I
The Role of
Information and Communication Technology for
Small, Medium and Micro Enterprise Development
in
Botswana
Interim Report
Interim Results of a Research Project Supported by the
UK Department for International Development (DFID)
Prepared by
Richard Duncombe
Institute for Development Policy and Management (IDPM)
The University of Manchester
In co-operation with BIDPA
(Botswana Institute for Development Policy Analysis)
September 1999
The UK Department for International Development supports policies, programmes
and projects to promote international development. DFID provided funds to support
this study as part of that objective, but the views and opinions expressed are those of
the author alone.
II
Table of Contents
TABLE OF CONTENTS ................................................................................................................ II
LIST OF FIGURES............................................................................................................................. V
ABBREVIATIONS ...........................................................................................................................VII
EXECUTIVE SUMMARY .............................................................................................................. 1
BACKGROUND ................................................................................................................................. 1
RESEARCH OBJECTIVES AND METHODS ............................................................................................ 2
PRINCIPAL INTERIM FINDINGS .......................................................................................................... 2
SOME PRELIMINARY CONCLUSIONS .................................................................................................. 4
PROJECT OUTLINE ...................................................................................................................... 6
RESEARCH BACKGROUND ................................................................................................................ 6
RESEARCH OBJECTIVES.................................................................................................................... 7
RESEARCH METHOD ........................................................................................................................ 8
RESEARCH OUTPUTS ........................................................................................................................ 8
COMMUNICATION AND DISSEMINATION OF RESULTS ......................................................................... 9
THE ROLE OF INFORMATION AND COMMUNICATION TECHNOLOGY IN SMALL,
MEDIUM AND MICRO ENTERPRISE DEVELOPMENT IN BOTSWANA ........................... 10
INTRODUCTION ............................................................................................................................. 10
AIMS AND STRUCTURE OF THE INTERIM REPORT ............................................................................. 11
CHAPTER 1. THE ROLE OF INFORMATION IN ENTERPRISE DEVELOPMENT ........... 14
1.1 INFORMATION ........................................................................................................................ 15
1.2 ENTERPRISE ........................................................................................................................... 16
1.3 ENTERPRISE INFORMATION NEEDS .......................................................................................... 17
1.31 Factors affecting information needs................................................................................. 18
1.4 ENTERPRISE/ENTREPRENEUR INFORMATION NETWORKS .......................................................... 20
1.41 Economic (business) linkages........................................................................................... 20
1.42 Socio-cultural environment.............................................................................................. 21
1.43 Institutional networks....................................................................................................... 21
1.44 Entrepreneurship ............................................................................................................. 22
1.5 DATA, INFORMATION AND KNOWLEDGE .................................................................................. 23
1.51 Formal and informal information models......................................................................... 25
1.52 Internal/external information........................................................................................... 25
1.6 INFORMATION BARRIERS/RESOURCE INEQUALITIES .................................................................. 26
1.61 Lack of demand for formal information............................................................................ 26
1.62 Lack of supply of formal information ............................................................................... 27
1.63 Lack of access to information sources.............................................................................. 28
1.64 Lack of information handling capacities .......................................................................... 28
1.7 ENTERPRISE STRATEGY ISSUES............................................................................................... 29
1.71 The information ‘value chain’.......................................................................................... 30
III
CHAPTER 2. INFORMATION AND ENTERPRISE DEVELOPMENT: THE CASE STUDY
OF BOTSWANA............................................................................................................................ 32
2.1 ECONOMIC BACKGROUND TO ENTERPRISE DEVELOPMENT......................................................... 32
2.2 THE SMME MARKET STRUCTURE IN BOTSWANA ..................................................................... 35
2.21 Formal sector enterprises ................................................................................................. 37
2.22 Non-formal sector enterprises........................................................................................... 38
2.3 THE CONTRIBUTION OF SMMES TO THE ECONOMY ................................................................. 39
2.4 CONSTRAINTS ON SMME DEVELOPMENT IN BOTSWANA .......................................................... 42
2.41 Lack of entrepreneurial background and aptitudes .......................................................... 43
2.42 Lack of education, skills and training .............................................................................. 43
2.43 Lack of incentives and opportunities................................................................................. 45
2.44 Lack of capital/finance .................................................................................................... 46
2.45 Lack of technology/technical expertise ............................................................................ 47
2.46 Lack of land/premises ....................................................................................................... 48
2.47 Lack of business linkages................................................................................................. 48
2.48 Lack of effective institutional support .............................................................................. 49
2.49 Lack of information .......................................................................................................... 52
2.5 HYPOTHESES CONCERNING INFORMATION, ICTS AND SMME DEVELOPMENT IN BOTSWANA ..... 54
CHAPTER 3. THE INFORMATION NEEDS OF THE SMME SECTOR IN BOTSWANA: A
FIELD STUDY............................................................................................................................... 55
3.1 THE FORMAL SECTOR STUDY .................................................................................................. 55
3.11 Methods and techniques for data collection ..................................................................... 55
3.12 Sampling.......................................................................................................................... 57
3.13 Sample response .............................................................................................................. 58
3.2 ANALYSIS OF SAMPLE RESPONSE ............................................................................................. 59
3.21 The entrepreneurs............................................................................................................. 59
3.22 The enterprises ................................................................................................................. 59
3.3 ANALYSIS OF RESULTS: INFORMATION NEEDS OF ENTERPRISES ................................................ 62
3.31 Information needs of enterprises ....................................................................................... 64
3.32 Access to information ....................................................................................................... 67
3.33 Information sources .......................................................................................................... 68
3.4 CURRENT INFORMATION PRACTICES WITHIN FORMAL-SECTOR SMMES ..................................... 69
3.41 Labour, skills and training................................................................................................ 70
3.42 Capital and finance .......................................................................................................... 70
3.43 Technology ....................................................................................................................... 71
3.44 Materials ......................................................................................................................... 71
3.45 Existing local customers .................................................................................................. 72
3.46 New local customers ......................................................................................................... 73
3.47 Export customers ............................................................................................................. 73
3.48 Competition and competitors ........................................................................................... 74
3.49 Regulatory/legal information ........................................................................................... 74
IV
CHAPTER 4. INFORMATION AND COMMUNICATION TECHNOLOGY AND
ENTERPRISE DEVELOPMENT IN BOTSWANA..................................................................... 76
4.1 TELECOMMUNICATIONS EXPANSION AND DE-REGULATION ....................................................... 76
4.2 INFORMATION TECHNOLOGIES IN BOTSWANA .......................................................................... 78
4.3 ICTS IN THE SMME SECTOR .................................................................................................. 80
4.31 Technologies for information retrieval/dissemination ....................................................... 80
4.32 Technologies for information storage and processing ...................................................... 83
4.4 EMERGING ICTS IN THE SMME SECTOR ................................................................................. 86
4.41 E-mail.............................................................................................................................. 86
4.42 Internet and World-Wide Web.......................................................................................... 86
4.43 Local networking ............................................................................................................. 87
4.44 Mobile communications ................................................................................................... 87
4.45 Electronic commerce ....................................................................................................... 88
4.5 ARCHETYPES OF BOTSWANA-BASED SMMES........................................................................... 88
4.51 Preliminary classification of enterprises according to ICT intensity ................................ 89
4.6 PILOT CASE STUDIES .............................................................................................................. 94
4.7 ICTS IN THE NON-FORMAL SECTOR ......................................................................................... 99
EXTENDED SUMMARY AND CONCLUSIONS...................................................................... 102
BACKGROUND ............................................................................................................................. 102
RESEARCH OBJECTIVES................................................................................................................ 102
THEORETICAL FRAMEWORK ......................................................................................................... 103
THE CASE STUDY OF BOTSWANA ................................................................................................. 104
RESEARCH METHODS AND SAMPLING ........................................................................................... 104
RESPONSE PROFILE ...................................................................................................................... 105
PRINCIPAL FINDINGS ................................................................................................................... 105
1. Factors mentioned as critical for business success.............................................................. 105
2. Stated information needs of formal sector SMMEs.............................................................. 106
3. Formal/informal information practices of formal sector SMMEs ........................................ 107
4. Information sources used by entrepreneurs......................................................................... 107
5. Communication channels used by entrepreneurs................................................................. 108
6. Information storage and processing within formal sector SMMEs....................................... 109
7. Dissemination/use of information by formal sector SMMEs ................................................ 110
SOME PRELIMINARY CONCLUSIONS .............................................................................................. 110
1. Prioritisation and effective use of ICTs in SMME development........................................... 110
2. Overcoming ICT constraints for SMMEs ............................................................................ 113
REFERENCES............................................................................................................................. 116
APPENDIX 1. CHARACTERISTICS OF INTERVIEW SAMPLE .............................................................. 119
V
List of Figures
Figure
Fig 1.
Schematic Representation of Small-enterprise Information Networks.
Fig 2.
The Information Chain.
Fig 3.
Information Handling Capacities in the Information Chain.
Fig 4.
Critical Information in the Value Chain for Manufacturing Enterprise.
Fig 5.
Distribution of Registered Private Sector Enterprises According to Economic
Sector and Firm-size. (Number of Employees)
Fig 6.
Gross Domestic Product (GNP) by Type of Economic Activity.
(1985/86 Prices. Pula million)
Fig 7.
Labour Force Composition in Botswana. 1981 – 1994.
Fig 8.
The Distribution of Sample Response According to Number of Employees.
Fig 9.
The Importance of Groups of Customers for Total Sales within
Sample Response
Fig 10. Prioritised List of Factors Governing Business Success
Over the Next Three Years.
Fig 11. Prioritised List of Factors (1-3) Governing Business Success for ServiceSector, Non-exporting Manufacturers and Manufacturing Exporters.
Fig 12. Prioritised List of Information Needed Most Urgently within Enterprises.
Fig 13. Prioritised List of Information Needed Most Urgently for Service-sector,
Non-exporting Manufacturers and Manufacturing Exporters.
Fig 14. Ease of Obtaining Good Quality Information for Respondents.
Fig 15. Percentage of Enterprise Finding Information Difficult to Obtain/
Not Obtainable. (Manufacturing and Service-based Enterprises)
Fig 16. Importance of Sources of Information for Respondents.
Fig 17. Percentage of Respondents Who Felt Information Source was ‘Very
Important’ for the Success of their Business.
Fig 18. Selected Telecommunication Indicators from SADC Region and
Three High Income Economies (1996)
Fig 19
Percentage of Respondents who used Communication Channel ‘Very Often’
In their business dealings.
VI
Fig 20. Percentage of Respondents Who Found Communication Channels ‘Very
Effective’ for Promoting their Products and Services.
Fig 21. Percentage of Manufacturing and Service-based Enterprises using
Computer-based Storage/Processing Systems (Business Functions)
Fig 22. Percentage of Manufacturing and Service-based Enterprises Making
Use of Computer-based Activities.
Fig 23. Distribution and Characteristics of Survey Responses According to
Level of IT Intensity.
Fig 24. Use of computer-based Activities within Enterprises According to Level
of ICT Intensity.
Fig 25. Level of Computer Use for Storage and Processing of Enterprise
Information According to Level of ICT Intensity.
VII
Abbreviations
BDC
Botswana Development Corporation
BEDU
Botswana Economic Development Unit
BIDPA
Botswana Institute for Development Policy Analysis
BMC
Botswana Meat Commission
BOCCIM
Botswana Confederation of Commerce, Industry and Manpower
BTC
Botswana Technology Centre
CSO
Central Statistical Office
FAP
Financial Assistance Policy
GDP
Gross Domestic Product
GNP
Gross National Product
IBRD
International Bank for Reconstruction and Development
ICT
Information and Communication Technology
IDPM
Institute for Development Policy and Management
IFS
Integrated Field Services
ISDN
Integrated Services Digital Network
IT
Information Technology
LDC
Less Developed Country
LPP
Local Procurement Programme
MSE
Micro and Small Scale Enterprise
MVA
Manufacturing Value Added
NDP
National Development Plan
NGO
Non-governmental Organisation
NIC
Newly Industrialising Country
RIIC
Rural Industries Promotion Company
SADC
Southern African Development Community
SEPROT
Small Enterprise Promotion Trust
SMME
Small, Medium and Micro Enterprise
TIPA
Trade and Industry Promotion Agency
UNCTAD
United Nations Conference on Trade and Development
VTC
Vocational Training Centre
Executive Summary
This is a summary of research that examines the role of information and
communication technologies (ICTs) in the development of small, medium and micro
enterprises (SMMEs) in Botswana. The preliminary results are based on the initial
phase of fieldwork conducted in Botswana from January to March 1999. The enclosed
report presents the principal findings produced from the analysis of data at the interim
stage of the project. The conclusions reached, therefore, are both tentative and partial.
Whilst it is hoped that the report will be useful to its recipients, it should also be
emphasised that the final results and recommendations will only be made available
upon completion of the fieldwork and publication of the final report.
Background
The role that emerging ICTs can play in closing knowledge gaps and solving
information problems for SMMEs in Botswana has yet to be clearly defined. The
impact of enhanced communications on the SMME sector has been extremely uneven.
More sophisticated ‘modern sector’ enterprises have been able to take advantage of
new technological opportunities, such as e-mail, Internet access and mobile
communications, which have seen rapid expansion within larger urban centres.
However, most SMMEs operate in traditional or ‘backward sectors’ of the economy
often in remote locations, and lack access to the skills, finance and infrastructure
necessary for effective utilisation. The wider enterprise sector has remained largely
untouched by rapid changes in technology and there appears to be an increasing
polarisation between those sections of the population who are able to participate in the
‘global information revolution’ and those who remain distanced from it.
In recent years, however, the Botswana government has made a number of policy
changes which offer the potential for extending information and communication
services more widely. The new telecommunications policy has laid down three policy
goals of universal service, efficient supply of services, and regional balance between
urban and rural areas. The new policy for SMMEs aims to encourage the development
of a competitive and sustainable SMME community, utilising modern technologies and
business practices. The thrust of present policy is to encourage rapid adoption of
emerging technologies with the hope of empowering more local entrepreneurs within
the process of industrial growth and economic diversification.
At present there is little research, based on objective evidence, analysing the impact of
emerging ICTs on industrial and commercial development in less developed countries
(LDCs) such as Botswana. There is virtually no evidence to suggest how such
advanced technologies can address the information and communication needs of poor
and disadvantaged groups within LDCs, such as represented by the wider SMME
community.
1
Research Objectives and Methods
The main research objective is to provide realistic recommendations about the
ways in which information and communication technologies can be applied to SMME
development. The project has the following primary aims:
•
•
•
•
•
Describe the ‘generic’ information needs of SMMEs in Botswana, and to assess
where the provision of externally generated information is likely to enhance the
prospects for business survival and growth.
Identify where information needs of SMMEs are currently not being met, and to
establish the nature of a possible ‘information needs gap’.
Map current information systems, which are common to SMMEs, for the
acquisition, processing, storage and utilisation of information.
Understand why entrepreneurs use current information systems, and to assess the
quality of information that is currently being provided.
Establish the potential for information and communication technologies (ICTs) to
bridge the gap between information needs and current provision.
The initial phase of data collection used interview and questionnaire surveys to analyse
the changing information needs and communication practices amongst a representative
sample of Botswana-based formal sector enterprises, the results of which are contained
in this interim report. The second phase of data collection will include in-depth
enterprise case studies, and will assess the role of intermediary organisations in the
provision of information to small/micro enterprises and in support of the non-formal
sector. Finally, the role of government in setting the policy framework for effective IT
implementation within the SMME sector as a whole will be considered.
Principal Interim Findings
The research findings, presented in abbreviated form, are based on data
collected from 61 enterprises that participated in the study. Data was assembled from
detailed questionnaire responses, and an additional 20 face-to-face entrepreneur
interviews with a representative cross section of formal sector enterprises. The
research sample covered SMMEs from a wide range of manufacturing and servicebased sub-sectors as well as manufacturing exporters.
The survey results are
representative of the views, actions and experiences of relatively well-educated
business owners/managers of established formal sector enterprises. It is the intention
of the second phase of fieldwork to balance the ‘bias’ of the formal sector survey by
concentrating data collection on micro and small-scale enterprises (MSEs) and the
non-formal sector.
The intention of the survey was to establish the information needs and information
practices of enterprises, including the formal and informal nature of sources, channels
and content of enterprise information. Against this background the current, and
possible future, role for ICTs in enterprise development could be determined. The
principal findings were as follows.
2
Information Needs of Formal Sector SMMEs
• Within all areas of business information (relating to business inputs, output markets
and the business environment) there exists a widespread ‘information needs gap.’
There appears to be a large unmet demand for essential business information from
all types of enterprises, and across all sectors.
• 91% of non-exporting manufacturers urgently needed information that would lead
to advice and/or assistance in accessing external financing and/or solving internal
financial problems.
• 58% of manufacturing exporters had urgent needs for information concerning
access to trained personnel and assistance with workforce training.
• 74% of service-based enterprises expressed urgent needs for information
concerning management training and new trained employees.
• 72% of all enterprises had urgent need to access information that would lead to
increased sales through obtaining new local customers and/or expansion into
export markets
Information Channels and Sources used by Formal Sector SMMEs
• Entrepreneurs depend heavily on their own ‘internally generated’ knowledge and
experience which has been built up within their present business or is a result of
previous employment/business ownership.
• Current information practices for obtaining external information are predominantly
informal in nature. Critical business information, relating to output markets and
business inputs, is received predominantly via personal contact through informal
business networks of customers, suppliers, other business contacts, family and
friends.
• Service-based enterprises and manufacturing exporters place little or no importance
on external business support institutions (governmental, non-governmental or
private) for providing business information. In contrast, 50% of non-exporting
manufacturers regard business support institutions as their single most important
source of external business information.
• Formal sources, such as provided by journals and Internet access, are of greater
importance to service-sector enterprises than for either non-exporting
manufacturers or manufacturing exporters.
Formal/Informal Information Content
• The exchange of informal information is common across all areas of business
activity. For example, informal loans from family and friends, on the job training
whereby knowledge and experience are passed on from experienced to less
experienced employees, informal advice or technical assistance from a business
associate, or market information leading to a new contract received through the
business grapevine or from a family member.
• At present insufficient data has been collected to determine the comparative quality
of formal and informal information. However, information received through
informal sources and channels is rated highly by business owners when compared
with formal institutional sources, because of the time, cost and convenience
benefits of accessing information informally.
Current ICT Utilisation within Formal Sector SMMEs
3
•
•
•
•
Face-to-face meetings and fixed line telephone and fax are all used very often by
approximately 70% of respondents within service and manufacturing sectors. Use
of other communication channels, such as e-mail, mobile telephone and postal
services, was appreciably higher amongst service-based enterprises and to a lesser
extent manufacturing exporters, but hardly used within non-exporting
manufacturing enterprises.
Enterprises in specific sectors, such as technical services, the IT sector and travel
and tourism, have achieved significant information access benefits from emerging
technologies, such as e-mail and Internet. These are all sectors that require regular
access to information and/or software across borders, both regionally and worldwide.
The level of IT use was particularly low within non-exporting manufacturers.
These enterprises were predominantly citizen-owned (86%). Differences in levels
of computer use amongst citizens or non-citizens were not, however, observable in
the service sector.
Amongst computer users with no external network connections, the level of IT
application within the enterprise was comparatively low. Only 20% of all such
enterprises had computerised basic business functions such as customer invoicing
and their internal accounting systems.
Some Preliminary Conclusions
It is not yet possible to present definitive conclusions concerning the
applicability of ICT solutions to the information problems and knowledge gaps
experienced by SMMEs. It is clear from the survey that there is a widespread unmet
demand for business information and/or assistance involving information provision.
The majority of entrepreneurs had a strong perceived need for quality information
relating to workforce skills and training, finance and management skills, output
markets and new technology. It is also clear, however, that enterprises depend upon,
and often prefer to access, information through informal/personalised channels and
sources. The costs and benefits and the ‘quality’ issues associated with informal
information practices are not yet clear from the data collected.
Some conclusions can be presented based on a preliminary enterprise classification that
defines formal sector SMMEs according to their level of ICT/information intensity.
Non-IT users, were predominantly small-scale citizen-owned manufacturers within the
survey response. They typically lacked finance, management and workforce skills, and
considered these factors to be their most significant business constraints. In terms of
telecommunications access these enterprises have potential for expanding their use of
IT systems. It is not yet clear how such enterprises could benefit from enhanced use of
ICTs, such as through the utilisation of internal computer systems, for example. It
would appear that current non-IT users require improvements to their existing
information practices, including access to quality training for improving business
communication skills, enhanced financial management skills and training in sales and
marketing techniques. Within such enterprises, improvement in basic skills (and
4
expansion of financial resources) is likely to be a precondition for expanded use of
ICTs.
Non-networked IT users can be described as ‘first-footers’ in small business
computing, who have access to computers, but no external network connections.
Although this category of enterprise has access to computers on the premises, the level
of IT application was comparatively low. 50% of such enterprises, however, regarded
upgrading computer systems as being critical to their future business success.
Evidence shows this type of business is widespread throughout the manufacturing and
service sectors covered in the survey. Many non-networked IT users are also lacking
in managerial capacities and share many of the characteristics of non-IT users. In these
cases the same pre-conditions for enhancing basic management skills would be
required.
Anecdotal evidence from interviews suggests significant problems amongst this
category of ‘first-footer’ computer users. It was not uncommon to find computers out
of use or consigned to a back room, after initial failed attempts to adapt unfamiliar
software to the needs of the business. The success or failure of this category of
enterprise in expanding their use of computers would be critical to raising the overall
level of ICT use within the SMME sector. The second phase of data collection will
provide in-depth case studies of such enterprises, examining in detail the costs and
benefits associated with current ICT investments.
Networked IT Users are predominantly service-based enterprises. E-mail and the
Internet are used very or quite often by 85% of these enterprises, and computers were
used for more complex business activities such as project planning by 50% of
respondents. They all regarded further upgrading and continued expansion of
computer-based management systems as being critical or very important for the future
success of their businesses.
Anecdotal evidence shows that such enterprises have applied and adapted IT systems
largely on an ad-hoc basis and in many cases they lack the employee skills to
effectively manage the systems which have been developed. Such enterprises may
benefit from a more strategic approach to managing information, in order that the costs
and benefits associated with both technology based and non-technology based systems
can be evaluated. It will be important to consider in more detail the potential of
emerging technologies, such as the Internet/e-mail and electronic commerce, for the
future of such businesses. This will apply particularly to enterprises that conduct
transactions across borders, such as manufacturing exporters and the tourist sector.
An Extended Summary and Conclusions can be found at the end of this report.
5
Project Outline
The project aims to find out what role new information and communication
technologies (ICTs) may play in small, medium and micro enterprise (SMME)
development. The project will principally focus on analysing the information and
communication needs of small medium and micro enterprises, and will assess the
opportunities for ICT application. The project will produce a set of recommendations
aimed at three groups within the SMME development community: small, medium and
micro enterprise entrepreneurs, intermediary support organisations and government
policy making bodies. All recommendations will guide recipients toward best practice
in the application of new technologies for SMME development and toward alternative
non-technology-based improvements in information and communication systems.
Research Background
The need to harness information and knowledge in pursuit of economic and social
development in less developed countries has been emphasised recently by a number of
influential international bodies. The rapid advances taking place in information and
communication technologies in the developed countries are seen as a potential vehicle
for enabling participation of poorer countries in the ‘global information revolution.’ It
is suggested that less developed countries must fully embrace new technologies or risk
exclusion from the global economy and competitive disadvantage for their goods and
services. It is also suggested that information and communication technologies offer
potential to solve pressing problems of human and economic development in areas of
health, education, poverty alleviation, rural development and care of the environment.
In the developed countries emerging technologies are having a dramatic impact on the
growth and development of the enterprise sector, and particularly within small and
medium enterprises. Enterprises are adapting rapidly to new forms of communication,
organisation and new methods of doing business, and a wide range of new
information-based industries have been established. The enterprise sector in less
developed countries has also taken on a new importance for development within a
more market orientated economic climate. However, the ability of small, medium and
micro enterprises, in less developed countries, to take advantage of the potential
benefits of emerging technologies are likely to be constrained by a wide range of
factors including lack of infrastructure, education, technical support and low
information handling capacities.
The governments of less developed countries are being encouraged to developed
strategic policies and implementation strategies that will facilitate rapid adoption of
emerging technologies, giving rise to new structures and methods of working as well
as demanding new skills and knowledge. At present there is little understanding of the
current and likely future impact of emerging technologies on industrial and commercial
activity in less developed countries. There is even less understanding of exactly how
such advanced technologies can address wider social and economic development
priorities of poor and disadvantaged groups within LDCs.
6
It is essential, therefore, that the governments and non-governmental organisations
within LDCs are informed on the real issues concerning this new wave of technological
development. At present there is little research, based on objective evidence, that
describes the actual impact of ICTs on less developed countries. It is imperative,
therefore, that research is undertaken in the area, and that such research is able to take
an objective view of the costs and benefits associated with the rapid and large-scale
adoption of such technologies. On the basis of the results of such research policy
makers, and those involved in enterprise development, will be able to make informed
choices regarding policy formulation, investments and support for emerging
technologies.
Research Objectives
Botswana has been chosen as a case study for this research project for two main
reasons.
First, due to Botswana’s relatively well developed communication
infrastructure which affords scope for observing current ICT applications, and also
making meaningful recommendations on future policy toward ICT implementation.
Second, due to the large number of enterprises across a range of sectors which are
relatively easily accessible, and the large number of intermediary organisations - both
governmental and non-governmental - operating in the role of SMME support.
The main research objective is to provide realistic recommendations about the ways in
which information and communication technologies can be applied to small, medium
and micro-enterprise development. Initially, an analysis will be made of the changing
information needs and communication practices amongst a representative sample of
Botswana-based formal sector enterprises. The role of intermediary organisations in
the provision of information will also be assessed as well as the potential role of ICTs
in supporting the non-formal sector. Finally, the role of government in setting the
policy framework for effective IT implementation will be considered.
The project has the following primary objectives:
•
Describe the ‘generic’ information needs of SMMEs in Botswana, and to assess
where the provision of externally generated information is likely to enhance the
prospects for business survival and growth.
•
Identify where information needs of SMMEs are currently not being met, and to
establish the nature of a possible ‘information needs gap’.
•
Map current information systems, which are common to SMMEs, for the
acquisition, processing, storage and utilisation of information.
•
Understand why entrepreneurs use current information systems, and to assess the
quality of information that is currently being provided.
7
•
Establish the potential for information and communication technologies (ICTs) to
bridge the gap between information needs and current provision.
The research aims to take a broader and deeper perspective in analysing the potential
role of ICTs in enterprise development. The intention, therefore, is not to begin by
analysing the application of technology, but instead to concentrate on assessing the
existing information and communication practices of enterprises, and to examine the
requirements of enterprises for improvement in those practices. When this analysis has
been carried out it will then be possible to come to realistic and informed conclusions
regarding ICT application.
Research Method
The core component of the research method will be semi-structured interviews with
Botswana entrepreneurs using a sample set controlled for sector, location and size.
The sample set is intended to cover export and non-exporting enterprises, as well as
current ICT and non-ICT users. The research method will also draw a distinction
between survivalist enterprises: to be found mostly in the non-formal sector where
entrepreneurs are motivated primarily by the need to sustain their livelihood; and
dynamic enterprises, to be found mostly in the formal sector where entrepreneurs are
primarily motivated by the need for business growth and profitable operation.
The interviews will collect background data on current information needs and
communication practices, as well as profiling the enterprise, the entrepreneur, the ICT
access, use, skills and awareness of business owners. Data will be gathered by the use
of critical incident recall, and structured around issues of information needs, content,
sources, channels, recipients and use. An information mapping exercise will be used to
help illustrate typical information linkages for enterprises according to a range of
sampling criteria. Interview data will be supplemented by a small number of extended
observations of information seeking behaviour of entrepreneurs, and on the basis of
interview data, a questionnaire survey will be used to gather information from a
broader spread of enterprises. In addition, ICT and small enterprise context data will
be gathered from interviews with staff in intermediary and support organisations as
well as within governmental and non-governmental policy-making bodies.
Research Outputs
Research project outputs will be presented in both interim and final versions:
Interim Research Papers dealing with the current information and
communication systems of SMMEs, and the status and constraints of ICT
application.
Final Research Report including summary of interim papers and
recommendations for ICT application to SMME development, as well as nontechnology-based-improvement of information and communication systems.
Practical Handbooks providing straightforward guidance for improvement in
8
ICT implementation, aimed at a) entrepreneurs b) intermediary organisation
staff.
Communication and Dissemination of Results
All reports and papers will be circulated to a compiled mailing list of Botswana
recipients, and through the international mailing list of small enterprise development
institutions operated by IDPM. Papers will also be published on the world-wide-web
and distributed to dissemination services such as ID21. The practical handbooks will
be circulated to a range of intermediary and support organisations in Botswana, and in translated form - through appropriate channels to Botswana entrepreneurs.
Additionally, a one-day workshop will be organised in Botswana for intermediary
organisations and officials from policy-making bodies, to present recommendations and
discuss surrounding issues.
9
The Role of Information and Communication
Technology in Small, Medium and Micro Enterprise
Development in Botswana
Introduction
Information and communication technologies (ICTs) are playing a growing role
in the process of industrial and commercial development within the countries of the
Southern African region. Since the mid-1980s, the Botswana Government has been
investing heavily in a sophisticated telecommunications infrastructure for the country
and is establishing its own data communication networks across a range of ministries
and departments, as well as within parastatal organisations and public utilities.
Currently, the Government of Botswana remains by far the largest contributor to
investment in IT and communications systems, but it is expected, in the years to come,
that the private sector will play an increasing role both as a provider and a user of ICT
goods and services. There are a number of factors that are driving this process of
change:
•
•
•
•
•
Botswana’s Vision 2016 document makes a strong commitment to the
development of competitive industries utilising the most modern technology,
including the implementation of information technology across all industrial and
service sectors.
Policy towards the SMME sector has been revised since the new policy on
SMMEs was approved by the Botswana Government in December 1998. The
Government envisages a growing role for SMMEs in the future development of the
economy, and is providing revised and updated institutional, regulatory, training
and financial support to that end.
The Telecommunications Act (1996) has committed Botswana to enhanced private
sector involvement within a deregulated competitive environment allowing new
market entrants to compete in the provision of infrastructure, network access and
value added services.
Government is restructuring and de-centralising its own computer operations and
will allow individual ministries and departments, at central and local level, to form
their own partnerships and contracts with the private sector. This is likely to lead
to increased opportunities for SMMEs in the provision of IT hardware and in the
support of IT systems development within individual departments and within other
government funded organisations.
The education system is being restructured, increasing opportunity for following
technical, managerial and computer related subjects. A major programme of
computerisation in schools will lead to increasing levels of computer literacy
amongst the working population.
ICTs are already in widespread use within a range of more ‘information intensive’
enterprise sectors, as well as within many medium and large-scale firms within urban
areas.
Within intermediary and support organisations, ICTs are also playing a
10
growing role in the capture, processing and the dissemination of information, giving
rise to a rapid expansion in their utilisation in the role of project support across a range
of social development sectors, primarily education, healthcare and agriculture.
The role of the SMME sector has already been recognised as critical to achieving the
objectives of the long-term vision for Botswana. SMMEs are recognised as having
substantial employment creating capacity; they provide a means of empowering more
citizens in the process of industrialisation; and they are able to give rise to a wider base
of indigenous, and sustainable, technological capability. SMMEs, however, are being
subjected to increased competition, as well as increased demands for quality of
products and services. Surviving in this increasingly competitive environment will
require raising the overall productivity of the SMME sector, which in turn will require
higher levels of management capacity. In this regard the ability to acquire, process and
effectively use business information becomes central.
Emerging ICTs have the potential for transforming access/provision to information,
improving internal information systems and enhancing methods and scope of
information dissemination. However, the extent to which the SMME sector can
benefit from emerging ICTs is still open to question. In terms of scale, sophistication,
market orientation and geographical location, the SMME sector is extremely diverse.
The information needs of an urban-based medium-scale enterprise in the technical
services sector will differ radically from the needs of a small rural-based retail outlet in
a remote village. The vast majority of business owners, particularly those within micro
and small-scale enterprises, (MSEs) have little or no formal education, and may lack
the capacity to access, process and use information provided through ICTs.
In the past few years there have been calls for the Botswana Government to develop an
integrated and co-ordinated policy toward ICTs, as well as strategies for
implementation and support. The New Industrial Development Policy for Botswana
states the need for a comprehensive science and technology policy. There is, however,
no clearly stated recognition of the strategic importance of ICTs in the process of
industrial and commercial development. As the impact of emerging ICTs grows in the
wider economy, there may be a more pressing need to develop a national policy
framework for implementation of ICTs in the enterprise sector, including SMMEs. It
is likely that a more co-ordinated approach will be required in areas such as awareness
and training, infrastructure provision, the role of business support services, data
protection and privacy and standardisation/regulation.
Aims and Structure of the Interim Report
The overall aim of the study at the interim stage is to provide a preliminary
research output on the role of ICTs in SMME development in Botswana, which will
form the basis upon which the 2nd phase of the project will be built. At present there is
little or no country-specific research available that describes the impacts and
opportunities created through emerging ICTs in less developed countries. It is hoped
that the interim findings will provide an aid to effective policy formulation in the area
and will help to support implementation strategies, assisting policy makers,
intermediary organisations and the enterprises themselves. It is also hoped that the
11
lessons learned from the Botswana case will be applicable to other countries in the
region.
Currently the research project is at an interim stage and has already produced a range
of results and outputs which are contained in this report. The results obtained thus far,
however, are not sufficient to warrant definitive conclusions and detailed policy
recommendations to be put forward. Therefore, the conclusions presented are tentative
in nature, and are designed to provide a sound basis for the second phase of the
project. The interim report is structured to meet the following objectives.
Chapter one presents a summary of a theoretical framework that has been developed
during the course of the project. A research model has been developed in order to
enable a broader and deeper perspective in analysing the potential role of ICTs in
enterprise development. The research model does not begin by analysing the
application of technology, but instead provides a framework for assessing the existing
information and communication practices of enterprises. The model describes the role
of information in enterprise development within the context of the market, as well as
considering the social, cultural and institutional factors that shape the information and
knowledge environment.
Information, as applied to enterprise development, is conceptualised in a number of
different ways. A distinction is drawn between data, information and knowledge, and
information is described, not in static terms, but as a dynamic ‘human centred’ process
involving information access, processing, application and as a tool for decision making
by entrepreneurs. Information is considered in its formal and informal context, and a
range of information barriers and resource inequalities typical of LDCs are suggested.
Finally, information is considered as a resource that can be mobilised to enhance
enterprise survival and possible growth within a changing market environment.
Chapter two describes the local context for SMME development in Botswana. A
detailed survey of the literature concerning economic background, market structure
and economic impact of the SMME sector is provided. Enterprise development is
considered in its historical context, and it is suggested that a more competitive and
open market environment is likely to present a future challenge for the SMME sector
to increase both its productivity and competitiveness. The SMME sector is also
considered in terms of its employment creating capacity and it is suggested that whilst
enterprise development has provided substantial employment growth in Botswana, it
has been largely unable to absorb the growing pool of, predominantly young,
unemployed citizens.
Evidence concerning a wide range of constraints to SMME development in the formal
and non-formal sector are then considered. Evidence from previous studies identifies
considerable barriers to enterprise development relating to entrepreneurial, educational
and skill-based deficiencies. Constraints are also considered in relation to lack of
access and availability of business inputs, lack of incentives and opportunities created
in output markets and weaknesses in institutional support. Some evidence is presented
concerning the extent to which ‘information problems and knowledge gaps’ contribute
to identified business constraints, and number of hypotheses are put forward
concerning a possible role for information and communication technologies in
12
overcoming such constraints.
Chapter three presents the results of the fieldwork undertaken up until the interim
stage of the project. The data collected through a questionnaire survey and semistructured interviews with business owners/managers is presented. Results are
analysed focussing on the information needs of enterprises, methods of information
access and sources of information for formal sector enterprises. Comparative results
are presented covering service sector enterprises, non-exporting manufacturers and
manufacturing exporters from a wide range of economic sub-sectors. Some initial
findings are provided on the formal/informal nature of information practices, describing
the content, sources and channels of information, in different information categories.
Details of research methods and techniques of data collection are also provided,
including sampling and problems of non-response bias.
Chapter four presents evidence concerning current usage and applications of
information and communication technologies within Botswana-based SMMEs. The
impact of current telecommunications expansion and de-regulation are surveyed and
the potential impact of emerging business-related ICTs is described. Data is presented
concerning current levels of usage of ICTs for the access, storage and processing of
business information. A range of archetypes of Botswana-based SMMEs are also
considered according to their level of ICT intensity. Five categories of enterprise are
suggested that exhibit characteristics that are typical of SMMEs in Botswana, and a
number of case studies are presented to illustrate differing levels of ICT usage within
contrasting business environments.
The report ends by presenting an extended summary and conclusions. Some
tentative conclusions are drawn concerning how ICTs can be best applied to SMME
development in Botswana. The conclusions consider both technology-based and nontechnology-based improvements, in SMME information and communication systems,
and a range of ICT constraints are described.
13
Chapter 1. The Role of Information in Enterprise
Development
The acquisition of knowledge and the effective use of information are seen as
increasingly important to economic and industrial development in less developed
countries (LDCs). The most recent World Bank Development Report (1998)
highlights the existence of knowledge gaps and information problems as primary
impediments to the growth and development of LDCs, and particularly, to the
economic and social progress of disadvantaged groups within LDCs. The report
identifies knowledge about attributes, in relation to human skills, product quality and
financial viability, for example, as playing a particularly important role in the effective
operation of internal markets within developing countries. The critical role of reliable
information in creating market knowledge, and hence, giving rise to market
opportunities and increased economic activity, is emphasised.
“ Information is the lifeblood of every economy. In more traditional economies,
information may be less codified, more often conveyed in personal interaction, but
it is vital nonetheless…. The ways people get information, and the incentives they
have to gather and provide it, are affected by the way society is organised: legal
rules and social conventions, institutions and governments, all determine how
much information people have and the quality of that information…. Without
reliable information markets do not work well. “1
Within less developed countries, market and non-market mechanisms for the
transmission of information are likely to be less developed; barriers to the freeflow of
information are likely to be higher, and resource inequalities in the provision of
information more extensive. Local business networks will be less developed and more
fragmented, and entrepreneurs are likely to be less educated and less skilled in
acquiring, processing and using business information. There is likely to be, therefore, a
lack of capacity for handling formal information amongst LDC entrepreneurs.
Because of the lack of an information infrastructure, entrepreneurs tend to rely on
informal methods for the accessing, processing and application of information within
their businesses. Informal information is generally in an unwritten/unrecorded form, is
of variable quality, and obtained through networks of local contacts, friends or family.
The costs and benefits associated with both formal and informal information practices
within LDC market environments have not been clearly defined, and are generally not
well understood.
This chapter will put forward some suggestions for a theoretical framework which will
assist in understanding the relationship between information and enterprise, drawing
together three strands of enterprise development, information and entrepreneurship,
within the context of a market structure typical of a less developed country. It will take
a systemic view of enterprise development, set within the environment of the market,
as the main conduit for the acquisition, communication and use of information.
1
World Development Report: Knowledge for Development. (1998/99)
14
Additionally it will stress the important role of the entrepreneur in the information
process.
1.1 Information
Information, relating to all aspects of enterprise development, can be
categorised as either internally or externally generated. Internally generated
information will include that which is gained from the inherent skills and capacities of
the business owner and the employees of the enterprise. It will also include knowledge
and information accumulated within the enterprise, incorporating financial, technical
and managerial data.2 Most market-related information, however, will be externally
generated: information relating to market price, product quality requirements, existing
and potential customers, sources of finance and new innovation, for example.
Therefore, understanding the role of information in enterprise development initially
requires an analysis of the interaction between the enterprise and its market
environment. Theories concerning the role of information in enterprise development,
and in the growth of markets, have had a long history.
Orthodox market economics has always regarded information as being a freely
available commodity which all enterprises have access to, within an environment
characterised by ‘perfect competition’. This model regards each enterprise, regardless
of size, as an independent economic unit, acting independently within a competitive
market where both buyers and sellers are able to make rational decisions based on
perfect information. Models of perfect markets (Friedman, 1953; Marshall, 1966) have
formed the basis for the mainstream of modern micro-economic theory.
According to the neo-classical model, information relating to the price and availability
of inputs (capital, labour, materials and technology) and outputs (goods and services)
should flow freely and equitably between producers and consumers, buyers and sellers.
In this ‘ideal’ model, markets will operate efficiently; more productive and efficient
consumers will succeed, whilst those less productive and less efficient will go under.
Benefits to consumers will be maximised in terms of price, availability and quality of
goods; and benefits to the wider economy will be maximised through increased
productivity within market sectors, leading to increased levels of competitiveness in
external markets. Orthodox market economics, by making assumptions about ‘perfect
information’ has tended to downplay the role of information in enterprise development
and in the formation of markets. However, other schools of thought, have given
information a more prominent role in economic theory.
Economic theorising emphasising imperfect information has been more influential
when considering the relationship between enterprises and their economic
environment. Economists belonging to the Austrian school (Knight, 1921; Mises,
1949; Hayek, 1978) placed issues of information at the centre of an economic model
2
The importance of accumulated knowledge and expertise for the growth of firms has been
emphasised by a number of studies. (Arrow, 1962; Lall, 1980, Bell, 1985) All these writers suggested
that internal information, and hence knowledge, gained through learning by doing over time,
represents the most significant factor in a firm’s ability to adapt and change to a new
technological/market environment.
15
which suggests that economic decisions are made in the face of imperfect information
about alternatives and outcomes. The development of enterprise, and of markets, is
seen as a dynamic process which is characterised by uncertainty, and which is driven,
not by the impersonal ‘invisible hand’ of the price mechanism, but by the real actions of
‘profit motivated’ entrepreneurs.
Modern economists have taken theories of imperfect information, and uncertainty in
markets, a step further. Most notable of these, (Williamson, 1975) who in his theory
of transaction economics, sees the enterprise (or the firm) as the basic driving force
which determines the allocation of resources within a market. The market is defined, in
Williamson’s model, only by the transactions, which take place between buyers and
sellers. (I.e., without transactions between economic actors, there would be no market
and no firms.) In this model, information plays a significant role in the transaction
costs, which arise for the enterprise as a result of entering the market.
These ideas have given rise to a number of important concepts concerning the role of
information in the development of the enterprise. Firstly, information about future
events is inevitably uncertain. Enterprises are required to make decisions in the face of
uncertain or incomplete market knowledge. Secondly, the information held by parties
to a transaction is not likely to be equitable. This is likely to give rise to ‘non-rational’
opportunistic behaviour. Thirdly, individuals have limited ability to process complex
market information and are unlikely to come to optimum decisions regarding the
allocation of resources.
1.2 Enterprise
Orthodox economics tends to take a ‘black box’ approach to understanding the
enterprise. Individual enterprises are concerned solely with profit maximisation, and
their actions are merely responses to changes in cost and demand taking place in
external markets.
Alternative theories, developed as critiques of the neo-classical perfect market
approach, have described enterprises, not as individual economic units, but rather as
part of a wider network or hierarchy of economic units. According to the hierarchical
model, small enterprises sit at the bottom of a hierarchy of enterprises which is
dominated by the activities of large national and multi-national corporations.
(Williamson, 1981; Castells and Portes, 1989) In the context of less developed
countries, this hierarchy has been further widened at the base by the inclusion of a large
so called non-formal sector. In most LDCs the non-formal sector comprises the vast
majority of enterprises, and provides the bulk of employment for both urban-based and
rural-based populations. It is typically made up of survivalist and micro-businesses
which are characterised by traditional backward technology; which serve highly
competitive ‘cut throat’ local markets; and which have little opportunity to progress
from their marginalized size and status to compete in the ubanized and more advanced
formal economy. (Hart, 1973)
These two models, the perfect market model and the perfect hierarchy model, are the
two extreme ends of a spectrum of theoretical approaches for understanding the
16
relationship between the enterprise and its environment. More recently, alternative
models have been observed from the results of research carried out in a range of
countries and socio-cultural environments in different stages of development.
(McCormick and Pedersen, 1996; Van Dijk and Rabellotti, 1997) All these studies
suggest that the behaviour, success or failure of enterprises cannot be understood in
isolation from the specific market and socio-economic environments within which they
operate.
Researchers of less-developed countries have outlined a range of country specific
models, which describe the relationship between the enterprise and their socioeconomic environments. All these theories see interactions between enterprises and
their environment as creating networks, which may be based upon personal relations,
trust and reciprocity; as well as embodying relationships defined by simple market
transactions, or by the exploitative relationships suggested by pure hierarchies.
Pedersen (1996) points toward the usefulness of theories based on networks.
“ When talking about networks of enterprises we do not use the term to
denominate any specific form of inter-enterprise organisation. Rather we see the
network metaphor as a tool to investigate the dynamic interaction between the
enterprise and its environment, in whatever form it may take.”3
Understanding the role of information in enterprise development, therefore, demands a
network model. It is necessary to know how an enterprise interacts with its
environment: to identify what are the sources, channels and content of externally
generated information, how that information is accessed, and accordingly, processed
and used within the enterprise to inform decision making, and to enable effective
interaction with the market.
1.3 Enterprise Information Needs
The information needs of entrepreneurs/enterprises will be determined by a wide
range of market and non-market factors. All enterprises need information, but to
differing degrees and at differing levels of complexity. There are three main factors
that should be pointed out in relation to the information needs of enterprises.
•
Information is a generic term. The information needs of an enterprise include
information and data that relate to all aspects of business operation. Information is
not, therefore, a resource that should be considered in isolation from other business
resources such as finance, technology and labour. Rather, the accessing, storage,
processing and use of information form an intrinsic part of all business activities.
•
All enterprises will have common information needs, relating to sources of finance,
access to markets, management skills, technology, etc. However, the type of
information required will vary widely, according to type/size of enterprise, the
nature of the market within which the enterprise is operating and the
capacities/abilities of the business owner/employees of the business.
3
Taken from: Pedersen (1996), p5.
17
•
The information needs of enterprises/entrepreneurs will vary over time, according
which stage of the enterprise lifecycle the enterprise finds itself. The needs of
enterprises prior to start-up, or during the start-up phase, will differ from those in
a growth or expansion phase. Additionally, enterprises which are in danger of
imminent collapse, or that have recently failed, will also have differing, and
possibly more urgent, needs for information and/or assistance.
The information needs of enterprises/entrepreneurs can be understood in terms of the
content, sources and channels of business information. Information content describes
the formal/informal nature of information relating to all aspects of business operation
including business inputs, customers, markets and competitors, and the business
environment. Information can be categorised as follows.
Supply-side information. Information concerning:
•
•
•
•
•
Sources of finance.
Sources of materials
Sources of technology/technical assistance
Sources of labour/skills
Sources of land/premises
Demand-side information: Information concerning:
•
•
•
Existing customers and markets.
Potential new customers and markets
Export markets
Business environment: Information concerning:
•
•
•
•
•
Positioning of existing competitors,
Threat of substitute products and new market entrants.
Regulatory/legal Information.
External assistance/promotion
Economic Information.
Information channels and sources, both formal and informal, will arise from ‘enterprise
specific’ information networks: These will be established through the contacts,
relationships and linkages formed with customers, suppliers, collaborators and
competitors. (See Fig 1.)
1.31 Factors affecting information needs
•
Enterprise Size/formality. Within each market sector there exist a wide range of
enterprises of differing sizes. These will include both formal and non-formal sector
enterprises. The non-formal sector will include extremely marginal survivalist
enterprises that are only generating enough income to meet basic need, as well as
18
micro-enterprises with potential for growth. (Farbman, 1981). Formal sector
enterprises will range from very small recent start-ups to well-established small and
medium-scale firms. Each of these categories of enterprise will have divergent
needs for information, as well as widely differing capacities to assimilate
information.
•
Market orientation. Enterprises will serve home markets or export markets, or a
combination of both. Enterprises may be heavily dependent on single customers,
such as through preferential purchasing from government. They may have a wide
customer base, serving predominantly open/private markets. Differing groups of
customers will place widely divergent quality assurance demands on products and
services, giving rise to needs for information of differing levels of sophistication.
•
“Traditional”/”modern” sector. Within less developed countries, high technology
enterprises can exist alongside low technology, within the same sector and within
close geographical proximity. Capital intensive enterprises utilising modern
technology may coexist with labour intensive enterprises using low traditional
manufacturing (or service provision) methods. Such enterprises may also be
interdependent, with low-capital intensive sectors acting as suppliers or subcontractors to high-capital intensive. (or vice-versa)
•
Location. The information needs of rural enterprises will largely be determined by
local market demands. Because of communication problems, rural enterprises will
be cut off from sources of information open to those in urban areas. Rural
enterprises will not only be less able to access information, but will also lack the
capacity to absorb and utilise information, due to reduced levels of education and
literacy.
19
1.4 Enterprise/Entrepreneur Information Networks
The relationships, linkages and contacts that an entrepreneur/enterprise forms
with its external environment will form the channels along which information will
travel, giving rise to an enterprise specific set of information networks. Fig 1.
illustrates the information networks of importance for enterprises including economic
(business) linkages, institutional networks and information received from the sociocultural environment.
Fig 1. Schematic Representation of Small Enterprise Information networks.
Supply-side
Information
Assistance
Support
Regulatory
Legal
Demand-side
Information
Promotion
Marketing
Institutional Networks
Business Inputs
Output Markets
Finance
Labour
Skills
Technology
Premises/Land
Materials
Infrastructure
Services
Procurement
Sub-contracting
Local Sourcing
Individual Customers
Retailers
Wholesalers
Forward
Linkages
Enterprise/
entrepreneur
Backward
Linkages
Socio-economic Environment
Socio/
Cultural
Competition
Economy
Markets
Political
Environment
1.41 Economic (business) linkages
A wide range of market and non-market factors will determine the linkages, which
an enterprise establishes with other enterprises. Economic networks, however, will be
largely defined by contractual relationships, which involve transactions between
enterprises. Enterprises will form relationships with others, which will give rise to
information flows, through three forms of linkage:
•
Information flows through forward business linkages: which will be defined by
relationships with customers or potential customers, and the marketing of final
goods and services. These may include linkages with individual customers, retail
outlets, distribution chains, other SMMEs or sub-contracting relationships with
larger firms.
20
•
Information flows through backward business linkages: which refer to
relationships with the suppliers of inputs, including: finance, materials, labour and
technology. These may include both local sourcing, and the importation of goods
and services either directly or through import agents.
•
Information flows through horizontal business linkages: from established
competitors or new market entrants, supplying home-produced or imported
products and services. Also through collaborative relationships with similar firms
producing similar products or services.
1.42 Socio-cultural environment
Socio-cultural networks are seen to play a more important role in less developed
countries in the process of enterprise development. This is because within those
societies, market environments tend to be more highly influenced by traditional
allegiances of family, region and socio-economic grouping. Traditional structures of
kinship will tend play a far greater role as social support structures than would be
found in developed countries. Enterprise information networks will be defined by a
number of characteristics and tendencies, which are more prevalent in less developed
countries. These will include:
•
The tendency of small/micro entrepreneurs to have multiple occupations, which
may include a combination of formal and informal employment, which may vary
seasonally, from week to week, or day to day. (Kilby, 1971; Shipton, 1985)
•
A large overlap between family networks and enterprise networks. Enterprises, as
well as providing employment and paying wages to extended family members, may
also provide a resource upon which extended families can draw in times of
hardship. (Benedict, 1968, 1979)
•
A tendency for enterprises to be confined to markets defined by specific territories.
These are likely to be more strongly defined in developing countries according to
non-market parameters, such as family lineage, castes or classes, chiefdoms or local
village allegiances. (Badgely, 1978)
Economic and social networks in less developed countries are more likely to overlap.
Hence, enterprise information networks, are likely to be more diffuse, extending into
both traditional and modern social structures, which themselves, will be defined by
complex interactions between family and ethnicity, region and tribe.
1.43 Institutional networks
Institutional information networks include those contacts, relationships and
linkages that are established between enterprises, governmental, non-governmental and
private institutions. These may include government departments or central purchasing
organisations, acting as customers or suppliers of goods and services. They may
involve commercially driven linkages with private institutions such as banks or
21
insurance companies offering financial/management services. They will involve
interaction with national/international bodies that define the legal/regulatory
environment within which enterprises operate. They may include assistance from
business support agencies/NGOs that are seeking to facilitate the establishment and
growth of enterprise. Within less developed countries, institutional information
networks can be considered to fulfil three separate functions:
•
Regulatory environment – which may give rise to either an enabling of a restrictive
environment for enterprises. Information will largely be that which is generated by
central/local government bodies, or possibly regional or international organisations
– concerning trade relations, licensing, business/labour law, etc.
•
Promotional networks – promotional activities carried out on behalf of enterprises,
which may be conducted by governmental, non-governmental, or in some cases
private institutions. These activities will create the potential for exchanging large
amounts of information through the provision of human and technical
infrastructure, the research and publicising of economic opportunities, the
formation of business associations or professional bodies and the organisation of
marketing or promotional events such as trade fairs/conferences.
•
Assistance networks – direct assistance in the form of preferential purchasing,
financial assistance, marketing, skills enhancement, etc. These networks may
include both commercial and non-commercial organisations. At one end of the
spectrum, commercial banks and money lenders providing commercial loans and
assistance, and at the other end, government bodies and NGOs providing noncommercial finance and other non-fee paying assistance.
1.44 Entrepreneurship
The critical role that the entrepreneur plays in the development of enterprise
and in the growth of new markets has largely been ignored by orthodox economics.
This has been particularly the case, until recently, in development economics which has
tended to concentrate on macro-economic analysis, and less on economics at the
micro-level as a human-driven activity. Entrepreneurship, however, is seen as the
essential dynamic component of a range of economic development models, which
acknowledge the reality of imperfect information. (Knight, 1921; Mises, 1966; Kirzner,
1979; Casson, 1982)
Entrepreneurs have been characterised in a number of different ways:
•
as creative and innovating prime movers, propelling the economy forward by
increasing efficiency through technical and managerial innovation, and the
establishment of new methods. (Schumpeter, 1943; Williamson 1983)
Entrepreneurs are seen to embody special qualities, distinct from those of
managers or owners, which lead to the establishment of new products and
services, the exploitation of new markets and to greater economic efficiency.
22
•
as fulfilling a purely functional economic role through the co-ordination and the
allocation of resources within a market environment characterised by uncertainty.
(Casson, 1982) Here entrepreneurs are seen essentially as managers.
•
as opportunity seekers. (Knight, 1921; Mises, 1966; Kirzner, 1979) They regard
the entrepreneur as being primarily a profit-seeking individual whose activities do
not necessarily lead to economic progress and may not bring about greater
efficiency in the allocation of resources.
Entrepreneurship has also been associated with a set of largely positive, and
predominantly innate, human characteristics which define a particular type of
individual. These include innovativeness, curiosity and openness to new ideas, hard
work, orientation toward the future, willingness to save and invest, leadership, risk
acceptance and even selfishness or greed. (Grindle, 1989; McClelland, 1976)
Psychological explanations for entrepreneurship tend to suggest that entrepreneurs are
born and not made, and hence, the social, economic and cultural influences which exist
within, and between, societies are often not considered as important. Research in
developed and developing countries, however, shows a wide range of motivational
factors, which stimulate a disparate range of people, from a wide spectrum of social,
economic and educational backgrounds, to become self-employed/small business
owners. (Storey, 1990)
Although a ready supply of potential entrepreneurs may exist, they will only be drawn
into a market where there exists both market demand and a potential for earnings or
profits. Both incentives and opportunities will regulate the extent to which potential
entrepreneurs will feel motivated to start a business. Additional incentives may include
the desire to make use of abilities and experience and to achieve financial independence
(Vivarelli, 1991) It is generally agreed there is no single set of factors which lead to
successful entrepreneurship. It is likely, therefore, to be a result of a combination of
demand (market pull) and supply (market push) related factors.
The role of the entrepreneur, whether innovating, profit seeking or managerial, will be
central in the role of information acquisition and use. The entrepreneur will stand at
the centre of an ‘enterprise specific’ set of information networks. The entrepreneur
will fulfil the role of searching out and identifying new market opportunities; of
managing and co-ordinating information relating to the allocation and the efficient use
of resources, and collecting and utilising information concerning new product, process
and management innovations.
1.5 Data, Information and Knowledge
Business information comes in many forms, and is often used as a generic term
that ignores more complex underlying processes. A more useful definition of
information, as applied to enterprise and markets, considers the inter-relationship
between data, information and knowledge.
Data can be described as raw, unprocessed, information. Most information that is
acquired by an enterprise will be in an unprocessed form. For example, unprocessed
23
financial data in the form of invoices, delivery notes and cash slips; completed stock
sheets and inventories; or verbal feedback from customers concerning the quality of
products and services. In a formal sense, data can only be considered as ‘information’
when it has been processed in some way and made useful to its recipient. The
processing of data may involve selection, classification, sorting and rearranging,
aggregation or some form of calculation and comparison. For example, a summary of
a range of customer responses to a new product or service, the organised and correctly
entered contents of a cash book, expense ledger or debtors book; or cash-flow forecast
based on data obtained from previous records and future projections. Data and
information, however, can be inter-changeable terms. What the clerical staff of an
enterprise regard as processed information, may be only regarded as data to the
business owner or manager.
Knowledge is distinct from both information and data. New knowledge is gained
through the recipient’s ability to understand information, and to adapt it to their own
existing knowledge-base. This means that the recipient must have the capacity to
understand and assimilate information in a way that is useful to the
business/organisation. Knowledge is also largely contained in the mind of the business
owner/employee, and is expressed through enhanced skills, aptitudes and
understanding of business problems. Enhancing knowledge is likely to be the most
valuable end product of the accessing and processing of new information. For
example, new knowledge in relation to market trends, new technology and skills, or
better financial management is likely to enhance the business when successfully
applied.
It may be more instructive and realistic therefore, to regard information in relation to
enterprise, as being made up of a series of processes, which form an information chain
Fig 2. The Information Chain.
Information
Capture
Information
Processing
Information
Storage
Data
Information
Application
of
Information
Decisionmaking/Action
Knowledge
The information chain is a dynamic representation of the relationship between
information and the enterprise, which suggests a staged process of information access,
storage and processing, and in turn, some form of information use leading to decision
making and action. Information, therefore, becomes less of an abstract and static
concept, but more closely intertwined with dynamic ‘human’ or ‘entrepreneurial’
activity.
24
1.51 Formal and informal information models
The term ‘formal’ and ‘non-formal’ economy have become part of the accepted
language for describing the market structure of less developed countries.4 The terms
‘formal’ and ‘informal’ are also important when considering the role of information in
enterprise development. Analyses of the role of information in enterprise development
have been mostly concerned with formal content, sources and channels: information
that is recorded and is available in a readable form. This might include technical
information from a manual, market information from a market report or survey, official
information or on-line information from a database. Informal information, however,
has been described as information sourcing in which the entrepreneur or business
owner relies on a network of personal contacts in the local area from which subjective
information of variable quality is derived. (Oakey and White, 1993) This may be
information that is received from business contacts, or friends and family members.
Informal information will probably be unstructured, unrecorded and may take the form
of rumour or hearsay.
Informal information is seen to play a far greater role in less developed economies for
the following reasons:
•
•
•
•
•
Lack of formalised information infrastructure
Lack of modern communication infrastructure
High degree of overlap between socio-cultural and economic networks
Lack of capacity (education and skills) to assimilate formalised information.
Non-formal economic activity still predominates – in term of employment and
number of enterprises economically active.
Reliance on informal information sources, however, has its limits. For small and
medium-scale enterprises, (or MSEs that wish to grow) reliance on informal localised
information, although still essential, may also become an inhibiting factor. Growthorientated enterprises may wish to access formal credit facilities; they may want to
expand their market reach beyond their immediate locality; they may wish to access
modern technology and training. It may be necessary to look further afield for raw
materials and other business inputs; and they will have to take greater account of the
legal/regulatory framework within which they are operating. As enterprises become
larger, therefore, it is likely the demand for formal information will grow, and those
formal sector enterprises that continue to rely on informal networks/practices may find
this to be a significant barrier to survival or growth.
1.52 Internal/external information
4
Traditionally, the informal sector has been viewed as predominantly service based activities carried
out by those who are considered ‘underemployed’. The definition of the informal sector has, however,
been widened and is now generally described according to the particular characteristics of, both urban
and rural based, small/micro scale and subsistence level enterprise. Informal sector activity is
generally defined by ease of market entry, reliance on local indigenous resources, family ownership of
small/micro scale enterprises, low skills and the use of labour intensive and adapted technology.
25
Thus far, the relationship between information and enterprise has been
considered in terms of externally generated information; that is, information which is
obtained from the external environment of the enterprise. In contrast, internally
generated information defines information that is coming from within the enterprise.
This includes information which is derived from knowledge and data which has been
accumulated and stored within the internal environment of the enterprise, or which is
gained as a result of the competencies, skills, traits and abilities of the enterprise owner
or enterprise employees.
The relationship between internal and external information, however, is clearly one of
constant interaction and fluidity. For example, external information regarding sales
and purchases is constantly collected, processed and recorded in order to establish
internal accounting procedures; information relating to customers or potential
customers can be collected, stored, analysed and then used to plan a marketing
strategy. Technical information may be acquired externally, but will then be
internalised and adapted within the enterprise.
1.6 Information Barriers/Resource Inequalities
When considering the impact of information barriers, it is important to distinguish
between formal and non-formal sector activities. The non-formal sector generally
makes little use of formalised information: that is, information that is gained through
formal channels, which is recorded and available in a readable form. The supply of
information in the non-formal sector is overwhelmingly the result of personal
networking, close proximity to consumer markets, and an understanding of local
market conditions. Information barriers can be summarised in terms of information
demand, supply, access and handling capacities.
1.61 Lack of demand for formal information
It is suggested that close contact with local information sources, and access to
local market knowledge, are essential ingredients for sustaining local economic
development in LDCs. (World Bank, 1989; UNCTAD, 1991) The ‘informal’
information that is gained, and the knowledge that is developed, regarding local market
supply and demand conditions, forms an invaluable resource for micro and small-scale
entrepreneurs. For example, non-formal sector entrepreneurs are able to make efficient
use of local resources, such as through re-cycling and the use of local labour for
operation, repair and maintenance of machinery. They rely on low-level technology
that is quickly adaptable to changing market conditions. Close proximity to local
information sources also enables quick responsiveness to market signals. This has been
found to be particularly true with regard to the operation of informal distribution
networks.
“Traders, many of them women, have devised informal distribution networks to
keep pace with the growing demand from Africa’s expanding urban population.
These networks provide an important link for moving food supplies and consumer
goods between rural and urban areas and across international borders. In Ghana
26
and Senegal, for example, grassroots agricultural co-operatives have successfully
made contact with these networks, thereby reducing their marketing costs, and
improving their access to inputs.“ (IBRD, 1989)
Therefore, in order to operate effectively, local micro and small-scale enterprises need
locally generated information and local market knowledge. They need to gain
information from within their own socio-cultural environments. This enables a greater
amount of trust, and hence confidence and security, in the information sources and the
communication channels used. Formal information, however, generally comes from
external sources and is in a non-personalised form, and may not be directly relevant to
local socio-economic conditions.
1.62 Lack of supply of formal information
Good quality market and non-market information is lacking in most less developed
countries. This includes externally generated information provided through
governmental, non-governmental and private institutions; and internally generated
information provided from within the enterprise sector itself. The lack of formal
information within LDCs reflects on the lack of well-developed institutional sources.
•
•
•
•
•
Lack of private sector business services for information provision, such as market
data and business statistics.
Lack of effective business associations co-ordinating information provision within
sub-sectors.
Lack of professional organisations covering technical and commercial disciplines.
Lack of public information sources serving business needs, such as public libraries.
Inefficiencies concerning the supply of official information collected by
government bodies.
Enterprises themselves generate large amounts of information that could potentially
have market value. Information can be made available at a very simple level, through
the distribution of a business card for example, or at a more complex level through the
publication of annual reports and accounts. Other ways in which enterprises generate
information include:
•
•
•
•
•
Through official sources, by filing tax returns, completing official registration or by
completing census or other official questionnaires.
By making available financial statements and reports
By producing marketing information in relation to products/services offered
By advertising or promoting products/services through formal channels.
Product lists/price lists/ technical manuals, etc.
In the non-formal sector virtually no formal information is generated by the enterprises
themselves. This creates substantial problems of assembling data regarding non-formal
sector make up and activity. As enterprises grow they are likely to generate more
data. However, in comparison with enterprises in developed countries, most
enterprises in LDCs, formal and non-formal, will generate very little information.
27
1.63 Lack of access to information sources
Although information may be available, it may be difficult to access for different
sections of the SMME community. Ease of access will be governed by a wide range of
socio-economic and geographical factors.
•
•
•
•
•
Lack of proximity to information source.
Lack of economic means to access information source
Lack of knowledge about information source (insufficiently publicised)
Lack of effective sources and channels in the form of inter-firm linkages and
formalised business information networks.
Lack of technological infrastructure for communications and access.
1.64 Lack of information handling capacities
Low levels of education and training, lack of managerial skills and experience
are all factors that lead to low information handling capacities on behalf of SMME
owners and employees. They are probably the single most important factor that creates
low demand for information. (They are also reflective of the extreme social, economic
and educational inequalities that exist in LDCs.)
A range of differing capacities for information handling are required at different stages
of the information chain. For example, for information access entrepreneurs initially
require knowledge about the whereabouts and the accessibility of sources of
information. They require the skills to search, acquire and then select the most useful
information, and finally they require the necessary communication infrastructure and
access technology. Information access, of course, may not necessarily require
technology, but will require knowledge and skills. Access may be ICT-based, but may
include other means of communication such as the possession of a means of transport,
for example. Different knowledge, skills and technology will also be required for
information processing, application and use. (Fig 3)
28
Fig 3. Information Handling Capacities in the Information Chain.
Required Knowledge
Required
Skills
Knowledge about
existence/availability of
information/data
sources.
Searching
Acquiring
Selecting
Knowledge to adapt
Information/data to
business needs.
Analysing
Sorting
Rearranging
Knowledge necessary
to recognise
problems and allocate/
mobilise resources
Planning
Prioritising
Implementing
Knowledge about
business objectives.
Communicating
Monitoring
Controlling
New
Knowl
edge
Inform
ation
Data
Information
Capture/Access
Information
Storage/Processing
Application of
Information
Decision making/
Action
1.7 Enterprise Strategy Issues
Information acquisition/provision of information is only beneficial when new
information/knowledge is put to some effective use to ensure the survival/growth of an
enterprise. Assuming that entrepreneurs are in possession of the required information,
it then becomes necessary to articulate a strategy whereby that information can be
utilised.
Strategy can be articulated in relation to internal and external issues. Internal issues
relate to the internal workings/management of the enterprise, and relate primarily to
enhancing internal efficiency. External Issues relate to the market orientation of the
enterprise, and relate primarily to securing existing or new business. Strategies
adopted (either implicitly or explicitly) will probably be one of the following:
29
•
Survivalist strategies: where the business will focus primarily on retaining existing
customers and market share through better use of existing resources and
promotion of existing products and services.
•
Growth strategies: where the business will seek to expand production or delivery
of services by seeking out new customers, expanding into new markets or
developing new products and services.
•
Niche market strategies: where the business may seek to focus on specialised
products or services, or on market areas that are not adequately covered from
other sources, such as by larger enterprises.
•
Export-led strategies: where the business focuses on expanding
production/sales/service provision outside its own national borders.
Applying new information practices (including ICTs ) to enterprise development will
entail gauging the potential costs and benefits of adopting new technology or new
skills in the context of the current and future business strategy of the enterprise. The
need for enhanced information provision/processing/application and use within an
individual enterprise can be considered according to the following decision criteria:
•
Assessing the costs and benefits of formal/informal information practices.
Comparing the relative importance of formal/informal information content,
channels and sources, and the extent to which the enterprise may benefit from
expanding either.
•
Prioritising ICTs in overall business development. Assessing the role of ICTs in
business development in comparison with other forms of business support. E.g.,
developing entrepreneurial skills, support for marketing, finance and other forms of
technological support.
•
Assessing how ICTs can be successfully applied. At which stage of the information
chain can ICTs be most beneficially, and cost effectively applied. For example, for
information access, information processing or information dissemination.
•
Overcoming ICT constraints. IT constraints can be considered at different stages
of the information chain. I.e., constraints on information acquisition, information
storage and processing and information use for decision making.
1.71 The information ‘value chain’
Value Chain Analysis is a concept that was developed in order to break down
the activities of the enterprise into strategically relevant activities, and analyse those
activities individually in order to reduce overall costs and increase performance and
efficiency. Essentially, it represents a systematic way of looking at a business that
breaks down business operations into: inbound logistics, operations, outbound
logistics, marketing, sales and service and support activities. (Porter, 1985)
30
This type of analysis may prove useful by assessing the relative value of information at
each stage of the business process. (Fig 4) It can also be suggested that different parts
of the value chain will be of more or less importance to different types of companies in
different sectors, and hence information supplied to some business activities will be
more critical that others. Understanding where and how value is added to enterprises
will be critically important when considering the application of ICT solutions to
business problems. The following diagram gives examples of information that would
be critical for adding value at different stages of the value chain, also giving business
sector examples.5
Fig 4. Critical Information in the Value Chain.
Critical Information
Scientific and
Technical
Knowledge
Research
+
Developm
ent
Pharmaceuticals/
Health Products
Price and
Availability of
components
Purchasing
Assembly of
Personal
Computers/
Electrical Goods
Product and
Process
innovations
Distribution
and retailing
network
Manufacture
Distribution
Furniture/
Fabricated
Products
Garments/
Fashions
Consumer
Market
data
Marketing
Customer
feedback
Sales +
Service
Hair Products/
Cosmetics
Business Sector Examples
5
Adapted from: Wilson (1994)) Tools for the Analysis of Business Information Needs, p21.
31
Fast Food
Retailing
Chapter 2. Information and Enterprise Development:
The Case Study of Botswana
It might not be immediately clear why Botswana should present a suitable case
study for analysing the growth and development of small, medium and micro
enterprises (SMMEs). Botswana’s small population, currently only 1.3 million people,
has undoubtedly presented a limited demand for indigenous products, and the relative
immaturity of the economy has presented potential entrepreneurs with predominantly
unsophisticated rural-based consumer markets.
However, Botswana has also
presented a number of important lessons in industrial development since independence
in 1966.
The usefulness of studying industrial development in Botswana has been outlined by
Harvey (1990) who compares manufacturing in Botswana with six other sub-Saharan
countries. Three factors are suggested which make Botswana a valuable case study.
Firstly, Botswana has shown the most rapid rate of real economic growth, whether
measured by GNP per capita or total GDP, of any country in the world between 1965
and 1985 (World Bank 1987). Secondly, the rate of growth in manufacturing value
added (MVA) is only slightly lagging behind countries such as S.Korea, Indonesia and
Singapore, and this development of an indigenous productive capacity has been
achieved alongside strong mineral-led export growth. Thirdly, Botswana, unlike most
other sub-Saharan economies, has operated a relatively open trade policy with its
Southern African neighbours, whilst making little use of protectionism and
encouraging the full participation of the private sector in the economy.
There are many factors, therefore, which bring Botswana into line with current
economic thinking and there may also be lessons to be gained from their experience.
2.1 Economic Background to Enterprise Development
Like many other African countries, Botswana’s economic development has
been built upon the exploitation of natural resources. Unlike many other African
countries Botswana has, possibly uniquely, been able to successfully direct the earnings
from the export of minerals toward encouraging rapid industrial and commercial
development. In 1970, when diamonds were first discovered, Botswana was
predominantly an agricultural subsistence economy with no developed infrastructure.
In the early days, non-mining industrial development took place almost exclusively due
to the exploitation of meat products through the formation of the Botswana Meat
Commission (BMC), which still remains an important source of export earnings.
The 1970s and early 1980s saw rapid sectoral growth rates not only in mining and beef
products but also in other industrial sectors.6 Many of the success stories from this
period were created through a judicious mix of public and private investment much of
6
From 1973/74 to 1985/86 there was an average increase per annum of 22.05% in the contribution
from mining to total GDP, year upon year. During the same period, the average yearly increase for
manufacturing industries was 13.7%. Bank of Botswana Annual Statistical Review. (1998)
32
which, for larger projects, was allocated through the Botswana Development
Corporation (BDC). The most successful of these were for import substitution of
basic foodstuffs, such as the Kgalakgadi Breweries established in 1975, Bolux Milling
for flour products established in 1985 and Sugar Industries established in 1984. BDC
also created private sector partnerships or directly invested in a range of other
manufacturing and service industries from hotels to distribution companies and
building products to private hospitals.7
As well as investing in industrial growth and diversification projects, the Botswana
government was also spending heavily on basic physical and social infrastructure
(Harvey and Lewis 1989). This created a large demand for contracting services and
encouraged a large number of foreign-owned enterprises to locate in Botswana, in
order to satisfy local demand. Figures show that by 1984 over 60% of all
manufacturing establishments were foreign owned.8
The first two decades of independence, therefore, were characterised by extremely
high levels of both government and foreign investment in a range of industrial and
service sectors. However, the question remains: what benefit did the SMME sector,
and in particular locally-owned enterprises, derive from this process of rapid economic
development?
By the late 1970s, the evidence tended to show that locally owned businesses were not
either being created or being expanded to meet the rapidly growing demand for goods
and services. Additionally, there were growing concerns about rising urban
unemployment, the need for industrial diversification and the creation of a larger job
market was recognised. At the time, a detailed study of employment trends and
policies (Lipton, 1978) helped bring this trend to the notice of policy makers and
consequently, a series of policy initiatives were enacted in the early 1980s. (National
Policy on Economic Opportunities, 1982; Financial Assistance Policy (FAP), 1982)
The ideas contained in the 1982 policy were further integrated into The Industrial
Development Policy (1984). Jefferis (1996) has summarised three basic principles that
underpinned the policy.
•
The primacy of private ownership and the operation of market mechanisms in the
process of industrial development, except where the state had legitimate
involvement in infrastructure provision, support for strategic industries and other
incentive schemes and interventionist measures to correct market failures.
•
It was hoped that the growing internal market would provide sufficient demand for
locally produced goods, enabling further import substitution, and some limited
promotion of exports.
7
On its 25th anniversary in 1995, the BDC had total investments worth 600 Million Pula, and since
1984 has been conducting a disinvestment programme selling interests in more established and
mature enterprises. See: BDC Annual Report (1996)
8
This process was in fact encouraged through the provision of government financial assistance to
medium scale foreign-owned businesses the Botswana Enterprise Development Unit (BEDU). This
policy was continued under the Financial Assistance Policy (FAP) which commenced in 1982.
33
•
There was an emphasis on encouraging small industries that were locally owned,
particularly in the rural areas. In addition to stating basic principles, the policy also
initiated policy instruments that included the Financial Assistance Policy (FAP), the
extension of the local preference purchasing schemes and the creation of new
support services for SMMEs.
The economy continued to grow and Botswana created a small economic boom in the
latter half of the 1980s, fuelled primarily by steadily rising government revenues from
the output of diamonds. This period, from 1986 to 1991, also saw a rapid increase in
private formal sector employment. From 1986 to 1991 employment in the private
sector more than doubled, to a total of 142,500 employed persons, and achieved on
average a 4% growth rate per annum ahead of the rate of growth in the labour force.9
It has been estimated that only 7000 secure jobs were created by SMMEs receiving
government assisted (FAP) grants, which draws the conclusion that the vast majority
of jobs created through the boom period were the result of private sector investment
rather than through direct financial assistance from government. 10
The rapid growth rates of the 1980s were not sustained into the 1990s, and a period of
recession created a shake out, particularly in the manufacturing and small business
sector. It has been noted by Jefferis (1995) that the economic downturn had a
particularly negative effect on small and medium size enterprises created through
financial assistance from government. He states:
“The growth of domestic markets slowed down and this affected a lot of firms.
Many firms found that their markets were not growing in the way they had
used to and that markets became more competitive. Many firms had access to
FAP but they were not very successful at bringing about improvements in
productivity. Often when their five years of FAP ran out they went under.“ 11
In the latter half of the 1990s the economy has seen a small upturn. It has been noted
that this upturn has resulted primarily from increased government expenditure and
continually improving revenues from the diamond mining industries. Rapidly rising
private sector employment has ceased to be a feature of the Botswana economy with
the private sector playing a gradually reduced role in providing formal sector
employment.12
It is now widely recognised that the domestic market is saturated and companies who
wish to grow must consider export markets as an outlet for their products. In fact
government is facilitating export-led growth by encouraging inward investment in large
manufacturing projects such as the assembly of Hyundai vehicles from imported knock
9
CSO Employment Surveys and Labour Statistics.
Jobs created through the financial assistance policy have been defined as those which are
attributable to businesses whose survival rate exceeded 5 years. See: The Third Evaluation of the
Financial Assistance Policy (FAP), Phaleng Consultancies, 1995.
11
Jefferis, K. (1996) Industrial Development: Policies, Achievements and Challenges. Paper
presented at National Seminar on Botswana’s New Industrial Development Policy, Sept 1996,
Botswana Institute for Development Policy Analysis.
12
In 1996 the contribution of the private sector to total formal sector employment dropped from
58.5% to 57.4 %. Annual Economic Report 1997. Ministry of Finance and Development Planning.
10
34
down kits.
Government macro-economic policy is now being directed toward
sustainable economic diversification emphasising commercial investment based on
economic viability and rising productivity. This ‘new thinking’ has been summarised as
follows:
“Sustainable economic diversification must be viewed in the widest possible
terms. It includes the diversification of production into new products, which can
be sold to different markets, using new or adapted innovations and technologies,
relying on different domestic and international inputs and resources, which are
acquired from new suppliers, both domestic and foreign. Diversification will shift
the structure of the economy towards those sectors which grow faster in the
future, creating additional employment opportunities for workers and suppliers of
domestic resources. It will also help to create forward and backward linkages
throughout the economy, as local producers and resource owners, will also
become suppliers to other local producers, who in turn will have their products
demanded by other firms and consumers in Botswana.“ 13
The future prospects for SMMEs, therefore, will be based on their ability to adapt and
survive in a new economic climate subject to increased levels of domestic and
international competition. There will also be new opportunities, particularly where
links can be forged with larger more technologically and export orientated companies.
The next section will examine the SMME market structure in Botswana, and will
describe the current make up of the SMME sector.
2.2 The SMME Market Structure in Botswana
There is no single source of data that describes the detailed composition of the SMME
sector in Botswana. Government statistics on small business formation tend to be
scattered between a number of ministries, and in most cases are incomplete or poorly
recorded. However, a number of studies have attempted to collect information on
the make up of Botswana’s SMME sector, by gaining access to official statistics and
by conducting field surveys in connection with various research projects. The
definitions of SMMEs used in this report will be based on those used in the official
Botswana government SMME Task Force Report (1998). The report defines
enterprises primarily according to number of employees, annual turnover, and level of
formality. (Defined according to whether or not an enterprise is officially registered)
Definitions of SMMEs used in this report.
•
Survivalist Enterprises: No paid employees, asset value minimal,
vendors, subsistence farmers, etc.
•
Micro Enterprises: Unlikely to have formal registration, only one or two paid
employees, no formal book keeping or record keeping, probably family run. Small
roadside store, mini-taxis, etc.
13
hawkers,
Industrial Development Policy for Botswana, Government Paper No.1 of 1998, Ministry of
Commerce and Development Planning.
35
•
Very Small Enterprises: Less than 5 paid employees. Enterprises may access
formal markets and may use modern technology. May include professionals or
artisans. Likely to have formal record keeping and registration.
•
Small Enterprises: Grown from very small enterprises into established firms and
will probably, but not necessarily, have a management structure, and may not be
under the sole control of the business owner. A small enterprise will be defined as
a registered firm which has less than 25 employees, and is likely to have an annual
turnover of between P60,000 and P1,500,000.
•
Medium Size Enterprise: Owner/ manager controlled, but larger and more complex
management structure. Separation of ownership and management likely. A
medium size enterprise will be defined as a registered firm which has less than 100
employees and is likely to have an annual turnover of between P1,500,000 and
P8,000,000.
The Task Force Report (1998) produced the following statistics. That there are
approximately 50,000 micro-enterprises, that is, predominantly, non-registered
informal sector enterprises; 6,000 small enterprises employing 25 people or less; and
300 medium size enterprises employing between 25 and 100 people. 14 In the small
enterprise sector it was noted that the vast majority of businesses are located in urban
areas (about 80%) and the average number of persons employed in such enterprises is
6 including the owner. The vast majority of micro enterprises, however, are located in
rural areas (about 70%) and 75% of micro/informal sector enterprises are owned and
run by women, whose main aim is to provide family income.
The distinction between the formal and non-formal sector is often not clearly defined,
and there is commonly a large overlap between micro, very small scale and small-scale
enterprises. There is also a great deal of controversy about whether it represents a
useful and realistic dichotomy. As well as giving rise to difficulties of definition, it is
also widely recognised that there is a close interrelation between formal sector and
non-formal sector activities. The following observation has been made by UNCTAD
(1991)
“In many LDCs where infrastructure and markets tend to be fragmented, microbusiness networks perform an important role in linking and intensifying
commercial exchanges between rural and town centres, by organising the
transportation and marketing of agricultural produce to town centres, and the
distribution of consumer goods to the countryside …. Country surveys show that
informal trades are not only dependent on formal intermediaries for the supply of
their inputs, but they also rely on formal households as a source of their demand,
although sales to big business in the modern sector, and to government appear to
be virtually non-existent.”15
However, in the context of this report, the distinction will be retained. Firstly, because
it is still regarded locally as a valid distinction, and the presence or absence of formal
registration largely governs accessibility to recorded enterprise level data. Secondly, it
14
15
This figure includes both small and very small enterprises employing up to 25 people.
UNCTAD, The Least Developed Countries 1990 Report, United Nations, 1991, p54.
36
represents a useful distinction in terms of understanding the comparative information
needs of enterprises, and the policy framework within which those needs can be
addressed. For the purposes of this analysis, enterprises will be defined, therefore,
according to the presence or absence of formal registration.
2.21 Formal sector enterprises
The formal sector includes very small, small, medium and large enterprises, which have
official registration. Small enterprises make up the vast majority of registered
enterprises. Small enterprises, however, tend to be the most insecure, resulting in
small enterprise owners being more likely to fail in their endeavours to sustain their
businesses. The Task Force Report estimated business failure rates of approximately
80-85% after 5 years of trading. It is also estimated only a very small proportion (12%) ever succeed in expanding their businesses. Medium scale enterprises tend to be
more established and less prone to failure.
The following table gives a breakdown of registered privately owned enterprises in
Botswana, according to the number of employees in the business, and the sector within
which the enterprise is operating.
Fig 5. Distribution of Registered Private Sector Enterprises According to Economic
Sector and Firm-size. (Number of Employees)
Economic sector
Agriculture
Mining & Quarrying
Manufacturing
Electricity, Gas and Water
Construction
Wholesale & Retail
Hotels & Tourism
Transport & Communication
Financial Intermediaries
Business Services
Social & Personal Services
Total
NE
26
0
20
0
19
170
3
24
14
57
6
339
WPO
18
0
14
0
15
244
0
11
1
50
5
358
N/A
1-4
4-29
102
5
105
0
144
737
15
160
30
225
32
1555
131
1
151
0
104
2786
10
120
15
269
85
3672
201
6
403
0
354
1761
45
109
60
268
68
3275
30-49
50-99
100+
29
0
74
0
62
119
14
7
14
23
0
342
10
3
41
0
22
58
9
11
11
10
1
176
4
2
43
0
44
20
9
5
11
22
0
160
Total
521
17
851
0
764
5895
105
447
156
924
197
9877
Source: Government of Botswana. Registry of Establishments, 1997.
The largest proportion of small and very small enterprises are to be found in the
retailing sector which make up 60% of the total number of registered enterprises
currently trading in Botswana. These are predominantly small food retail outlets and
general stores. Manufacturing, construction and business services represent the most
significant areas of business activity amongst small, medium (and large) businesses.
Firms offering personal and social services seem to be under represented.
Manufacturing firms make up 8.6% of the total number of enterprises trading in
37
Botswana. Within the manufacturing sector large and medium-scale firms predominate
in food and beverages, textiles and clothing, paper, printing and publishing; fabricated
metal and wood products and non-metallic mineral products. Small and very small
firms are also well represented in these sub-sectors, particularly in bakery products,
textiles, clothing and leather, printing, paper and publishing, non-metallic mineral
products (primarily brick making) and fabricated metal products.
Within services, very small and small firms dominate - making up 82% of a total of
1,483 firms in the sub-sectors specified. These firms are widely distributed across a
range of service activities: predominantly, transportation and cargo handling, legal,
accounting and business management services, technical services and other business
activities. Large and medium firms are to be found predominantly in the banking,
security and road transport sub sectors.
The export sector is dominated by large and medium firms with food and livestock
products, minerals, vehicles and textiles contributing to 95% of total exports in 1995.16
Only 32 very small or small firms have been identified as exporters. Tourism (including
hotels) is also a major contributor to foreign exchange earnings and has a high
proportion of very small and small businesses (86%) operating within the sector.
Briscoe (1995) in a study of small-scale enterprises in urban areas, focused on the
problems experienced in business start-up. This survey revealed the largest area of
new business start up was in business services (42%) compared with only 21% in some
form of manufacturing, 13% retailing, 12% in transport and 8% in construction. A
cross over between sectors is also noted when individual firms are analysed.
2.22 Non-formal sector enterprises
Detailed enterprise level data relating to the non-registered informal/survivalist
sector is not collected through official channels on a regular basis. However, in the
micro/small scale sector there have been a number of independent research studies
which have collected and aggregated such data: (IFS, 1994; Daniels and Fisseha, 1992;
Rempel, 1993; Somolekae, 1989; Lisenda, 1997). All these studies suggest that micro
and survivalist sector enterprises tend to be household run businesses employing one or
two people and approximately 75% of business owners are women. Additionally 70%
of these enterprises are in rural areas, with 65% involved in trading and 25% involved
in manufacturing. As mentioned previously, it is estimated that there are up to 50,000
such enterprises operating in Botswana.17
Informal sector activities are located either in trade or manufacturing, rather than
other personal services. It has been noted that the number of citizen very small
business owners engaged in trade (retailing, bars, bottle stores, etc) is very high
compared with other countries in the region, such as Zimbabwe, Lesotho and
Swaziland, where there is a far higher degree of business activity involving
manufacturing and personal services. (Daniels and Fisseha, 1992)
16
See: Annual Economic Report. (1997), Ministry of Finance and Development Planning, February
1997, p61.
17
Refer to: SMME Task Force Report (1998)
38
The IFS study data of 1994 (Summarised by Lisenda, 1997) covered a survey sample
of 2665 formal and informal sector enterprises. The survey sample was made up,
predominantly, of survivalist/micro-enterprises (informal) with 1-3 employees including
the owner. The survey was also biased heavily toward the very small
manufacturing/workshop sector, where a large number of firms had been assisted
through small-scale financial assistance from government (FAP). In terms of enterprise
activity, most were concentrated in the clothing sector (51%), the food manufacturing
sector (10%) the building materials sector (bricks and blocks, 10%) and the basketry
sector (10%). The remainder were involved in other forms of low technology
manufacture, using traditional materials and methods.
The majority of enterprises in the traditional manufacturing sector are found in rural
areas (66%), with 17% in primary villages, 1% in peri-urban areas and 16% in urban
areas. The vast majority of rural enterprises are located in the eastern part of the
country: 54% for rural east in contrast to only 12% for the rural west, less developed
and less populated, part of the country.
2.3 The Contribution of SMMEs to the Economy
The contribution of SMMEs to national output is not easy to quantify. There
is, however, no doubt that the SMME sector, both formal and non-formal, provide a
far greater contribution to employment than to output. National output tables (for all
industries) by areas of economic activity give the following picture of sectoral
distribution (inc large firms).18
18
Source: Bank of Botswana Economic Review (1996) Statistical section, Table 1.1. Bank of
Botswana.
39
Fig 6. Gross Domestic Product (GNP) by Type of Economic Activity.
(1985/86 Prices. Pula million)
Economic Sector
1986/87
%
1996/97
%
Agriculture
Mining and Quarrying
Manufacturing
Electricity, Gas and Water
Construction
Hotels and Tourism
Transport and Communication
Business Services
General Government
Social Services
122.8
1,225.6
146.4
63.9
111.4
340.8
65.7
145.6
392.2
74.2
4.7
46.5
5.6
2.4
4.2
12.9
2.5
5.5
14.9
2.8
188.2
1,808.5
328.5
127.2
280.2
938.1
245.3
558.0
959.8
245.6
3.4
32.6
5.9
2.3
5.1
16.9
4.4
10.1
17.3
4.4
GDP at constant Prices (85/86)
GDP per capita
2,636.1
2,306
5,544.3
3,623
Source: Republic of Botswana. Statistical Bulletin, March 1998, Vol.23 No 1., CSO
The overall contribution of SMMEs to national output cannot be accurately quantified
from these figures, which include both large and small businesses. Manufacturing, for
example, in 1955/96 contributed 4.7% to total GNP. Of this total, a large proportion
can be accounted for by the contribution of Botswana’s two principal exported
manufactured products - motor cars assembled from complete knock down kits, and
textile products. In the case of manufactured goods for home consumption, as well as
for exports, large firms make by far the largest contribution. SMMEs overall
importance to national manufacturing output, therefore, would be minimal, probably
amounting to less than one percent. In services, however, SMMEs are likely to make
a far higher contribution across a range of sectors, in areas such as tourism, business
services, transport and construction. As the research progresses, it is hoped that more
detailed and accurate figures can be produced as regards the overall contribution of
SMMEs to national output.
40
Fig 7. Labour Force Composition in Botswana. 1981 – 1994.19
1981
‘000
Population
Total labour Force
Total Employed
Formal Sector (1)
Non-formal Sector
Traditional Agriculture
Total Unemployed
941
315
283
91
44
149
32
1991
%
‘000
100%
90%
29%
14%
47%
10%
1327
442
380
229
60
91
61
1994
%
‘000
100%
86%
52%
14%
21%
14%
1454
487
380
233
68
78
108
81 - 94
%
Change ‘000
100%
78%
48%
14%
16%
22%
+513
+172
+96
+142
+24
-70
+76
(1) Excludes Botswana Defence Force Personnel
Source: Formal Sector Employment Data from Labour Force Survey (CSO Employment Statistics),
1981 and 1991 Census.
Table 3 shows the overall composition of the labour force in Botswana from 1981 to
1994, including those employed in formal sector activity, (including large firms) nonformal sector activity (estimated) and traditional agriculture. The figures illustrate
three important long-term trends in the make up of the labour force:
•
•
•
A rapid increase in formal sector employment, which peaked in 1991 at 50% of the
total labour force, and has since decreased slightly.
A sharp decline in employment in traditional agriculture.
An overall doubling in the unemployment rate.
The proportion of the labour force employed in the non-formal sector has remained
fairly constant throughout the period, which suggests that job creation has taken place
overwhelmingly in the formal sector. The figures show that a total of 142,000
additional formal sector jobs have been created in the economy over the period: which
takes into account private, parastatal, central and local government jobs. For the year
1994, official estimates show that approximately 41% of those employed in the formal
sector were employed directly by government or parastatals, with the remaining 59%
employed in the private sector.20
Many studies in developed countries have suggested a very strong association between
lack of work and enterprise start up. Those without work are forced into business in
order to secure a livelihood. Additionally, the lack of state provision of social security
in less developed countries increases the need for those without formal sector
employment to find some form of self employment or gain income through
marginal/non-formal sector economic activity.
In Botswana, however, whilst formal sector employment levels have risen substantially
over the past two decades, levels of unemployment have also remained high, rising to
19
Taken from: Study of Poverty and Poverty Alleviation in Botswana, Phase One. Technical Report
No 3. Review of Financial Assistance Policy, 1997.
20
Statistical Bulletin, March 1998, Vol. 23, No.1, p63, Central Statistical Office, Republic of
Botswana.
41
an estimated level of 21% of the working age population in 1997.21 The section of
society most affected is the 15-24 age group, accounting for approximately 50% of the
total unemployed. This is reflective of a rapidly increasing birth rate and a consequent
increase in population over the period. It has been suggested that the number of new
jobs created through rapid economic growth during the 1980s, was largely sufficient to
absorb the overall increase in the labour force. Increases in unemployment have been
predominantly a result of a continuing exodus from traditional agriculture and, more
recently, due to the downturn in the economy, which occurred during the early 1990s.
However, notwithstanding the increased population, consistently high rates of
unemployment within an economy that has exhibited consistently high rates of growth,
year on year, tends to indicate that unemployment, in itself, has not constituted a
significant push factor for the creation of enterprises. It is likely, therefore, that there
are other non-economic constraints that are inhibiting the potential of the enterprise
sector to absorb the increasing numbers of unemployed.
2.4 Constraints on SMME Development in Botswana
Historically, the participation rates of Batswana in business have been low. This
was recognised as early as 1982 when the Report of the Presidential Commission on
Economic Opportunities pointed toward the noticeable lack of, particularly, citizen
entrepreneurs and business owners.
“ Although international comparative data on citizen participation in business are
not available, all observers agree that the extent to which citizens are involved in
business is particularly low in Botswana. There is a noticeable lack of citizen run
small scale and informal businesses compared with many other developing
countries; this is of concern, since such enterprises are often regarded as a training
ground from which the most successful may progress to larger scale formal
activities. Latterly, traditional cattle farming and/or government employment have
seemed the secure options for most enterprising and educated citizens”22
As was previously outlined, the period since 1982, has been one of rapid economic
progress. However, a wide range of constraints have inhibited levels of enterprise start
up, enterprises growth, and the success or failure rates of existing enterprises. These
can be classified as either resource-based ‘market push’ factors, or demand-based
‘market pull’ factors. 23
21
Total formal sector employment has risen from a level of approximately 50,000 in 1980 to 237,500
in 1997. It is estimated that 135,800 of this total are employed in the private enterprise sector.
(including large firms). Source: Republic of Botswana. Annual Economic Report, 1998.
22
Government of Botswana. Report of the Presidential Commission on Economic Opportunities,
1982.
23
Market push factors relate to the social/cultural, economic and motivational forces that determine
the supply of potential entrepreneurs within an economy. Market pull factors relate to the incentives
and opportunities created by sufficient demand for products or services, and the potential for profits
and increased earnings. The relative importance of these factors will vary between countries and
regions, and there are likely to be a number of additional country specific factors that determine the
extent of entrepreneurship within any economy.
42
2.41 Lack of entrepreneurial background and aptitudes
There are a number of issues relating to personal background and levels of
motivation amongst Batswana business owners and the Botswana population in
general. It is often suggested that Batswana lack entrepreneurial skills and motivation.
This is largely because there has been no tradition of small/medium business citizen
ownership within the formal/modern business sector. Much formal sector business
activity has been dominated by either ex-patriates or other non-Batswana citizens from
surrounding countries, or further afield. The BOCCIM (formal sector) Industry
Survey (1994) showed only 30% of medium-sized enterprises as citizen-owned, rising
to 56% for small and very-small enterprises.
International studies show that enterprise start-up is related strongly to either a family
or an employment-related business background. In the case of Botswana, Briscoe
(1994) showed that owners of 47% of recent business start-ups had either owned
another small business or had worked in a small business previously. Additionally, the
majority (90%) had started up a business which was closely linked to their previous
employment, the majority of whom (70%) were competing, in some way, with their
previous employer, or offering products/service to their previous employer. (30%)
“Recent research at the Business School of Botswana suggests that social
conditioning, especially in the early years, is very influential in developing
entrepreneurship. A study of more than 200 small business owners in Botswana,
who started up a small business in urban areas between Jan 1991 and Aug 1993
indicates the significant influence of factors such as : parental role models, contact
with family and friends who run small businesses, and previous employment
experience, especially in small business.”24
An extensive Botswana-based study, of micro and small-scale enterprises, carried out
in 1992, also showed this to be the case. The study showed that approximately 54% of
all business proprietors surveyed were engaged in some form of business activity,
either as business owners or business employees, prior to starting their present
business. The wider Batswana population, particularly the younger generations, largely
lack the business-related family background or the personal experience of formalsector business, which has been shown to be strongly related to levels of enterprise
start-up and enterprise ownership.
2.42 Lack of education, skills and training
Both major studies in the micro and small-scale sector have reported a very low
level of education amongst proprietors. Daniels and Fisseha (1992) reported that 29%
had no education at all, whilst 48% had completed only primary school. The
educational level amongst females was found to be much lower than males. Similar
results were extracted by Lisenda (1997) from the IFS data. Within micro-enterprises
(1-3 employees) 88% had primary education or less, whilst only 12% had tertiary or
secondary education. The analysis also concluded that those enterprises that had
24
Small Business Support in Botswana. Andrew Briscoe, 1995, p105.
43
grown (10 or more employees) had proprietors whose educational level was
significantly higher, with 56% having secondary or tertiary education.
Research undertaken by Briscoe (1995) focussing on young, formal sector,
entrepreneurs in urban areas, shows a slightly different picture. Within the sample,
68% had completed senior secondary (Cambridge level), had vocational or university
education. The same study reported a low level of business related training, with only
16% having undertaken some form of management or technical training. Lack of
training opportunities have already been identified within the SMME Task force
Report (1998) as a major constraint to enterprise development. It states:
“In Botswana, small business development has undoubtedly been constrained by
lack of relevant educational, vocational and training opportunities. Hitherto,
responsibility for providing these services and opportunities has fallen almost
exclusively upon government institutions, which have lacked appropriate staff to
meet the challenge. There is now an urgent need to address this issue, and
appropriate measures must be introduced if the provision of entrepreneurial
education and training is to be significantly improved.”25
There is general agreement that the information needs of enterprises have not been
addressed with regard to the provision of managerial and technical training in
Botswana. This is true with regard to the amount, the quality and the availability of
training for different sections of the population.
The prime responsibility for business training falls under a range of government
ministries: Commerce and Industry, Ministry of Education, Labour and Home Affairs
and the Ministry of Agriculture.
Programmes specifically designed to develop
business and technical skills for urban and rural business development are implemented
by Integrated Field Services (IFS). The training provided through IFS tends to be
directed to two major sub sectors - garments and construction. Basic level training is
provided in management skills, technical and craft skills. However, the major problem
faced by citizen owned enterprises remains lack of efficiency and productivity
compared with foreign owned businesses, a fact admitted by the ministry themselves
with regard to the construction sector:
“It is apparent that small and medium scale citizen contractors still fail to
develop and compete more favourably against expatriate companies. Many
contractors fail to draw up an effective working programme for the works and
lack site productivity management skills. “ 26
Access to vocational education and training is very limited. Recent enrolment data
indicates that less than 10% of secondary school leavers have been able to access
some form of tertiary/vocational training. This means that those secondary school
leavers who fail to enter university, and who may wish to start their own business
venture, will be poorly equipped to do so. (MLHA, 1997)
25
SMME Task Force Report (1988), p39.
See: Department of Industrial Affairs Annual report, 1994/95. p17. Ministry of Commerce and
Industry.
26
44
Research also suggests that existing SMME owners are generally not inclined to seek
training either for themselves or their employees, even though enhanced managerial
and technical skills may be a strong perceived need. Studies in Botswana have
suggested many reasons for this: primarily, lack of time and resources to pursue such
training, and a perception that the training on offer does not fulfil the specific needs of
their business. (Briscoe, 1995)
2.43 Lack of incentives and opportunities
SMMEs in Botswana are overwhelmingly dependent on domestic markets, usually
markets that are located within the immediate locality of the enterprise. A countrywide
population of only 1.4 million people, where average disposable incomes are still
extremely low, inevitably gives rise to limited demand for goods and services. This is
true, particularly, for the micro and small sector. All surveys of micro/small sector
business owners have reported weak market demand as the single most important
factor (together with lack of finance) inhibiting their businesses. Survey results
indicate that 25% of non-formal SMMEs regard lack of demand, combined with
increasing competition from imports, as being their greatest constraint to growth and
survival. (Lisenda, 1997; Daniels & Fisseha, 1992; Phaleng Consultancies, 1995)
Within the small and medium (formal sector) the same dependency on domestic
markets is found, with only a very small proportion of enterprises involved in
exporting. The Exporters Association of Botswana lists only 32 small exporting firms,
and the majority of these only export a small proportion of their output. Another
characteristic of the formal sector market is the importance of government, both local
and central, as the major customer. Many small and medium-sector manufacturing
firms are sustained due to preferential purchasing arrangements, which guarantee up to
30% of total government purchasing for SMMEs for selected goods.27
However, evidence shows that rising market demand (from a low base) has also been a
significant factor leading to the creation of enterprises in Botswana. In order for
potential entrepreneurs to enter self-employment and business ownership, it is critical
that there exists sufficient incentive for earning income or profits, and sufficient
opportunities for exploiting market demand. As was previously outlined, the
Botswana economy has been one of the strongest growth economies in the world,
from the time foreign exchange earnings, from the sale of diamonds, began to fuel
economic growth. The rapidly expanding market has undoubtedly been the single most
important factor in the creation of new enterprises, and for the creation of small
enterprise employment.
The results of research carried out by Mead (1994) points towards employment
creation through small enterprise as being most highly influenced by demand-pull
factors. Two thirds of all enterprises created from 1981-1990 are considered to have
been created primarily due to expansion of market demand for goods and services.
27
The Local Procurement Programme (LPP) is an industrial development programme intended to
reserve up to 30% of the government’s annual budget for local manufacturing enterprises, both citizen
and foreign owned. In order for firms to qualify they must have an annual turnover in excess of
200,000 Pula and less than 5 Million Pula.
45
This was a significantly higher figure than other countries in the region, such as
Malawi, Swaziland and Zimbabwe, where levels of growth in demand had been much
lower, but where levels of enterprise creation had been roughly the same. 28 The
influence of market forces on patterns of enterprise creation, expansion and failure are,
therefore, likely to have both positive and negative effects.
Positive market-related factors
•
•
•
•
Positive (and high) rates of growth, year on year.
Low tax environment gives potential to retain earnings
Progressive/supportive policy framework.
Open market policy stimulates inward investment, and access to imported inputs
(also has negative outcomes)
Negative market-related factors
•
•
•
•
•
Unequal distribution of demand between urban and rural areas
Overall size of market is small leading to over-trading in cyclical downturns.
Large proportion of demand is stimulated through government purchasing, which
tends to be biased against SMMEs.
Open market policy, in underdeveloped economy where demand is growing, leads
to high ratio of imports to Gross Domestic Product.
Competition is intense for local SMMEs. Direct competition from Botswanabased large companies. Competition from directly imported goods and services,
new market entrants (possibly subsidised through Government support), and
substitute products/services for traditional products/services
2.44 Lack of capital/finance
Lack of investment/working capital and cash flow problems are most often
cited in surveys as being the most serious obstacle/problem facing SMMEs. (SMME
taskforce Report, 1998)) Results of surveys carried out in Botswana show that
Batswana entrepreneurs often perceive lack of finance as their greatest constraint. In
the Daniels and Fisseha Study (1992) 53% of micro and small business owners
reported lack of finance as a major problem at start-up. A study of micro-businesses
carried out by Rempel.et.al (1994) reported that 74% of business owners identified
lack of finance as their most serious constraint to business development. Additionally,
when asked to explain in more detail the nature of that constraint, 35% listed lack of
information on sources of finance as the primary problem. The IFS Study carried out
in 1994 (Analysed by Lisenda, 1997) of micro and small-scale enterprises showed only
25.6% of respondents identifying lack of capital as their most serious problem.
Studies have also shown that personal funds account for the vast majority of capital
investment in small and micro-scale enterprises in Botswana Sunny and Babikanyisa
(1994) reported that personal (equity) funds accounted for 78% of the total funds
available to small and micro-scale enterprises, whilst commercial banks only
28
Refer to: Mead (1994),
46
contributed 1.5%. Lisenda (1997) summarised the data collected by Integrated Field
Services (IFS) based on a survey sample of 2665 micro and small scale enterprises.
This shows quite clearly that private banks, and other formal lending institutions, (inc
NGOs) play a negligible role in the financing of micro and small-scale enterprises. A
more substantial role, however, is performed by both financial assistance (FAP), from
government, and equity financing, which includes personal savings and loans from
friends.
2.45 Lack of technology/technical expertise
Technology should be defined, not only in terms of hardware and machines, but
also processes and software, scientific and technical information, and the managerial
knowledge, skills and ability necessary for effective utilisation. The SMME sector as a
whole has a wide range of requirements for technology and for technical expertise.
They range from the ‘low technology’ requirements of the non-formal, largely ruralbased, sector to the ‘high technology’ requirements of the modern sector, based
largely, although not exclusively, in urban areas.
Less developed countries, such as Botswana, have an extremely limited indigenous
technological capability, and most technology is still imported from outside the
country. However, the choice and utilisation of technology is now seen, not just in
terms of direct technology transfer (north to south), but involves a multiplicity of
sources and channels. It has also been argued that much of the technical expertise, that
now exists within less developed countries, has resulted from firm specific learning,
and that firms themselves now represent an important local technological resource.
Technology and technical expertise, therefore, is being accessed through a wide range
of, local, regional and global, commercial and non-commercial linkages, such as:
•
•
•
•
•
•
•
•
Sub-contracting and other sourcing mechanisms.
Workforce mobility
Equipment suppliers
User-producer relationships
Indigenous R+D and other support structures
Consultants
Informal linkages
Partnerships/alliances/franchises/networks and other inter-firm relationships.
Evidence, from Botswana, regarding the existence and/or effectiveness of these
channels is largely unavailable, due to the lack of research in the area. This is
particularly so with regard to SMMEs. However, there are a number of points that
have arisen from preceding studies.
Amongst micro and small-scale enterprises, access to technology has not arisen as a
major constraining factor. In the Daniels and Fisseha Study (1992) only 5.9% of
respondents regarded lack of technology as a problem after start-up. Lisenda (1997)
also reported that only 5.5% entrepreneurs regarded lack of machinery as a major
problem for their businesses. It is suggested that proximity to South Africa represents
47
a major advantage, for Botswana-based enterprises, which facilitates ease of access,
either through local importers or direct purchasing.
2.46 Lack of land/premises
Lack of premises was identified by the SMME Task Force Report (1988) as being
a major constraint to business development. It noted that 70% of all micro and small
enterprises were being conducted from residential premises, which included
manufacturing enterprises. Many other businesses also operate from sub-standard
premises that are too small, badly located or not provided with the necessary
infrastucture, transport and communication services.
2.47 Lack of business linkages
Customer/Supplier relationships. Studies indicate that the overwhelming majority
(99%) of Botswana micro and small level enterprises (MSEs) sell directly to the final
consumer. (Daniels and Fisseha, 1992) The make up of the customer base tends to
vary according to firm size and market sector. Some larger MSEs, in construction and
transport for example, had larger and more established customers, with other firms
making up 20% of their customer base. The study also found that those enterprises
with forward linkages to other enterprises were more likely to grow and had higher
employment levels.
For the micro and small sector, inputs are likely to be sourced from local suppliers.
The Daniels and Fisseha survey demonstrated this was the case in over 80% of cases.
In some sectors, such as food and beverages (beer making) enterprises supplied their
own inputs, but generally this was not the case. It was also interesting to note the
single most popular source of material inputs was from wholesalers and large retailers,
and these were predominantly imported S.African goods.
Within formal ‘modern sector’ enterprises, (small and medium) the range of customers
and suppliers are far wider. The range of customers will include individual consumers,
government markets, other SMMEs and larger business customers. There are no
available statistics concerning the make up of formal sector SMME market. It has
been noted, however, that commercial forward linkages, to the large enterprise sector,
are not well developed in Botswana. (Chotani, 1995; SMME Task Force Report,
1998)
Competitor/collaborator relationships. In a market of limited size, the overall effect
of intensified competition is likely to be felt most seriously by SMMEs. Competitive
pressures will vary considerably according to the economic sector and location of the
enterprise. Competition will be felt due to a range of market pressures:
•
•
Direct competition from similar enterprises supplying similar locally produced
products/services, leading to overtrading in some sectors.
Direct competition from, predominantly, larger enterprises supplying substitute
products/services, either locally produced or, more likely, imported.
48
Evidence tends to show that other similar size businesses, operating in the same
locality, are providing the greatest competitive pressures on micro and small-scale
enterprises. (Daniels and Fisseha, 1992) In many sectors, such as dressmaking and
brickmaking, the provision of government financial assistance for start up, has led to
overtrading. (Phaleng Consultancies, 1995) In the small/medium scale sector
intensified competition is more likely to come from directly imported products and
services.
The role of collaborative relationships between SMMEs, in the African context, has
been the focus of much attention in recent research. (Pedersen et.al., 1996) They have
essentially used models of European small business development to suggest the
existence of ‘agglomeration economies’ and ‘collective efficiencies’ amongst
geographically clustered SMMEs in less-developed countries. Some limited evidence
has been put forward in the African context, pointing toward such efficiency gains
through collaboration, in both the formal and non-formal sectors. However, these
collaborative relationships have been described by Adeboye (1996) as lacking many of
the positive characteristics which have been observed in such clusters of firms in
developed countries.
“ They are not clusters of intense inter-firm interaction; the technological
dynamism which has been reported in many of the clusters, has resulted more
from interaction with foreign technology owners and suppliers, than from firms
within each cluster. They are not clusters with strong self-help organisations, and
local government or municipal authorities contribute little or nothing to the
success of the clusters. There is also no evidence of input/output-based inter-firm
relationships. “29
All studies of collaborative arrangements amongst enterprises in LDCs agree they have
not exhibited significant potential for collective efficiency, and the dominant
characteristic of inter-firm collaboration seems to be that of ethnic homogeneity.
(McCormick and Ongile, 1996; Biggs et.al., 1996; Oyeyinka, 1996)
No such studies have been carried out in Botswana, and there is limited anecdotal
evidence that points towards high degrees of collaboration amongst SMMEs. Such
collaboration, however, would be beneficial in terms of information sharing.
Community-based enterprise projects initiated by NGOs have been found to exhibit a
fairly high degree of co-operation and information sharing between enterprises,
facilitated by non-governmental intermediaries. Other co-operative self-help type
movements have been founded in Botswana, such as The Brigades Movement. (insert
footnote) However, these are predominantly non-commercial organisations, whose
main function is that of training and community development.
2.48 Lack of effective institutional support
29
Taken from: Adeboye, T. (1996) Technological Capabilities in Small and Medium Enterprise
Clusters. Review of International Experiences and Implications for Developing Countries. Science,
Technology and Development, Vol 14, No 3, December 1996, pp32-49.
49
The framework for current policy towards SMMEs was laid down in the 1984
Industrial Development Policy. Since then, policy has been developed and adapted in a
piecemeal way in accordance with changing government priorities. As pointed out by
Briscoe (1995) the responsibility for policy towards SMME development has been
dispersed throughout many government ministries - principally agriculture, commerce
and industry and finance and development planning. This has led to no overall coordination of policy initiatives and, until very recently, the full importance of SMMEs
in development planning has not been recognised.
At present there is a wide ranging debate taking place on how the role of government
should be adapted to the new economic environment. There have for many years been
calls for a shift in emphasis away from regulation and towards promotional activity.
The main vehicle for delivering direct financial support has been the Financial
Assistance Programme (FAP) which has been administered centrally by the
Department of Industrial Affairs. Responsibility for implementation of the programme
is held by the Integrated Field Services (IFS) Division which consists of Business
Management Development Services and Industrial Technology Support Services
which are located in 20 stations throughout Botswana.30 The FAP has undergone
three evaluations since its inception, the most recent being Phaleng Consultants
(1995). The report, whilst praising the role of the programme in creating jobs for
unskilled citizen employees and giving an introduction to business to many first time
entrepreneurs, also points out a range of drawbacks of such a government
administered programme.
•
•
•
•
•
Such government intervention inevitably has the effect of distorting the market
bringing about disequalibriums between supply and demand in various sub-sectors
of the economy. Over concentration of grants in specific areas of manufacturing,
such as brick making and sewing for example, has created oversupply and
consequent retrenchment in times of economic downturn.
Existing businesses which were not in receipt of grants were subject to unfair
competition.
Because the largest proportion of the medium-scale FAP is a 5 year rolling labour
grant, there remains little incentive to reduce labour costs - in fact this would be
contrary to the aims of the programme.
Low commitment from entrepreneurs, due primarily to their low overall stake in
the business and relative lack of skills in the areas of marketing, management and
bookkeeping.
Many of the company failures came about due to inability to manage cash flow and
30
According to ministry figures the programme has approved a total of about 7000 projects from
1982 to 1995 creating a total of 25,697 jobs. Of these, 7497 were under small-scale grants, 14903
under medium and 7408 under large-scale projects. The programme is designed primarily to reach
the rural and semi-rural regions of Botswana and as a consequence most of the approved projects
have been developed to meet local needs. This is reflected in the sub-sectors that have benefited,
where textiles, building materials and metal products have taken about 80% of the small-scale grants.
In the medium and large grant allocations there has been some diversification although traditional
sectors such as brick moulding, leather work, welding, carpentry and other ‘low technology’ sub
sectors predominate.
50
the reluctance of entrepreneurs to seek training in aspects of business development.
Notwithstanding these shortcomings the evaluation reports a business survival rate of
about 50%, after five years, for all projects. However, 5 years represents the point
where government assistance ends and the extent to which these businesses have been
sustained is not clear.
The justification for the continuation and expansion of the FAP will continue to be
employment creation, particularly in rural areas. However, there is realisation that
government sponsored programmes can only go part way in alleviating the expected
employment gap.
There is also much criticism of the administration and
implementation of the programme.
Briscoe (1995) notes that the FAP assists
approximately only 8-10% of total SMMEs in Botswana excluding those in services,
construction, retailing, transport, tourism and the informal sector, all of which do not
qualify for support. In fact, SEPROT (The Small Enterprise Promotion Trust) a body
which represents nearly all major non-governmental stake holders, considers that
SMME support should be widened and that government should cease to be the main
promoter and implementor of small business support. They state:
“There is now fairly widespread belief that central government and parastatal
bodies in most countries, including Botswana, have not been effective in
promoting small enterprise development. We therefore recommend that
resources such as FAP, training and counselling should be administered and
managed at the local level by a tripartite partnership involving local
authorities, NGOs and private sector organisations to encourage local business
development” 31
Marketing is another area where government has attempted to provide support. This
also has a training element in the provision of counselling and advice on the marketing
of business products. The other major area of support is export promotion. The main
governmental organisation for the provision of these services has been the Trade and
Investment Promotion Agency. (TIPA) However, the future of this organisation is
under review, since its performance was questioned in the mid-term review of National
Development Plan 7 (NDP7), and a new export and trade promotion body is in the
process of being formed.
Two other important areas of government support for local entrepreneurs give
preferential treatment in the marketing of locally produced and supplied products.
These are the Reserved Activities Policy and the Local Preference Scheme. A number
of government acts have stipulated that certain economic activities are to be reserved
for citizens only.32 It is suggested that this policy has had the effect of reducing
competition in these sub sectors, whereby there is a tendency for prices to increase
whilst productivity remains low. (Phaleng Consultancies, 1995)
31
SEPROTs small-scale enterprise policy recommendations. Taken from Briscoe (1995).
These are principally in the areas of retailing and the provision of traditional services such as
security services, for example. Industrial activities are also covered, however, and include the
following: baking of bread, manufacture of burglar bars, protective clothing, school furniture, cement
and baked bricks, school uniforms and the milling of sorghum. It also includes many ‘low skill’
activities in the field of construction.
32
51
The local preference scheme, which has recently been changed to the Local
Procurement Programme (LPP) is an industrial development programme intended to
reserve a proportion of purchases by government exclusively for local manufacturing
enterprises, either locally or foreign owned. The intention is to channel up to 30% of
the government’s annual budget for supplies to local small and medium size firms. In
order for firms to qualify they must have an annual turnover in excess of 200,000 Pula
and less than 5 Million Pula. 33
In Botswana, the government remains the single most important institution that
influences the business environment. There are also, however, a wide range of public,
private and non-governmental organisations which are offering business promotion
services and direct financial support to SMMEs. It has been estimated that there exist
over one hundred non-governmental organisations offering such business support and
training for entrepreneurs and crafts people in Botswana. (Briscoe 1995) Most
prominent of these are the Botswana Technology Centre (BTC) offering technical
training and advice; the Rural Industries Innovation centre (RIIC) offering
management training with the aim of increasing rural productivity; the Brigades
movement providing local training in craft based subjects.
A recent innovation in business training for entrepreneurs has been funded through
UNPD - Enterprise Botswana. The objective of the project is to provide a ‘one stop
shop’ for business advice and training. It is organised along the lines of a private
company and is aiming to provide a professional approach to promoting growth and
development of small and medium size enterprises with growth potential. It represents
a new departure in government sponsored training initiatives and is a sign of more
business-orientated approach to satisfying business information needs.
2.49 Lack of information
In Botswana, as in many other less developed countries, lack of finance is most
often described as the single greatest barrier to enterprise creation, survival and
growth. It was the view of the SMME Task Force Report (1998), however, that lack
of finance, more often than not, represents a symptom of other problems, such as poor
management or lack of business skills. The report went on to state it was more a lack
of entrepreneurial skills rather than lack of finance, that had been the fundamental
constraint to SMME development in Botswana. The report also emphasised the extent
to which entrepreneurs lacked information about available sources of assistance. It
was concluded from the IFS data, for example, that only 7% of micro and small-scale
business owners were considered to be aware of most finance and business assistance
programmes; and more alarmingly, only 27% were aware of the availability of FAP
capital expenditure grants.
Briscoe (1995) in a study of urban formal sector business start-ups reported that 60%
of enterprises claimed to be having problems with finance. However, he further states
that:
33
See: Local procurement Programme, 1st April 1997, Department of Industrial Affairs, Ministry of
Commerce and Industry.
52
“We attempted to assess how genuine these problems were by asking the
entrepreneurs what sources of potential funding they had explored, and our
conclusion was that 75% of those who claimed problems had very little
understanding about the range of finance available. The commonly used sources
of finance were personal savings, loans from family members and bank
overdrafts. “34
This is the second such study, therefore, which puts forward lack of information
regarding sources of finance as being equally, if not more, important than lack of
finance itself. This tends to indicate that many of the problems faced by SMMEs may
well be the result of an inability to access critical information, and a shortfall in the
necessary information handling capacities to effectively utilise business information
from both market and non-market sources.
Government has taken on major roles of business promotion and business assistance as
well as accepted regulatory/legal functions. In relation to the Financial Assistance
Policy (FAP), government has taken on the role of information provider in the areas of
direct financial support, business training and marketing. Independent evaluations of
FAP have consistently pointed toward a range of information problems associated
with the implementation of such programmes. These include:
•
•
•
•
•
•
Lack of public knowledge about FAP, which has resulted from both inaccurately
publicised information, and a general lack of understanding about the details of the
programme, amongst applicants.
Difficulties in filling in application forms.
Inadequate training prior to receiving grants, for small-scale recipients.
An Inability to properly assess FAP proposals by Production Development
Committees and Administrative Committees, that are generally made up of people
with no business experience.
Virtually no business experience and no training amongst Appraisal Officers.
Delays in processing, lack of proper record keeping and lack of proper monitoring
by administrative bodies.
It is now generally accepted in Botswana, as well as in many other less-developed
countries, that government (and para-statals) does not represent the most effective
body for co-ordinating and administering the implementation of policy in the enterprise
development sector. They are particularly poor at disseminating information within a
market environment, and lack the experienced personnel who are able to effectively
interact with entrepreneurs.
34
Taken from Briscoe (1995), p37.
53
2.5 Hypotheses Concerning Information, ICTs and SMME
Development in Botswana
This chapter has dealt in detail with a range of information-related constraints
concerning SMME development in Botswana. The evidence from existing research
shows that ‘knowledge gaps’ and ‘information problems’ may form an important
component of the overall business needs gap. In two business areas, provision of
finance and institutional support, existing research has confirmed that lack of
information constitutes a significant constraint on SMME development.
Evidence from studies of small enterprise development in developed countries suggest
that lack of information and effective information delivery represent a major
determinant of business success/failure. (Abell, 1994; HERTIS, 1994) However, the
‘degree’ to which ‘information problems’ and ‘knowledge gaps’ contribute to overall
Botswana SMME business constraints, across a range of business processes, has yet to
be established. It is also not clear how the information component of overall ‘business
needs’ can be quantified.
However, evidence from the existing local literature suggests a number of general
hypotheses that can be put forward concerning the role of information in enterprise
development in Botswana.
•
The information needs of Botswana-based SMMEs are not being met in a number
of important respects, and the existence of a significant ‘information needs gap’ is
an inhibiting factor in their survival and growth.
•
Entrepreneurs depend primarily on informal information networks for the
acquisition of vital business information, which can lead to poor business decision
making.
•
Lack of good quality formal information, particularly for citizen entrepreneurs, is a
significant inhibiting factor in their inability to enter/survive/grow within the
modern/formal sector.
•
There exists only limited potential for information and communication technologies
to overcome the ‘information needs gap’, in the light of other non-information
related constraints that SMMEs face.
•
The application of information and communications technologies is unlikely to lead
to significant improvement in the efficiency of information handling within
SMMEs, without commensurate improvements in overall business practices.
The following two chapters will make an initial examination of the veracity of such
hypotheses, by presenting an analysis of data collected during the first phase of the
fieldwork.
54
Chapter 3. The Information Needs of the SMME
Sector in Botswana: A Field Study
This chapter of the report will present the data collected during the first phase
of the fieldwork. The objectives of the fieldwork will be reiterated, and the fieldwork
data will be presented and analysed within the context of the model of ‘information and
enterprise’ that has been suggested in chapter one.
Specific objectives of the fieldwork study are to:
•
Describe the ‘generic’ information needs of SMMEs in Botswana, and to assess
where the provision of externally generated information is likely to enhance the
prospects for business survival and growth.
•
Identify where information needs of SMMEs are currently not being met, and to
establish the nature of a possible ‘information needs gap’.
•
Map current information systems, which are common to SMMEs, for the
acquisition, processing, storage and utilisation of information.
•
Understand why entrepreneurs use current information systems, and to assess the
quality of information that is currently being provided.
•
Establish the potential for information and communication technologies (ICTs) to
bridge the gap between information needs and current provision.
3.1 The Formal Sector Study
The first phase of the fieldwork study has concentrated on collecting data
relating predominantly to formal-sector enterprises. The initial phase of data collection
has dealt, primarily, with the first three research objectives, and has focussed on
information provision/capture rather post-capture processes and information use within
formal-sector SMMEs. The information needs of enterprises have been assessed
within a framework which has distinguished between ‘information content’, ‘sources of
information’ and ‘information channels’. The ‘formal’ and ‘informal’ content of
information has been recognised, as has the level of formality/informality exhibited by
SMME ‘information networks’.
3.11 Methods and techniques for data collection
The literature on methodology tends to divide research techniques into qualitative and
quantitative approaches. Although a quantitative approach is likely to give rise to a
more structured and scientific analysis, most practitioners agree, that the usefulness
55
and practicality of qualitative techniques should not be undervalued in order to obtain
deeper insights into research questions/hypotheses.35
Data collection techniques for this project, both qualitative and quantitative, have been
chosen in accordance with the level of understanding that is likely to arise from their
use. Wherever, possible results were cross-checked (triangulated) by using a number
of different sources and by utilising a range of, structured, semi-structured and
unstructured data collection techniques.
Survey Methods
The methods employed were essentially those of a field survey. The field survey was
designed in order to establish entrepreneur’s views on what they think, believe, value
or feel. In order to discover these views for their own sake, or to support an argument,
sampling a population of potential respondents in order to generalise conclusions more
widely. 36 As well as eliciting the views of respondents, equal importance was placed
on their actions and experiences, using both a time and an incident focus.
The field survey concentrated on gaining primary research data from entrepreneurs,
business owners and managers. Previous experience of carrying out surveys in the
SMME sector, tended to suggest that formalised sources of data, such as through
published company reports and accounts or business plans, for example, are either not
produced or not available in a written form. Therefore, first hand accounts through
interviews, observation or questionnaire techniques would be most likely to elicit the
most pertinent data.
There were, however, a range of problems associated with the survey techniques.
Verbal reports, either oral or written, are inevitably partial and subjective, and in some
cases may not be truthful. For this reason, it was essential to adopt effective
interviewing and questionnaire techniques, as well as the cross-checking of responses.
Triangulation techniques were used, where possible, to verify the results: by gauging
differing responses to similar questions, by comparing responses gained through
differing techniques (interviews, questionnaires and observation) and by comparing
responses from a number of different sources. (both primary and secondary)
Data Collection Techniques
Data collection techniques were chosen for reasons of sample coverage, to enable the
cross-checking of data and for reasons of practicality. Data collection techniques were
pre-tested in the pilot survey, and developed and adapted accordingly. Two
complementary data collection techniques were used in the first phase of the main
fieldwork survey:
35
A more detailed analysis of research techniques can be found in Miles, M.B. and Huberman, A.M.
(1994) Qualitative Data Analysis: An Expanded Source Book, London, Sage.
36
For more information on field surveys, see: Jankowicz (1995) Business Research Methods, 2nd
Edition, Thompson Business Press.
56
Postal Questionnaire
A questionnaire was used to gain factual data and structured responses from a
widespread population of registered formal sector enterprises. The objective of using
structured techniques was to elicit responses to questions concerning the information
needs of the enterprise, the information channels the enterprise utilised and the relative
importance of information sources. Additionally, questions were posed concerning the
storage, processing and effective use of information, and the current usage of
information and communication technologies (ICTs) within the enterprise. The
questionnaire was designed to include a mixture of closed and open questions in order
that statistically valid comparisons could be made, as well as recording individual open
responses
Semi-structured Interview Survey
A series of semi-structured interviews were carried out with a sample of formal sector
enterprises. Additionally, a small number of interviews were carried out with nonformal sector micro-enterprises and with number of intermediary organisations
working in business support/rural business development. The interviews were
designed to elicit detailed responses in relation to the information needs of enterprises,
focussing on the content, sources and channels of different categories of business
information. Questions were posed using a time and incident focus, covering market
information, business inputs and the business environment.
A semi-structured interview format was used in order to enable a relatively open-ended
and free-flowing interview style. Experience shows that this is more likely to give rise
to in-depth data relating to opinions, actions and experiences.
3.12 Sampling
The primary objectives of the formal sector study were focussed on assessing the
‘generic’ information needs of a wide range of enterprises covering the whole SMME
sector. However, for practical reasons, it was not possible to include all sub-sectors of
the economy. Therefore, it was decided to construct a sample based on a random
selection of enterprises from a representative spread of sub-sectors, covering both
manufacturing and service-orientated activities. It was decided to include sub-sectors
that were deemed economically important, in terms of their potential for future growth.
It was also decided to include sub-sectors that would be representative of both
traditional and modern enterprises. It was also hoped that a sufficient number of
responses would arise from the sample, to enable a comparison to be made between
domestic and export-orientated enterprises. Primary source data, that would enable
stratification using export/domestic criteria, was not initially available
It should be stated that the sample, as a whole, is not representative of the total
population of SMMEs in Botswana. It does, however, reflect a wide range of
economically important sub-sectors. The results of the fieldwork, therefore, will relate
57
to those sub-sectors only, and not to sectors of the economy which have not been
included in the research sample.
The sample
The sample was drawn from the total population of formal-sector enterprises in
Botswana, as recorded in the Botswana Registry of Establishments (CSO, 1997).
Other secondary sources of enterprise level data were also used for cross-referencing
purposes. These were the Botswana Telephone Directory (BTC, 1998) and the
Botswana Review of Commerce and Industry, Classified section, 18th Edition. (B+T
Directories, 1998)
It was decided to construct the sample on the basis of an equal number of enterprises
from each sub-sector. This would enable meaningful comparisons between sub-sectors
covering both manufacturing and service-based activities. It would also mean that the
sample would non-biased in favour of any single business area. The sample was made
up of 480 enterprises covering 8 sub-sectors. Enterprises were equally divided
between manufacturing and service-orientated activities, drawn from the following
sub-sectors.
Manufacturing and Service Sub-sectors covered in the sample:
BSIC. Codes
Sub-sector.
Manufacturing
1700, 1800, 1910.
3610, 2000
2610, 2620
2200
Textiles, Clothing, Leather Products.
Wood products, Furniture and Crafts
Building and Construction Materials
Printing and Publishing.
Services
5510, 6304
7200, 6420
6023, 6305
7422
Tourism
IT and Computing
Transport
Engineering and Technical Services
3.13 Sample response
During the initial phase of the fieldwork questionnaires were distributed by post to 480
enterprises in the sub-sectors specified, comprising a total of 60 enterprises in each
sub-sector. The initial response was as follows:
Correctly completed questionnaires
Incorrectly completed questionnaires (considered void)
Questionnaires not meeting sampling criteria
Questionnaires returned (undelivered)
Non-responses.
58
61
4
5
48
362
The questionnaire survey, therefore, has produced an initial response rate of 14.12%.
It is hoped that upon final completion of the questionnaire survey, the level of response
will be increased substantially. The second avenue of data collection involved in-depth
interviews with entrepreneurs from a random sub-sample of enterprises. Thus far, a
total of 20 entrepreneur interviews have been conducted across the full range of subsectors, concentrated predominantly on small and very small enterprises. (A list of
interviewees is contained in Appendix 1. of this report.) The fieldwork results that
follow, therefore, are based on the outcome of the initial responses of the questionnaire
survey and the entrepreneur interviews, as well as some reference to the pilot work
previously undertaken.
3.2 Analysis of Sample Response
The following analysis will present the results of the questionnaire survey, the
interview survey and will also draw upon other published data sources. Firstly, the
overall information needs of enterprises will be examined, focussing on information
content, information sources and information channels. The data will also be
disaggregated to show some inter-sectoral differences between service-sector
enterprises, non-exporting manufacturers and manufacturing exporters. Secondly, by
drawing upon individual responses, different categories of needs will be examined,
comprising information relating to markets, business inputs and the business
environment. Thirdly, a number of individual case studies will be examined which
serve to illustrate representative archetypes of Botswana-based enterprises.
The overall response to the questionnaire survey exhibited the following profile:
3.21 The entrepreneurs
•
•
•
•
77% of respondents were male and 23% female.
The age range of respondents showed the majority (62%) being 41 years or over,
with only 5 respondents falling into the 21 – 30 age group.
54% of those responding were citizens, whilst 46% were non-citizens.
The educational level of the respondents varied widely, but with the vast majority
having been educated to senior secondary level and beyond. (88%)
3.22 The enterprises
•
The majority of enterprises fell into the small firm category. The distribution of
enterprises according to number of employees was as follows:
59
Fig 8. The Distribution of Sample Response According to Number of Employees.
35
31
30
Number of Enterprises
1-4 Emp
5-29 Emp
25
30-49 Emp
20
50-99 Emp
15
15
10
7
8
5
0
Firm Size
•
•
•
•
•
The majority of enterprises had shown signs of growth in the last two years, with
62% reporting an expansion in the labour force, 31% reporting no change and only
7% indicating a contracted labour force.
57% of enterprises were citizen-owned, 30% were foreign-owned, 10% had joint
ownership and only 3% were foreign-owned subsidiaries.
36% of enterprises had been funded by the Financial Assistance Policy. (FAP)
61% of enterprises were dependent solely on domestic markets. 11% of
enterprises exported less than 10 percent of their output, 10% exported between
10 and 50 percent, and 17% exported more than 50 percent. The figures include
enterprises involved in tourism, which are also dependent on customers from
overseas.
Enterprises from differing sub-sectors reported a wide-range of end-use customers.
The respondents exhibited the following profile in terms of the importance of
groups of customer for total sales.
60
Fig 9. The Importance of Groups of Customers for Total Sales within
Sample Response
35
30
29
28
Number of Enterprises
27
Very
Important
24
25
22
Quite
Important
20
19
20
17
16
15
15
10
13
13
12
12
11
10
12
11
10
10
9
NotVery
Important
Not
Important
8
6
6
5
0
Government
Exports
Sub-contracting
Agents
GeneralPublic OtherSMEs
CategoriesofCustomers
The extent to which the total response is representative of formal-sector SMMEs as a
whole in Botswana, can be estimated by comparing the profile of the response with
available primary source data and the results of previous research.
•
In terms of enterprise size, the sample response, gives rise to a reasonably
representative spread of enterprises. There is however, a bias in favour of mediumscale enterprises, and an under representation of very small enterprises in the
response. Official statistics show the following composition of formal-sector
enterprises according to number of employees. (Sample response in brackets)
37% (26%) of enterprises have 1-4 employees, 33% (50%) have 4-29 employees,
4% (11%) have 30-49 employees and 2% (13%) have 50-99 employees. (CSO,
1998)
61
•
The number of enterprises indicating growth in their labour force is high, which
tends to indicate that the sample response is made up of predominantly successful
enterprises, whose owners may have been more inclined to complete the
questionnaire.
•
The proportion of citizen and non-citizen owned enterprises, the age range and the
ratio of male and female entrepreneurs were in line with the results of previous
studies of the formal sector. (BOCCIM, 1994; Briscoe, 1995)
•
The sample response indicates a high proportion of educated entrepreneurs. The
proportion with Cambridge and above is 88%, which compares with 66% reported
by Briscoe (1995). This indicates a non-response bias in favour of educated
entrepreneurs. (which might be expected from a postal questionnaire)
•
Respondents were also asked to gauge the importance of different groups of
customers for the total sales of their business. The results show that formal sector
SMMEs exhibit a wide range of customer groupings, the two most important, for
the largest number of enterprises, comprising government purchasing and
individual consumers. However, a significant number of enterprises also rated
export customers, (including tourists) sub-contracting from larger firms, re-sale
agents, wholesalers and other SMMEs as very important customers. This contrasts
sharply with the results of research carried out amongst micro and small-scale
enterprises (predominantly in the non-formal sector) which show almost exclusive
reliance on final consumers as end- use customers. (Daniels and Fisseha, 1992)
3.3 Analysis of Results: Information Needs of Enterprises
Information needs can be most easily understood by relating them to the factors which
business owners consider to be the most critical for the survival and/or growth of the
enterprise. Respondents were asked to give their opinion on the relative importance of
a range of factors that would contribute to the success of their businesses over the next
two to three years. The results are presented in the form of a prioritised problem list,
showing the percentage of entrepreneurs who considered the factors specified to be
‘critical’ or ‘very important’ to the future success of their business.
The results presented in Fig 10. (Overleaf) show that access to skills, access to markets
and access to finance are mentioned most often as equally critical ‘problem areas’ for
approximately 40% of enterprises. However, the issue that most concerned business
owners was increasing the skill level of the workforce, where an additional 52% of
enterprises considered it very important. This result was confirmed when
entrepreneurs were asked to comment on the biggest constraint that was preventing
them achieving their business goals. Respondents most often stated poor existing
management skills, lack of access to improved management skills, the inability to
acquire and retain skilled workers and the lack of access to skills training as their most
significant constraint.
62
The prioritised ‘problem’ list represents an aggregated view across the eight subsectors specified, and includes a wide range of manufacturing and service-sector firms
each with their own individual problems and priorities.
Fig 10. Prioritised List of Factors Governing Business Success
Over the Next Three Years.
% of enterprises regarding
success factors as ‘critical’
or ‘very important’
Prioritised Success Factors
Increasing the skill level of the workforce
Increasing sales/diversifying customer base
Acquiring additional financing for the business
Upgrading production technology/machines
Improvements in marketing/promotion
Improving internal financial management
Introducing/upgrading computer systems
Developing new products and services
Entering export markets
Forming alliances/partnerships with other firms
Critical
Very important
42%
41%
39%
34%
29%
29%
25%
25%
15%
10%
52%
38%
25%
31%
44%
39%
39%
38%
20%
23%
However, when the results were examined in more detail, a number of differences were
observed between enterprises. (Fig 11.) Those involved in manufacturing (34
enterprises) placed the need for finance at the top of their priority list with 53%
regarding additional finance as critical. Amongst service-sector enterprises only 25%
regarded additional finance as critical for business success. Within the manufacturing
sector, there was a sharp difference observed between exporting and non-exporting
firms. Of those involved in exporting (13 enterprises) only 30% regarded additional
finance as being critical or very important. This figure rose to 91%, however, for nonexporting manufacturers. It was also interesting to note that the vast majority (86%)
of non-exporting manufacturers were citizen-owned enterprises.
63
Fig 11. Prioritised List of Factors (1-3) Governing Business Success for ServiceSector, Non-exporting Manufacturers and Manufacturing Exporters.
1st
Priority
Factor
Service
Enterprises
Manufacturing
Enterprises
Non-exporting
Manufacturers
Manufacturing
Exporters
Increasing
skill level of
the workforce
Acquiring
additional
finance
Acquiring
additional
finance
Increasing
skill level of
the workforce
C
r
i
t
i
c
a
l
%
V
e
r
y
I
m
p
o
r
t
a
n
t
%
44%
56%
53%
21%
68%
23%
46%
38%
C
r
i
t
i
c
a
l
%
V
e
r
y
I
m
p
o
r
t
a
n
t
%
Increasing
sales
41%
41%
Increasing
sales
41%
2nd
Priority
Factor
Improving
financial
management
Increasing
sales
C
r
i
t
i
c
a
l
%
V
e
r
y
I
m
p
o
r
t
a
n
t
%
Improvements
in marketing
30%
37%
35%
Upgrading
technology
41%
29%
50%
41%
Increasing
sales
50%
36%
31%
31%
Developing
new products
23%
23%
3rd
Priority
Factor
3.31 Information needs of enterprises
Respondents were asked to provide information concerning their current needs for
differing categories of business information, rating its urgency on a scale of
importance. (Fig 12.) The results show that the information needs expressed by
entrepreneurs accord largely with the priority factors that were considered to be most
critical to the future success of the enterprise. The results also show that there is a
large unmet demand for information across all the sub-sectors within the sample. Over
50% state they have urgent needs for information, which is essential or very important
for their business, in all the business areas specified apart from export markets and new
staff.
Manufacturing and service-sector enterprises showed distinct differences with regard
to the type of information they required. (Fig 13) Manufacturing sector business
owners expressed information needs of a greater magnitude. They most urgently
needed information concerning sources of finance, existing and new local customers
and land/premises. Service-based businesses owners expressed greater needs for
information on management and staff training, new staff, new technology and
equipment and new local customers. Non-exporting manufacturers showed the
greatest overall needs for information with over 75% of respondents stating
information as being essential or very important across all categories, with the
exception of new staff and export markets. Manufacturing exporters generally had less
urgent needs for information apart from the areas of existing export customers, export
markets, new staff and management/staff training.
64
Fig 12. Prioritised List of Information Needed Most Urgently within Enterprises.
Information Concerning …
% of enterprises regarding
information needs as ‘essential’ or
‘very important’
Sources of Finance
Existing Customers
New Local Customers
New Technology/Equipment
Land/Premises
Management/Staff Training
Laws and Regulations
Export Markets
New Staff
Essential
Very important
42%
37%
35%
35%
35%
32%
27%
23%
18%
23%
18%
37%
30%
22%
45%
27%
17%
27%
The results suggest significant sectoral differences governing the information needs of
enterprises. The greater level of need exhibited by non-exporting manufacturers
reflects the lack of sophistication of many manufacturing enterprises serving domestic
markets, and confirms the difficulties they face in financing their businesses, and
locating and retaining both existing and new customers. The needs of service-based
enterprises and manufacturing exporters, however, reflect human resource-based
business deficiencies. Business information needs relate predominantly to enhancing
management and employee skills and accessing new staff. This reflects a higher degree
of sophistication within service-based and exporting sectors and the need for upgraded
technical and managerial/human resource inputs.
65
Fig 13. Prioritised List of Information Needed Most Urgently for Service-sector,
Non-exporting Manufacturers and Manufacturing Exporters.
Service
Enterprises
Manufacturing
Enterprises
Non-exporting
Manufacturers
Manufacturing
Exporters
1st priority
Management/Staff
Training
Sources
of Finance
Sources
of Finance
Management/Staff
Training
2nd Priority
New Technology
Existing
Customers
New Local
Customers
New Staff
3rd Priority
New local
Customers
Land /Premises
Existing Customers
Export Markets
4th Priority
New Staff
New local
Customers
Land/Premises
New Technology
Fig 14. Ease of Obtaining Good Quality Information by Respondents
100%
6
6
23
80%
4
6
5
Number of enterprises
6
8
12
90%
70%
2
4
8
11
9
4
13
10
17
Don't Know
15
60%
26
13
50%
32
24
32
Not able to obtain
29
35
Not easy to obtain
40%
Easy to Obtain
30%
33
31
23
20%
20
10%
20
16
13
18
11
2
0%
Ex
Ne
Ex
La
So
Ma
Ne
Ne
ws
urc
isti
por
wt
wl
wS
nag
ng
es
and
ech
oca
tm
taf
em
o
cus
f
ark
n
l cu
fF
ent
R
o
e
l
tom
ets
ina
ogy
gul
/St
sto
nce
aff
me
atio
ers
/eq
tra
rs
uip
ns
ini
me
ng
nt
66
La
nd/
pre
mi
ses
3.32 Access to information
Respondents were also asked about the degree of difficulty they had experienced in
obtaining good quality information that was critical to their business. (Fig 14) In all
information categories (apart from information relating to existing customers and
laws/regulations) over 50% of respondents stated that they had not found it easy or
they were not able to locate the information required. Information concerning land and
premises and export markets were the categories of information most difficult to
obtain. Service-sector enterprises found it particularly difficult to locate the
information they needed regarding new land/premises, management and staff training
new staff and new local customers. (Fig 15) Non-exporting manufacturing firms found
greatest difficulty obtaining information concerning new technology and equipment,
sources of finance and new local customers. Manufacturing exporters stated
information on export markets and new staff as their greatest problem areas.
Fig 15. Percentage of Enterprises Finding Good Quality Information Difficult to
Obtain/Not Obtainable. (Manufacturing and Service-based Enterprises)
Priority
Service
Enterprises
%
Manufacturing
Enterprises
%
Non-exporting
Manufacturers
%
Manufacturing
Exporters
%
1st
Land/Premises
93%
New
Technology
67%
New
Technology
73%
Export Markets
85%
2nd
Management/
Staff Training
70%
Land/Premises
67%
Land/Premises
68%
New staff
77%
3rd
New Local
Customers
67%
Export markets
65%
Sources of
Finance
68%
Land/Premises
69%
4th
New Staff
63%
New Staff
62%
Export Markets
55%
New local
Customers
69%
5th
Sources of
Finance
59%
Sources of
Finance
62%
New Staff
55%
New
Technology
62%
6th
New
Technology
59%
New Local
Customers
53%
New Local
Customers
50%
Sources of
Finance
54%
67
3.33 Information sources
Entrepreneurs were also asked to state how important different sources of information
had been to the success of their businesses. Respondents were asked to comment on
sources that exhibited both formal and informal characteristics. (Fig. 16) The results
Fig 16. Importance of Information Sources for Business Success for Respondents.
0
1
100%
9
90%
8
5
11
10
14
16
18
8
15
11
9
24
80%
14
13
70%
Number of enterprises
14
15
60%
12
25
17
22
50%
Not very
important
14
22
50
40%
19
20
27
23
26
12
30%
20%
Not important
Quite
important
Very important
12
13
11
10
23
17
10%
12
12
18
16
14
7
0%
Fam
ow
loc
loc
com
Ba
Go
NG
int
ern
nk/
al c
nk
al s
ver
Os
pet
ily
et
con
now
nm
upp
ust
ito
and
e
o
s
r
lier
led
nt
ult
me
s
frie
a
a
g
s
r
g
n
s
e
enc
nds
ts
ies
jou
rna
ls
Co
nta
cts
abr
oad
.
tended to confirm that entrepreneurs depend predominantly on their own ‘internally
generated’ knowledge and experience, which has been built up within their present
business or as a result of previous employment/business ownership.
The results also tend to suggest that ‘externally generated information’ is sourced
primarily through informal business networks of customers and suppliers or family and
friends. In contrast, formal institutional sources, such as banks, consultants and
business support agencies are rated low. Access to information from sources outside
Botswana, however, was rated ‘very’ or ‘quite’ important by 61% of entrepreneurs.
More detailed analysis showed clear differences between service-based enterprises
exporting and non-exporting manufacturers. (Fig 17.) The results gave rise to two
main observations:
•
Service-based enterprises and manufacturing exporters place little or no importance
on external business support institutions (governmental, non-governmental or
private) for providing business information. In contrast, non-exporting
manufacturers regard business support institutions as their single most important
source of external business information.
68
•
Formal sources, such as provided by journals and internet access, are of greater
importance to service-sector enterprises than for either non-exporting
manufacturers or manufacturing exporters.
Fig 17. Percentage of Respondents Who Felt Information Source was ‘Very
Important’ for the Success of their Business.
Information source
Service-based
Enterprises
Knowledge and experience of the
business owner
Local customers
Contacts outside Botswana
Family and Friends
Journals/handbooks
Access to internet/databases
Local suppliers
Bank/consultants
Contacts with competitors
Non-governmental Orgs (NGOs)
Governmental Organisations
Non-exporting
Exporting
Manufacturers Manufacturers
93%
77%
69%
37%
33%
33%
33%
26%
11%
11%
7%
4%
4%
45%
14%
23%
27%
9%
27%
41%
13%
41%
50%
31%
38%
23%
8%
8%
15%
0%
11%
0%
15%
The differences exhibited in the results clearly reflect a far greater degree of
dependency on external business support on behalf of the non-exporting manufacturing
sector. Exporters and service-based enterprises, however, place little or no importance
on governmental and non-governmental agencies. Interview data suggests that, in the
case of service-based enterprises, this is due to lack of targeting by external
information providers (e.g., FAP) and the fact that service-based entrepreneurs tend to
be more independently minded and are less inclined to seek information/advice from
outside institutions. Such enterprises, however, place higher importance on other
formal sources such as journals and internet access. Exporting manufacturers placed
the least importance on Botswana-based formal sources. (located within Botswana)
Surprisingly, exporting manufacturers rated internet access and use of journals low.
3.4 Current Information Practices within Formal-sector SMMEs
The following section will summarise the results of individual open responses of
entrepreneurs, business owners and managers, concerning sources, channels and
content of business information. It will describe the formal/informal nature of
information content, and outline the common practices used by enterprises for
information acquisition, as well as some of the information barriers/problems which
entrepreneurs experience.
69
3.41 Labour, skills and training
Responses from all interviewees suggested that information content relating to labour,
skills and training is predominantly of an informal nature. It is largely internallygenerated through firm-specific learning. For established enterprises, firm-specific skills
have been built up over long time periods, and had been passed on through informal
training and instruction by business owners or long-serving employees.
•
•
•
•
•
Both skilled and unskilled labour is accessed overwhelmingly through informal
means, largely through informal business networks or ‘spreading the word’ by
means of the existing workforce.
Enterprises, across all sub-sectors, generally did not access information on the
availability of labour or the existence of accredited training from external training
institutions.
In more technologically advanced sub-sectors, however, the need to recruit and
employ more highly educated and trained personnel is giving rise to the use of
more formal procedures such as advertising, short-listing, interviewing, the
checking of qualifications, and the attendant use of recruitment agencies.
In some cases, business owners were unaware of the nature of the formal
accredited training, that does take place in Botswana, and which might have been
relevant to their business needs. In most cases however, lack of information
regarding training was merely a reflection of the lack of training opportunities in
Botswana generally.
For most small and medium size enterprises informal in-house training forms an
essential part of their business. Most business owners, in technical services and
engineering for example, feel that insufficient information is made available in
support of the important training role that the enterprise sector has taken on.
3.42 Capital and finance
The needs of the enterprises within the interview sample varied considerably with
regard to their requirements for information on finance. A large proportion of the
enterprises interviewed had grown to become established firms, but they were by no
means financially secure. The majority of enterprises were experiencing financial
problems, and a small number were in danger of failure. More often than not,
increased funds for working capital, and more effective management of cash flow, was
required to ensure business survival. Only in two cases were business owners seeking
investment capital to fund business expansion and growth.
•
•
Many entrepreneurs exhibited a rigorous attitude towards financial record keeping,
and kept detailed accounts covering all financial transactions and borrowings.
Others, and more commonly for small-scale enterprises, operated on a strictly cash
basis, where records of transactions and borrowings were not be kept, or were
recorded inadequately.
Demand for formalised information tends to increase as enterprises grow larger.
However, a number of medium-scale enterprises, with turnovers in excess of 1.5
million Pula, showed evidence of scant record keeping, and largely informal
practices in the conduct and recording of financial transactions.
70
•
•
Obtaining information relating to potential sources of loan finance does not,
however, appear to be a significant constraining factor. Business owners are more
concerned by the barriers to obtaining external financing for their businesses.
Many of the barriers to obtaining finance are the result of institutional or
commercial considerations.
Procedures for accessing loans were viewed by business owners as being too
complicated, and demanding of information that was both time consuming and
expensive to provide. Many business owners also felt they lacked the capacity to
effectively interact with the financial sector, and most small and very small
businesses were unable to afford the services of accountants or financial
consultants to assemble financial information and present it in a professional
manner. Many small business owners had also experienced similar constraints in
the process of making FAP applications.
3.43 Technology
The technical knowledge accumulated within enterprises will also vary considerably,
depending upon the age of the enterprise and the particular knowledge and skills
possessed by the business owner and/or the workforce. Generally speaking,
small/medium manufacturing enterprises within the interview sample had fairly basic
needs for production technology and related technical information. The overall
demand and cost structure associated with small/medium-scale manufacturing
enterprises in Botswana has not, as yet, justified investment in a new generation of
automated technologies.
•
•
•
•
•
Technical knowledge is largely firm-specific and is accumulated within enterprises
in an informal manner.
Most enterprises are using tried and tested technologies and are able to rely upon
internally generated information and skills for operation of machines and
equipment.
Access to information concerning repair, maintenance and servicing is extremely
limited locally. In many cases business owners had to travel to South Africa in
order to obtain the necessary information spare parts and/or technical assistance.
Enterprises with links outside Botswana have a considerable advantage in acquiring
technology, technical information and assistance.
Local entrepreneurs, particularly small-scale non-exporting manufacturers, have
limited access to wider business networks, both regional and worldwide. For small
citizen-owned enterprises there is, therefore, a greater reliance on intermediary
donor assistance in providing technical information
3.44 Materials
Enterprises rely overwhelmingly on inputs of materials from outside Botswana,
predominantly imported from South Africa.
71
•
•
•
•
Most small and very small enterprises access information from local importers and
wholesalers, whilst medium-scale enterprises are more likely to have direct
contacts with suppliers overseas.
Inefficiencies in the operation of supply chains were widely reported to cause
significant problems for manufacturing, but also service-based, enterprises
A range of information problems mentioned, which centred on difficulties of longdistance communication with external suppliers.
The use of couriers or import agents to handle import and other transit
documentation substantially increases costs. It also means that enterprises have less
control over their own supply chains, and are dependent on information received
through intermediaries.
3.45 Existing local customers
There was a high degree of dependency on government contracting in all
manufacturing and service sub-sectors, apart from tourism. Service sector enterprises
tend to have a wider range of customers, although 45% of respondents stated
government markets were very important – covering IT, transport, technical services
and engineering. Service sector enterprises are, however, more able to access large
private sector customers than their counterparts in manufacturing.
•
•
•
•
•
Enterprises which are heavily dependent on government contracting are governed
by official tendering procedures. This means that information exchange with their
main customers, which will include central and local government departments and
parastatals, will tend to be highly formalised.
Respondents report little transparency in the tendering process, and little
opportunity, for example, to receive details of decisions, such as through tender
board reports
Information exchange within private (non-government) markets tends to be much
more informal. Close relationships with customers are preferred, and frequent
contact is likely to take place with customers at all stages of the business process,
including negotiation, placing of orders, production, delivery and after sales
service.
Personal relationships with existing customers are highly valued, which are
cultivated through extensive face-to-face contact and business networking. Once
relationships have been established, and customer loyalty won, then business is
more likely, at least partially, to be conducted at a distance through the use of fax
or telephone.
Formal advertising and promotion of business products and services was not
mentioned by many respondents as being an important method of communication
with existing customers. Business promotion was largely reduced to the use of
business cards, business signs and letterheads. The only exception to this was
participation in trade shows, which was considered to be beneficial. Trade shows,
however, were considered to be valuable because they provided opportunity for
information exchange based on personal contact.
72
3.46 New local customers
The ability of enterprises to access information on new local customers is severely
constrained due to the overall small size/fragmented/dispersed nature of the Botswana
market, and the high degree of market saturation in many sectors of the economy.
•
•
•
•
There is little evidence of the use of formal marketing methods in order to locate
and attract new local customers. Only in a few cases were interviewees able to
produce any examples of customer profiling or relevant market surveys.
Established enterprises tend to rely on word of mouth and referrals in order to
attract new business. In this respect, building up the reputation of the business is
seen as essential.
Locating new customers, for most service and manufacturing sector enterprises, is
not dependent on receiving single items of information, but usually entails a long
process of assembling a wide range of information, cultivating customer
relationships and enhancing market knowledge.
Recently established businesses, which lack customers, often reported a long and
difficult process to attract initial orders. For many enterprises, which had
subsequently grown, this entailed frequent personal visits and cultivation of
relationships with potential customers over many months, or more commonly
years, before the enterprise was successful in obtaining its first major contract.
3.47 Export customers
Manufacturing exporters in Botswana are predominantly large enterprises. There are,
however, a significant number of medium-size enterprises, and a few small enterprises,
which are exporting manufactured products.
•
•
•
The majority non-citizen owned manufacturing exporters had well-developed
linkages outside Botswana, either with parent or associated companies, which in
most cases also acted as their major customer. These linkages were critically
important when accessing information relating to marketing, technical assistance
and management expertise.
Foreign-owned enterprises, or enterprises with strong external linkages, have a
considerable advantage over Botswana-based independent exporters. Non-citizen
owners generally have a wider range of management experience outside of
Botswana; they have a wider range of business contacts and an in-depth knowledge
of regional and world wide industry trends.
Citizen-owned enterprises wishing to export, or to expand exports, tended to lack
strong business linkages within the region. In all cases export success was
achieved through some form of external assistance.
73
3.48 Competition and competitors
The level of competition experienced by SMMEs in Botswana in growing
considerably. The limited size of the overall market, combined with a relatively open
trade policy, means that SMMEs across a wide range of manufacturing and service
sectors are coming under a number of competitive pressures
•
•
•
•
•
Entrepreneurs access information on competitors and competition almost
exclusively in an informal manner. Information results largely from informal
networking, and arises from market knowledge gained through observation and
experience, or often rumour or hearsay.
Formal sources of market data, such as market reports, that may supply
information relating to market share/import penetration/market trends, etc are not
utilised. (Generally due to their unavailability)
The level of contact that enterprises have with competitors, and the level of
information exchanged, varies considerably within the sub-sectors covered. In
some sub-sectors the formation of business associations has been instrumental in
enhancing the level of interaction between business owners/managers,
disseminating market information and enabling effective interaction with
government.
Information sharing, or collaboration, between enterprises is more likely to be
facilitated as the result of commercial incentives. For example, in sectors such as
printing and publishing, linkages are established between enterprises through the
integration of up-stream and down-stream processes, and contracting out of work.
Evidence of collaboration, contract-sharing or contracting-out was found in
service-based sectors, but was not a feature of manufacturing enterprises.
3.49 Regulatory/legal information
Many business owners, across a wide range of sectors, did not regard regulatory/legal
information as a critical area largely because of the widespread belief, and experience,
of lack of enforcement of rules and regulations.
•
•
•
•
Of all the information categories, regulatory/legal information was considered to
present the least problems of access and availability.
For formal sector urban-based enterprises access was facilitated by a relatively
open door policy of many ministries. Many business owners stated they went
direct to government departments to access the information they needed.
Others felt that the number, and general informality, of access points created
difficulties, and would prefer a central source dealing with government-generated
business information that could also provide professional advice on the correct
interpretation of various rules and regulations.
Those situated outside of Gaborone reported significant problems associated with
obtaining official information, particularly from local government, where staffing
was considered to be less competent and generally less experienced/qualified in the
areas with which they were dealing.
74
•
Very-small citizen-owned enterprises, new business start-ups and some expatriate
business owners reported greater problems in accessing and interpreting
regulatory/legal information. In these cases the low level of education/experience
of citizen entrepreneurs was a factor, as was the language/cultural barriers
experienced by some expatriate business owners.
The findings presented in this chapter relate to formal sector enterprises,
predominantly those that are urban-based and owned and managed by relatively welleducated entrepreneurs. Therefore, the analysis of data represents only a partial view
of the whole SMME sector. The data collected from the formal sector is also
incomplete. Thus far there is insufficient data for a detailed assessment of the relative
quality/usefulness of formal and informal information to be carried out. Therefore,
findings and conclusions regarding the information needs of enterprises (outlined in the
extended summary at the end of the report) are tentative in nature.
75
Chapter 4. Information and Communication
Technology and Enterprise Development in Botswana
Within developed economies, information and communication technologies
(ICTs) are rapidly transforming economic activity in the enterprise sector. New
information and communication technologies, as well as creating a wide range of new
‘information-based’ growth industries, are also revolutionising existing production
processes and methods of economic exchange within all other industries and services.
(Perez, 1985; Freeman, 1996)
This transformation in the way information is exchanged and used is being felt as much
in the small enterprise sector as it is within large corporations. Research from the UK
shows that the use of computers within 94% of all businesses is regarded as standard
business practice. Additionally, 49% are connected to the Internet, and 25% have a
company web-site. Business communications are also being transformed. 84% of UKbased businesses are using digital mobile communications and 30% are frequent users
of electronic data interchange (EDI) whereby documents, such as orders and invoices,
are transmitted directly between the computer systems of purchasers and suppliers.
(DTI, 1998)
In recent years Botswana has also experienced a rapid increase in the use of
emerging information and communication technologies and attendant network-based
services. The growth in the use of e-mail and internet services, for example, has been
particularly noticeable in Botswana due to the rapid expansion of private sector ISPs
(Internet service providers) following telecommunications de-regulation. However,
patterns of diffusion of ICTs have been extremely uneven within the economy as a
whole, and the benefits of the new technology, thus far, have been felt only within the
modern urban-based sectors of the economy.
This chapter will present initial data on patterns and levels of ICT usage
collected during the first phase of the fieldwork. Background data will be presented
concerning the current status of telecommunications and information technology in
Botswana. The data from the fieldwork will then be examined focussing on
technologies
for
information
retrieval/dissemination
and
information
storage/processing within the SMME sample response. The status off emerging ICTs
in the SMME sector will be examined, and finally, a preliminary classification of
SMMEs will be suggested based on levels of ICT intensity, and a number of pilot case
studies will be outlined which illustrate differing levels of ICT usage within differing
market environments.
4.1 Telecommunications Expansion and De-regulation
Large-scale investments during the 1980s have led to the rapid expansion of a
digital telecommunications infrastructure into the main urban centres and the major
towns/large villages, within the country 37
37
Since the establishment of the Botswana Telecommunications Company (BTC) in 1980,
its customer base has grown from 6,500 to 67,000 in 1996, which gives an indication of the rapidity of
76
Botswana has wisely invested in a highly sophisticated fibre-based transmission
network together with a series of high capacity digital exchanges. The figures
presented below (Fig 18) show some comparisons between regional SADC economies
and other income group averages. The figures illustrate the extent to which the
low/middle-income countries still lag behind in terms of telecommunications coverage
countrywide, as well as their lack of access to integrated digital or other high-speed
services. However, Botswana does compare well with its regional neighbours, and
shows a very high rate of internet usage when compared with other lower-middle
income countries, ranking 9th on a list of 65 other comparable economies for internet
usage.38
Fig 18. Selected Telecommunications Indicators from SADC Region and Three HighIncome Economies. (1996)
Country
Teledensity
Main City
Teledensity
Countrywide
ISDN
Users
Internet
Users
Main Lines per
100 inhabitants
Main Lines per
100 inhabitants
(000’)
Per 10,000
inhabitants
South Africa
41.52
10.05
35.11
145.78
Botswana
17.95
4.83
0
33.42
Zimbabwe
6.32
1.47
0
1.68
Zambia
2.4
0.94
0
1.03
Tanzania
2.3
0.3
0
0.16
Lesotho
6.29
0.9
0
0.24
Swaziland
20.87
2.1
0
5.33
Namibia
25.28
5.06
0
0.74
Mozambique
2.4
0.34
0
0.28
Africa Average
5.11
1.83
37.33*
9.93*
Low Income
6.53
2.48
0.06
0.89
Lower/Middle
22.16
9.41
14.31
19.00
Upper/Middle
25.73
13.74
38.77
55.87
High Income
52.85
45.95
4,714
498.73
* Predominantly S.Africa.
Source: World Telecommunication Indicators. (1998)
Access to digital communication services has been extended recently through the deregulation of the telecommunications sector, the introduction of private mobile
growth of the telecommunications sector. In the year 1996/97 the installation of additional switching
increased the system capacity by a further 21% in one year. (Annual Economic Report, MFDP, 1998)
38
World Telecommunications Indicators, ITU, 1998.
77
communication operators and other value added services, including the provision of
ISDN. 39
Tele-density in Botswana compares well with other countries in the region. (Fig 18)
However, as the above data shows, there still exists a wide disparity between
communications services available in the main urban centres and other peri-urban and
rural areas of the country. Problems of network coverage are further compounded by
the unreliability of existing access networks in many parts of the country, most of
which are based on older technology. The Botswana Government’s own Data
Communications Network Review (1995) stated that the access network has lagged
behind significantly, to the extent, where today it suffers from inadequate plant and
ineffective control, which in many cases is severely inhibiting the effectiveness of
transmission and switching networks.40
Botswana has one of the most advanced high capacity transmission and switching
networks on the African continent. The ability of SMMEs to take full advantage of
countrywide and international communications is determined however, by their ability
to connect to their local exchange through existing access networks. SMMEs will be
prevented from effectively utilising emerging technologies, which demand everincreasing bandwidths, without reliable, and affordable, local access.
4.2 Information Technologies in Botswana
Botswana’s Vision 2016 Document (1997) indicates a strong commitment on the
behalf of the Botswana government to expanding the use of information technologies
within the country as a whole:
“The next millennium will usher an information driven society throughout the
world. To ensure the participation of Botswana in these developments, an
Information Age Working Group will be created with the mandate to formulate a
national information vision, policy and information technology strategy, as well as
to co-ordinate the currently fragmented information infrastructure in the country.
Information must be harnessed to the best advantage of all citizens.”41
Public sector investment through expansion of the government data communications
network will form by far the largest segment of demand for new IT goods and services
in the short and medium-term. Large-scale investment in computer networking of
government departments and public services has already taken place under NDP7 and
greater amounts of computerisation are planned under NDP8. These include the
computerisation of data handling in such areas as supplies, police records, vehicle
registration, collection of taxes, national registration and passports and a range of
other government functions.
39
Since de-regulation took place in 1997 two cellular network operators have received licences,
operating GSM technology. (Mascom and Vista)
40
Botswana Government Data Communications Network Review (1995), compiled by the
Government Computer Bureau.
41
Presidential Task Group for a long-term vision for Botswana, Sept, 1997, p35.
78
Implementation of new government projects will be carried out on a de-centralised
basis with individual ministries having control over project planning and purchasing.
Additionally local government will have their own IT strategies, and will be able to
carry out computerisation projects at a district level without recourse to central
authorities, such as the Government Computer Bureau.
Wide ranging and increasing expenditures by government have been planned from the
development funds for NDP 8.42 These include the following:
Computerisation Projects under:
NDP 8 (Million Pula)
Office of the President
Government Computer Bureau
Ministry of labour and Home Affairs
Ministry of Agriculture
Ministry of Education
Ministry of Commerce and Industry
MLGLH
MWTC
MRWA
Ministry of Health
5M
50M
8M
5M
14M
6M
10M
5M
17M
4M
1 $US=4.46 Pula (Dec 1998)
These amounts account for planned expenditures within the ministries themselves and
do not include computerisation components within other items of development
expenditure such as a major programme to computerise schools and new vocational
training institutions. Additionally, a major expenditure on an information and
broadcasting network and offices is planned under NDP8, amounting to 193 Million
Pula, which will undoubtedly include a large component of ICT-related expenditure.
Large-scale expansion of ICT utilisation in the public sector is likely to have both
positive and negative consequences on the enterprise sector, and particularly for
SMMEs. Overall negative economic effects may result from a drain in investment, but
particularly manpower resources, away from the private enterprise sector.
Additionally, the local IT/information services sector, including a potentially large
SMME component, is only likely to benefit substantially from public investment if it
has the available resources to grow and develop alongside the public sector.
The ICT supply sector itself is quite small, comprising 67 firms in total. In
telecommunications the sector is dominated by the Botswana Telecommunications
Company (BTC), although small and medium firms are now entering the market in
areas such as cellular, satellite and other access provision. There are only two firms
listed as manufacturing IT products - TEK (pty) Ltd and Fram Botswana (pty) Ltd,
both based in Gaborone. In the IT services sector, 50 companies are listed, all of
which fall into the small business category with less than 30 employees. These firms
are involved in a range of computer, data processing and software sales and services
and include local firms, but predominantly subsidiaries and agents of larger
international computer companies.
42
Compiled from Estimates of Expenditure from the Consolidated and Development Funds, 1998/99,
Government of Botswana.
79
There is no data available relating to levels and patterns of IT usage in the private
sector. There is no doubt, however, that large companies in the services sector
represent the most significant users. The financial sector, including banks and insurance
companies, have invested in their own countrywide networking and intranets, whilst
also bringing IT-based services to the general population, such as through the
availability of cash cards and smart cards. As this project develops during the 2nd
phase it is hoped that more detailed demand and supply related background data can be
collated relating to ICT usage in the wider economy. The next section will present an
analysis of data collected thus far in the project relating to levels and patterns of usage
of ICTs in the SMME sector.
4.3 ICTs in the SMME Sector
Within the formal sector enterprises surveyed there existed a wide variation in
the level of use of information and communication technologies across a wide range of
business processes and business sub-sectors. Data was collected relating to channels
of communication and information retrieval, methods of storage and processing of
business information and the extent to which computer-based activities are carried out
within enterprises. The data will initially be presented in an aggregated form, showing
some observed differences between service and manufacturing-based enterprises.
Following this a number of archetypes of enterprises will be suggested categorised
according to their level of ICT usage, and a number of case studies, covering the range
of archetypes, will be examined.
4.31 Technologies for information retrieval/dissemination
Respondents were asked to specify their frequency of use of different communication
channels. (Fig 19) The results show that face to face meetings and use of fixed line
telephone and fax are all used very often by approximately 70% of respondents within
service and manufacturing sectors. Use of telephone/fax services were generally on a
par with personal contact. Use of other communication channels, such as e-mail,
mobile telephone and postal services, were appreciably higher amongst service-based
enterprises and to a lesser extent manufacturing exporters, but hardly used within nonexporting manufacturing enterprises.
80
Fig 19. Percentage of Respondents Who Used Communication Channel ‘Very Often’
in their Business Dealings.
Fa
ce
to
fa
ce
M
eet
in
gs
Co
m
mu
nic
ati
on
by
let
ter
Fa
x
Te
le
ph
on
e
(Fi
xe
d
lin
e)
Te
lep
ho
ne
(M
obi
le)
Ema
il/I
nte
rne
t
2W
ay
ra
di
o
Service
Enterprises
63%
30%
67%
67%
41%
48%
15%
Manufacturing
Enterprises
71%
15%
65%
74%
15%
9%
0%
Non-exporting
Manufacturers
73%
14%
64%
73%
14%
0%
0%
Manufacturing
Exporters
77%
23%
69%
77%
23%
31%
0%
Entrepreneurs were also asked to specify which methods of communication
(information channels) they found most effective for promoting their products or
services. (Fig 20) The vast majority of respondents regarded direct contact with
customers through face-to-face meetings as the single most effective method of
business promotion, rising to 90% for non-exporting manufacturers.
81
Fig 20. Percentage of respondents who found communication channels ‘Very
Effective’ for promoting their products and services.
F
a
c
e
t
o
F
a
c
e
M
e
e
ti
n
g
s
M
a
il
S
h
o
ts
T
e
l
e
p
h
o
n
e
S
a
l
e
s
M
a
g
a
z
i
n
e
A
d
v
e
r
ti
s
i
n
g
B
il
l
B
o
a
r
d
A
d
v
e
rt
is
i
n
g
E
m
a
il
/I
n
t
e
r
n
e
t
Service
Enterprises
85%
0%
11%
15%
11%
7%
Manufacturing
Enterprises
85%
6%
27%
24%
15%
5%
Non-exporting
Manufacturers
90%
0%
19%
29%
24%
0%
Manufacturing
Exporters
77%
15%
38%
15%
0%
8%
In terms of promoting products and services, other forms of communication were not
considered as particularly effective compared with direct personal contact. This was
particularly the case amongst service-based enterprises. For example, whereas 48%
made frequent use of the Internet, only 9% regarded it as being ‘very effective’ for
their businesses.
The results from interviews, presented in the previous chapter, also tend to confirm the
preference for seeking personal contact with potential or existing customers, and the
importance of informal information accessed through business networks. Formal
methods of media-based marketing, for communicating with customers, are generally
not used in Botswana by the small business sector at present. The postal and
telecommunications infrastructure is thought to be insufficiently developed and not
reliable enough for effective direct telephone sales or direct mail marketing/sales.
Marketing and advertising services in Botswana are at an early stage of development
and cater predominantly for the corporate sector. Such services would generally not
be affordable by SMMEs.
SMME owners in the formal sector prefer personal contact with customers/clients
because they regard this as the most effective method of promoting their products and
82
services. There are, however, growing opportunities in Botswana for the use of
media-based marketing and advertising techniques. At present these are not generally
available or affordable to most SMMEs. Emerging ICT technologies, offering e-mail
and internet-based marketing tools for example, will extend the choice of
communication methods, and their rate of adoption will be determined by their cost,
effectiveness and usability in comparison with other forms of business communication.
4.32 Technologies for information storage and processing
Business owners/managers were also asked what methods of information storage
and processing they used in their businesses across a range of business processes. (Fig
21) They were asked to specify whether they held information mainly in their heads,
mainly on paper/cards or mainly on computer. The results showed a wide disparity
between levels of computerisation for service-based and manufacturing-based
enterprises.
Amongst service-based businesses and manufacturing exporters,
information relating to company accounts, for example, is held on computer by nearly
70% of enterprises surveyed. Amongst non-exporting manufacturers only 9% utilise
computer-based systems. Service-based enterprises showed high levels of computer
use for keeping company accounts and for sales/invoicing. In other business areas,
however, the use of computer-based systems within service-based enterprises fell
below 50%.
83
Fig 21. Percentage of Manufacturing and Service-based Enterprises Using ComputerBased Storage/processing Systems.
I
n
v
e
n
t
o
r
i
e
s
S
a
l
e
s
a
n
d
I
n
v
o
i
c
i
n
g
P
r
o
d
u
c
ti
o
n
r
e
c
o
r
d
s
C
o
m
p
a
n
y
A
c
c
o
u
n
t
s
W
a
g
e
s/
s
a
l
a
ri
e
s
S
u
p
p
li
e
r
r
e
c
o
r
d
s
C
u
s
t
o
m
e
r
r
e
c
o
r
d
s
M
a
r
k
e
ti
n
g
a
n
d
d
is
tr
i
b
u
ti
o
n
A
ft
e
r
s
a
l
e
s
s
e
r
v
i
c
e
Service
Enterprises
44%
59%
48%
67%
48%
37%
37%
33%
18%
Manufacturing
Enterprises
18%
29%
9%
29%
18%
18%
18%
9%
6%
Non-exporting
Manufacturers
14%
18%
5%
9%
0%
9%
9%
5%
5%
Manufacturing
Exporters
31%
54%
23%
69%
54%
38%
46%
31%
0%
Respondents were also asked to specify the extent to which they used computer-based
activities in their businesses. (Fig 22) These comprised the use of word processing,
spreadsheets, desk-top-publishing, project planning packages, CAD/CAM and
internet/e-mail access. The results presented in Fig.22 show the percentage of
enterprises that make use of such computer-based activities on a regular basis. A
similar disparity is observed between service-based and manufacturing-based
enterprises. The use of e-mail and internet access is particularly high amongst servicebased enterprises, but lower than might be expected for manufacturing exporters.
84
Fig 22. Percentage of Service-based and Manufacturing-based Enterprises
Making Use of Computer-based Activities on a Regular Basis.
W
o
r
d
P
r
o
c
e
s
si
n
g
S
p
r
e
a
d
s
h
e
e
ts
D
T
P
P
r
o
j
e
c
t
P
l
a
n
n
i
n
g
I
n
t
e
r
n
e
t
A
c
c
e
s
s
C
A
D
C
A
M
E
m
a
il
Service
Enterprises
81%
54%
15%
42%
38%
27%
4%
58%
Manufacturing
Enterprises
29%
29%
6%
9%
9%
12%
9%
18%
Non-exporting
Manufacturers
14%
14%
5%
9%
5%
18%
13%
9%
Manufacturing
Exporters
62%
62%
8%
23%
15%
8%
0%
38%
The use of computer-aided-manufacturing amongst non-exporting manufacturers can
be explained due to a small group of respondents from the printing and publishing
sector who regularly use computer controlled vinyl cutting machines for the
production of signs. There were no other respondents from the manufacturing sector
who made use of such computer controlled automated processes.
Taken overall, the aggregated results show significantly higher levels of computer use
amongst service-based enterprises, than either manufacturing exporters or nonexporting manufacturers. Amongst the 22 non-exporting manufacturers who replied
to the survey the level of computer use was particularly low. These enterprises were
predominantly citizen-owned (86%). Differences in levels of computer use amongst
citizens or non-citizens were not, however, observable in the service sector.
It might be thought that there would be a strong relationship between the general
education of business owners and levels of ICT use within SMMEs. However,
amongst the 23 non-computer users in the sample response 78% were educated to
senior secondary level or above, and 8 respondents were university graduates. This, of
course reflects the overall bias toward educated formal sector entrepreneurs in the
sample response. It does, however, indicate that high levels of education are not
necessarily a spur to utilising modern business tools.
The patterns and levels of usage of computer-based internal management systems
within SMMEs are determined primarily by the characteristics, and level of
development, of individual sub-sectors. There is no indication that the general level of
85
education or the nationality of the business owner are factors which necessarily lead to
the adoption of ICTs within enterprises.
4.4 Emerging ICTs in the SMME Sector
As well as traditional fax and fixed line communications, a range of emerging
communication and information access technologies have become widely available in
Botswana in the last 5 years. These include e-mail/internet access, mobile
communications, satellite, (VSAT) extended microwave communications, and a range
of value-added telecommunication end-user services. A number of these can be
considered.
4.41 E-mail
E-mail enables fast and relatively cheap communication internally, between networked
computers, and externally, within the locality, regionally and world-wide. An e-mail
message, and any accompanying computer files, can be sent via the phone line within a
few minutes to any global destination. E-mail creates many advantages for business
communication. Foremostly, it is significantly cheaper and quicker than other methods
of communication, including phone, fax and postal services. E-mail also enables the
user to message multiple clients simultaneously, to re-route messages and to pick up
messages whilst at different locations.
Within relatively isolated LDCs, such as Botswana, e-mail has been the fastest growing
emerging technology amongst business users. The unreliability of existing mail
services within a large geographically spread country has also encouraged adoption of
e-mail. Within the survey sample approximately 50% of the response were e-mail
users. 66% used e-mail very often, 25% used it quite often and only 9% didn’t use it
very often. Those who used e-mail very often were predominantly in the service sector
from the technical services, IT and tourism sub-sectors covered in the sample.
4.42 Internet and World-Wide Web
Connection to the internet enables communication with a global network of computers,
and access to enormous quantities of information, providing for multi-media content
based on text, pictures, sound, graphics and moving images. The internet, as well as
providing for e-mail, also gives access to information published on web-sites, from
other commercial and non-commercial organisations. The internet also allows small
companies to publish their own web-sites as a means of promoting their
products/services. The internet also allows users to discuss common problems and
interests through User-groups and Newsgroups.
Levels of internet usage in Botswana have also grown rapidly in recent years, although
not as fast as e-mail. Approximately 50% of those who responded to the survey had
internet access. 43% used the internet very often, 33% used it quite often and 24% did
not use it very often. When asked how important the internet was as a source of
86
information for their business, 30% stated it was very important, 37% that it was quite
important, 20% stated not very important and 13% not important. In terms of the
effectiveness of the internet as a method of promoting products and services, only 13%
of internet users regarded it as very effective, 20% said it was quite effective, 20%
regarded it as not very effective and a further 47% had not used the internet as a
business promotion tool.
The results tend to indicate that at present in Botswana the internet is being used as a
method of accessing information, rather that as a tool of business promotion, amongst
internet users. However, a significant number of small business web-sites have been
set up in Botswana mostly in the tourism sector and business services.
4.43 Local networking
Businesses can benefit from creating internal networks by connecting computers
together by means of cabling. This enables them to communicate with each other, to
share data files, printers and faxes. Computers can be linked within a single location
known as a Local Area Network (LAN) or between multiple locations, known as a
Wide Area Network (WAN). Internal networks can also be connected to external
networks such as the World Wide Web (Internet).
Internal networking gives the potential to work faster, to work more efficiently and to
have better internal communications. The extent to which businesses can benefit from
internal networking, however, will be dependent on a wide range of other business
management factors relating to the information needs of the enterprise, the level of
internal information management and the available business management skills.
A total of 16 respondents had internal networking of computer systems. These were
all ‘information intensive’ enterprises in the services sector covering technical services,
IT and tourism. They all regarded further upgrading and continued expansion of
computer-based management systems as being critical or very important for the future
success of their businesses.
4.44 Mobile communications
Mobile communications based on new digital technology, allows business owners to
answer calls, from customers immediately, and to reach staff working away from the
office, no matter what their location. This can bring greater flexibility, faster customer
response and time savings. In developed countries mobile phones are now part of the
business fabric. In Botswana the growth in mobile communications, since their
introduction in 1997, has been extremely rapid.
Within the survey sample response 60% were mobile phone users. 43% used them very
often, 24% used them quite often and 33% of owners didn’t use them very often.
Mobile phone users were equally spread across all the manufacturing and service-based
sectors covered in the survey. This figure is of course unrepresentative of overall
87
SMMEs, but only suggests high levels of use by relatively well educated urban-based
entrepreneurs.
4.45 Electronic commerce
Electronic commerce is one area, which is predicted, will have a significant affect on
the SME sector. Electronic commerce, of course, is already used in Botswana,
through the use of the telephone and credit cards, electronic payment and money
transfer systems and smart cards. However, it is through the medium of the internet
and on-line services that rapid expansion is likely to take place. The number of internet
users is predicted to reach 300 Million world-wide by the year 2000, having risen from
a mere 4.5 million users in 1985. Although at present only a fraction of 1% of total
worldwide transactions are via the internet, it is predicted this will grow to 3% by the
year 2001 and to 15% by 2007. (WTO, 1998).
Within Botswana there is evidence of growth of network-based electronic commerce
taking place is in the tourism sector.
The extension of the high speed
telecommunications ring to the north west of the country, and the introduction of a
local internet server, has enabled rapid adoption of internet/E-mail-based
communication. Tourism operators are highly dependent on external communications,
and interviews with Maun-based enterprises suggest that e-mail is now the preferred
option for exchanging information with clients and parent companies, driven primarily
by substantial cost savings and convenience factors. There is also evidence of a
growth of direct bookings and payment utilising Botswana-based company web-sites.
4.5 Archetypes of Botswana-based SMMEs
In order that a more in-depth case study approach can be developed it was
thought useful to classify SMMEs according to their level of information/ICT intensity.
This form of classification was considered useful for a number of reasons:
•
•
•
•
It would enable a distinction to be made between different categories of enterprises
depending upon their level of ICT use.
Between all categories of enterprises, differing levels of access, and patterns of use
of ICTs, can be assessed in a structured manner.
When it comes to making policy recommendations, specific suggestions can be
made concerning definable groups of enterprises.
It would enable a case study approach to be adopted that will emphasise the extent
to which the needs of individual enterprises differ.
Enterprises have been classified according to whether they have access to
telecommunication services, whether or not they have access to computer-based
systems on their premises and whether they have access to internal/external networks.
This is a preliminary classification that will be used as a basis for data collection during
the 2nd phase of fieldwork.
88
4.51 Preliminary classification of enterprises according to ICT intensity
•
Non-ICT Users: Non ICT users can be defined as enterprises that have no
immediate access to telecommunication services. They have no use of computers
and have no telephone or FAX on the premises.
•
Non-IT Users: This category of enterprises make no use of computers, but have
access to telecommunication services, primarily telephone and FAX.
•
Non-networked ICT Users: This category can be defined as enterprises with just
one foot in IT. (first footers) They will have one or more computer on their
premises, but with no network connections.
They will have access to
telecommunication services.
•
Networked ICT Users: This category of enterprises may also be first-footers, those
with stand-alone computer(s) (i.e., no internal networking) but with an external email/internet connection.
•
Intensive ICT Users: Defined as those enterprises that utilise two or more
computer terminals that are internally networked. They will also have email/internet connection, and may be connected to other local/regional networks.
The following data table (Fig 23) summarises the make-up of each category of
enterprises within the sample response and shows the distribution of enterprises
according to enterprise size, (No of employees) enterprise sector (manufacturing or
services) and form of ownership. (citizen or non-citizen)
A number of observations can be made concerning the distribution of enterprises.
Overall, there seems to be little relationship between ICT use and enterprise size,
except to note that the majority of non-ICT/IT users amongst the response have less
than 5 employees. IT intensive and networked IT users are just as likely to exist
amongst small enterprises as amongst medium-sized.
Of more significance is the distinction between services and manufacturing exporters
on the one hand and non-exporting manufacturers on the other. Only one (from 22
responses) non-exporting manufacturers in the sample response had external
networking, whilst for services and exporting enterprises the majority had
internal/external network connections. There is some evidence that citizens are less
likely to be IT users, but only amongst non-exporting manufacturers. Within service
enterprises and exporters no significant differences where observed between citizen
and non-citizen owners/managers.
89
Fig 23. Distribution and Characteristics of Survey Response According to Level of
ICT Intensity.
Characteristics of
enterprises in sample
Number of Enterprises
Enterprise
Size
1-4 Emp
Non-ICT Users Non-IT Users Non-networked
IT Users
Networked
IT Users
Intensive IT
Users
4
10
15
16
16
4
6
4
1
2
3
8
9
9
1
3
6
5
5-29 Emp
30-99 Emp
Non-exporting
manufacturers
3
9
9
1
-
Manufacturing
exporters
-
-
3
6
4
Services
1
1
3
9
12
Citizen-owned
4
9
8
6
6
Non-citizen owned
-
1
7
10
10
The level of computer use amongst enterprises varies considerably, both within and
between categories. Figs 24/25 present data relating to levels of use of computerbased systems for the storage and processing of information and levels of use of
computer-based activities with groups of enterprises.
All those categorised as non-ICT/IT users declared their use of computers within their
businesses as zero. It may be that a proportion of these may have made use of
computers outside their business, either belonging to friends, family or business
contacts. Evidence from interviews with such enterprises, however, did not suggest
this to be the case. Nor was there any evidence of business owners having access to
computer facilities through business support organisations or any other publicly
accessible facilities.
Non-IT Users. The survey results showed that 90% of non-IT users were small-scale
manufacturers (1-29 employees) and they were all citizen-owned. Approximately 75%
of this group used telephone and fax on a regular basis. This group would offer
potential for expansion of ICT use, given that they already have access to necessary
infrastructure services. However, in terms of prioritised problems facing business
owners, lack of finance and lack of management and workforce skills were mentioned
as the two most significant factors inhibiting their businesses, with over 90% of
90
business owners regarding them as critical or very important. This would tend to
indicate that both affordability and lack of management skills would preclude the
majority of present non-users from expanding their use of ICTs beyond the use of
telephone/fax services.
Non-networked IT Users.. Non-networked IT users can be described as ‘first-footers’
in small business computing. Fifteen such enterprises were identified in the sample
response. They covered very small, small and medium-size enterprises. Most were
manufacturers (three exporters), and a further three service-based enterprises. There
were an equal number of citizen and non-citizen owners. Although this category of
enterprise have access to computers on the premises, the level of computer use was
comparatively low. Only 20% of all such enterprises had computerised basic business
functions such as customer invoicing and their internal accounting systems. This
category of enterprises primarily made use of their computer systems for general
administrative activities with 71% of enterprises making use of word processing
applications and 43% using spreadsheets. 39% of non-networked IT users, although
having computer (s) on the premises, made no use of them in their everyday business
activities. Amongst this group lack of finance and management/employee skills were
also seen as the factors most critical to the success of their business. 50% of such
enterprises, however, also regarded upgrading computer systems as being critical.
91
Fig 24. Use of Computer-based Activities within Enterprises According to Level
of ICT Intensity.
Percentage of enterprises
using computer-based
storage/processing
systems for stated
business functions.
Non-ICT Users Non-IT Users
Non-networked
IT Users
Networked
IT Users
Intensive IT Users
Word Processing
0%
0%
71%
88%
94%
Spreadsheet Analysis
0%
0%
43%
69%
88%
Desk-Top-Publishing
0%
0%
7%
31%
38%
Project Planning
0%
0%
21%
44%
81%
Internet Access
0%
0%
0%
56%
88%
CAD
0%
0%
14%
19%
56%
CAM
0%
0%
7%
13%
13%
E-mail
0%
0%
0%
94%
88%
Networked IT Users. Networked IT users most commonly had a single computer on
the premises with an external/modem connection. The sample response identified 16
such enterprises. All bar one had more than five employees, including 6 small
enterprises with more than 30 employees. All bar one were either service-based
enterprises or manufacturing exporters. The level of utilisation of IT across a range of
business functions was much higher, with 75% using mainly computer-based systems
for company accounts, 56% using computers for sales and invoicing, but under 50% in
other categories such as wages and salaries and inventories. E-mail was used on a
regular basis by 94% of the respondents and 56% used internet access very or quite
often.
This group of enterprises regarded lack of workforce/management skills and problems
of sustaining/increasing sales as their two most critical problem areas. Three
respondents only described financial constraints as critical.
92
Fig 25. Level of Computer Use for the Storage and Processing of Enterprise
Information According to Level of ICT Intensity.
Percentage of Enterprises
Using Computer-based
Activities
Non-ICT Users Non-IT Users
Non-networked
IT Users
Networked
IT Users
Intensive IT Users
Inventories
0%
0%
20%
31%
63%
Sales and Invoicing
0%
0%
20%
56%
88%
Production Records
0%
0%
7%
31%
63%
Company Accounts
0%
0%
20%
75%
81%
Wages and Salaries
0%
0%
7%
44%
69%
Supplier Records
0%
0%
13%
25%
63%
Customer Records
0%
0%
20%
31%
63%
Marketing & Distribution
0%
0%
0%
25%
50%
After-sales service
0%
0%
7%
12%
25%
IT-intensive Enterprises: The vast majority of IT-intensive enterprises are servicebased, found in technical services, the IT services sector and the tourism sectors. There
were also four manufacturing exporters in this category. The enterprises range in size
quite dramatically, from very small proprietor only businesses to medium-scale with
between 50 and 99 employees. Most are non-citizen owned or owned by nonBatswana citizens) They have high levels of utilisation of computer-based processes
across all business functions, as well as high levels of utilisation of computer-based
activities.
Within the IT-intensive category computer-based systems are used to differing degrees
across a range of business functions. Over 80% of all such enterprises have
computerised accounting and customer invoicing systems. Most other business
functions, such as inventories, customer and supplier records, are computerised in
approximately 60% of enterprises. E-mail and the internet are used very or quite often
by 88% of these enterprises, and computers are used for more complex business
activities such as project planning by 80% of respondents.
When asked to specify the factors that were most critical for the success of their
businesses, this group stated workforce skills, sustaining/increasing sales and the
introduction of new products/services as being their top three priority factors.
93
4.6 Pilot Case Studies
The following pilot case studies have been selected from the interviews undertaken
with formal-sector enterprises. They are designed to illustrate the type of enterprises
that are typical of Botswana-based SMMEs exhibiting varying degrees of ICT
intensity. The case studies have, thus far, concentrated on formal sector
(small/medium) enterprises and at present only one non-IT user has been included. The
2nd phase of fieldwork will involve in-depth case studies with a more representative
spread of formal sector enterprises (Small/micro) as well as those in the non-formal
sector.
Case Study 1. Non-IT User.
The business is a small-scale manufacturing enterprise, urban-based, with 13 employees
and an annual turnover of between 200,000 and 500,000 Pula. The business owner is a
Motswana in his mid-40s who has been educated to junior secondary level. The business
owner is a self-taught leather craftsman, whose business, established in 1984, was initially
funded by small-scale FAP. The enterprise produces leather goods including handbags,
purses, wallets, belts and cases. Home market sales are predominantly to government,
parastatals and other non-commercial organisations that purchase wallets and document
cases for the conference market. The business also sells directly to consumers through local
markets.
The business has a strong and well-established home market that benefits from contracts
awarded under the local procurement programme. (LPP) The business receives some export
orders (primarily from Lesotho) which, in some years, have contributed up to 30% of
turnover. Current production relies on low-skill-based technology that is cheap and easy to
acquire, and for which local skills are readily available. However, the business is now at a
mature stage and there has been little product innovation in a market sector where tastes and
demands are constantly changing. The business relies heavily on government purchases for
bulk orders for longer production runs. The continuation of government orders have become
uncertain due to increased competition from new entrants in the market. The business
suffers from poor management skills, and the business owner feels he lacks the management
capacity and knowledge to expand the business further – into wider export markets, for
example.
There are opportunities to expand exports into the European market for high quality, high
value added, leather bags. In order to do this it will be necessary to upgrade designs and
utilise higher quality raw materials and fittings, all of which will need to be imported.
Current skills will be adequate for such production, but considerable assistance will be
needed in design and marketing. Home market share is coming under considerable pressure
from products imported from the Far East, manufactured from synthetic substitute
materials. The business has already moved into synthetic (PVC) materials for high volume
conference products, such as document wallets and cases. In consumer markets – primarily
for handbags – the company would find it impossible to compete on price with imported
products due to lack of volumes created through domestic demand. The demand for higher
quality, but considerably more expensive, leather bags is gradually tailing off in the region.
The future survival of the business will depend upon raising the overall product quality of
higher value-added products in order to expand exports into non-SADC markets (primarily
94
Europe). There are a number of critical factors that will determine the success of these
objectives.
•
•
•
•
Locating new markets outside SADC, whilst also sustaining home market share.
Accessing design and marketing expertise
Raising additional finance to support export-led strategy
Increasing management skills.
The business has a wide range of immediate needs for information in the areas of design,
marketing and business management skills.
•
•
•
•
The business requires information concerning marketing assistance for such products in
European markets.
Direct access to information and assistance concerning product design innovation.
Information on possible sources of finance
Information on sources of assistance in enhancing management skills.
The business is locked into government markets and largely lacks the information gathering
skills that would be necessary to effectively tackle wider export markets. The business
owner uses largely Botswana-based information sources and regards contacts with
government as most critical to the business. External channels have been established
through trade fair promotions, which have proved to be the most successful for reaching
regional markets. Because the business owner has no effective contact with business
networks outside Botswana, he has enlisted the assistance of a German trade promotion
agency (GPZ) which has already been able to provide the services of a technical expert in
the field.
Potential applications of ICTs. The most pressing needs of the business are not only for
external information concerning export marketing, but also for direct assistance through
consultancy. It is possible, however, that wider European market information could be
accessed through the internet, and a web-site presence could be used as a marketing tool, in
order to raise the profile of the business amongst potential European importers. However,
information provision through direct assistance will be required to successfully change the
product mix and successfully re-orientate the business.
Constraints: Lack of management and computer skills within the enterprise. Lack of
finance and time required to up-grade skills, and invest in necessary technology.
Case Study 2. Non-networked IT User.
The business is family owned, small-scale, urban-based, with 5 full-time employees. In
1997/98 the business had a turnover of approximately 215,000 Pula. The business owner is
a Motswana, and her son, who co-manages the business, is educated to graduate level. The
business was established in 1992, after the family took over from a previous S.African
partner who sold his share of the business. The business produces metal sign boards,
illuminated signs, perspex signs and banners. It also places signage on windows, vehicles
and shops and maintains signs. The business depends primarily on private sector
customers, mostly medium/large firms in the construction sector.
This is an established business that has built up a good reputation by offering a quick and
reliable service. The business has the necessary skills, both manual sign writing skills, and
95
the ability to offer computer-aided design/manufacture services. Demand from the
construction sector tends to be cyclical. The level of future demand is uncertain in a
business where increased levels of capital investment will be required to stay competitive.
Continual cash-flow problems.
A wider share of the market is available for businesses that can make the necessary
investment in new technology. Investment in upgraded CAD/Vinyl cutting equipment can
bring substantial savings in production time, giving considerable cost advantages. The
market for signage is very competitive. A large number of Botswana-based and SouthAfrican-based firms are competing for business. New technology is changing the business
and those firms that do not re-invest will lose their competitive position.
The medium/long-term survival of the business will depend upon reducing production costs
through further investment in up-graded CAD/CAM equipment, whilst expanding the
business to provide payback on investment. There are a number of critical factors that will
determine the success of these objectives.
•
•
•
•
Retaining existing customers, and gaining new local customers.
Raising additional finance for investment in new technology
Providing effective technical support for the business.
Upgrading workforce skills.
The business has a wide range of immediate needs for information in the areas of new local
customers, additional finance and technical support.
•
•
•
•
The business requires information that will lead to acquiring new major customers.
Local sources of technical support, providing information/assistance relating to
maintenance of existing technology.
Information relating to sources of up-graded technology
Information on possible sources of financial assistance.
The business has relied upon building up strong personal relationships with customers, and
has worked hard to develop a reputation for prompt delivery (which is important for signage
in the construction business). Contact with customers tends to be face to face, and new
business has been gained through word of mouth and referral. Contracts are placed by
large companies after written quotations are submitted, so business is sustained over the
long-term primarily through price competition.
The business has encountered considerable problems in locating local technical
support/information concerning existing computer-based vinyl-cutting machinery. The
machine was recently affected by a lightening storm and had to be sent to South Africa for
repair, causing 3 months downtime. No technical support/information was available
locally.
The business would consider applying for medium-scale FAP to expand their business and
make the necessary investment. They are put off from applying due to lack of necessary
internal financial information within the business and uncertainty about the rules governing
FAP applications. They regard the costs of employing a company secretary as being too
high.
Potential applications for ICTs: Application of up-graded computer-based production
technology is a critical factor for the future success of the enterprise. Future survival in the
96
business will necessitate gradually phasing out manual sign writing, and utilising
CAD/CAM for the majority of work. At present computer-based systems are not utilised
for any internal management functions. There may be room for using computer-based
systems to enhance internal financial control. Technical information may be accessible over
the internet, and a local web-site presence may be useful as a business promotion tool, as
many large potential customers now have e-mail/internet access.
Constraints: Lack of internal financial management skills. Lack of access to local
technical support. Future plans for this business will however, be constrained primarily by
lack of investment capital.
Case Study 3. Networked IT User.
The business is small-scale, urban-based, with 4 full-time employees. In 1997/98 the
business had a turnover of between 200 and 500,000 Pula. The business owner is a
Motswana, and is educated to graduate level. The business was established in 1996, and
has been internally financed. The business owner gained his experience through many
years working in a technical capacity for large computer firms in Gaborone. The business
provides computer services: including, network cabling, network installation, systems
integration, PC service and support. He services predominantly government contracts and
the small/medium firm sector.
The business owner has a good technical background and possesses the necessary skills to
compete effectively for contracts. He is able to respond quickly and flexibly to customer
requirements, due to small size. The business lacks access to sufficiently skilled and
experienced employees, which would remove workload from business owner. Little
opportunity for on-the-job training of trainees. Lack of internal financial management
skills.
Demand for computer services is expanding rapidly. Opportunities for accessing larger
government contracts if the business can be expanded. Little opportunity to compete with
large companies for hardware sales, thereby closing off most lucrative component of
contracts.
The business owner would like to expand the business in order to satisfy existing demand,
and take on larger government networking and maintenance contracts. There are a number
of factors that will be critical to business expansion:
•
•
•
•
Locating trained and experienced IT professionals to work in the business..
Raising funds for re-investment in updated hardware/ software tools.
Expanding in-house on-the-job training of employees.
Improving internal financial management.
The business has a wide range of immediate needs for information in the areas of new staff,
assistance with employee training and management skills.
•
•
•
Information concerning management support, particularly for improving internal financial
management.
Information concerning new experienced staff or support for in-house training.
Information on possible sources of business expansion finance.
97
The business has been built up exclusively by word of mouth and referrals. He has never
advertised or promoted his business, except through face-to-face contact with customers.
The recent explosion in demand for IT services has kept the business growing year-on-year.
Future growth of the business is constrained by lack of basic business management skills on
behalf of the business owner. Although he has the technical/computer skills, he is not able
to apply those to the internal financial management of the business. The business owner
admits that in order to contemplate business expansion, such as through external financing,
he will need external business management advice/information.
Potential applications for ICTs: The business has the necessary IT/computer skills, the
necessary access to network services and sufficient financial resources to make effective use
of IT-based systems. The business lacks internal financial control and record keeping, and
hence the lacks the ability to use technology effectively for storage/processing of internal
information.
Constraints: Lack of internal financial management skills. Lack of access to management
support.
Case Study 4. Intensive IT User.
The business is medium-scale, urban-based, with 42 full-time employees. In 1997/98 the
business had a turnover in excess of 2 million Pula. The business owner is Indian, but a
Botswana citizen, and educated to graduate level. The business was established in its
present form in 1993, and has been financed through private family means. The business
owner gained his experience through many years working in the printing sector in
Gaborone, after re-training in India in DTP. The business produces all types of off-set
lithographic printing, also handling up-stream printing processes including layout,
typesetting, film production and offering industry standard DTP facilities. The business can
handle high volume print runs, and serves a wide range of customers, including large
companies and para-statals.
Investment of 400,000 Pula in industry standard up-stream DTP technology means firm is
able to offer high quality utilising wide range of colours, styles and creative design options.
Well-established skilled workforce with printing experience dating back to the 1970s.
Effective upper-management skills. Strong local technical support from large computer
manufacturer. Established customer base. Lack of middle management skills, particularly in
the new technology.
The business has the necessary management expertise and technological/skills capacity to
take advantage of new opportunities in a rapidly changing business sector – a move toward
full colour printing for example. Growing competition from smaller printers using new
technology, and in-house DTP.
The business owner would like to continue to expand the business in order to satisfy
existing demand, and to widen market share by introducing full colour printing. There are a
number of factors that will be critical to business expansion:
•
•
Increasing market share, particularly in higher value added printing.
Increasing management skills within the workforce, and locating more highly
trained/educated employees to handle up-stream processes.
98
The business has immediate needs for information in the areas of new staff and new local
customers.
Current information/ICT practices: This is an example of a business that has successfully
adapted information technology across a wide range of business processes. Most internal
management systems are computerised, including ordering, the up-stream manufacturing
process, delivery, invoicing and customer records. The business owner has been able to
integrate computer-based systems effectively because he had the technical/computer
background and the necessary management expertise. He was also forced to implement
more efficient information management systems in order to adequately control the low
margins and high overheads with which the business operates.
Constraints: Lack of internal middle management skills.
4.7 ICTs in the Non-formal Sector
Currently non-ICT users can be found in both formal and non-formal sectors. Nonformal sector enterprises did not form part of first phase of fieldwork, and will be
included in the 2nd phase of the project. Therefore, data has not yet been produced
concerning the vast majority of non-ICT users. However, as previous studies have
shown this type of enterprise constitutes the majority of enterprises within the SMME
sector as a whole, and creates livelihoods for the largest number of people. In
Botswana, they are predominantly rural based although there are significant and
growing numbers of urban-based non-formal micro/small enterprises.
Four respondents in the survey were classified as non-ICT users. They were all smallscale local manufacturers with annual turnovers of less than 12,000 Pula, and all citizen
owned. They all expressed critical needs for information concerning additional finance
and improving financial management of their businesses. When asked to specify the
biggest constraint that confronted their business a typical response was …. “
Mismanagement: I can see I am not good at management, more especially
financially. So I need more help and will need to have a partner for I need his/her
advice in running the business.”
It is too early in this study to conclude what role ICTs can play in assisting such
businesses. The IFS Study summarised by Lisenda (1994) provided evidence that
suggests little or no scope for the application of ICT-based systems in a business
support role. Micro-enterprises (1-3 employees) were shown to make up 75% of the
estimated 50,000 enterprises in the overall SMME sector. Within the micro-enterprise
sector 80% of enterprises kept no internal records – formostly financial records (e.g.,
cash book, expense ledger, etc) but also other records of transactions such as invoices,
receipts, etc. This tends to indicate that the information handling skills, and the manual
recording systems, of such enterprises are not yet sufficiently developed for the internal
application of ICTs to be seriously considered.
It is also apparent that such enterprises lack the three basic requirements of access,
affordability and skills that would be required to take advantage of any services or
appropriate applications provided through emerging ICTs.
99
•
Lack of Access. Small business users will need reliable access to the available
infrastructure from their localities. The majority of SMMEs are likely to have no
access, or restricted/unreliable access to communication services. Evidence relating
to the geographic location of SMMEs shows that the majority (66%) are located in
rural areas and at present do not have reliable access to communication networks.
•
Lack of Affordability. The technology will need to be affordable, not just in terms
of initial capital outlays for hardware, software, installation and peripherals, but
also in terms of the ‘total cost of ownership’. Total costs will include consumables
such as printer inks, software updates and maintenance, training requirements for
business owners and employees to keep abreast of emerging technologies or new
business requirements, and network access charges. Most SMMEs, however, are
too small to warrant any investment in computer-based ICTs, with the majority
(69%) of micro-enterprises generating average annual turnovers of 6,919 Pula.
(US$ 1,551) (Lisenda, 1997)
•
Lack of Knowledge and Skills. Users will also need to have sufficient education
and training in order to operate computer-based systems effectively, and to be able
to adapt them to the real needs of their businesses. Additionally, and more
importantly, users will need to have a sufficient level of literacy in order that they
are able to access, understand and process the information that is being provided in
a way that will benefit their business. The business owners of SMMEs largely lack
literacy, education and training, particularly those in the micro/small and informal
sectors. In 1994, 88% of all business owners surveyed in the IFS study had
primary or no education, whilst only 1% had some form of tertiary education.
.
Such businesses, however, may benefit from greater access to communication facilities,
such as through normal telephone services, facsimile, mobile communications and
other value added telecommunication services. A large number of donor and
enterprise development organisations are promoting the expansion of rural
communication services as a primary tool of economic development. For example, the
Micro-enterprise Best Practices Project, sponsored by USAID, sees a generally
positive role for emerging information and communications services.
“There is growing demand among MSEs for basic telecommunication services
such as local and long-distance phone and fax services.
As new
telecommunications services become more readily available and affordable. Micro
and small businesses of various types have emerged as some of the more avid
customers. The availability of basic communication services makes it possible for
businesses of all sizes to operate more efficiently, reduce their business
transaction costs, expand their networks of business and personal contacts, access
new markets, obtain better price information, and generally become more
competitive.”43
In a number of developing countries a range of experiments have been conducted
which have attempted to bring communal telecommunication services into remote
areas. Usually described as phone shops or rural telecentres, all initiatives have
43
Micro-enterprises Best Practices (1999) p7.
100
endeavoured to create access and provide basic communication and information
gathering skills at a price which is affordable, not only to micro/small enterprises
located predominantly in rural areas, but also to the general population.
However, for the vast majority of business owners, there may exist a range of
additional socio-cultural barriers that will inhibit their ability to interact, not only with
the technology, but also to absorb information which has been generated from within
very different socio-cultural environments. Evidence from the preceding chapters
demonstrates that the vast majority of SMMEs service immediate local markets and
rely on locally generated information and locally accumulated market knowledge. In
order to operate successfully they need to gain information from within their own
socio-economic/cultural environments. This enables a greater amount of trust, and
hence confidence and security in the information sources and the information channels
used.
These barriers have been summarised as: (Heeks, 1999)
•
Lack of source proximity. The sources of most available digitised information will
be extremely distant, both geographically and culturally. It may be presented in
ways that reflect the environments and the values of its creators, and may lack any
embedded characteristics of direct relevance to users in very different sociocultural settings.
•
Lack of trust and security. The evidence shows that business owners place greater
value on information received through personal contact, and are able to build up
greater trust in personalised information channels and sources. Conversely,
information received in a digitised form is generally non-personalised and distant,
and lacks the security necessary when making decisions that may involve an
element of risk.
•
Lack of knowledge. The knowledge of most recipients will be restricted to their
local environment. In order for business owners to access, to assess the value, to
select and to process external information it is necessary to have previous
knowledge about the contexts and environments from within which the information
has been generated.
Significant positive impacts associated with enhanced telecommunications and wider
access to information, for non-formal sector enterprises, have yet to be proven, and in
consequence should be examined critically. There are likely to be substantial long-term
socio-cultural, literacy and knowledge barriers that would need to be overcome before
most business owners could effectively utilise both the technology and the available
information.
The second phase of this research project, which will be concentrating in more detail
on the non-formal sector, will aim to provide some conclusions concerning the
applicability of such remote area services in the case of Botswana.
101
Extended Summary and Conclusions
This is a summary of research that examines the role of information and
communication technologies (ICTs) in the development of small, medium and micro
enterprises (SMMEs) within less developed countries. (LDCs) The data collected
during the first phase of the research project is drawn from fieldwork undertaken in
Botswana during the first half of 1999. The enclosed report presents the principal
findings produced from the analysis of data at the interim stage of the project. The
conclusions reached, therefore, are both tentative and partial. Whilst it is hoped that
the report will prove to be informative to its recipients, it should also be emphasised
that final results and recommendations will only be made available upon publication of
the final report.
Background
The role that emerging ICTs can play in closing knowledge gaps and solving
information problems for SMMEs in Botswana has yet to be clearly defined. The
extension of telecommunication services has, thus far, favoured large enterprises and
the corporate sector located predominantly in urban areas. The impact of enhanced
communications on the SMME sector has been extremely uneven. More sophisticated
‘modern sector’ enterprises have been able to take advantage new technological
opportunities, such as e-mail, Internet access and mobile communications, which have
seen rapid expansion within larger urban centres. However, most SMMEs operate in
traditional or ‘backward sectors’ of the economy often in remote locations, and lack
access to the skills, finance and infrastructure necessary for effective utilisation.
The wider enterprise sector in Botswana has remained largely untouched by rapid
changes in technology and there appears to be an increasing polarisation in the ability
of enterprises to participate in the ‘global information revolution.’ Many international
organisations and donor agencies have recognised rising inequalities of access, and a
large number of initiatives have been undertaken to re-dress this growing technological
imbalance. The cost effectiveness and the usability of such technology-based solutions
to the problems faced by SMMEs will be critically examined during the course of this
project, as will the appropriateness of emerging ICTs as tools for poverty alleviation
through local economic development.
Research Objectives
During the initial research phase the primary objectives for data collection were as
follows:
•
•
Describe the ‘generic’ information needs of SMMEs in Botswana, and assess
where the provision of externally generated information is likely to enhance the
prospects for business survival and growth.
Identify where information needs of SMMEs are currently not being met, and to
establish the nature of a possible ‘information needs gap’.
102
•
•
•
Map current information systems, which are common to SMMEs, for the
acquisition, processing, storage and utilisation of information.
Understand why entrepreneurs use current information systems, and to assess the
quality of information that is currently being provided.
Establish the potential for information and communication technologies (ICTs) to
bridge the gap between information needs and current provision.
Theoretical Framework
The theoretical model emphasises the importance of effective interaction
between the enterprise and its market environment. It is predominantly the linkages,
relationships and contacts that an enterprise establishes with customers, suppliers,
collaborators and competitors that will determine the sources, channels and content of
externally generated information. The ability to access, process and use market
information, in order to inform decision making and action, will largely determine the
capacity of the enterprise to adapt, survive or grow within a competitive market
environment.
The ‘information environment’ within LDCs differs considerably from developed
countries. Market and non-market mechanisms for the transmission of information in
LDCs are less sophisticated, barriers to the free-flow of information are higher, and
resource inequalities in the provision of information more extensive. Local business
networks are less developed and more fragmented, and entrepreneurs are likely to be
less educated and less skilled in acquiring, processing and using business information.
Evidence shows that information exchange, particularly amongst the bulk of small and
micro enterprises, tends to rely on informal practices, utilising networks of personal
contacts in the local area from which unstructured, unrecorded and subjective
information of variable quality is derived.
The provision of information is only likely to be beneficial when it enhances
knowledge, and is put to some effective use to ensure the survival/growth of an
enterprise. A potential role for ICTs in this process should be placed in the context of
the overall information needs of enterprises, and can be considered by using the
following four main decision criteria.
•
•
•
•
Assessing the costs and benefits associated with of formal and informal information
practices.
Prioritising ICTs in overall business development.
Assessing how ICTs can be successfully and cost effectively applied.
Establishing how ICT constraints can be overcome.
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The Case Study of Botswana
The level of interest in SMME development in Botswana has been growing
recently in the light of the publication of a Task Force Report on SMMEs and the
subsequent approval of a new SMME Policy in December 1998. The primary aim of
the policy is to encourage further expansion of the SMME sector, creating new
sustainable employment opportunities for citizens.
It is also hoped that SMME
growth will provide a new spur to economic development by providing the means to
diffuse and adapt new technologies in the wider economy, leading to the empowerment
of increasing numbers of citizen entrepreneurs.
The data collected during the first phase of this project has concentrated on the formal
sector, including small and medium enterprises, which have official registration. Small
enterprises make up the vast majority of registered enterprises. Small enterprises,
however, tend to be the most insecure. The Task Force Report (1998) estimated
business failure rates of approximately 80-85% after 5 years of trading. It is also
estimated only a small proportion (1-2%) ever succeed in expanding their businesses.
Historically, the participation rates of citizens in business have been low and the
enterprise sector has faced a wide range of constraints that have inhibited levels of
enterprise start up, survival and growth.
•
•
•
•
•
•
•
•
Lack of entrepreneurial aptitudes and no tradition of family-centred small business
ownership in the formal sector.
Insufficient basic education and lack of business skills training
Lack of incentives and opportunities due to negative market-related factors.
Lack of capital and finance, particularly in the micro business sector and amongst
small enterprises not eligible for government support.
Lack of access to technology and technical expertise.
Insufficient land and premises.
Lack of development of business linkages, such as through sub-contracting.
Weaknesses in institutional support.
Each of these constraints is dealt with in detail in the main report. Related to each of
these constraining factors are a number of information related issues. Evidence shows,
for example, that in the case of access to finance and institutional support, there are
considerable problems related to lack of information and inadequate knowledge.
However, the ‘degree’ to which information problems and knowledge gaps contribute
to overall business constraints is open to question, and it hoped that a clearer picture
will emerge upon completion of this research project.
Research Methods and Sampling
A questionnaire was used to gain factual data and structured responses from a
widespread population of registered formal sector enterprises. A series of semistructured interviews were carried out with an initial sample of 20 enterprises. Data
collection techniques were designed to elicit detailed responses in relation to the
104
information needs of enterprises, focussing on the content, sources and channels of
different categories of business information.
The sample was drawn from the total population of formal-sector enterprises in
Botswana, as recorded in the Botswana Registry of Establishments (CSO, 1997). The
sample was made up of 480 SMMEs covering non-exporting manufacturers, exporting
manufacturers and service-based enterprises. The questionnaire survey produced an
initial response rate of 14.12%. Further details relating to research methods, sampling
and non-response bias can be found in the main body of the report.
Response Profile
77% of respondents were male and 23% female. The age range of respondents showed
the majority (62%) being 41 years or over. 57% of enterprises were citizen-owned,
30% were foreign-owned, 10% had joint ownership and only 3% were foreign-owned
subsidiaries. The sample response indicates a high proportion of educated
entrepreneurs. The proportion with secondary qualifications and above is 88%, which
compares with 66% reported by Briscoe (1995). This indicates a non-response bias in
favour of educated entrepreneurs, which might be expected from a postal
questionnaire.
50% of responses were from small enterprises (4-29 Emp), 26% from very small
enterprises (1-4 Employees), and 24% from medium enterprises. (30-99 Emp) When
compared with the distribution of the total population of formal sector SMMEs in
Botswana, this indicates a small bias in favour of medium-scale enterprises, and an
under representation of very small enterprises in the response.
The results show that formal sector SMMEs exhibit a wide range of customer
groupings, including government purchasing, individual consumers, export customers,
(including tourists) sub-contracting from larger firms, re-sale agents, wholesalers and
other SMMEs. This contrasts with the results of research carried out amongst MSEs
(predominantly in the non-formal sector) which show almost exclusive reliance on final
consumers as end-use customers. (Daniels and Fisseha, 1992)
Principal Findings
1. Factors mentioned as critical for business success
The results show that access to skills, access to markets and access to finance
are mentioned most often as equally ‘critical’ problem areas for approximately 40% of
enterprises. However, the issue that most concerned business owners was increasing
the skill level of the workforce, where an additional 52% of enterprises considered it
‘very important’. Respondents most often stated poor existing management skills, lack
of access to improved management skills, the inability to acquire and retain skilled
workers and the lack of access to skills training as their most significant constraints.
Amongst service-sector enterprises only 25% regarded additional finance as ‘critical or
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very important’ for business success. Of those involved in exporting (13 enterprises)
only 30% regarded additional finance as being ‘critical or very important’. This figure
rose to 91%, however, for non-exporting manufacturers.
2. Stated information needs of formal sector SMMEs
The information needs expressed by entrepreneurs accord largely with the
priority factors that were considered to be critical to the future survival/success of the
enterprise. The results also show that there is a wide ‘information needs gap’ across
all the sub-sectors within the sample. The information needs gap is a measure of the
difference between the stated demand for information from enterprises and their
success in obtaining the information required.
Overall, within the formal sector, the evidence suggests there is a large unmet demand
for information across a wide range of business activities. For example, 91% of nonexporting manufacturers exhibited the greatest need for information that would lead to
advice and/or assistance in accessing external financing and solving internal financial
problems. 58% of manufacturing exporters had urgent needs for information
concerning access to trained personnel and assistance with workforce training. 74% of
service-based enterprises expressed urgent needs for information concerning
management training and new trained employees. 72% of all enterprises had urgent
need to access information that would lead to increased sales through obtaining new
local customers and/or expansion into export markets
Evidence shows that information relating to management skills training, skilled
employees, availability of land/premises, export markets and technical expertise is
difficult to obtain primarily because those commodities/services are in short supply
locally. In contrast, difficulty in obtaining information relating to finance and new local
customers (and to a lesser extent, rules/regulations) relates more to lack of access for
SMMEs rather than lack of availability. For example, in relation to finance, difficulties
of accessing information are both the result of barriers erected by lending institutions
and the lack of capacities on behalf of business owners to effectively search out and
access such information.
The greater level of need exhibited by non-exporting manufacturers reflects the lack of
sophistication of many manufacturing enterprises serving domestic markets, and
confirms the difficulties they face in financing their businesses, and locating and
retaining both existing and new customers. The needs of service-based enterprises
and manufacturing exporters, however, reflect human resource-based business
deficiencies, requiring enhanced management and employee skills and access to new
staff.
These are general observations, and it should be emphasised that enterprises are
characterised by their diversity: depending upon the markets within which they
operate; the goods and services they provide and the capacities of business owners and
employees. Each enterprise has its own individual problems and priorities, and hence
‘enterprise specific’ needs for information. These are tentative findings and relate only
to formal sector sub-sectors covered in the initial phase of data collection.
106
3. Formal/informal information practices of formal sector SMMEs
The evidence shows that current information practices within formal sector
SMMEs are overwhelmingly informal in nature. Informal information practices are
observed to a greater extent amongst ‘traditional sector’ enterprises, but are also
extremely important within more sophisticated ‘modern sector’ enterprises. Sources
and channels of informal information are characterised by:
•
•
•
•
A high degree of reliance on information obtained through the knowledge and
experience of the business owner.
Information received through informal local networking within the business
community.
Information received through contacts with family and friends.
Information accumulated through enterprise specific learning.
Evidence from case studies shows that the exchange of informal information is
common across all areas of business activity. For example, informal loans from family
and friends, on the job training whereby knowledge and experience are passed on from
experienced to less experienced employees, informal advice or technical assistance
from a business associate, or market information leading to a new contract received
through the business grapevine or from a family member.
It is noticeable that enterprises that exhibit a high degree of dependency on
government contracting tend to be locked into more formalised practices. Many of
these enterprises seem to lack access to the informal business networks that are valued
by the wider business community, and place a far higher degree of importance on
information received from external governmental and non-governmental support
organisations.
At present insufficient data has been collected concerning the relative merits of formal
and informal content, channels and sources of information. It is not yet possible to
determine the comparative quality of information provided. However, information
received through informal sources and channels is rated highly by business owners
when compared with formal institutional sources. This tends to be because
entrepreneurs find it quicker and easier to access. For example, information relating to
the implications of a new law or regulation may be more easily accessed from a
business associate than through interaction with a government institution or regulatory
body. It is apparent that business owners value the time, cost and convenience benefits
of accessing information through informal channels and sources.
4. Information sources used by entrepreneurs
The results confirm the findings of previous research in the small enterprise
sector that suggests entrepreneurs depend predominantly on their own ‘internally
generated knowledge and experience’, which has been built up within their present
business or as a result of previous employment/business ownership. The results also
107
tend to suggest that ‘externally generated information’ is sourced primarily through
informal business networks of customers and suppliers or family and friends. In
contrast, formal institutional sources, such as banks, consultants and business support
agencies are rated low. Access to information from sources outside Botswana,
however, was rated ‘very’ or ‘quite’ important by 61% of entrepreneurs.
Service-based enterprises and manufacturing exporters place little or no importance on
external business support institutions (governmental, non-governmental or private) for
providing business information. In contrast, 50% of non-exporting manufacturers
regard business support institutions as their single most important source of external
business information. Formal sources, such as provided by journals and internet
access, are of greater importance to service-sector enterprises than for either nonexporting manufacturers or manufacturing exporters.
The differences exhibited in the results clearly reflect a far greater degree of
dependency on external business support on behalf of the non-exporting manufacturing
sector. Exporters and service-based enterprises, however, place little or no importance
on governmental and non-governmental agencies. Interview data suggests that, in the
case of service-based enterprises, this is due to lack of targeting by external
information providers and the fact that service-based entrepreneurs tend to be more
independently minded and are less inclined to seek information/advice from outside
institutions. Such enterprises, however, place higher importance on other formal
sources such as journals and internet access. Exporting manufacturers placed the least
importance on Botswana-based formal sources of business information
5. Communication channels used by entrepreneurs
Face to face meetings and use of fixed line telephone and fax are all used very
often by approximately 70% of respondents within service and manufacturing sectors.
Use of other communication channels, such as e-mail, mobile telephone and postal
services, were appreciably higher amongst service-based enterprises and to a lesser
extent manufacturing exporters, but hardly used within non-exporting manufacturing
enterprises. The vast majority of respondents regarded direct contact with customers
through face-to-face meetings as the single most effective method of business
communication, rising to 90% for non-exporting manufacturers.
Telephone services (including fax) represent the most popular initial investment for
businesses. The rapid growth of mobile communications in the past two years is also
proof of the value entrepreneurs place on real-time voice communication. The
evidence shows that even very small businesses find telephone services advantageous.
For example, a rural artisan producing leather goods who wishes to communicate with
a market trader in a distant town, or even a supplier of materials in an adjoining
country. The extension of telecommunication services, providing for direct voice (and
fax) communication, are able to provide significant benefits to SMMEs operating in a
large geographically spread country. It is likely, therefore, that the benefits of increased
use of telephony services will far outweigh the comparatively low investment and
training costs born by the enterprise.
108
Emerging communication technologies
The vast majority of formal sector SMMEs serve local markets, and rely
primarily on locally generated information. The expansion of information provision
through emerging local networked services, as provided by local web-sites for
example, is still in its infancy. Until the amount of local content is expanded, both in
terms of volume and quality, it is unlikely that the benefits of information access
through networked services will justify the costs for most formal sector SMMEs.
Emerging technologies for information access, such as provided through the internet
and e-mail, require far greater investment in terms of initial outlay, running costs, time
and skills. With significantly higher costs, such investments would need to be
accompanied by significant benefits in terms of regularity of use and quality of
information provided. The evidence shows that it is predominantly enterprises in
specific sectors, such as technical services, the IT sector and travel and tourism, that
have achieved significant information access benefits. These are all sectors that require
regular access to information and/or software across borders, both regionally and
world-wide.
6. Information storage and processing within formal sector SMMEs
Taken overall, the interim results suggest significantly higher levels of computer
use amongst service-based enterprises, than either manufacturing exporters or nonexporting manufacturers. Amongst service-based businesses and manufacturing
exporters, information relating to company accounts, for example, is held on computer
by nearly 70% of enterprises surveyed. Amongst non-exporting manufacturers only
9% utilise computer-based systems.
Amongst the 22 non-exporting manufacturers who replied to the survey, the level of
computer use was particularly low. These enterprises were predominantly citizenowned (86%). Differences in levels of computer use amongst citizens or non-citizens
were not, however, observable in the service sector.
There was no overall relationship between the general education of business owners
and levels of ICT use within SMMEs. Amongst the 23 ‘non-computer users’ in the
sample response 78% were educated to senior secondary level or above, and 8
respondents were university graduates. This reflects the overall bias toward educated
formal sector entrepreneurs in the sample response. It also indicates that high levels of
education are not necessarily a spur to utilising modern business tools.
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7. Dissemination/use of information by formal sector SMMEs
The primary formal objective of all enterprises is to sustain/increase their sales by
means of retaining existing customers and/or locating new customers. There is
evidence from the survey that, when promoting their products and services,
entrepreneurs have a strong preference for personal contact with customers. 90% of all
business owners regarded face-to-face contact as being very effective.
In terms of promoting products and services, other forms of communication were not
considered as particularly effective compared with direct personal contact. This was
particularly the case amongst service-based enterprises. Formal methods of mediabased marketing are generally not used in Botswana by the small enterprise sector at
present. The postal and telecommunications infrastructure is thought to be
insufficiently developed and not reliable enough for effective direct telephone sales or
the use of direct mail marketing techniques. Marketing and advertising services in
Botswana are at an early stage of development and cater predominantly for the
corporate sector. Such services would generally not be affordable by SMMEs.
Approximately 50% of those who responded to the survey had internet access and
43% used the internet very often. When asked how important the internet was as a
source of information for their business, 30% stated it was very important. However,
in terms of the effectiveness of the internet as a method of promoting products and
services, only 13% of internet users regarded it as very effective, and a further 47%
had not used the internet as a business promotion tool. The results tend to indicate
that at present in Botswana the internet is being used as a method of accessing
information, rather that as a tool of business promotion, amongst internet users.
Within local markets, internet-based marketing is not likely to offer any substantial
benefits in comparison with other forms of media, which are already under-utilised at
present. There may however, be considerable benefits for enterprises whose customers
are located outside Botswana. For manufacturing exporters and the tourist industry
visibility on the internet may become a powerful marketing tool, both for raising the
profile of the business and rapid dissemination (and retrieval) of information.
Some Preliminary Conclusions
The conclusions presented are both partial and tentative in nature and may be subject
to modification upon completion of the 2nd phase of data collection and the publication
of the final project report.
1. Prioritisation and effective use of ICTs in SMME development
Decisions regarding the utilisation and application of ICTs within SMMEs will largely
be in the hands of business owners. However, it will also be important for
entrepreneurs to be able to receive impartial advice and assistance regarding the costs
and benefits associated with ICT investments. The successful application or updating
110
of ICTs within an enterprise will require not only considerable financial investment, but
also allocation of time, changes in managerial practices and enhanced skills.
Non-IT Users
The survey results showed that 90% of non-IT users were small-scale manufacturers
(1-29 employees) and they were all citizen-owned. In terms of prioritised problems
facing business owners, lack of finance and lack of management and workforce skills
were mentioned as the two most significant factors inhibiting their businesses, with
over 90% of business owners regarding them as critical or very important.
Most of these enterprises make regular use of telecommunication services such as fixed
line telephones and fax, and are increasingly using mobile communications, but make
no use of computer systems in the business. In terms of telecommunications access
these enterprises have potential for expanding their use of IT systems. This category
of enterprise typically lacks financial resources, managerial capacities and have low
skill levels. It is unlikely, therefore, that enhanced use of ICTs, such as through the
purchase of a personal computer, could be afforded or would be of benefit to the
majority of current non-users in the short/medium term. (This situation may change if
an enterprise was able to continue to grow and be successful.)
Current non-IT users are more likely to benefit from improvements in their existing
information practices using the technology that they currently have access to. There
are a variety of ways in which business owners and employees can be assisted to
improve their capacities for information access, processing and dissemination. These
would include access to quality training for improving inter-personal communication
skills, enhanced financial management skills to improve business efficiency and training
in sales and marketing techniques. Within such enterprises, it is only when basic skills
have been significantly improved that any true benefit is likely to be gained from
applying ICTs.
Non-networked IT Users
Non-networked IT users can be described as ‘first-footers’ in small business
computing. There were an equal number of citizen and non-citizen owners. Although
this category of enterprise has access to computers on the premises, the level of
computer use was comparatively low. Only 20% of all such enterprises had
computerised basic business functions such as customer invoicing and their internal
accounting systems.
This category of enterprises primarily made use of their computer systems for general
administrative activities with 71% of enterprises making use of word processing
applications. 39% of non-networked IT users, although having computer (s) on the
premises, made ‘no use’ of them in their everyday business activities. Amongst this
group lack of finance and management/employee skills were described as their greatest
constraining factors. 50% of such enterprises, however, also regarded upgrading
computer systems as being critical to their future business success.
111
Evidence shows this type of business is widespread through out the manufacturing and
service sectors covered in the survey. Many non-networked IT users are also lacking
in managerial capacities and share many of the characteristics of non-IT users. In these
cases the same pre-conditions for enhancing basic management skills would apply
before investments in enhanced ICTs should be considered. There are a range of other
factors, however, that may influence business owners investment decisions.
•
•
•
It may be difficult to justify increased investment in ICTs in the short, or even
medium term. However, it may be considered that such technologies will be
critical for the long-term future of the business and the professional development of
the business owner. This may particularly apply to younger entrepreneurs that
wish to advance up the technological learning curve.
Enterprises may have specific needs for ICTs, such as in the printing and publishing
sector, where competitive pressures driven by rapid technological change means
enterprises must ‘adapt or die’.
Enterprises may also feel pressurised to expand their use of ICTs in order to
achieve compatibility with customers or suppliers.
Anecdotal evidence from interviews suggests significant problems amongst this
category of ‘first-footer’ computer users. It was not uncommon to find computers out
of use or consigned to a back room, after initial failed attempts to adapt unfamiliar
software to the needs of the business. The success or failure of this category of
enterprise in expanding their use of computers would be critical to raising the overall
level of ICT use within the SMME sector. The second phase of data collection will
provide in-depth case studies of such enterprises, examining in detail the costs and
benefits associated with ICT investments.
Networked/intensive IT Users
The vast majority of networked/IT-intensive enterprises are service-based, found
in technical services, the IT services sector and the tourism sectors. There were also
manufacturing exporters in this category. The enterprises range in size quite
dramatically, from very small businesses (I-4 Emp) to medium-scale. (50-99 Emp)
Most are non-citizen owned or owned by non-Batswana citizens.
75% of all such enterprises have computerised accounting and customer invoicing
systems. Most other business functions, such as inventories, customer and supplier
records, are computerised in approximately 60% of enterprises. E-mail and the
internet are used very or quite often by 85% of these enterprises, and computers are
used for more complex business activities such as project planning by 50% of
respondents. 50% had internal networking of computer systems. They all regarded
further upgrading and continued expansion of computer-based management systems as
being critical or very important for the future success of their businesses.
Anecdotal evidence shows that such enterprises have applied and adapted IT systems
largely on an ad-hoc basis and in many cases lack the employee skills to effectively
manage the systems which have been developed. Such enterprises may benefit from a
more strategic approach to managing information, in order that the costs and benefits
associated with both technology based and non-technology based systems can be
112
evaluated. It may also be important to consider in more detail the potential of
emerging technologies, such as the internet/e-mail and electronic commerce, for the
future of the business. This will apply particularly to enterprises that conduct
transactions across borders, such as manufacturing exporters and the tourist sector.
The Non-formal Sector
Non-ICT users are defined as having no access to telecommunication services on
their business premises, and no use of computers. Previous studies indicate that the
majority of such enterprises will be located in the non-formal sector. Statistics show
this type of enterprise constitutes the majority of enterprises within the SMME sector
as a whole, and creates livelihoods for the largest number of people. Such enterprises,
at present, largely lack the basic requirements of access, affordability, knowledge and
skills that would be required to take advantage of any services or appropriate
applications provided through emerging ICTs.
Significant positive impacts associated with enhanced telecommunications and wider
access to information, for non-formal sector enterprises, have yet to be proven, and in
consequence should be examined critically. Within the non-formal sector there is
strong evidence that business owners place greater value on information received
through personal contact, and are able to build up greater trust in personalised
information channels and sources. Conversely, information received in a digitised form
is generally non-personalised and distant, and lacks the security necessary when
making decisions that may involve an element of risk.
There are likely to be substantial long-term socio-cultural, literacy and knowledge
barriers that would need to be overcome before most business owners could effectively
utilise both the technology and the available information.
The second phase of this research project, which will be concentrating in more detail
on the non-formal sector, will aim to provide some more informed and definitive
conclusions concerning the applicability of remote area telecommunication and
information services in the case of Botswana.
2. Overcoming ICT constraints for SMMEs
The following interim conclusions are designed to raise a number of policy
related issues that will be addressed in more detail upon completion of this research
project. Evidence shows that ICT constraints will vary considerably between different
categories of enterprises. The constraints experienced by rural-based largely
uneducated business owners will be of a different order of magnitude from those who
are urban-based and educated.
Lack of Knowledge and Awareness
Business owners need prior knowledge and awareness of available technologies
and their potential applications. Knowledge is the first prerequisite for making
informed decisions about possible ICT investments. Knowledge and awareness of new
113
technologies is not just an issue that effects individual businesses, but also the wider
community. In order for enterprises to utilise ICTs for interaction with the wider
community (market) it is also necessary to enhance community awareness. For
example, if a rural-based entrepreneur acquires a telephone, it will be of little use
unless he has business contacts who are also able to use telephone services, and his
telephone number is well publicised in the wider community.
The long-term key to enhanced knowledge and awareness will be education. The
government of Botswana is currently funding the widespread introduction of
computers, and computer studies, into secondary schools. Computer literacy through
education is likely to increase significantly amongst the educated younger generations
in the medium/long term. However, approximately 80% of young people countrywide
do not enter senior secondary school, and although this proportion is set to decrease, it
still indicates that the vast majority of Batswana, young and old, are likely to lack
sufficient awareness and knowledge of new technologies for some years to come.
Lack of Skills
In 1994, 88% of all business owners surveyed in the IFS MSE study had primary or no
education, whilst only 1% had some form of tertiary education. Within such an
environment computer/IT skills will be non-existent or severely lacking. Training can
be the solution to lack of skills. However, evidence also shows that SMME owners are
reluctant to enter formal training due to lack of time, financial resources and a belief
that external training will not suit their business needs.
Users will need to have a sufficient level of literacy in order that they are able to
access, understand and process the information that is being provided through ICTs in
a way that will benefit their business.
There was little evidence of business owners seeking external computer training from
formal institutions. Computer users were more likely to be self trained or have
received help and advice from friends and family. Amongst non-computer users,
particularly the older generation so of business owners, it is unlikely that IT skills can
be appreciably raised. It is more likely that skill levels can be increased through
attracting younger generations of educated and/or trained entrepreneurs into the
SMME sector.
Lack of Affordability
The evidence shows that most SMMEs, which are citizen owned, are severely
constrained by lack of finance and working capital. The results suggest that even
established small/medium enterprises in the formal sector would find the necessary
‘total cost of ownership’ of ICT systems prohibitive. Most MSEs are too small to
warrant any investment in computer-based ICTs, with the majority (69%) of microenterprises generating average annual turnovers of only 6,919 Pula. (Lisenda, 1997)
Many enterprises, however, may benefit considerably by accessing improved
telecommunications including telephone/FAX, mobile communications and other value
114
added services. The cost structure associated with the delivery of such services,
particularly to rural areas, is likely to be the main determinant of the level of take up by
SMMEs. It may be that de-regulation and the introduction of local competition in the
provision of services will provide the necessary cost reductions for enterprises. It is
likely, however, that access for micro enterprises and other marginalised groups would
require some form of subsidy, such as proposed through the provision of communitybased services, phone shops or telecentres.
Lack of Connectivity
Botswana has one of the most advanced high capacity transmission and switching
networks on the African continent. The ability of SMMEs to take full advantage of
countrywide and international communications is determined however, by their ability
to connect to their local exchange through existing access networks. SMMEs will be
prevented from effectively utilising emerging technologies, which demand everincreasing bandwidths, without reliable, and affordable, local access.
Small business users will need reliable access to the available infrastructure from their
localities. Evidence relating to the geographic location of MSEs shows that the
majority (66%) are located in rural areas and at present do not have reliable local
access to communication networks.
Lack of ICT support/intermediaries
Evidence shows that Non-ICT/IT users, as well many current users, are constrained by
lack of IT and business skills. Such enterprises, assuming ICTs are deemed both
appropriate and usable, will require ‘intelligent intermediaries’ to facilitate access and
effective use of technologies. At present, no representative data has been collected
concerning the level of adoption of ICTs within intermediary and business support
organisations. There is evidence, however, that within established support structures,
such as provided through Integrated Field Services, there is no ICT support being
currently offered. The second phase of fieldwork will provide data concerning the role
of NGOs and private sector providers in the role of ICT support for SMMEs.
115
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Appendix 1. Characteristics of Interview Sample
Subsector
Number of
employees
Turnover
(Pula)
1997/98
Location
(Urban
/Rural/Peri
-urban)
Form of
ownership
(1)
Business
Owner
Nation’ty
Share of
Exports
(%)
ICT
Intensity
(2)
Enterprise
A.
Text
13
300K
Urban
Cit
Bats
10%
2
B.
P+P
5
200K
Urban
Cit
Bats
Nil
3
C.
P+P
3
50K
Urban
For
Zim
Nil
3
D.
Trans
19
1.9M
Urban
Cit
Bats
Nil
2
E.
Tech
30
-
Peri-Urban
For
Zim
Nil
3
F
P+P
25
-
Urban
Cit
Indian
Nil
5
G.
Furn
28
-
Peri-Urban
Cit
Bats
10%
2
H
Furn
50
2M
Urban
Sub
RSA
10%
3
I.
Furn
25
2M
Urban
For
Bots
10%
3
J.
Text
20
-
Urban
For
Ghan
5%
2
K.
Text
45
400K
Peri-Urban
Cit
Bats
Nil
2
L.
Text
3
50K
Rural
Cit
Bats
Nil
2
M.
Text
15
300K
Rural
Cit
Bats
10%
2
N.
IT
4
400K
Urban
Cit
Bats
Nil
4
O.
IT
4
-
Urban
Cit
Bats
Nil
5
P.
IT
3
300K
Urban
Cit
Bats
Nil
4
Q.
IT
3
-
Urban
Cit
Bats
Nil
4
R.
IT
6
-
Urban
Cit
Bats
Nil
5
S.
IT
2
-
Urban
For
Zam
Nil
4
T.
Trans
15
1M
Urban
Cit
Bats
Nil
3
(1)
Cit – Citizen-owned. For – Foreign-owned. Joint – Joint Foreign/citizen owned. Sub – Foreign-owned subsidiary.
Fran – Franchise.
(2)
1 – Non-ICT Users. 2 – Non-IT Users. 3 – Non-networked IT Users. 4 – Networked IT Users. 5 – Intensive IT Users.
119