Challenges Facing the Financial Management of Small, Medium and Micro Enterprises in Botswana

Abstract

Using a sample of 66 respondents drawn from Gaborone, this sought to investigate financial management practices among small, medium and micro enterprises (SMMEs) in Botswana and how these affect performance. The survey method, in the forms of self-administered questionnaires and face-to-face interviews, was used to collect the data required for the study. Data were analysed using the SPSS statistical package. The results showed that SMMEs in Botswana were faced with multiple challenges that undermine their capacity to operate effectively. The top five of these were stiff competition both locally and internationally, short term business requirements and multiple responsibilities of managers, access to finance to expand businesses, poor Management, and poor employees' work ethics. The study also showed that many entrepreneurs within the SMMEs sector have not recognised the importance of adopting financial strategies such as maintaining business plans, planning their business strategies, using good cost structure needed for the attaining competitive edge, marketing strategies, effective administrating of their business operations and cash flows management. This compounded the problem of access to finance since proper financial records are a requirement for a business to apply for loans. In addition, it was found that the majority of managers/owners appreciated the dynamics of affecting a business' profitability. The respondents were well-versed with the factors that they responsible for non-profitability such as poor management, inadequate financing, and competitive pricing, among others. Based on the findings of the study, it was concluded that the SMMEs in Botswana was faced with many challenges including the lack of access to finance that hampered its viability as a job creator. However the economic benefits of sustainable SMMEs in Botswana are convincing and the potential effects on the citizen empowerment and economic diversification are equally promising. Guided by the objectives of the study a number of recommendations were offered by way of strengthening the SMMEs sector. Among others, these included the call for increased participation of SMMEs in design and implementation of new financial policies, provision of extensive libraries of financial management topics and resources, training in entrepreneurship and managerial skills, ensuring that all businesses funded through government schemes

have their financial management handled by accounting firms for the first three years, encouraging SMMEs to establish sound financing and accounting systems, and improving quality of business advisors.