André Botes:
Technology Transfer and related Policies for SMEs: The Case of Namibia

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Technology Transfer and related Policies for SMEs: The Case of Namibia
André Botes

Introduction

Namibia is a country with a very small population, and yet has a high unemployment rate. The skill levels of the nationals are low and the finances available to small entrepreneurs are limited. Estimates suggest that small businesses are the major source of employment and income in Namibia. They provide some form of employment and income to approximately 160,000 people, about one-third of the nation’s workforce.

However, the majority of these are individuals in the subsistence sector of the economy and the unemployed seeking to supplement income by periodically engaging in informal commerce. The activities of the small businesses vary between the informal, unregistered sector and formally established businesses.

The informal sector includes a large number of people in rural areas who sell agricultural produce they grow or handicrafts they make on a part time basis. The activities of those engaged full-time in the informal sector also generate low income and most are engaged in low value added retailing and catering as shown in figure 1. The majority of informal entrepreneurs are „pushed" into business rather than attracted to it.

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Figure 1: Activities of small businesses in the informal sector

The pattern of activities of the formal sector businesses differs markedly from the informal sector. Retailing and catering are not as dominant as forms of business activity as they are in the informal sector as shown in figure 2.

Namibian small businesses are particularly disadvantaged. In the informal sector most are new and the past made them confine their access to resources and spheres of activity to a very narrow part of the economy which is the most underdeveloped. In the formal sector they suffer from the structural weakness of the economy that wealth generation is concentrated in a limited number of sectors which do not have strong linkages to the rest of the economy. They have to content also with entrenched competition from established competitors from South Africa.

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Figure 2: Activities of small businesses in the formal sector

The following are the main constraints to the growth of small businesses as revealed by various surveys commissioned since independence.

• Finance: Small businesses cite lack of finance as the greatest constraint to their growth and development.
• Markets: Not only does the small population lead to small markets, but the structure of the economy serves to make access to spending power extremely difficult.
• Purchasing: Fundamental to the ability of small businesses to compete against larger rivals, is the possibility to competitively purchase inputs for resale or raw materials for manufacturing.
• Technology: The major problem with regard to technology is that the productivity of capital among small businesses in Namibia is lower than large businesses. Generally, there is insufficient knowledge in Namibia of the availability of technologies suited to small business and of the sources of competitive suppliers of plant and equipment world-wide.

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• Training: Despite adequate levels of literacy, most entrepreneurs received little technical training and the vast majority received no training at all in business management.

It is clear that as a result of serious constraints to the growth of small businesses, the sector is, for now, unable to play its potential role. Though accurate estimates are not available, it would appear that the sector’s contribution to GDP is less than 5%.

The solutions to the problems of poverty, unemployment and socio-economic inequity call for a multi-pronged approach. In recognition of the socio-economic role of the sector and its potential contribution to the country’s economic development, the development of the small business sector has been declared by government as a subject of national importance. Small businesses have been designated a priority sector for the Government in terms of policy formulation, direct support from its own resources and in the mobilisation of resources from donors.

Over the medium to long-term, it is the aim of Government to ensure that small business takes the lead role in economic development and spearheads the drive to create jobs and increase productive efficiency. There is, however, a need to address the major constraints which have made it difficult for small businesses to out-compete imports, increase exports and to sustain business growth.

Namibia therefore needs low cost, labour intensive low-tech technologies, which can produce high quality products competitive to larger industries. This need has been identified in the policy document and the policy provides for international linkages to be developed through diplomatic missions, scientific fora, institutions and SME associations.

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SME policy framework

Highly demanding objectives have been set for SME development, which will only be achieved by adopting a determined approach to the sector’s development. In practice, the policy framework, which will guide the SME sector’s development will be to create a favourable, enabling environment for the sector through:

• de-regulation and incentives;
• ro-active programmes;
• strong institutional support.

The Government should undertake to create a favourable environment in which small businesses are able to flourish. Active assistance by the Government is required to help small businesses to overcome the many constraints to their development. These businesses need to be equipped with the business tools with which to build commercial futures. Therefore, in addition to creating a favourable environment for the sector, the government is launching a series of active business development programmes to help SMEs to overcome specific commercial obstacles they face and exploit their opportunities effectively.

Based on the diagnosis of the small business sector there are six priority areas for programmes to be developed, namely:

• Finance
• Markets
• Purchasing
• Technology
• Sites & Premises
• Training

For the sector to benefit fully from the measures described, programmes are being put in place for them to have access to effective business advice and support.

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Transfer of appropriate technology

The introduction of appropriate technology is crucial to the development of small manufacturing industries in Namibia. Appropriate technology is that technology which is suitable for small businesses and adapted for local conditions. The low overheads and greater flexibility of such technology would enable small businesses to compete effectively with larger organisations.

But, in Namibia, the knowledge of and access to available technologies is low. The main influence is what is available in South Africa. This low technical appreciation, coupled with the historic trading relationship between the two countries, has led many Namibians to hold an exaggerated view of the strengths of South African industry. This has meant that many have been discouraged, by fear of foreign competition from South Africa, from setting up manufacturing businesses themselves. And, in some instances, appraisal of business ventures, using unsuitable high cost South African technology, has resulted in the rejection of sound commercial ventures.

There are, however, many alternative technologies and manufacturing practices, which can compete effectively with those of South Africa. Lower cost, less sophisticated technologies and processing plants are available, which allow viable manufacturing facilities to be introduced to service small markets. In many instances, these small appropriate technology plants can produce at lower cost, which can compete with multinationals.

The reorganisation of production to enhance speed of response (changing from one product to another as per market demands) and higher productivity have replaced long production runs as a source of competitive advantage. But, knowledge of these technologies and manufacturing practices is very poor in Namibia.

A structured process of technology transfer being proposed, involves the following stages:

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1. Technology search
   The identification of the various types of relevant/appropriate technology and the countries/suppliers from which they are available.
2. Assessment
   Evaluating in cost-benefit terms, the most competitive types of technology, taking into account also their accessibility and appropriateness to local conditions. A key part of the assessment should be the ease with which the technology could be absorbed by local entrepreneurs/workforce.
3. Transfer
   Evaluating the appropriate form of transfer and then transferring the technology. Each form of transfer, i.e. purchase of plant and equipment, licensing, leasing, joint venture, etc. should be evaluated in cost-benefit terms.
4. Absorption and adaptation
   Learning to use the technology under local conditions and adapting it as required.
5. Replication
   Whereby the technology adopted to local conditions, is made known and hope-fully used widely.

The Ministry of Trade and Industry, with support from donor agencies, is in the process of creating a database of appropriate technology and suppliers of such technology. This task covers the search and assessment stages in technology transfer. The database would be used for sector planning and for the dissemination of information to local enterprises and development agencies, and hence, to entrepreneurs. As a starting point, the focus is on technology suitable for the existing sectors of agro-processing and manufacturing as well as those other sectors, which offer strong opportunities for the expansion of small manufacturers. Further prioritisation of the types of technology required will be provided by the needs analysis of large businesses.

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Once the target technologies have been identified, the process of assessment will be carried out. This will take into account markets, factor costs and most importantly, skill levels. It will be important to update the database frequently with information on new technologies, processes and licensing opportunities for target sectors.

In Namibia, small businesses are not sufficiently familiar with technology and the process of transfer. To execute these crucial stages of technology transfer, the Government will have to play the role of catalyst, at least in the initial stages. The Ministry has, therefore, taken steps to establish a technology demonstration centre. This centrally placed institution will be responsible for bringing technologies that are found appropriate to the country for demonstrating to Namibian businessmen and women the viability of commercial exploitation of the technology.

The first of such centres will be demonstrating plastic manufacturing technologies. The concept is that a particular technology is commissioned and production demonstrated. The complete facility, including sourcing of raw materials and availability of markets is available for the entrepreneur to see. If an entrepreneur is interested, the facility is sold to him/her. As long as the equipment remains at the centre, it produces to generate income. Even the sale of the equipment involves a small service charge, which supports the sustainability of the centre. The money realised for the sale of the equipment will be utilised to import new/another technology.

Other similar centres may be in the area of agro-processing, fruit and vegetable preservation and processing, metal working, wood working and automobile industries sector.

In addition to the demonstration centre, Common Facility Centres are proposed to be constructed and will be an integral part of the technology transfer project. These centres will be mainly for repair and servicing of equipment in the demonstration centres, but will also

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provide technical training to entrepreneurs. These centres can also provide machining and fabrication facilities to local entrepreneurs on a payment basis.

It is vital for each technology to be seen in a business environment where it is actually being operated to generate wealth. Examples from the range of technologies considered appropriate will be installed in appropriate regions and operated to generate income. Products produced in the demonstration centre will be for sale and the funds will be used to import new types of technology.

The following agencies are actively involved in the transfer of appropriate technology:

• Rural Development Centre, Ongwediva: Established on the lines of RIIC, Botswana. Management and sustenance crisis;
• University of Namibia: Appropriate technologies for rural and agricultural applications. Work in close relation with the RDC in Ongwediva;
• Solar energy systems: Co-ordinated by the NDC;
• Energy conservation technologies: Northern Electricity and Nampower;
• Water use conservation technologies: Namwater

RURAL DEVELOPMENT CENTRE: ONGWEDIVA

The Rural Development Centre is primarily a technology development and diffusion centre with a strong emphasis on the training of staff who advise communities on the value and use of appropriate technology. Rural problems are centered around basic needs such as water supply, adequate housing, increased food production and processing, crop storage and fuel supplies. The RDC aims at contributing towards achievement of household food security through the design, testing, production and diffusion of appropriate technologies in the area of food production, food storage and processing, and water development and harvesting.

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With the focus of the RDC’s development activities on appropriate technology, there is a need for direct involvement of communities in any technological research intended to benefit them. The challenge of the RDC is to establish a system, which will produce machines that will increase productivity in rural Namibia, machines that will work, last and which are affordable.

"Participatory Technology Development" is the key phrase for the RDC and the process is based on the identification of the needs of end-users.

Integrated technology management

An integrated approach to the solution of rural development through appropriate technology holds a better promise for success. Meaningful solutions must address two thorny problems of scale and sustainability. With regard to sustainability, it is important that benefits are lasting, and not just temporary. The question of sustainable technology management for rural development is perceived to have the following four elements:

• Specific technology interventions;
• Technology management and entrepreneurship;
• Financial support; and
• Marketing.

The use of new technologies results in increased productivity, and therefore, increased income. However, the realisation that there is a need for such an intervention, and the ability to initiate and maintain the intervention will depend on the level of technological management and entrepreneurship existing in the country.

Poor technological management is the cause of failures in technological programmes in developing countries. It is through technology management that mechanisms are developed to acquire, adapt and disseminate technologies. Thus, technology management will entail the interlink among national research institutions, the

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indigenous technological base, and the commercialisation of research results. Availability of funds, marketing of technological products and the commercialisation of new technologies have to be closely linked.

Financial Services: Despite the involvement of many NGOs and agencies in the SME sector, the availability of finance to small businesses remains poor. This is a major obstacle to the sector’s inability to realise its potential social and economic role.

To overcome this obstacle, Government will over the short to medium term provide financial assistance through its agencies in the form of Micro Loans and Credit Guarantee Scheme. Over the longer term Government will encourage the involvement of the commercial financial sector to provide financial assistance to small businesses.

The Namibia Development Corporation is a major provider of financial assistance to small businesses and offers the following financing products:

• Business Assistance Scheme
• Agro-industries Assistance Scheme
• Small Builders Bridging Fund
• Franchise Financing
• Lease Financing
• Wholesale Financing
• Credit Guarantee Scheme
• Rural Women Enterprise Development Scheme
• SME Start-up Assistance Programme
• Traders Aid Fund
• Young Entrepreneur Assistance Scheme

The ultimate objective of the NDC is to strive for sustainability of credit operations servicing disadvantaged markets or groups without ready access to conventional lending.

Training: One of the areas identified in the policy on small business development is that of training for entrepreneurs who wish to become

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involved in enterprises of their own. Many of these entrepreneurs have good ideas and ample entrepreneurial drive, but find the world of business rather more daunting than they at first anticipated. Encouragement through training is frequently a significant aid to overcome the hurdles in the endeavour.

While the country has a number of vocational training establishments and has enacted the National Vocational Training Act, surveys of small businesses revealed that suitable on-the-job training is in short supply. A training sub-committee was formed under the SME programme, which in turn formulated a Training Policy Implementation Programme with the aim to translate the training policy into action plans.

Five levels of activity for the training of entrepreneurs were identified and include the following:

• the presentation of courses in entrepreneurship and business subjects in schools, educational institutions and vocational and technical training centres as part of the basic curricula;
• the presentation of entrepreneurship development training opportunities for young as well as adult unemployed persons;
• the presentation of start-up training courses for entrepreneurs with demonstrated ability and capability;
• the presentation of enterprise growth programmes covering a broad spectrum of services ranging from teaching courses to one-on-one advisory services;
• the presentation of seminars and workshops in more specialised areas such as import and export opportunities, business linkage opportunities, franchising and product development.

A number of project ideas have been developed which, if implemented would lead to practical training interventions that are specifically designed to meet the initial needs in the implementation process.

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Vendor Development Programme: In Namibia it was observed that all the large buyers had very little confidence in terms of local manufacturing capabilities. There was a historical feeling that things manufactured in South Africa were superior and better. The small-scale industries therefore did not take roots, even though these would make the large buyers more viable in terms of competitive sourcing.

Recognising the situation, and the possibility of getting over it, the Vendor Development Programme was launched through which small producers, capable of producing quality goods, could be identified. On the other hand buyers of such commodities could be sensitised and the two could be brought together. Large buyers are showing an interest in this programme and are requesting three things, i.e. quality, correct price and reliability of supply. The main problem being experienced in this programme is continued and reliable supply.

Extension Services: The RDC’s links with community members are mainly through agents working directly with communities, such as extension staff, community development officers, co-operatives, etc. To remain effective, extension will be linked to the research programme, which in turn is tuned to the needs of the farmers and small businesses.

The RDC will facilitate the participatory technology development process with active participation of extension workers. The process of participatory technology development involves the following activities: - needs prioritisation, exposure of farmers to new technologies, selection of technologies to test, testing process with farmers, review performance of technology tested, adoption and adaptation of technologies and finally the dissemination process.

Government-private sector collaboration

The Joint Consultative Committee (JCC), a non-political and non-profit umbrella committee, was established with the objective to establish and advocate a synergetic working institutional framework

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which fosters an effective and sufficient utilisation of resources for the benefit of Namibian entrepreneurs in the small and medium enterprise sector. Thus, the JCC aims to promote the small and medium enterprise sector in a coordinated effort through effective networking by key role players.

The operations of the JCC are as follows:

• to create a network that will foster cooperation and effective communication between stakeholders in the SME sector;
• to act as a forum for coordination of effort in order to minimise duplication by role players;
• share experiences and lessons learnt;
• where possible, seek to rationalise the allocation of responsibilities between the various role players with a view to maximising the effectiveness of the utilisation of their respective specialities and capacity;
• act as an advocacy group to advance an appropriate enabling framework in which SMEs can flourish.