Implications of an SME-based economy.

The government industrial policy has always supported the small to medium-scale enterprises (SMEs) as a vital economic sector. The SMEs have been a viable, yet subsidiary sector that complemented big business by supplying goods and services. Southern Eye indicates that the presence of the SME sector has been made possible by the government’s investment in practical subjects and entrepreneurship. Its emergence as a primary sector has been further catalysed unwittingly by the imposition of economic sanctions on Zimbabwe.

 The economic sanctions forced many big companies into liquid action and viability problems leading to widespread shutdowns or scaling down of operations, forcing retrenchment of tens of thousands of employees. Some of those who lost their jobs started their own businesses such as small-scale mining and farming, initiatives promoted by the government and aimed at benefiting Zimbabweans.

 indigenisation to prevail in Zimbabwe.

 Furthermore, Southern Eye mentions that SMEs now become the dominant sector which is responsible for providing the government revenue. The government needs to avoid revenue leakages from this sector by ensuring that it reforms and implements an appropriate and effective governance and tax collection system. The current level of revenues should be seen partly as a struggle by the government to collect taxes from an SME sector still adapting to a major economic structural change.

locals advised to grow more of local products

 However, that potential revenue loss would likely be temporary. As SMEs become more competitive and get a tighter grip of the economy, and as the new SME-based tax structure reaches and incorporates a majority of SMEs, revenue will likely improve. Importantly, the government will need to be more financially prudent so that their expenditure does not lead them to levy higher taxes to SMEs.