Financing and managing manufacturing small, medium and micro enterprises (SMME' s) in Botswana : challenges and opportunities

Abstract

Small, medium and micro enterprises (SMMEs) are pivotal to income generation, gross domestic product (GDP), poverty reduction, employment creation, economic growth, and diversification of a nation. Botswana has over-depended on diamond exports, which are on the decline; hence, it is imperative to diversify the economy into manufacturing. Manufacturing SMMEs face challenges that cripple their chances of survival and growth. This study therefore, examines the gravity of financing and managing challenges of Botswana manufacturing SMMEs, as well as causes of the challenges and opportunities. The study also examines the factors influencing borrowing from commercial banks by SMMEs in the manufacturing sector. The study will bridge the gap of scarcity of data on manufacturing sector. Before the main study, there was a pilot study on 12 SMMEs in Gaborone, Botswana to test the questionnaire and fine-tune it. The main study employed both qualitative and quantitative research design. The researcher used a combination of deductive and inductive research approach. A target population of 329 registered manufacturing SMMEs in Botswana was employed where a research sample of 100 was drawn using a random stratified sampling technique. The researcher divided Botswana as a country into six strata from which sample figures were derived: Gaborone, Francistown, Maun, Kasane, Serowe, and Ghanzi. The manufacturing SMME participants (owners/directors/managers) were administered a structured questionnaire which was either emailed by the researcher or delivered by hand to the office of the participant. The population of commercial banks was a possible seven commercial banks operational in Botswana. Homogenous purposive sampling was used to select three commercial banks out of the seven. The selection criterion for commercial banks was based on the researcher selecting the banks that had active programs for supporting manufacturing SMMEs. At each of the selected banks, the person interviewed was the head of SMME banking to maximize the information collected during interview. A modified credit rational theory was used to interpret the two-pronged approach to the research where both demand-side and supply-side of financing were covered in the study. Reliability and validity tests were run on the instrument and a Cronbach's Alpha of 0.873 was attained. Data was captured, coded and analysed using SPSS computer software. The data was analysed descriptively and using multivariate logistic regression model. Presentation of data was done through descriptive statistics, figures, tables, pie charts, and percentages. Qualitative data was thematically coded and analysed. Findings include: 1) the factors influencing manufacturing SMME borrowing are gender, marital status and annual sales turn over; 2) the problem of information asymmetry is evident in the Botswana manufacturing sector; 3) the main challenges faced by SMMEs (in descending order) are lack of capital, lack of market, tough competition, shortage of skilled labour, tough regulations and lack of accounting records; and 4) opportunities in and around Botswana are available, but SMMEs are ignorant of process to tap into the market, for instance, to export into Southern African Development Community, and the rest of Africa. Policy implications and recommendations were given.