therefore require some form of capacity building if it is to do so more successfully in future.

Nonetheless, small business support is a viable business, which if properly managed should be able to cover a considerable amount of overheads and administrative costs over time.

Policy Framework

Policy on small businesses is being reviewed to make it more appropriate. However, more still needs to be done in this area so that the right policies are formulated that can move the sector forward. Policies that are small business focused need to be formulated in all areas of business and the economy. There is need for deliberate policies aimed at small business promotion.

Private Sector Involvement in Small Business Development in Zambia


The private sector in Zambia is coming from a period where Government played a dominant role in almost all areas of business, economy, education, health and others, until the economic reforms that came with the change in the political system of Government in 1991.

Since small business development was a Government domain and there was no incentive for the private sector to get involved, after all, 80% of the economy was controlled by Government.

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Given such a background private business saw no need to involve itself with small business development because it did not have the resources to do so.

Donor Agency Preference for Private Sector Involvement in Small Business Development

The new Government that came to power in 1991 had a host of pressing issues to grapple with. Unfortunately the Government did not have the resources needed to do this. Most of the support needed was coming from bilateral and multilateral institutions that had pledged to help the Government restructure the economy of the country. This aid had conditions attached.

One area recognised as having the potential to contribute to the economic restructuring was the small and medium business sector. This sector has the potential to:

  • provide employment to those to be displaced from formal employment as a result of the economic restructuring, and

  • could be used as vehicle in the diversification of the national economy

A number of donor programmes were targeted at this sector. However, most support programmes to the sector were government initiated and managed by government institutions. The donor agencies were not pleased with this arrangement and wanted private sector involvement in this important area.

The donors wanted to put their money in organisations that were accountable and efficient in resource utilisation. As far as they were concerned this could only be found in private sector institutions.

Consequently, private sector and business organisations including civic non-governmental organisations (NGOs) were identified as appropriate organisations for channelling donor support to the small and medium business sector.

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ZACCI's experience with small businesses

The acronym ZACCI stands for Zambia Association of Chambers of Commerce and Industry. As the name suggests it is an umbrella organisation for different business organisations such as chambers of commerce and industry and business associations. In addition companies also join ZACCI under a corporate membership category, as long as they are also members of a local chamber or an association.

Currently, the organisation has 9 district chambers, and 7 associations affiliated to it. In addition, 40 corporate entities, which are mainly multinational corporations, are also members. Total membership stands at about 600 members country-wide with the largest concentration being in urban areas.

ZACCI is organised on a federal basis meaning that its affiliates are autonomous bodies.

Being a business organisation most donors saw ZACCI as a more appropriate organisation through which to channel their support to small businesses.

ZACCI's experience with small businesses started during 1993. The organisation had to bid with others for the management of a donor programme targeted at small businesses. Among the reasons for this was that the organisation saw a financial incentive in the scheme which could go a long way in helping the organisation meet some of its budgetary needs. This was so because private business, which constitutes the membership at ZACCI, was slowly coming out of the slumber experienced during the period of economic decay, and it was not easy for members to pay their subscriptions. In fact membership had shrunk considerably and this was worrying. The organisation, therefore, had to look out for other possible sources of finance as long as these did not deviate the organisation from its service delivery to members.

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Small and Medium Business Support Programmes Managed By ZACCI

Membership in ZACCI has generally been that of large businesses. The organisation was therefore going to be involved with small businesses for the first time. However, this was easier because these donor programmes came with complete structures that were then supervised by ZACCI.

  1. The Clark Atlanta University Small Business Training Programme - 1993/94

    This was the first donor supported small business support programme ZACCI got involved with. The programme was sponsored by the United States Agency for International Development (USAID), and provided assistance in form of business skills training to small businesses through out the country but managed from Lusaka. The project ended in 1994.

  2. The Small Business Development Unit - 1995 - to-date

    This programme is funded by Friedrich Ebert Stiftung (FES), a German organisation. It provides non-financial support to the small and medium business sector operating in Lusaka, Zambia’s capital. The support is in form of training, provision of information, advocacy and consultancy services.

    Over the years the programme has provided training to over 400 small and medium entrepreneurs.

    One of the main objectives of the programme at inception was to help grow membership in the chambers and ZACCI through the creation of a small business membership category as one way of strengthening business organisations in Zambia.

  3. The Human Resources Development Project - 1996 - to-date.

    This programme is more like a resurrection of the Clark Atlanta University Small Business Training Programme mentioned in (i) above.

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    This programme provides mainly training to small and medium businesses in the provinces of Zambia. The country has nine (9) provinces, and the project operates in eight (8) of them except Lusaka, which is serviced by the FES supported programme mentioned in (ii) above. The provinces serviced by this project are mainly rural in character except for the Copperbelt province.

    Through this programme provincial and district associations have been formed by small and medium businesses. These are membership organisations which are expected to grow into chambers in the various districts and regions. The aim is to strengthen the chamber movement in Zambia.

What Successes have been achieved?

  1. Programme implementation

    Generally speaking programme implementation has been successful. Training seminars conducted have been very popular among the beneficiaries, indicating greater need for the service. Other programme activities such as advocacy, provision of information and consultancy have done fairly well too, although they need to be improved upon.

  2. Programme sustainability.

    This aspect still remains a vexing matter. Currently, the programmes can not charge economic fees for the services they provide as the target group is unable to afford them. As a result sustaining the programmes beyond donor support is still questionable. However, more sustainable ways of ensuring the programmes continue even without donor support, are being investigated as is shown below (pp. 56, 57).

  3. Integration of small businesses into the chamber movement.

    While the various support programmes have been generally successful, the same has not been the case with the integration of small businesses into the main stream chamber movement. This

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    has been the case both at local chamber level as well as at national or ZACCI level.

    Some of the reasons are as follows:

    1. ZACCI as well as local chamber constitutions do not provide for a small business membership category and it has not been possible to amend the constitutions.
    2. There is a general perception among the indigenous business people that chambers are for white business people only. This stems partly from the fact that chambers have been dominated by businesses owned and/or run by white people.
    3. Chambers in Zambia have been dominated by large businesses. Small businesses have not shown serious interest in becoming members of chambers in their respective districts and provinces. This has led to a situation where the large businesses see no need to co-opt small business members who have no interest in the chambers at all.
    4. Small businesses have also been perceived as unscrupulous competitors by large businesses. They also see them as people who are only after donations instead of working hard. As a result small businesses have been unwelcome in the chambers.

While the present co-operating partners have indicated willingness to extend their support programmes in ZACCI they would like to see a situation where more serious attention is paid to the creation of a more integrated and sustainable mechanism for small business development in Zambia led by the private sector.

The future of private sector involvement in small business development

As earlier indicated efforts at encouraging small business membership in the chambers have not been very successful due to various reasons some of which could be termed psychological.

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However, small businesses are slowly acknowledging the fact that they need to organise themselves in groups if they are to be more effective in lobbying.

Right now there are several associations formed by different categories of small businesses. However, these are not affiliated to an organisation that has a national character at all.

It is equally agreed by most small business entrepreneurs that they need support services to continue to be provided to them if their businesses are to grow and contribute meaningfully to the economic development of the country. Currently, though, no existing institution appears to be in a position to satisfactorily provide support to the sector, in order to move it forward.

While ZACCI as a private sector business organisation would appear more appropriate, the experiences of the past three years through donor support seem to indicate that ZACCI may not necessarily be the right vehicle to move the sector forward.

The two small business support programmes under ZACCI have also been giving thought to the matter and recently came up with a discussion paper on the subject.

Proposal for the creation of a chamber of small business

ZACCI through its two units providing support to the small business sector has come up with a proposal to create a chamber of small business.

The chamber once established would be a membership organisation working to service its members who in turn pay a subscription to the chamber.

All businesses meeting the description of a small business as outlined in the Small Enterprises Development Act would be free to join the

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chamber. In addition, all small business associations would be encouraged to affiliate to the chamber.

One of the objectives of the chamber will be to grow small businesses and see them graduate into medium and/or large businesses which would then be encouraged to join local chambers or sector associations.

Like other chambers, the chamber of small business would affiliate to ZACCI, which is the apex business organisation in the country. This way business development in Zambia would be integrated and private sector-driven.

This proposal which has been endorsed by co-operating partners was tabled at the ZACCI Council meeting held during the month of August 1998, and was approved. What is remaining is to draw up an implementation plan as well as a business plan for its implementation.

© Friedrich Ebert Stiftung | technical support | net edition fes-library | November 1999

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