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P.O BOX 20515

STUDENT NO.:09175202



Topic of Study-Challenges of Growing Small Businesses in Zambia


The economic climate and land scape for carrying out business for SMEs in modern society
differs from country to country. As such, the appropriate policy for one country would not
necessarily be appropriate for another. With the advent, in 1991 of a more liberal economy it has
become increasingly difficult for local SMEs to grow and face up to competition being created
by foreign companies. In view of this, the fairness of the economic policies governing the way
business is conducted in Zambia on the basis of companies being local SMEs and foreign
conglomerates is being questioned. The whole purpose of empowering local Zambians is being
defeated because they cannot face up to competition from foreign companies in terms of
capacity, quality of goods, access to financing and general management.
At present, the ZDA act does seem not to be having any impact at all on the promotion of the
Zambian entrepreneur through SMEs, and most SMEs in Zambia are ignorant of the provisions
and powers given unto them through this act. Given the circumstance how adequate are the
provisions contained in the ZDA act to empower the Zambian SMEs and what strategies and
methods is the ZDA going to use to ensure that the Zambian entrepreneurs are aware of the
various provisions and policies the act brings on board to empower them.
Although the SMEs in the private sector in Zambia have such great potential for economic
development, equitable wealth redistribution and poverty alleviation, they face many business
constraints and challenges which hinder growth and limit their ability to contribute effectively to
national economic development.
According to the Ministry of Commerce Trade and Industry (MCTI) (2006), these challenges
and constraints include:-
Limited access to markets,
Limited access to appropriate technology, machinery and equipment
Limited access to suitable business financing solutions
Inadequate business infrastructure such as roads and telecommunication facilities

In addition to the constraints identified by Ministry of Commerce Trade and Industry, the SME
sector also faces the following constraints;

Limited technical and management skills
Inadequate and unsuitable operating premises that can facilitate enterprise growth.
Inadequate regulatory systems
Excessive competition from unregulated importation of cheap products
All these business constraints and challenges manifest themselves in the failure by the sector to
grow into a viable bottom up development tool and an effective contributor to national
development as is the case with SMEs in economies such as India, Central Asia, and South

I will conduct my study in within Zambia among SMEs themselves and also among
government regulating agencies, SME sector associations, Non Governmental organizations,
representatives from cooperating partners, the Ministry of commerce trade and industry and
financial lending institutions, like Banks, and Microfinance institutions
I will select 10 companies from SMEs, I will also interview representatives from, the Mine
Suppliers and Contractors Association of Zambia, the Zambia Development Agency, the
Consumer Protection and competition Commission, Zambia Public Procurement Authority, the
Citizens Economic Empowerment Commission, the Zambian Bureau of Standards, Stanbic Bank
Zambia Limited, Natsave, Bayport, Blue services, and the Development Bank of Zambia.
My primary focus with the SMEs will be to find out what difficulties they encounter in their day
to day running of the business? What challenges they face to acquire financing, what challenges
they face in order to build capacity in the management of their businesses? What challenges do
they face to acquire licensing? What challenges do they face to have access to markets?
With regards to the SME sector associations my focus will be on: what challenges do they face
in trying to help their members have access to or overcome the above outlined challenges? What
are the benefits for the members belonging to these associations? What do the member SMEs
wish to accomplish by forming these associations? What have the various associations
accomplished for the period that they have been in existence? If they have accomplished
anything, is there any working examples to that effect and what do other countries have to learn
from this example.
From the Zambia Development Agency , my focus will be on what is the work of ZDA with
regard to SME development. How has it been able to help SMEs since its establishment? Is the
work being done by ZDA the best way of helping SMEs or is there any other way that the
Government can help to develop SME in Zambia.
From the Consumer protection and completion commission my focus will be how is the
commission helping SMEs to come up with quality products in trying to protect the consumer.
How much sensitization is the commission doing to ensure the SMEs have a fair trading ground
or are competing favorably with goods from outside the country some of which are sub standard.
The Zambia Bureau of Standards my focus will be on how much work is it doing to protect the
local SME from substandard goods coming from outside the country. Is there any deliberate
policy to stop certain goods that can be effectively produced in Zambia from being imported?
From the Zambia Public Procurement Authority, I shall seek to find out what policies the
government has put in place to promote SME through the authority and if there are any what has
been the effects of these policies. Have they helped to grow the SME in Zambia or not?
From the Citizens economic empowerment commission I shall seek to find out what has been the
effect of this empowerment fund on SMEs. Has it benefited all SMEs regardless of their political
affiliations or not. Has the repayment of these funds buy the SMEs that benefited been a success
or not and is it the best way to empower the SMEs. Overall has this fund been a success or a
From the Banks my focus will be to find out if they have been able to help in the growth of
SMEs by providing finance. What deliberate policies have they put in place to ensure the SMEs
have got access to the various loans the banks and other microfinacing institutions provide? How
can they relax the complex procedures and requirements that make SMEs fail to access funding
from the Banks?
From Zambias cooperating partners and or donor agencies, what has been their policy on SME
development for Zambia? What intervention measures do these countries put in place to ensure
the support for this country in terms of funding is channeled through SMEs? Have these
countries been able to identify SMEs in Zambia that have potential for growth and be able to
provide funding, capacity building and management support them? Going forward how can
cooperating partners channel direct foreign investments through SMEs to empower them and
foster growth?
From the ministry of Commerce I will seek to find out what deliberate policies the Government
has put in place to help SME sector growth in the Country. What supervisory measures or bench
marks has the government put in place to monitor the work of the various agencies meant to help
promote SME growth in the country? In comparison to the policies of other governments in the
SADC and COMESA region what deliberate policies has the Government put in place to protect
the local SME and also to suit the economic climate of our nation and not to copy from other
nations policies which are not conducive for the growth of SMEs in our country

I will first of all carry out a desk research in form of literature review
I will begin by doing a literature review of the various books, Journals and posts on SME sector
development in Zambia and the SADC region and COMESA. From this review I will analyse the
findings of the impact of the various policies that the Governments in the SADC region and
COMESA have put in place has had on the growth of SMEs in the region in general and do a
comparison of the effects such policies have had on the growth of SMEs in Zambia in particular.
Data collection will consist of surveys, and interviews with SMEs, Heads of Government
Agencies responsible for SME policy development, appropriate departments in the Banking
sector and other financial lending institutions, Heads of Government missions in Zambia and
leaders of various SME sector associations. Initially a survey instrument in form of a
questionnaire to measure the general response regarding prospects of SME growth and what
factors the Government can put in place will be put to a broad spectrum of SMEs in Zambia (
ideally, n=50). Subsequently a purposeful sample will be identified to participate in the second
round of data collection. Multiple interviews are planned with each participant in order to
provide more in-depth data collection and opportunities for follow up. The goal is to interview
approximately 10 participants who embody a range of identity positions and who come from
different stakeholder sectors mentioned above.
A qualitative evaluation shall be utilized for this research project leveraging subjective methods
such as interviews and surveys to collect substantive and relevant data.
Upon collecting the qualitative data derived from said interviews, careful analysis shall be done
to prepare a SWOT (strengths, weaknesses, opportunities, and threats) analysis to analyze how to
best customize these findings to the target audience.

Data Analysis
Data will be analysed according to a frame work that will be as follows:
The first part of the study will review literature from different parts of the world including
Zambia and describe and evaluate different SME policies in these countries and compare them
with our Zambian policies. This will be basically a desk research which will examine previous
research papers and practices in these countries in order to map the current understanding of
SME enterprise development and to identify critical issues
The second part will critically analyse the genesis of the SMEs in Zambia focusing on the role of
Government in promoting SME development. This will involve careful study and analysis of
literature and documents in Libraries, at the ministry of commerce Trade and industry, Zambia
Development agency, Zambia Revenue Authority (ZRA), Zambia Public Procurement Agency
(ZPPA) and Patents And Companies Registration Agency ( PACRA)
Data will be analysed according to a frame work that includes the following:
What were the policies of government on SME growth soon after independence
What guide lines did the ministry then put in place to guide the formation of the SMEs.
How much emphasis did the government then put in regarding the growing of the private
sector led economy through SMEs
what percentage of employment ratio did the SME run companies provide in comparison
to the state run companies
What challenges did the SMEs face due to the heavy presence of state run companies
Thus the various stages of development towards a private led enterprise will be highlighted
taking note of the various constraints encountered and the strategies put in place to overcome
these obstacles for the entire SME journey in Zambia will be identified
The third part will now zero in on the current policies and will be primarily qualitative in focus,
employing semi structured interviews of selected executives from SME associations like the
small scale miners and contractors association of Zambia, the Zambia Chamber of commerce and
industry, the Economic Association of Zambia, Non Governmental organizations involved in
empowering the SMEs and foreign missions with interest in enterprise development. Other
people to be interviewed will be heads of commercial departments in mining conglomerates,
governments heads of procurement and business units, Government agencies established
through various acts of parliament like ZDA, ZPPA, PACRA and CEEC.
This will be aimed at gathering and analyzing the views, opinions and general understanding of
the current liberal, decentralized and private driven economic system. This part of the research
will also indicate or peer into new ways in which SMEs in an emerging liberal market can be of
value to the nation by being innovative, building capacity in their operations and become
competitive and grow at the same level with foreign companies
I will be guided most generally by the interpretive perspective, and situational approach. The
interpretive perspective places the focus on interpreting the meanings and perspectives of sector
stakeholders, and how these meanings are negotiated. I am exploring the views the SMEs have
for themselves as individuals and for their relationships, as well as the views SMEs have for the
government policies, the cooperating partners, and the associations of which they are members.
The situational approach directs me to choose a few specific interactions to explore in depth
findings from Government agencies, cooperating partners and the ministry of Commerce. Thus,
an appropriate means of investigating the topic from this perspective is conversational, plus
interviewing the various stakeholders to understand the challenges in developing this important
sector of the economy
Conclusions and Recommendations

The small and medium enterprises have been believed as very important in accelerating the
economic development of a country. That is why its role is becoming increasingly prominent
throughout the world. This study examines the factors which hinder growth and success of small
and medium enterprises. These factors are financial resources, marketing strategy, technological
resources and government support and entrepreneurial skill.
The study is likely to find out and conclude that financial resources, technological resources,
government policies and support, competition and lack of capacity and entrepreneurial skills
have a significant impact on business success if harnessed properly under conducive
This research also wishes to establish that financial resources are the most important factor that
affects the SMEs success. Financial resources are the key factor on which whole business is
depending upon. Due to less Government financial support to entrepreneurs they face a lot of
problems. Due to less financial resources entrepreneurs are not able to finance the marketing
activities of their products. First of all this is due to fact that SMEs have very small capital as
compared to corporate sectors. Secondly SMEs have to face global competition. It has long been
established in past researches that technology plays a vital role in the productivity of the firms.
The efficiency of production sector can be increased by using new technology. It is also cost
saving. Business success is directly dependent upon technological factors. Therefore lack of
access to new technology by SMEs hampers their growth and success
The research also wishes to conclude that leadership skills , decision making skills, management
skills and professional affiliation with the business sector associations is also very important in
achieving success of the business. If an entrepreneur is expert in above mentioned functions only
then he can avail the opportunities in better way. Entrepreneurs are not satisfied with the
government support.
While SMEs in general face significant obstacles that can affect their development and growth,
these vary from country to country. Some Governments make it increasingly difficult for local
businesses to flourish through burdensome regulation that lengthens important procedures and
raises the stakes of failure. This is what this study whishes to examine if Zambia is among such
If the factors that make SME growth and development especially difficult can be improved in
Zambia this sector is likely to grow at a very fast rate and contribute to the national economy.


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