Smme in Botswana

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LITERATURE REVIEW
THE SMME SECTOR IN BOTSWANA
2.1 INTRODUCTION
In its effort to diversify the economy away from dependency on the mineral sector, the government of Botswana realised the importance of supporting SMMEs in fostering economic growth and creating jobs. Over the past two decades, targeted financial support as well as advisory programmes to help the people of Botswana to establish their own enterprises was introduced and implemented at different levels. In the initial stages, “the programmes were set up more in response to specific problems encountered than as the basis of a comprehensive and more focused government policy on SMMEs” (RB, 1999). However, in recent times the landscape has since changed with government and the private sector pulling resources together in a crusade to assist the local SMME sector. The purpose of this chapter is to provide an overview of the SMME sector by reviewing the initiatives undertaken by government. Such initiatives include policy formulation and the implementation of programmes intended to assist the SMME sector in Botswana. 2.2 SMME DEFINITION

A review of the literature on definitions and categorisation of SMMEs indicates that there is no single and standard definition for SMMEs. It is in this regard that the Government of Botswana accepted the criteria proposed by the SMME Task Force of 1998 in defining the three categories of enterprises, using annual turnover and the number of employees. A micro enterprise is defined as a business with the number of employees not exceeding six and a maximum annual turnover equal to or less than BWP 60,000.00. A small enterprise makes an annual turnover of between BWP 60, 000.00 and BWP 1.5 million and employs not more than 25 people. A medium enterprise is defined as a firm that has a maximum number of 250 employees and an annual turnover of between BWP 1.5 million and BWP 5 million (RB, 1999). The SMME Policy (1999) notes that, even though the categorisation is retained as a guide for broad policy purposes, the Policy leaves room to consider more specific definitions such as when a particular government policy on e.g. taxation or direct assistance programme is developed.

It has been an observation that many small business owners fail to realise the importance of the accounting function and as a result cause the failure of the business (Stone, 2003, preface). This assertion supports the view that the implementation of an effective accounting system can contribute to the success and growth of a small business. 2.3PRELIMINARY LITERATURE REVIEW

A number of research interventions have been conducted on the importance of access of finance to small business owners on a global level. On a survey done on SMMEs in Great Britain, access to finance was the main reason for the failure of these businesses. Woodcock in Buckland and Davis (1995) argues that there is a continuity of lack of knowledge on the part of small businesses pertaining to possible funding options. Mason et al in Buckland and Davis (1995) in conjunction with the latter, observe that entrepreneurs often have difficulty in convincingly conveying their specialized knowledge to a bank manager. In Great Britain banks are a recognized source of start-up and working capital. According to Hughes and Storey (1994) they are however, not a particularly easy source, putting a priority on security/collateral and for intervention of the state. Thus, SMMEs require support if they are to survive and grow. According to Miroslav and Drnovsek in Kirby and Watson (2003), one of the obstacles that hindered the creation of new ventures in

Slovania includes lack of capital financing for small business initiatives on the part of banks and other financial institutions. Banks were reluctant to lend to small businesses and practically no venture funds existed. New entrepreneurs primarily obtained the requisite resources from family members and friends (Kirby and Watson, 2003)....
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