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Mozambique 2015 | ECONOMY | VIP INTERVIEW

TBY talks to Claire Mateus Zimba, General Director of the Instituto para a Promoção das Pequenas e Médias Empresas (IPEME), on what the institution is doing to support SMEs.

Can you introduce Instituto para a Promoção das Pequenas e Médias Empresas (IPEME) to our readers?

IPEME was created in 2008 by the government with a mandate to undertake three core activities. The first is to develop, propose, and implement policies that support SMEs in Mozambique. The second is to provide services to support SMEs, and thirdly to implement and establish SME platforms, such as our business development centers and business incubators. Since 2008, we have created four business development centers: one in Maputo, one in Tete, one in Manica, and another in Cabo Delgado. We are receiving EU and United Nations Industrial Development Organization (UNIDO) support for our business incubation pilot program, which will focus on the carpentry and woodworking sector. We are still also being supported by USAID on building and implementing the SME Complex in Machava. From 2010 to 2014 we provided around 11,800 services to SMEs. We are investigating improving our business assistance by acting as an intermediary and facilitating links between SMEs and the larger projects. For example, IPEME signed an MoU with Anadarko in 2014. The goal is to ensure that Mozambican SMEs can be linked with and benefit from the activities of Anadarko. Our role is to act as an intermediary and facilitate SME access to commercial finance as well manage the SME database. IPEME helps SMEs apply for credit loans, gain financial literacy, and negotiate with the banks. The Portuguese and Mozambique governments signed, in March 2014, a deal to reactivate the Fundo Empresarial de Cooperação Portugues (FECOP), which is focused on SMEs and business cooperatives and provides special financial services such as credit warranties and bona fide interest rates at a national level. IPEME is also a member of a steering committee that approves and supervises credit applications. The FECOP will be implemented by selected commercial banks, namely BIM, BCI, MozaBanco, and Banco Único.

Aside from financing, what other challenges do Mozambican SMEs face?

Access to information is limited, such as being able to identify business opportunities, or where to apply for the proper licensing. Many SMEs are not well structured in terms of quality standards and efficient business plans. We are addressing this by implementing a program called One District One Product (CADUP) sponsored by the Japanese government and its development agency, JICA, to the agribusiness sector. This program focuses on developing the products that have the highest potential demand at both the local and export level. We selected five provinces and 200 products from rural associations of producers, micro businesses, and small companies, and have started structuring output in line with international standards. Regarding exports, we are partnering with the Mozambique Institute for Export Promotion (IPEX) to identify the right markets into the SME Export program.

“SMEs are a rapidly emerging sector, and these companies are the primary employers in Mozambique."

How would you characterize the evolution of the SME sector?

A recent report found that SMEs in Mozambique comprise 98.7% of the market, but they only contribute 28% to GDP. The right financial solutions will empower these businesses to reverse that statistic. Most SMEs are in the informal sector. We are addressing this problem by working with the taxation authorities to implement a system that integrates these businesses into the formal economy, also supported by the German government, ensuring that bigger projects are a market opportunity for these SMEs. In 2010, the government approved a new procurement law that provides two modalities of contracts exclusively to SMEs, namely small dimension and limited tender bids. The law mandates that public institutional bids must account for SMEs.

What incentives should be provided for SMEs to move into the formal market?

Taxation is an important consideration. In light of this, the government is currently reviewing the second phase of its business development strategy, which is focused on taxation. Most SMEs remain informal in order to avoid taxation. This is in large part due to the structuring of the tax system in Mozambique, which fails to distinguish micro or small enterprises; all businesses are treated the same. The new taxation regime must take into account the classification of these companies, as well as tax, registration, and licensing incentives or exemptions.

What are your next strategies to expand and reach rural areas?

The Dutch government is funding the establishment of business development centers, which will open in 2015. These centers will be located in Chiúta, Catandica, Caia, and Mocuba. Another regional branch will open in Tete province. IPEME is also partnering with the Ministry of State, running a program that will be operational in 2015. The program entails nine business development centers in Gaza province, Cabo Delgado, and Nampula. The centers will assist and coach with business planning, industry networking, training, and business incubation. The government hopes to empower and develop SMEs by rolling out more of these integrated services.

In which sectors are SMEs developing the fastest here in Mozambique?

In 2014 the government approved a development strategy that prioritized some specific areas: industry, agribusiness, and agriculture, as well as others. However, tourism is also important and of course logistics services, which tend to large projects further upstream. These areas are of strategic importance to us. These areas will help our country develop its export market, create new jobs, and expand our taxation base.

How would you describe the degree of collaboration between foreign companies and the SME network in Mozambique?

SMEs are a rapidly emerging sector, and these companies are the primary employers in Mozambique. This translates into more Mozambicans using entrepreneurships and innovation as a tool to deliver services to the market, as well as develop partnerships with foreign companies. Mozambique also still needs to push for diversification in the financial sector, which can be partly addressed through the entry of more SMEs. We have an opportunity to empower the financial capability of SMEs so that they can contribute a significantly larger percentage to GDP.

© The Business Year - October 2014