Sandy Kachale:
Technology Transfer and related Policies for the SME Sector in Malawi

[Page-number of print ed.: 58]

Technology Transfer and related Policies for the SME Sector in Malawi
Sandy Kachale

Introduction

The Government of Malawi recognises the important role which small and medium enterprises (SME) play in the economic development of the country. Government commitment towards the development of the SME sector has been seen through a number of national initiatives. The following are some of efforts made by the Government in support of the SME sector.

1. The Government created a number of SME support institutions which include the Malawi Industrial Research and Technology Development Centre (MIRTDC), the Development of Malawian Entrepreneurs Trust (DEMAT), the Small Enterprise Development Organisation (SEDOM), Malawi Entrepreneurs Development Institute (MEDI), Malawi Export Promotion Council and the Malawi Investment Promotion Agency (MIPA).

2. The Government supported the establishment of SME support institutions in the private sector including several non-governmental organisations (NGO) such as the National Association of Small and Medium Enterprises under the Chamber of Commerce and Industry, National Association of Business Women, Malawi Union of Savings and Cooperatives, Malawi Rural Finance, and several skills training centres under NGOs.

[Page-number of print ed.: 59]

3. Establishment of SME financing windows in lending institutions such as the Malawi Development Corporation, SEDOM, Investment and Development Fund (INDEFUND), etc.

4. The Government of Malawi/UNDP established the 5th Country Programme (1992-1996) to support SMEs in credit, technology, policy issues, marketing, training, etc.

5. The Government established the Enterprise Development and Employment Creation Programme (1997-2001) to facilitate the development of the SME sector.

6. The Government established the Small Enterprise Development Programme and the Small Scale Industrial Unit (SSIU) in the Ministry of Commerce and Industry.

7. The Government established the Small and Medium Enterprise Fund (SMEF) to finance SME activities.

8. The Government organised several workshops and seminars for SMEs in consultation with various stakeholders.

Technology policy for SME sector

Malawi does not have explicit technology policies addressing the needs of the SME sector. However, the country has supported through funding of operations, equipment and machinery, and provision of business premises to institutions whose sectoral policies support the SME sector. Such institutions included MIRTDC, MEDI, DEMAT, SEDOM, etc.

Technology policy instruments that exist have been formulated and made available across the industrial sector. Due to lack of explicit policies targeting the SME sector, the trend is that the SME sector competes with the LSEs in sourcing funding, investment opportunities, production, markets, technology acquisitions, land

[Page-number of print ed.: 60]

acquisition, licensing, etc., thereby strengthening industrial competition rather than collaboration and integration. Due to lack of adequate capacity and capability, most SMEs become uncompetitive and the trend is that the majority of SMEs invest in trading rather than in manufacturing. This situation is unfavourable for national development.

In 1995, the Government of Malawi with financial support made available from UNDP contracted MIRTDC to develop policy for micro and small enterprises. The policy document has not yet been endorsed by Government. The report noted the following problems and needs facing SMEs.

• Limited access to credit
• Lack of clear policies supporting and guiding the promotion of SMEs
• Limited access to raw materials and inputs
• Limited access to markets
• Lack of entrepreneurship and management skills
• Lack of access to land, business premises, and common facility workshops
• Competition and lack of collaboration among SME support institutions
• Unfavourable fiscal and taxation policies
• Export markets constraints
• Lack of access to qualified staff to assist SMEs with business planning and appraisal
• Lack of access to information on investment opportunities
• Lack of knowledge on taxation systems
• Lack of access to technology
• Lack of understanding and necessary support in quality and standardisation
• High cost of raw materials and inputs
• Lack of technical skills
• High production costs
• Lack of knowledge of existing policies
• Lack of incentives

[Page-number of print ed.: 61]

Development in Malawi for the past decade has been guided by policy instruments made available in a national document called Development Policies (DEVPOL 1987-1996). The major shortfall of this document is that it contains no policies to guide the development of SMEs in Malawi. Even specific policies for industrial development in Malawi as a whole were not included. However, DEVPOL mentioned that Government policy would seek to deter monopolistic abuses to stimulate the expansion of small-scale Malawian trading activities. What actually followed in practice was that the degree of industrial concentration was excessively high, the size, access to resources and monopolistic and oligopolistic position of a few conglomerates coupled with their ownership of banks limited the scope for development of a more competitive private sector. The development of industry has, however, been guided by sectoral policies available in various institutions in the country.

Recently the Government has implemented a number of policies aimed at stimulating the development of industry, which included development of the industrial development policy, approving provision of various industrial incentives, establishment of the Malawi Investment Promotion Agency, approving export processing zones (EPZ), duty free importation on industrial machinery and raw materials, etc.

Acquisition of small scale technology by support institutions

The machinery and equipment capacity available in support institutions is mostly underdeveloped and has been made available by government and donor support. In some cases the required specialised skills to operate such machinery is also lacking.

Due to their low revenue generation capacity, support institutions are not able to procure the required types of machinery to support research and development, design and fabrication and technology adaptation. Capacity building is very much dependent on donations.

[Page-number of print ed.: 62]

The level of technology available to SMEs is very low and this affects revenue generation of technology related support institutions. Some financial support institutions are gradually being able to support their operations from revenue generated from loan application fees, interest on loans, etc.

SMEs in Malawi acquire foreign technologies on their own through normal bank procurement procedures. Locally sourced technologies are normally negotiated with the supplier. For instance, in some cases MIRTDC has been offering its technologies to SMEs on loan.

SMEs are being encouraged to seek the Centre's assistance in sourcing and negotiating technology acquisition. To this end, the Centre in 1995 organised a capacity building national workshop in collaboration with UNIDO on Contract Negotiation, and Technology Acquisition and Transfer. The Centre has also established an Information Bureau to assist industries in sourcing technology.

The Centre assists SMEs in protecting their innovations and inventions by offering services of a patent agent in collaboration with the Patents and Trademarks Office of the Registrar General. The Centre also assists local innovators and inventors in product development through the provision of its expertise and grants.

Dissemination of new technologies

Most SME support institutions mentioned above have opened up branches in districts throughout the country. They also have dissemination officers, in the case of MIRTDC, to undertake marketing, commercialisation, and skills development training on new technologies. Training workshops, technology fairs are also organised for SMEs and in the case of MIRTDC workshop facilities are made accessible to SMEs. A number of publications on technology issues are circulated to institutions and SMEs.

[Page-number of print ed.: 63]

Industrial linkages

There are no formal linkages between financing institutions and other SME support institutions. SMEs consult relevant institutions out of need. However, in order to develop an industrial market and encourage economic integration, the Centre with financial support from various donors is undertaking a Subcontracting and Partnership Linkage Programme and a Linkage Centre is expected to be established to gather industrial information and undertake match-making to link SMEs to LSEs.

Public-private sector-NGO collaboration

The Chamber of Commerce and Industry which is the umbrella organisation of the private sector organises consultative meetings with the Government at which some relevant NGOs may be invited. The Employers Consultative Council of Malawi is also in regular consultation with Government on various issues of concern to member companies.

The NGO community is also organised under one umbrella called the Council for Non-Governmental Organisations (CONGOMA) which is charged with the responsibility to coordinate the activities of the NGOs.

The private sector is also comprised of various sectoral associations, which share common interests and consultations with the Government.

International development cooperation

Malawi is signatory to a number of international conventions in trade, environment, etc. Some institutions such as MIRTDC are members of international organisations/agencies such as WAITRO and have established links with WIPO, UNIDO, etc. Collaboration links also exist at the regional level with other relevant institutions and groupings to share expertise and experiences. The Centre in the area

[Page-number of print ed.: 64]

of technology adaptation has engaged international consultants to transfer technologies to Malawi, in some cases the Centre has signed a memorandum of understanding with organisations in other countries to facilitate technology transfer. The Centre has also presented research findings at regional technology workshops and technology forums that facilitate technology transfer.