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Micro and Small-Scale Enterprises in Zambia
Joyce Mapoma

MSE's in Zambia and the role of the Village Industry Service

Zambia is an unlocked country with 753 square kilometres of land. It has an estimated population of 9.1 million (1995 CSO) with an annual growth rate of 3.2%. 40% of her population live in the urban areas - the highest of all the South Central African countries. This population concentration has been caused by a number of socio-economic factors based on rural-urban drift in search of improved living standards.

Economically, the country has a mixed economy approach involving Government and privately owned organisations. With the Structural Adjustment Programme (SAP) in place, more and more private participation is being encouraged.

The Micro and Small Enterprise (MSE) sector consists of approximately 336,600 enterprises. One out of four Zambian households has some income earning activity. The sector engages more than 700,000 individuals or 18% of the labour force in Zambia. 50% of the MSE are based in towns with fewer than 2000 inhabitants or in remote areas. The bulk of the remainders of MSEs are found in Zambia's 10 largest cities, predominantly in the low-income areas.

Half of Zambian MSE's are in the trade sector, largely engaged in vending activities. Another 40% are in manufacturing, grouped largely in natural resource related industries such as agricultural processing, beverage and forest products. The final 10% of the enterprises are in

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service industry. Women are an important force in the MSE sector, making up 46% of businesses owned and 47% of total employment. Women's businesses tend to be smaller and are grouped in low-return activities.

The MSE's face a number of operational constraints. The biggest problem is access to markets. As a result of competition, those operating in urban areas are finding it difficult to remain competitive. Those based in rural areas find it difficult to access customers. The other problem is financial management and control, especially in recovering credits extended to customers. Accessing working capital is also a problem. Commercial banks are usually reluctant to extend credit facilities to such groups of people because of lack of security. Input constraints and transport problems also affect a large number of enterprises.

With the advent of multi-party politics in Zambia, the new MMD Government came into power in 1991 and embarked on an economic recovery programme. Under this programme, the following sub-programmes are being implemented:

  • Structural Adjustment Programme (SAP)
  • Public Service Reform Programme (PSRP) and
  • Privatisation Programme

The above programmes though well intended, have had negative impacts on the living standards of the population because a number of workers have lost jobs through company closures, retrenchments brought about by down sizing the sold parastatal firms and the bloated civil service. It is mainly this large group which has set-up enterprises in the MSE sector.

In order to alleviate some of the operational problems a number of institutions have been set-up to give assistance to the micro and small scale enterprises. Among them is the Village Industry Service (VIS). Village Industry Service (VIS) is an indigenous Zambian non-governmental Organisation (NGO) registered under the Societies Act

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of the Laws of Zambia. The head office is in Lusaka and regional offices are maintained in Chipata, Kasama, Mansa, Mongu and Livingstone.

Village Industry Service (VIS) was created in 1976 with a purpose of fostering development in rural areas. Its mandate is to promote village and cottage industries that use simple machinery, equipment and raw materials. VIS area of emphasis is agro-based enterprises and the participation of women and youth.

VIS works closely with other development agencies such as District Councils, various Government departments and Ministries, donors and financial institutions. VIS draws on this support and other resources to provide a package of services to entrepreneurs in both rural and peri-urban areas of Zambia and charges modest fees to defray operating costs.

VIS is headed by a chairperson and assisted by a Management Committee. The line departments of VIS are two, namely the Projects Department and the Development and Training Department. The Projects Department identifies potential for VIS support, conducts feasibility studies, implements and monitors projects throughout the country and evaluates project activities. It also provides extension services and business counselling in collaboration with the Development and Training Department.

The Development and Training Department develops and conducts entrepreneurship-training programmes and provides a variety of other research, marketing and information services. The Administration and Accounting Section offers administrative support services. Village Industry Service has a Training Centre and offers a spacious facility for up to 40 persons. Both management and technical courses are conducted at the Centre. The organisation also has industrial "incubator" estates, which offer basic services and facilities to fledging entrepreneurs. The estate based at Chinika has 40 workshops

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and a professional Textile Cutting Centre. Other industrial estates are found in Chipata, Livingstone and Mansa.

The demand for NGO services has grown in all dimensions as we continue to provide support services to the small scale sector, and coping with these demands has forced the organisations to adjust and be flexible. People's participatory development and final empowerment of the end beneficiaries has become priority.

VIS enjoys a membership over 3,500 clients, made up of individuals, family groups, cooperatives and small-scale enterprises. The resources available to the organisation include a mix of energetic talented people with various duties and experiences, but with exceptional dedication. The exchange of experiences with other agencies added to the richness of the NGO.

Material support from the donor community has been proof of the confidence that the donor community has in VIS. A strong relationship exists between the international donor community and ourselves, these include ILO for assistance in our Improve Your Business and Best Practices Training Programme, UNDP for assisting us with funds to establishing funds credits to our clients, UNIDO for equipment and capital funds used in our food processing units, and the North-Rhine Westphalia State of Germany, which funded one of our Mini Industrial Estates, whose funds were channelled through the Friedrich Ebert Stiftung.

Linkages with research, institutions such as our National Council for Scientific Research and the Technology Development Advisory Unit have been necessary to design and adapt technologies that meet our needs. Through these linkages 395 units were established in grain milling and another 100 units in oil pressing, just to give an example of a few.

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Generally the sector continues to provide opportunities for self employment and for raising household incomes and standards of living.

However certain issues need to be addressed to make the sector even more viable, these include:

  1. Lobbying for further tariff reduction on imported equipment and machinery.
  2. High taxes to be paid by the sector.
  3. Inaccessible commercial credit.
  4. Lack of protection from unfair competition of foreign goods.
  5. Lack of linkages with large industries.
  6. Inadequate resources on the part of the promotional agencies to deal with a sector which has grown considerably over the past years.

As we go towards the year 2000, the future looks challenging for the sector. With the new global economic policies, more and more people have taken to small scale enterprises as a way to survive the harsh effects brought about by the Structural Adjustment Programme. The situation could be a blessing in disguise as it is a scenario ripe for small enterprise development. It is the entrepreneurial spirit prevailing at the moment, that needs to be captured and this potential tapped while at its peak.

Institutional capacity building should be the priority for promotional organisations in the region. Collaboration and networking and sharing of knowledge and ideas with other development agencies in the region should be strengthened to improve outreach efficiency and effectiveness.

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

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