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1、Promoting SME Competitiveness in EswatiniStronger business fundamentals for value-added exportsEeIn collaboration withFunded by the European UnionStreet address:ITC 54-56,rue de Montbrillant 1202 Geneva,SwitzerlandPostal address:ITC Palais des Nations 1211 Geneva 10,Switzerland Telephone:+41 22 730

2、0111Fax:+41 22 733 4439E-mail:itcregintracen.orgInternet:http:/www.intracen.orgThe International Trade Centre(ITC)is the joint agency of the World Trade Organization and the United Nations.International Trade Centre 2022 Shutterstock ITC ShutterstockPhotos coverPromoting SME Competitiveness in Eswat

3、iniStronger business fundamentals for value-added exportsiiAbout the paperSmall firms are at the heart of Eswatinis participation in international value chains.But they often struggle to trade due to production capacity constraints,including inadequate managerial skills and certification,failure to

4、engage with business support organizations and weak linkages with suppliers and buyers.Furthermore,innovation levels are low and many Swazi businesses cannot access finance.The COVID-19 pandemic,social unrest and climate change have aggravated these challenges.This report,based on data from the SME

5、Competitiveness Survey,recommends measures to reinforce business support services and improve the business and financial management skills of Swazi companies.Publisher:International Trade CentreTitle:Promoting SME Competitiveness in Eswatini:Stronger business fundamentals for value-added exportsPubl

6、ication date and place:Geneva,December 2022Page count:70Language:EnglishITC Document Number:RSE-22-79.ECitation:International Trade Centre(2022).Promoting SME Competitiveness in Eswatini:Stronger business fundamentals for value-added exports.ITC,Geneva.For more information,contact:Valentina Rollo,ro

7、llointracen.orgFor more information on the SME Competitiveness Survey,see:https:/intracen.org/resources/data-and-analysis/research-and-dataITC encourages the reprinting and translation of its publications to achieve wider dissemination.Short extracts of this paper may be freely reproduced,with due a

8、cknowledgement of the source.Permission should be requested for more extensive reproduction or translation.A copy of the reprinted or translated material should be sent to ITC.Digital images on the cover:Shutterstock and ITC International Trade Centre(ITC)ITC is the joint agency of the World Trade O

9、rganization and the United Nations.iiiForewordMicro,small and medium-sized enterprises(MSMEs)play a vital role in the economy of Eswatini and have great potential for growth.This sector catalyses economic growth by creating employment,developing entrepreneurship,reducing poverty and generally improv

10、ing the livelihoods of the citizens of the Kingdom of Eswatini.The sector is recognized as“hidden champions”due to the great potential of MSMEs for economic transformation.Research suggests these firms could provide employment for up to 65%of the workforce and generate up to 50%of national output.As

11、 the country seeks to revitalize the economy for growth and job creation in the years to come,MSMEs will be at the centre of the equation.Unfortunately,the MSME sector has suffered severely in recent years.The COVID-19 pandemic,social unrest and climate change have disrupted normal business operatio

12、ns and forced many firms to shut down temporarily.As the Swazi economy strives to recover from the pandemic,it is important to strengthen these businesses that are so crucial for Eswatinis economic development efforts.Against this background,the 2022 National Development Strategy acknowledges that a

13、 strong MSME sector enables inclusive growth.The Micro,Small&Medium Enterprise National Policy 2018 aims to increase the competitiveness of MSMEs,among other initiatives.Evidence on the strengths and weaknesses of MSMEs is needed to achieve what is set out in these plans,to take advantage of opportu

14、nities and diagnose problems.Information is key for evidence-based policymaking.To generate this evidence,the Government of Eswatini and the International Trade Centre(ITC)joined forces under the European Union-funded project Support to Job Creation and the Investment Climate.The competitiveness of

15、value chain actors in Eswatini was systematically assessed under this project.As part of the project,the ITC SME Competitiveness Survey was administered to 200 businesses across Eswatini in 2021.The survey results show that to be resilient to future crises,Swazi firms should strengthen their busines

16、s fundamentals,seek to diversify their supplier base and develop an entrepreneurial culture by investing in innovation.In line with the project goals,ITC and the Ministry of Commerce,Industry and Trade of Eswatini share a common vision to build alliances to improve MSME competitiveness and enable sm

17、all businesses to access more local,regional and international markets and withstand future crises.Trade can facilitate the structural transformation of the economy and help reduce poverty when well-crafted and targeted policies are in place.We see this report as an important step to make this visio

18、n a reality.Pamela Coke-HamiltonExecutive Director International Trade CentreHon.Manqoba KhumaloMinister of Commerce,Industry and Trade Kingdom of EswatiniivAcknowledgementsThe International Trade Centre(ITC)would like to express its appreciation to the representatives of enterprises who agreed to b

19、e interviewed as part of the SME Competitiveness Survey.Ruatpuii Cira and Nathalie Raschka wrote this report under the guidance of Sarah Mohan(ITC).Antonina Popova provided technical support to the data collection process and data analysis.Floriana Borino and Khadija Zaidi provided key support for t

20、he finalization of the report.Ndey Anta Taal and Kidest Teklu(both ITC)facilitated the institutional process.Valentina Rollo,SMECS coordinator,and Barbara Ramos,Chief of the Research and Strategies for Export Section,supervised the project.Business Eswatini conducted the interviews under the supervi

21、sion of Musa Maseko.ITC would like to extend its thanks to the Ministry of Commerce,Industry and Trade for guiding and supporting the survey process.ITC would also like to thank Natalie Domeisen and Anne Griffin(both ITC),who managed the editorial and production process;Jennifer Freedman,who edited

22、the report;and Franco Iacovino and Serge Adeagbo(both ITC),who provided graphic and printing support,respectively.About ITCThe International Trade Centre was established in Geneva,Switzerland,as a joint agency of the United Nations and the World Trade Organization dedicated to strengthening the comp

23、etitiveness of small and medium-sized enterprises to build vibrant,sustainable export sectors that provide entrepreneurial opportunities,particularly for women,young people and poor communities.vContentsForeword iiiAcknowledgements ivAcronyms viiExecutive summary viiiChapter 1Understanding the small

24、 business context in Eswatini 2Assessing competitiveness 4The SME Competitiveness Survey in Eswatini 5Swazi firms struggle to recover from COVID-19 7Chapter 2Improve business fundamentals to compete successfully 14Productive capacities are underused 14Firms must get the basics right 16Quality signal

25、ling to boost managerial capacities 17Chapter 3Fostering connections to improve market access 22Business linkages are key to access market information 22More marketing for new buyers is needed 25High dependence on foreign suppliers 26Chapter 4Responding to changing market demands 32Lack of innovatio

26、n impedes competitiveness 32Credit constraints cripple business operations 36Investing in environmental measures pays off 38Chapter 5Policies for more competitive small firms 42Annex 47Endnotes 52References 55viFiguresFigure 1 SME Competitiveness Grid 4Figure 2 Alliances for Action approach 5Figure

27、3 Surveyed regions of Eswatini 6Figure 4 Characteristics of firms that took part in the survey 7Figure 5 Microenterprises are pessimistic about recovery 9Figure 6 COVID-19 support did not reach most companies 10Figure 7 Production efficiency needs a boost 15Figure 8 Business fundamentals are lacking

28、 17Figure 9 Popularity of international certificates 18Figure 10 Companies need more support to get certified 18Figure 11 Good client information favours inventory management 23Figure 12 Engaging with BSOs helped firms access COVID-19 aid 25Figure 13 Women and youth-led firms more likely to advertis

29、e online 26Figure 14 Most Swazi companies rely on one main supplier 27Figure 15 Limited innovation and low resource commitment to R&D 33Figure 16 One-third of agrifood businesses focus on value addition 34Figure 17 Micro firms mainly finance using their own funds 36Figure 18 High outstanding demand

30、for good finance 37Figure 19 Swazi firms worry about excess rain and water access 38Figure 20 SME Competitiveness Surveys across the world 50BoxesBox 1 Government policies for small and medium-sized enterprises 3Box 2 Alliances for Action 5Box 3 Innovation in Swazi agrifood value chains 34viiAcronym

31、sUnless otherwise specified,all references to dollars($)are to United States dollars,and all references to tons are to metric tons.Percentages in some figures may not add up to 100%due to rounding.BSO Business support organizationITC International Trade CentreGDP Gross domestic productR&D Research a

32、nd developmentSEDCO Small Enterprises Development CompanySMEs Small and medium-sized enterprisesSMECS SME Competitiveness SurveyviiiExecutive summarySmall and medium-sized enterprises(SMEs)are at the heart of Eswatinis economic potential.About 41%of the countrys working age population is employed fo

33、rmally or informally in these small companies.While the SME sector is small,it is of vital importance for creating a more competitive and resilient business environment and driving economic development in Eswatini.Research suggests these firms could provide jobs to 65%of the workforce and generate u

34、p to 50%of national output.This is especially critical in light of COVID-19 recovery efforts.While gross domestic product recovered by an estimated 1.5%in 2021 from a drop of 2.4%in 2020,SMEs still feel the consequences of the economic downturn caused by the pandemic.A period of social unrest in mid

35、-2021 compounded the impact of this downturn.SMEs need support to start their journey towards greater resiliency.Increasing their competitiveness can jumpstart this process and prepare them for the looming climate crisis.Understanding the strengths and weaknesses of these firms and the business envi

36、ronment in which they operate is important to set this process in motion.With this goal in mind,the International Trade Centre partnered with Business Eswatini under the European Union-funded Support to Job Creation and the Investment Climate project to assess the competitiveness of SMEs in the coun

37、try.Under this collaboration,the SME Competitiveness Survey was administered to 200 companies from all regions of Eswatini in AprilOctober 2021.This report analyses data from the survey.It identifies areas where firms and the business ecosystem perform well and where improvements are needed.Although

38、 the focus is on small enterprises,large companies are included in the analysis for the sake of comparison.Analysing different aspects of competitiveness yields insights into economic realities.A specific focus on how small Swazi companies compete in certain sectors and regions and when they are led

39、 by women or youth shows the detailed pattern of competitiveness across enterprises.Support needed to recover from COVID-19To adapt to the new business environment created by COVID-19,SMEs had to find solutions to keep themselves running.The most popular coping strategy was teleworking,adopted by 25

40、%of firms,followed by 21%of firms that customized existing products or developed new ones.Some companies were unable to adjust to the new normal.One-third of respondent firms were not operational from mid-2020 to 2021,but had resumed operations at the time of the interview.In 2021,the survival of ma

41、ny businesses was still uncertain.About 82%were very concerned about their recovery and 40%feared that their business would permanently shut down because of the pandemic.Microenterprises,in particular,were concerned about their recovery.The analysis reveals that government support programmes did not

42、 reach all businesses that needed help.Four out of five firms did not receive any COVID-related assistance.A likely reason for this is that companies which had never submitted a tax return were not eligible for support.Increase competitiveness by improving management skillsFew SMEs in Eswatini fully

43、 exploit their production potential.In the year prior to the survey,operational firms used 54%of their capacity on average.One-third delivered fewer than half of their products or services on time.Micro firms had notably lower average rates of capacity utilization.Poor management capacity partially

44、drives this weak productivity performance.Forty-four percent of firms have no bank account and 36%keep no economic records.This limits their ability to manage their cash flow and inventory.ixUpgrading management practices would also set the stage for certification among Swazi firms,which needs to be

45、 encouraged.Certification numbers are low,with only 10%of firms having an international certificate.In the agricultural sector,this quality assurance is often a prerequisite to competitiveness on international markets,and certification processes are becoming prevalent in other sectors as well.This e

46、ndeavour could be made easier if information on certification and related assistance was more readily available.Stronger connections foster information and resilienceSwazi firms also lack good information about their buyers.Fewer than one-fourth of firms rated the availability of market information

47、on potential customers as good and 31%said the same about existing customers.This inhibits the ability of SMEs to tailor their goods or service offerings to the expectations of their buyers,decreasing their competitiveness.Business support organizations can Shutterstockxhelp firms acquire this marke

48、t intelligence.Engagement with these institutions should be improved,as only 54%of respondents actively interact with at least one of them.Firms also do not expend much effort to engage with new potential clients.In fact,fewer than half of survey respondents advertise their goods.Micro firms that do

49、 advertise prefer online channels,likely because they are more affordable.Swazi SMEs must diversify their supplier base to better adapt to changing market conditions.This is illustrated by the fact that those with more suppliers were less concerned about their recovery from COVID-19.Due to scarcity

50、of local inputs,Swazi firms rely heavily on foreign suppliers,especially from South Africa.Sixty-one percent of manufacturing and 44%of service firms source inputs from abroad.Improving the competitiveness of locally produced inputs can encourage medium-sized and large firms to source from micro and

51、 small companies in Eswatini.Local suppliers must develop their own competitiveness if they hope to be able to trump imported inputs.Adopting better management practices and innovative means of production are key steps in that direction.Innovation and access to finance to stimulate entrepreneurial c

52、ultureA sluggish entrepreneurial culture in Eswatini is reflected in the fact that few firms innovate or invest in research and development(R&D).About half of firms said they rarely developed new or improved products or systems.This result is not surprising,as 70%have committed only a few resources

53、to R&D,which drives innovation.In part,this can be explained by a lack of skilled labour,with Shutterstockxionly one-third of firms reporting an abundance of skilled workers for hire.To innovate and grow,businesses need access to credit.In Eswatini,the primary source of finance is personal savings.O

54、nly 2%of micro and 10%of larger firms had received financing from a bank.There is outstanding demand for formal finance which is not served by commercial banks.Eighty-one percent of surveyed firms indicated that if conditions were good,they would have applied for a loan.Financial resources are at th

55、e base of sustainable investment decisions in the country.Providing resources for innovation in agricultural and environmental domains is promising.The Swazi agrifood sector,for example,has enormous potential for value-added products,import substitution and niche market exports.To exploit these oppo

56、rtunities,farmers should upgrade their equipment,become certified and engage in tasks that add more value to their products.But the country is also vulnerable to climate change.One in four surveyed firms had invested in measures to reduce its negative impact on the environment.These investments seem

57、 to be paying off.Nearly all of these firms(98%)said they reaped opportunities and benefits for their business from these efforts.Policy recommendationsSeveral policy recommendations emerge from the survey findings.Chief among them is the need to invest in management capabilities.Weak management ski

58、lls inhibit the production capacity of Swazi firms and make them uncompetitive.To create an entrepreneurial culture,investments should be made in certification and other value chain governance techniques that encourage better firm practices.To encourage certification,buyers could require their suppl

59、iers to get certified.Other companies are becoming certified on their own,betting that it will attract new buyers.These improvements in the certification rate can foster the development of performance-based linkages among local enterprises.For businesses to engage in entrepreneurial activities,they

60、need finance.The Government could improve the countrys credit infrastructure to facilitate access to finance.Capacity building could also be offered to educate enterprises on how to prepare a business plan and apply for a loan.To help all firms recover from COVID-19,decoupling tax registration requi

61、rements from government support can be useful.Business networks have a role to play in circulating information about the availability of this assistance.Investments in business support organizations can enable them to become more effective at spreading market intelligence for SME strengthening.Final

62、ly,to bolster the countrys agricultural sector,government funding may prove helpful for farmers that wish to acquire more sophisticated technologies and engage in higher value-addition activities.This can enable some of the most vulnerable members of society to capture more value and improve their w

63、elfare.This report,along with complementary events and collaborations,aims to trigger a dialogue on SME competitiveness.It suggests policy-based solutions that stakeholders in Eswatini can apply to build the competitiveness of the countrys small businesses.ITCChapter 1Understanding the small busines

64、s context in Eswatini Assessing competitiveness 4The SME Competitiveness Survey in Eswatini 5Swazi firms struggle to recover from COVID-19 72PROMOTING SME COMPETITIVENESS IN ESWATINISmall and medium-sized enterprises(SMEs)play a vital role in the future of the economy of Eswatini,formally or informa

65、lly employing about 41%of the countrys working age population.1 As this small,open Southern African kingdom seeks to revitalize the economy for growth and job creation in the years to come,SMEs will be at the centre of the equation.Stimulating the competitiveness of these firms can help them grow an

66、d actualize their potential.Research suggests they could provide employment to 65%of the workforce and generate up to 50%of national output.2 With a business landscape shaped by a select few large-scale businesses,a concentrated export basket and a multitude of informal and microenterprises,there is

67、 a need to stimulate the growth of the smallest firms.This mandate is all the more pressing given that SMEs are integral to reduce high levels of poverty in this primarily agricultural country.3The Government of Eswatini has created policies,organizations and funds that underscore the importance of

68、SMEs to the local economy(Box 1).Problems remain,however.The SME sector has suffered severely in recent years,with the pandemic,social unrest and climate change disrupting normal business operations and forcing many firms to shut down temporarily.As the Swazi economy strives to recover from the pand

69、emic,it is time to strengthen these businesses that are so crucial for Eswatinis economic development efforts.To this end,the Government of Eswatini,the European Union and the International Trade Centre(ITC)joined together in a co-creation process focused on SMEs and value chains in the country.As t

70、he implementing agency of the European Union-funded project Support to Job Creation and the Investment Climate in Eswatini,ITC is working with local partners to strengthen productive,processing,promotion and marketing capabilities in value chains.Preliminary research in Eswatini indicated that a lac

71、k of market knowledge,entrepreneurial skills and access to finance had inhibited the development of a stronger SME sector.Development actors have argued there is a need to gain more value out of trade,counter the scarcity and limited competitiveness of local inputs,address missing opportunities for

72、product differentiation and expand the local entrepreneurial culture.4 In addition,early indications are that SMEs have been hard hit by the COVID-19 pandemic.5 To better understand the full picture of constraints and opportunities facing SMEs in Eswatini,the project decided to conduct a systematic

73、assessment of the competitiveness of value chain actors in the country.Better data on the state of firm-level competitiveness,and constraints in the business ecosystem,will inform project activities and government action to catalyse value-added commodity trade.This report presents the results of the

74、 assessment of the competitiveness of Eswatinis enterprises.The assessment was conducted using ITCs SME Competitiveness Survey(SMECS)tool,customized to the needs of the project and context,and implemented in cooperation with Business Eswatini.The goal was to perform a diagnostic on the state of thes

75、e firms to better understand their strengths,weaknesses and opportunities to improve their competitiveness for value-added SME exports.The survey was administered to 200 businesses across Eswatini in 2021.This reports insights into SME competitiveness are grounded in the data generated by that surve

76、y and the partnership that has supported it.Understanding the small business context in Eswatini ITC3ChAPTER 1 UNDERSTANDING ThE SMALL BUSINESS CONTExT IN ESWATINI Box 1 Government policies for small and medium-sized enterprises The Government of the Kingdom of Eswatini first introduced the Small,Mi

77、cro&Medium Enterprise National Policy in 2004.This policy underwent its third revision in 2018.It aims to increase access to finance,strengthen business support institutions and the regulatory framework,develop an entrepreneurial culture,boost the competitiveness of SMEs,protect the informal sector,

78、support women-and youth-owned SMEs,and improve the dialogue between key stakeholders.Several government policies aim to strengthen the Swazi private sector.In 1997,the kingdom issued the Vision 2022 national development strategy.It is implemented through the National Development Plan 2019/202021/22,

79、which recognizes that a strong SME sector enables inclusive growth.The strategy also identifies the agribusiness and manufacturing sectors as having the highest potential for driving SME growth in the country.The Strategic Road Map 20192023 was drawn up to facilitate progress towards the goals of Vi

80、sion 2022.It lists key policy objectives for SMEs in the short term,such as improving access to loans,and in medium-term,including simplifying tax codes and enacting tax reforms.The Ministry of Commerce,Industry and Trade is the focal point for SME policies and initiatives.It oversees SEDCO,the Eswa

81、tini National Industrial Development Corporation and the Eswatini Investment Promotion Authority,public enterprises that also provide development services.Business support organizations(BSOs)such as Business Eswatini and the Federation of Eswatini Business Community act as bridges between government

82、 authorities and firms.The National Financial Inclusion Strategy,developed by the Ministry of Finance for 201722,includes plans to enhance the business and financial management skills of SMEs.It also envisages improved access to business data on entrepreneurs and the establishment of both a business

83、 competitive scoring system and a microfinance policy to develop the institutional capacity of the microfinance sector.Several programmes provide financial support to SMEs.The Centre for Financial Inclusion facilitates access to financial services,SEDCO provides training,cash flow projections and bu

84、siness incubation,and the Eswatini Development Finance Corporation offers credit to SMEs.The Central Bank of Eswatini runs two credit guarantee schemes aimed at SMEs:the Export Credit Guarantee Scheme and the Small Scale Enterprise Loan Guarantee Scheme,which explicitly targets youth-led firms.At th

85、e grassroots,the Inhlanyelo Fund provides loan capital to micro and small businesses.Source:The Government of the Kingdom of Eswatini(2018).Revised Small,Micro,&Medium Enterprise Policy of Eswatini;The Government of the Kingdom of Eswatini.National Development Plan 2019/20-2021/22.Retrieved from htt

86、ps:/www.gov.sz/images/CabinetMinisters/NDP-2019-20-to-2021-22-final.pdf;The Government of the Kingdom of Eswatini.The Kingdom of Eswatini Strategic Roadmap:20192022.Retrieved from https:/www.gov.sz/images/CabinetMinisters/STRATEGIC-ROADMAP-2018-2023-MAY-2019.pdf;Central Bank of Eswatini.Development

87、Finance.Retrieved from https:/www.centralbank.org.sz/development-finance/;The Government of the Kingdom of Eswatini.National financial inclusion strategy for Swaziland 20172022.Shutterstock4PROMOTING SME COMPETITIVENESS IN ESWATINIAssessing competitiveness ITC developed the SME Competitiveness Surve

88、y to help countries collect the data needed to assess the competitiveness of their enterprises.6 As of August 2022,more than 36,000 firms had been surveyed in 57 countries,including Botswana and Zambia.The tool is designed to combine information at the meso-level(local support ecosystem for business

89、es)and the micro-level(firm capacity)to provide a nuanced picture of the capacity of a countrys private sector to compete in international markets.Small and medium-sized enterprises are defined as firms with fewer than 100 employees(see Annex).The term SME,therefore,includes microenterprises.Althoug

90、h the focus is on micro,small and medium-sized companies,some large businesses are included in the survey so the competitiveness of SMEs and big firms can be compared.The importance of competitiveness in driving firm survival,growth and trade makes it a central element in economic development.For th

91、is reason,ITC has developed an analytical framework to understand firm competitiveness and how it can be improved over time.The framework is built around three pillars that drive the capacity of a company to be competitive across three levels of the economy(see Figure 1).7 The rest of this report is

92、 structured around key themes featured in this competitiveness grid.Figure 1 SME Competitiveness Grid PillarsThemeCompeteFirm capabilitiesBusiness ecosystemNational environmentConnectChangeLevelsProduction efficiencyResource managementCertificationBuyersSuppliersInstitutionsFinanceSkillsInnovationSo

93、urce:ITC.Shutterstock5ChAPTER 1 UNDERSTANDING ThE SMALL BUSINESS CONTExT IN ESWATINI Box 2 Alliances for Action The Support to Job Creation and the Investment Climate project,funded by the European Union,works to increase the competitiveness and sustainability of Swazi SMEs,social enterprises,produc

94、er associations and smallholder farmers by reinforcing support institutions,establishing publicprivate alliances and improving access to finance and investments.The project uses ITCs Alliances for Action approach to support private sector-led export development in Eswatini.Alliances for Action is an

95、 inclusive,participatory multistakeholder consultative approach that targets sustained competitiveness and value creation aligned to market needs for shared prosperity and job creation.It is built on a publicprivate partnership of mutual trust.The Alliances for Action approach has five implementatio

96、n pillars,namely:Understand,Convene,Transform,Invest and Impact.It starts with an effort to understand the context through an analysis of markets,value chain systems and the business environment through an evidence-based multistakeholder process.Figure 2 Alliances for Action approachAlliances for Ac

97、tion/5-pillar approach for partnerships RESILIENCE,BETTER TRADE&GROWTH Markets&value chain systemsSustainability gaps and opportunitiesBusiness ecosystem Value addition and diversification potentialEstablish responsibleand inclusive public private productionand commercialization alliances Connect ac

98、tors from farm to forkUpgrade capacities forSMEs and trade and investment support institutions to compete Support responsible and sustainable production and trade Enable policy to put alliances into action Promote responsible investment in the AlliancesDerisk investment and finance M&E for responsib

99、le production and trade Traceability of impact from farm to fork Communication&promotionEthical businessmodelsUNDERSTAND CONVENETRANSFORMINVESTIMPACTSource:ITC.As part of the Alliances for Action Understand phase,the project involved collecting market intelligence about the competitiveness of value

100、chain actors in Eswatini.This was achieved through data gathering using ITCs SME Competitiveness Survey.The SME Competitiveness Survey in Eswatini In Eswatini,data were gathered using the SME Competitiveness Survey as part of a project that aimed to improve understanding of opportunities to increase

101、 competitiveness and sustainability(Box 2).ITC partnered with Business Eswatini to interview enterprises across the country.To simplify the collection of data,a sample of firms from across the country was randomly selected from a list of companies compiled by Business Eswatini.6PROMOTING SME COMPETI

102、TIVENESS IN ESWATINIThe sample was spread across regions,sectors(agrifood,manufacturing and services)and sizes(micro,small,medium-sized and large).Data were to be collected on firms operating in the agrifood(i.e.farming and agribusiness),non-food manufacturing and services sectors from the countrys

103、four regions.To the extent possible,the sample in each region was composed of both exporting and non-exporting firms.Using the SMECS questionnaire,data were gathered from 200 enterprises between April and October 2021.Figure 3 highlights the surveyed regions,with the corresponding number of firms in

104、terviewed in each region.Figure 3 Surveyed regions of Eswatini Hhohho,82Lubombo,35Manzini,51Shiselweni,32Source:ITC based on SME competitiveness data collected in Eswatini.Maps retrieved from Shutterstock and YourFreeTA total of 96%of companies interviewed for the SMECS in Eswatini were micro,small

105、or medium-sized enterprises(Figure 4).Companies with four employees or fewer made up 67%of the sample,consistent with other evidence showing that these microenterprises dominate the business landscape in Eswatini.8 Thirty-five percent of interviewed firms were in the agrifood sector,agricultural pro

106、cessors and food manufacturers.In addition,31%of respondents were in manufacturing and 35%in services.Women led 56%of the companies interviewed for this study.While there are more female business owners than male business owners in the country,women-owned companies are more likely to have no other e

107、mployees or be micro firms.9 The data also show that 41%of the enterprises were engaged in trade,though most of them imported only;just 8%had successfully exported across borders in the past.South Africa dominates Swazi imports,with 90%of total imports coming from the neighbouring country.10 The few

108、 Swazi companies that export have strong ties to South Africa.11 The Support to Job Creation and the Investment Climate project intends to help companies access new markets at the regional or global level.Two-thirds of surveyed firms said they were registered with or licensed by a national authority

109、.The sample likely overrepresents the formal sector,as previous estimates in Eswatini suggest that around 25%of SMEs in the country are registered.12 With a third of survey respondents hailing from the informal sector,the findings in this report reflect the reality in both formal and informal sector

110、s.7ChAPTER 1 UNDERSTANDING ThE SMALL BUSINESS CONTExT IN ESWATINI Figure4CharacteristicsoffirmsthattookpartinthesurveyManufacturing,31%Agrifood,35%Services,35%SectorsImport and export statusImportonlyExportonlyImport andexport59%33%3%5%No import orexportFirm sizeMicroSmallMedium-sizedLargeWomen-ledM

111、en-ledWomen-led67%18%12%4%44%56%Note:Microenterprises are defined as those with four or fewer employees;small firms have 519 employees;medium-sized ones have 2099 employees,and large companies have 100 or more employees.This definition differs from the legal definition in Eswatini(see Annex subsecti

112、on on What are SMEs?).Women-led firms are managed by a woman and at least 30%owned by women.Source:ITC calculation based on SME competitiveness data collected in Eswatini.Swazi firms struggle to recover from COVID-19 The spread of the COVID-19 virus triggered a state of emergency in Eswatini that la

113、sted from MarchOctober 2020.The partial lockdown permitted only essential businesses in the health,agriculture and telecommunication sectors to continue operating.Domestic travel was restricted,only allowing the movement of essential goods such as food and medicines.13 The economic uncertainty gener

114、ated by the pandemic had a major effect on the country,where gross domestic product(GDP)fell by 2.4%in 2020 and recovered by an estimated 1.5%in 2021.14South Africa,Eswatinis main trading partner,imposed strict lockdowns and restricted entry via its land borders,hampering the free flow of goods betw

115、een the two countries.15 In 2021,rising and falling case numbers led to restrictions being toughened and relaxed periodically.16 Two years on,there is hope that the pandemic is in its final stages.Yet Swazi firms continue to be buffeted by crises.Social unrest in mid-2021 brought many regions and th

116、eir enterprises to a halt.17 Climate change is increasing the frequency of drought and other shocks that affect the competitiveness of businesses in the agricultural sector 8PROMOTING SME COMPETITIVENESS IN ESWATINIin particular.18 In a context of varied and severe market disruptions,firms are explo

117、ring how to recover from past shocks and prepare for future crises.Teleworking and redesigning products are top coping strategiesSince the COVID-19 outbreak in early 2020,Swazi firms have had to adapt to the new normal by adjusting their business processes.Survey evidence indicates that teleworking

118、was the most popular coping strategy to deal with lockdowns.Twenty-five percent of surveyed firms moved their operations from production sites and office spaces to private homes.One-fifth of companies(21%)also started customizing existing products or developing new products.A textile company from Ma

119、tsapha,for example,started producing 3,000 masks per day.19 Women-led firms were more likely to customize goods or develop new ones;26%percent did so,compared to 15%of men-led enterprises.however,some firms struggled to adapt to the new environment.Of the companies interviewed for the SMECS,33%perce

120、nt were not operational in the year prior to the interview,that is,mid-2020 to 2021.They had no sales,did not use any of their capacity and/or did not deliver any products on time.Most of these companies operated in retail trade,crop and animal production,and the manufacture of textiles.Yet when the

121、y were interviewed in mid-2021,these firms said they were restarting operations.Micro firms were more likely to be closed between mid-2020 and mid-2021;39%were non-operational,compared to 21%of firms with more than four employees.Women-led firms were also more likely to be closed;43%were non-operati

122、onal,compared to 22%of men-led firms.These types of firms may have been less resilient because they had fewer available resources to deal with economic disruptions.Additionally,women-led firms tend to operate in the industries most immediately affected by the crisis,such as accommodation and retail.

123、20 ITC9ChAPTER 1 UNDERSTANDING ThE SMALL BUSINESS CONTExT IN ESWATINI While some companies avoided closures,they had to continue operations with reduced staff numbers to lower costs.In April 2020,Swazi businesses temporarily laid off at least 8,000 employees,including many in the textile industry.21

124、 In 2021,9%of surveyed companies that were operational had laid off employees and 13%had temporarily reduced employment.Business survival is still uncertainEswatini experienced its third wave of COVID-19 infections between April and October 2021,the data collection period for the SME Competitiveness

125、 Survey.22 The persistence of the pandemic and ongoing social unrest may have been behind the pessimism expressed by survey respondents.Around 82%of respondents were very concerned about their business recovering from the crisis and 40%thought there was a risk that their business would permanently s

126、hut down because of the pandemic.Micro firms in particular were more worried about their recovery and at a higher risk of closure:87%reported being very concerned about their recovery and 49%believed a business closure was likely.Firms with more than four employees were slightly more optimistic;73%o

127、f them were very concerned and 21%were at risk of closure(Figure 5).In addition,firms that were non-operational in 2020 struggled even more in 2021.Nine out of 10 of these firms were very concerned about their recovery and 59%envisioned closure.This indicates that microenterprises and businesses tha

128、t already had to shut down operations completely are at a higher risk of not surviving the pandemic and would benefit from additional support.Figure 5 Microenterprises are pessimistic about recovery40%49%21%TotalMicroOther82%87%73%0%10%20%30%40%50%60%70%80%90%100%TotalMicroOtherShare of respondentsV

129、ery concerned about recoveryClosure envisagedNote:In the panel on the left,respondents were asked:how concerned are you about the recovery of your business from the COVID-19 crisis?.Answer options were:Not concerned,Mildly concerned,Moderately concerned,Very concerned,Dont know.The panel shows the p

130、roportion of firms that selected Very concerned.In the panel on the right,respondents were asked:Do you think there is a risk that your business will permanently shut down because of this crisis,and if so,when could this closure occur?.Answer options were:1 month or less,3 months,6 months or more,Bu

131、siness closure not envisaged.The panel shows the proportion of firms that selected either 1 month or less,3 months or 6 months or more.Source:ITC calculations based on SME competitiveness data collected in Eswatini.Businesses need supportThe Government of Eswatini employed multiple response strategi

132、es to address the economic fallout from the pandemic.At a national level,the Central Bank of Eswatini cut interest rates to 3.8%from 6.5%to encourage borrowing.It also lowered liquidity requirements for commercial and development banks to support private sector-led growth.23 At the business level,th

133、e Government implemented a E90 million($4.8 million)COVID-19 Small and Medium Enterprise Relief Fund that aimed to support small businesses with a turnover of E8 million($517,000)or less24 through exceptional tax refunds.Looking towards long-term recovery,the Government introduced the Post COVID-19

134、Economic Recovery Plan in late 2020.25 10PROMOTING SME COMPETITIVENESS IN ESWATINIDespite these government programmes,the data show that few Swazi SMEs received help during the pandemic.About 16%of surveyed firms said they had received assistance,which came most often in the form of concessional fin

135、ance,such as grants.Most of those who received support(97%)said it had met their needs.Yet 84%of firms surveyed in mid-2021 reported they did not receive any pandemic-related assistance from the Government or BSOs(Figure 6).This can be explained by the fact that eligibility for the COVID-19 Small an

136、d Medium Enterprise Relief Fund was limited to enterprises that submitted an income tax return in 2019.26 Informal firms,for example,or those that started up more recently,were not eligible for this type of financial support.Of surveyed firms that had existed for at least five years,18%received assi

137、stance.Only 6%of firms that had been operational for less than five years received assistance.Figure 6 COVID-19 support did not reach most companies84%16%No support receivedSupport received81%9%6%4%No support received because.Did not qualify forsupportOther reason for notreceiving supportQualified b

138、ut have notyet received answer toapplicationNot aware of supportbeing availableNote:Respondents were asked:has the business received COVID-19-related support from the government or a business support organization?(left panel).Those who responded No were asked Why not?(right panel).Source:ITC calcula

139、tions based on SME competitiveness data collected in Eswatini.An additional factor that could have limited accessibility of the programme was a lack of information.Many companies had no information about the initiative,so they were unaware they could access it.Indeed,when asked why they did not rece

140、ive assistance,8 out of 10 respondents reported that they were unaware of any support being available.These results show that private-sector support needs to be broadened in terms of type of assistance,awareness and eligibility.Decoupling government support from tax registration,and promoting the av

141、ailability of assistance,could be one solution to support SMEs in the ongoing fight against COVID-19 as well as in anticipation of future crises.Lessons can also be learned from other countries that have cast a broad net through inclusive private-sector COVID-19 recovery programmes.In Nigeria,for ex

142、ample,the Government introduced the MSME Survival Fund that offered conditional grants to micro and small enterprises to help them meet their payroll obligations.27Preparation for future crises is limitedhistorically,small businesses tend to invest less in before-the-event preparedness than their la

143、rger counterparts.28 Between recent social turmoil,the economic effects of COVID-19 and the approaching climate crisis,uncertainty is high concerning how the Swazi business environment is going to look in the future.This is why even smaller firms are starting to think about how to be more resilient.

144、11ChAPTER 1 UNDERSTANDING ThE SMALL BUSINESS CONTExT IN ESWATINI Survey data show that 35%of Swazi businesses are working on their risk management strategies to prepare for future crises.The most popular approaches were revising their sourcing strategy(35%),revising their sales strategy(30%)and revi

145、sing the portfolio of products or services they offer(29%).BSOs and the Government can help SMEs to crisis-proof their businesses.In this context,it is notable that many SMEs in Eswatini are concerned about risks related to the environment and climate change(see Chapter 4).ITC has developed a Green

146、Recovery Plan for BSOs,governments,lead firms in value chains and international organizations that provides a roadmap on how best to help small firms address climate change.29 If all parties take these points into account and companies invest in their business fundamentals,SMEs will be better prepar

147、ed for future crises.Shutterstock ShutterstockChapter 2Improve business fundamentals to compete successfully Productive capacities are underused 14Firms must get the basics right 16Quality signalling to boost managerial capacities 1714PROMOTING SME COMPETITIVENESS IN ESWATINIImprove business fundame

148、ntals to compete successfully The capacity to compete assesses the ability of firms to deliver output of suitable quantity,timeliness,quality and cost to meet current market expectations.Firm-level operational characteristics such as efficient inventory management,professional financial management a

149、nd compliance with internationally recognized standards influence this ability to meet short-term market requirements.Factors at the business ecosystem and national level,including electricity and transport infrastructure and services,are also relevant.Swazi firms are lagging behind in their capacit

150、y to compete.They fail to exploit their full production capacity and struggle to deliver their goods on time.Data show that managerial capacities need upgrading,as many firms neither keep records or have a bank account.This limits their ability to manage cash flow and inventory.Signalling quality th

151、rough international certification is relatively uncommon.These factors hamper the ability of Swazi companies to compete on domestic,regional and international markets.Certification and supplier monitoring can provide incentives for firms to upgrade their management capacities.To become certified,bus

152、inesses need strong management practices.Large firms can pressure and provide support to their smaller suppliers to obtain higher quality inputs.To not lose their buyers,suppliers will have to establish stronger management processes.Productive capacities are underused Good management practices enabl

153、e a firm to supply according to the quantity and time requirements of the market.30 This is because a well-managed company can manage its resources effectively and produce efficiently.It can generate a greater output use more of its production capacity and deliver products on time.Companies that can

154、 produce more from their inputs are able to earn more money on a larger amount of output,making them more competitive and profitable as a result.31 Shutterstock15ChAPTER 2 IMPROVE BUSINESS FUNDAMENTALS TO COMPETE SUCCESSFULLY Firms in Eswatini struggle to efficiently coordinate and use the resources

155、 that are available to them.As a result,they do not fully exploit their production capacity and are unable to deliver their products on time.On average,firms that had been operational in the previous 12 months used 54%of their capacity.A third of firms that were operational delivered less than half

156、of their output on time(Figure 7).These tardy deliveries negatively affect buyerseller relationships as they erode the buyers trust in the seller.32 Disaggregating the data further shows that microenterprises operated below their maximum production capacity more often than larger firms.Fifty-four pe

157、rcent of micro firms used little of their capacity(i.e.they only employed 1%to 49%of their capacity),compared to 33%of larger firms(Figure 7).This evidence,along with data on the number of micro-sized firms in Eswatini,indicates that there are many very small-scale Swazi firms and many of these are

158、not running at full capacity.As the next section notes,improvements in their management along with stronger incentives from customers to upgrade their offering could help some of these firms to grow,consolidate markets,use more of their capacity and thereby improve the efficiency of the economy.The

159、difficult period that occurred in 2021 when firms were surveyed goes some way towards explaining the fact that many were not using their capacity fully.The pandemic and social unrest led to lower demand as consumers stopped purchasing goods and services.The production and delivery of non-essential g

160、oods and services were also brought to a complete halt during COVID-19 lockdowns.These issues were probably partially to blame for the low output and delayed delivery observed in the data.The results of the survey should therefore be read and understood in this context.Yet,data from the SME Competit

161、iveness Survey show that higher production efficiency also made companies more resilient to the COVID-19 crisis.The survey finds that firms that delivered at least half of their products on time were less concerned about their recovery from the pandemic.Figure7Productionefficiencyneedsaboost33%54%37

162、%29%30%34%22%44%17%0%20%FewSomeMost40%60%80%100%OtherMicroShare of respondentsProducts delivered on timeLittle capacityutilizedSome capacityutilizedMost capacityutilized10%20%30%40%50%60%70%80%90%100%Share of respondents0%Note:In the left panel,respondents were asked:In the last year,what was this c

163、ompanys output as a percentage of the maximum output possible?.The category Little capacity used comprises 1%49%,Some capacity utilized comprises 50%89%and Most capacity utilized comprises 90%100%.In the right panel,respondents were asked:In the last year,what percentage of this companys goods or se

164、rvices were delivered on time?.The category Few comprises 1%49%,Some comprises 50%89%and Most comprises 90%100%.Source:ITC calculations based on SME competitiveness data collected in Eswatini.In the long term,weak demand within the country may drive low rates of capacity utilization.Supply linkages

165、between firms in Eswatini are weak,as many inputs to production are imported from South Africa.33 This decreases domestic demand for Swazi products,as they are not purchased further down the supply chain.Another obstacle to better capacity utilization comes from the business ecosystem.Weak infrastru

166、cture hampers 16PROMOTING SME COMPETITIVENESS IN ESWATINImany firms in the country.Eighteen percent of respondents say the quality of their electricity provider is low.Without reliable electricity,it is hard to keep machines running during business hours.While Eswatini produces its own electricity,m

167、anaged by the state-owned Eswatini Electricity Company,most of the countrys electricity needs are met through imported electricity from South Africas Eskom.34 A further 22%of respondents indicate that access to water for production purposes is limited and 20%say that internet reliability is low.Inte

168、rnet reliability was an issue during social unrest in 2021,as many internet outages occurred.35 Transport infrastructure is also a concern,as almost 40%of respondents say transport infrastructure quality is low.This can make it difficult for SMEs to access the inputs they need and deliver output on

169、time to customers.Water and transport problems are especially prevalent in the rural regions of Lubombo and Shiselweni,where 37%of respondents reported limited access to water.This compares to 14%in urban regions(hhohho and Manzini).Also,49%of respondents in rural regions reported low transport infr

170、astructure,compared to 34%in urban regions.While Eswatinis economic centres are well connected through paved roads,unpaved roads dominate in rural areas.This adversely affects the agricultural sector,largely located in rural areas,as it makes the distribution of agricultural goods more difficult and

171、 costly.36The analysis highlights how several factors poor infrastructure,pandemic-era restrictions and low demand may have hampered the production of Swazi SMEs in 2021.At the root of companies ability to cope,produce and grow,however,are the fundamentals of business management.Companies need to ge

172、t the basic techniques in resource management right to maintain efficient,productive enterprises.As the next section shows,those capacities are often lacking in Eswatini.Firms must get the basics rightThe evidence points to major management gaps in the operations of Swazi firms.More than one-third o

173、f enterprises(36%)keep no economic records and about half(44%)have no bank account.These poor management practices lower the ability of companies to manage their resources and production.As a result,companies struggle to manage their cash flow and inventory.Only one in three surveyed firms(32%)repor

174、t having a high ability to manage cash flow and one in three firms(30%)have a high ability to manage their inventory(Figure 8).Not adopting basic management capacities leads to dysfunctional business processes that prevent companies from functioning in an efficient,competitive and profitable way.Ban

175、k accounts and records help managers make effective decisions about the allocation of resources.They enable them to keep track of liabilities,receivables and needed amounts of funding,thereby improving their ability to manage the firms cash flow.In Eswatini,keeping records and having a bank account

176、triple the probability of businesses having strong cash flow management,according to the data.Just 14%of firms that keep no records and 15%of firms that have no bank account have strong cash flow management.Conversely,42%of businesses that keep records and 46%of those that have a bank account have s

177、trong cash flow management.Strong cash flow management,in turn,ensures that businesses execute payments and collect receivables on time.37 A strong grasp of a companys financial activities is also essential to obtain formal financing.38 Cash flow management in Eswatini is complicated by the fact tha

178、t cash is the dominant payment form,preventing firms from keeping a digital transaction history.Mobile money could be a solution to replace cash in business transactions.39Tracking inputs and outputs also improves a companys ability to manage its inventory.Keeping records in particular,recording a c

179、ompanys assets helps managers Shutterstock17ChAPTER 2 IMPROVE BUSINESS FUNDAMENTALS TO COMPETE SUCCESSFULLY Figure 8 Business fundamentals are lacking36%65%44%56%0%10%20%30%40%50%60%70%No recordsKeeps recordsHas no bank accountHas a bank accountRecord keepingBank accountShare of respondents20%12%48%

180、58%32%30%0%10%20%30%40%50%60%70%80%90%100%Ability to managecash flowAbility to manageinventoryShare of respondentsLowDecentHighNote:Respondents were asked:At this time,does this company have a bank account for daily operations which is separate from a personal account?Yes,no and Does your company ke

181、ep the following types of records?Revenues,expenses,liabilities,assets.Respondents who kept at least one of these records were categorized as Keeps records.Respondents were also asked:Please rate this companys ability to manage its cash flow to reliably execute payments.Answer options ranged from 1(

182、no ability)to 6(very good ability).Those who answered 5 or 6 are categorized as high ability to manage cash flow,3 and 4 average ability,1 and 2 low ability.Respondents were also asked:Please rate the efficiency of this companys inventory management system?.Answer options ranged from 1(inefficient)t

183、o 6(highly efficient).Those who answered 5 or 6 are categorized as high ability to manage inventory,3 and 4 average ability,1 and 2 low ability.Source:ITC calculations based on SME competitiveness data collected in Eswatini.oversee the value of the companys inventory.A bank account is needed to know

184、 how much money is available to replenish inventories once they have been depleted.Analysis of the survey data shows that keeping records and having a bank account increases the probability of businesses having strong inventory management practices by more than 10 percentage points.Quality signallin

185、g to boost managerial capacitiesCertification can help push for the upgrading of management practices.The need to demonstrate compliance with a standard provides an imperative for management upgrading in smaller firms.40 It signals to buyers domestically and internationally that the enterprises mana

186、gers have the right practices in place to make high-quality goods and services.41 This,in turn,reduces transaction costs associated with communicating the quality of the product,which boosts competitiveness and exports.42In the agricultural sector,this quality assurance is often a prerequisite to co

187、mpetitiveness on international markets.43 Almost half of the firms interviewed in Eswatini report that they compete by offering high-quality products or services.To make buyers more aware of this quality and to increase their competitiveness,firms could have the quality of their products and process

188、es certified by external auditors and certification bodies.Yet,international certification is rare:only 10%of Swazi firms hold an international certificate.The most popular international certificates were safety and quality or performance certificates(Figure 9).This follows the common trend that SME

189、s tend to value safety and quality standards more to enter foreign markets,while sustainability certification is less pervasive among small enterprises.44 Micro firms,women-led firms and youth-led firms usually have lower turnover and therefore struggle to afford costly certification.Certified firms

190、 in all countries tend to have good practices and,indeed,the evidence suggests that in Eswatini,these firms have better management capacities.Of the companies that hold an international certificate,39%use most of their capacity,95%have a bank account and 100%keep records.For firms that hold no inter

191、national certificate,19%use most of their capacity,52%have a bank account and 61%keep records.18PROMOTING SME COMPETITIVENESS IN ESWATINIFigure9Popularityofinternationalcertificates2%3%7%8%0%1%2%3%4%5%6%7%8%OtherSustainabilityQuality or performanceSafetyShare of respondentsInternational certificates

192、Note:Respondents were asked:Does this establishments main product or service hold any of the following types of internationally recognized certificates?-safety,quality or performance,sustainability,other.Source:ITC calculations based on SME competitiveness data collected in Eswatini.At the same time

193、,information on standards is hard to access.Eighty-three percent of surveyed companies said that there was poor availability of information on certification(Figure 10).The quality of services offered by product testing,certification and inspection authorities was low,according to 26%of respondents,w

194、hile 19%reported that the cost of these services was high.Weak quality infrastructure is a common issue in developing countries45 because quality infrastructure institutions such as national standards bodies,metrology institutes and accreditation bodies are poorly developed.46 In Eswatini,the reach

195、of quality infrastructure appears to be limited:two-thirds of surveyed firms said they received no assistance to conform to standards and requirements(Figure 10).Figure10 Companiesneedmoresupporttogetcertified83%10%7%Availability of domestic informationon certification LowAverageHigh65%35%Assistance

196、 to help conformwith standards and requirements Received noassistanceReceivedassistanceNote:In the left panel,respondents were asked:Please rate the availability of domestic information on standards and certificates related to this establishments main product or service.Answer options ranged from 1(

197、very low)to 6(very high).Those who answered 1 or 2 are categorized as low,3 or 4 average,5 or 6 high.In the right panel,respondents were asked Does this company receive any assistance to help it conform to national,regional or international standards and requirements?.Answer options were Yes,No and

198、Dont know.Source:ITC calculations based on SME competitiveness data collected in Eswatini.19ChAPTER 2 IMPROVE BUSINESS FUNDAMENTALS TO COMPETE SUCCESSFULLY This problem was recognized in the 2018 Small,Micro&Medium Enterprise National Policy,which says the Eswatini Standards Authority is not operati

199、ng at its optimum due to missing capacity,making it cumbersome for businesses to get certified.47 This gap is reflected in the survey data.The standards authority did not aid most of the firms that did receive assistance.Instead,they received help from the National Agricultural Marketing Board,SEDCO

200、 and/or the Ministry of Commerce,Industry and Trade.General and sector-specific trade and support institutions can boost certification levels among Swazi firms.This could entail addressing information gaps and helping firms access assistance to conform to standards and requirements outside the count

201、ry.Indeed,the survey finds a positive correlation between engagement with BSOs and international certification:15%of businesses engaged with BSOs hold international certifications compared to 3%of those not actively engaged.Policy insight:Certification and supplier development as drivers of competit

202、iveness Many firms in Eswatini survive without a habit of good management practices,possibly owing to missing competitive pressure.More competitive markets force firms to adopt better management practices to avoid being pushed out of the market.48Such pressure is lower in Eswatini owing to a weak bu

203、siness climate characterized by stringent regulations,lack of entrepreneurial drive,sluggish growth and low levels of investment and innovation.49 As a result,even firms with bad fundamentals can persist.This also explains why there are so many micro firms that often have low levels of competitivene

204、ss.Nonetheless,there are ways to drive management and performance improvements.Certification can encourage firms,especially those that are looking to expand into foreign markets,to work on their management practices.Certification is especially relevant for the agrifood sector,which employs most of t

205、he Swazi population.In Kenya and Morocco,where small-scale farmers dominate the economic landscape,certification has been shown to increase exports of smallholder farmers.50 Obtaining international certificates is therefore an opportunity for the Swazi agrifood sector to enter international markets.

206、Supplier development is another path Swazi firms could take to improve management practices.Instead of sourcing from South Africa,large firms should look to local suppliers.Quality concerns associated with those suppliers can be rectified if these large buyers share some of their expertise with thei

207、r small suppliers by engaging in supplier development.Some examples of supplier development activities are:setting targets,incentives such as monetary rewards for better performance,penalties for falling short on commitments,on-site consulting,training or providing physical equipment.51 These incent

208、ives to improve the suppliers management skills can benefit both buyers and suppliers.In Iraq,for instance,agribusinesses were willing to pay a premium to their suppliers for higher-quality produce.52In Eswatini,however,supplier monitoring and training is not very pervasive.Although 26%of agrifood b

209、usinesses produce fully or partially to their buyers specifications,only 9%of them frequently assess the performance of the suppliers who sell them the inputs that determine the quality of their own output.There is a place for governments to support these activities.Chile,for example,pioneered the S

210、upplier Development Programme,which enables large firms to engage in supplier development with their SME suppliers,for instance in the form of training or technical assistance.The Supplier Development Programme then subsidizes the costs.53 The Government of Eswatini could establish a similar program

211、me to help improve the competitiveness of its SME sector.ShutterstockChapter 3Fostering connections to improve market access Business linkages are key to access market information 22More marketing for new buyers is needed 25High dependence on foreign suppliers 2622PROMOTING SME COMPETITIVENESS IN ES

212、WATINIEstablishing strong business connections with value chain actors is a crucial determinant of competitiveness.It helps the firm gather information about customers,suppliers,competitors,products,technologies and government policies,and use it for business operations and growth.Collaborating with

213、 other companies and linking with BSOs helps firms understand the market landscape.But information flow needs to be a two-way street.Forming good business linkages also involves actively reaching out to provide information about the firm and its offering through marketing and outreach efforts.54Most

214、 surveyed firms in Eswatini are dissatisfied with the level of market information available to connect with buyers and suppliers.Fewer than a quarter of firms are content with the availability of information about new potential buyers,for example.With low rates of exports,firms appear to cater mainl

215、y to their existing buyers rather than trying to find new ones.Furthermore,firms do not sufficiently seek to build the connections they need to be competitive.Only a few promote their business and engage in marketing and promotional activities.Firms must be flexible to succeed in rapidly changing ma

216、rket conditions,but few have a diversified supplier base that would underpin this resilience.Business linkages are key to access market information Information about current and potential buyers and suppliers is valuable to firms that want to grow.Knowing current buyers behaviour and preferences ena

217、bles firms to better satisfy their demands and get referrals to new customers.Knowing about potential new buyers allows them to target marketing in a manner that attracts new buyers.Similarly,knowing suppliers enables companies to identify shortfalls upstream in their supply chain that they can Fost

218、ering connections to improve market access Shutterstock23ChAPTER 3 FOSTERING CONNECTIONS TO IMPROVE MARKET ACCESS address by monitoring or switching suppliers.Building the capacity to understand buyers and suppliers can strengthen domestic value chains and enable expansion across borders to new buye

219、rs.Access to market information is a key policy objective to make Swazi SMEs more competitive.55 The 2004 national SME policy stressed the need for better access to information on input suppliers for production and on new and existing markets to boost exports.56 Years after this policy was formulate

220、d,however,the survey finds that less than a quarter of the firms(23%)rated the availability of market information on potential buyers as good.About one-third of firms(32%)reported this of suppliers.The scarcity of information on potential buyers can be linked to a lack of information on existing buy

221、ers.Only 31%of surveyed firms reported having rich information on their existing customers.The paucity of market intelligence hinders efforts companies might take to improve customer satisfaction.This,in turn,prevents the development of a culture of continuous improvement in the product and service

222、offering that could attract new buyers.Market intelligence must be accurate and up to date for firms to leverage it effectively for growth in market share.however,only about 30%of survey respondents were happy with the quality of market information available on potential buyers and suppliers.The lac

223、k of relevant information may undermine the ability of Swazi SMEs to align with market demands at home and abroad,thereby acting as an obstacle to enter international markets successfully.In addition,40%of the respondents thought the cost of information on potential buyers and suppliers was costly.T

224、he survey also reveals that market information accessibility varies depending on the sector and region of operation and the gender of company managers.Of women-led firms,38%said the quality of information on buyers was low compared to 21%of men-led firms.Furthermore,73%of services firms described in

225、formation availability on potential suppliers as average or high,compared to 68%of manufacturing and agrifood firms.Similarly,supplier information was more readily available in the Manzini and hhohho regions than in Shiselweni and Lubombo.Buyer and supplier information gives firms insights into the

226、demands and expectations of customers and can help firms manage their inventory.The survey finds that companies that are better informed about customers have more efficient inventory management systems than those with limited customer profile information(Figure 11).This is because having customer in

227、formation enables managers to efficiently match the production and distribution of goods with market demands.57Figure 11 Good client information favours inventory management 17%13%7%74%63%44%9%23%49%0%20%40%60%80%100%Little or noneModerate amountGood qualityShare of respondentsLow efficiencyAverageH

228、igh efficiencyCustomer profile informationNote:The survey asked,Please rate how much information you have about your buyers and Please rate the efficiency of this companys inventory management system.Source:ITC calculations based on SME competitiveness data collected in Eswatini.24PROMOTING SME COMP

229、ETITIVENESS IN ESWATINIBusiness networks can be extremely valuable in garnering information on markets.58 For example,collaborating with other firms in the same sector can help companies learn about potential buyers and suppliers.The survey shows a positive link between collaboration(through coopera

230、tion to solve problems and exchange of information)and information availability and quality about potential buyers and suppliers.For instance,51%of firms that collaborate to a great extent said information on potential suppliers was highly available compared to 29%of firms that hardly collaborate.Bu

231、siness support organizations,such as chambers of commerce,trade and investment promotion agencies,and sector associations,can help firms acquire market intelligence and business networks.The National Agricultural Marketing Board,for example,provides information on local and international markets to

232、fruit and vegetable farmers in Eswatini using a marketing information system.59 Yet interaction with BSOs could improve among Swazi SMEs.Just over half of the firms(54%)actively engage with at least one BSO,the survey reveals.Furthermore,most firms reported the quality of these BSOs to be quite aver

233、age,with fewer than a third saying they provide high-quality services.Large,medium-sized and small firms are more likely to engage with BSOs than micro firms.While 76%of larger firms engage with BSO,only 43%of micro firms engage with them.Agrifood businesses are also more likely than manufacturing a

234、nd services to connect with BSOs.The Shiselweni region has the highest engagement rate(72%)and Lubombo,the lowest(40%).The importance of these institutions became apparent during the pandemic.As previous research using the SME Competitiveness Survey has found,60 companies with connections to BSOs we

235、re more likely to receive COVID-19-related support when the pandemic hit.While 21%of Swazi businesses involved with BSOs received pandemic-related support from the government or BSOs,only 10%of those not involved have received support.This is because BSOs such as Eswatini Investment Promotion Author

236、ity,SEDCO and the National Agricultural Marketing Board as well as sector associations play an important role in disseminating information and providing training to access COVID-19 relief assistance.Shutterstock25ChAPTER 3 FOSTERING CONNECTIONS TO IMPROVE MARKET ACCESS Figure12 EngagingwithBSOshelpe

237、dfirmsaccessCOVID-19aid10%16%21%0%5%10%15%20%25%Not engaged with BSOTotalEngaged with BSOShare that received COVID-19-related supportNote:The survey asked,Are you actively engaged with any of the following types of institutions:Trade promotion organizations,investment promotion organizations,chamber

238、s of commerce,sector associations.And has the business received COVID-19-related support from the government or a business support organization?.Source:ITC calculations based on SME competitiveness data collected in Eswatini.More marketing for new buyers is needed Inadequate business knowledge and i

239、nformation on markets are accompanied by limited efforts to engage with new potential customers.For example,fewer than half of the surveyed firms(47%)advertise or promote their products or services,and only 9%have a business website.Much of the Swazi population remains offline despite the fourth gen

240、eration(4G)network covering 57.6%of the people in 2020.61 In 2017,only 30.3%of the population used the internet.62 Yet online advertising,such as through social media,is the most popular form of advertising,irrespective of firm size,gender and age of leadership.Among surveyed firms,23%advertise only

241、 online,but some online advertisers also use other channels such as newspapers,posters,radio and television(Figure 13).The most popular advertising channel for micro firms is online advertising,while offline channels are more widespread among small,medium-sized and large firms.Similarly,a higher pro

242、portion of women-led and youth-led enterprises use only online channels than men-led and non-youth-led firms.This could be because online channels are more affordable and accessible for advertising businesses.63 however,the relatively small share of internet users in the country might render online

243、advertising less effective for mass marketing compared to newspapers,TV or radio advertisements.Nevertheless,growing internet reach and usage both domestically and globally,offers enormous potential to expand digital marketing among Swazi firms.The government has worked to increase e-commerce adopti

244、on and boost digital literacy among local businesses,offering them training in digital marketing and hosting the regional headquarters of the African Electronic Trade Group,which seeks to advance e-commerce trade in the African continent.64Much research documents the positive impact of marketing on

245、a firms performance,showing it to increase profitability,market share,future earnings and marketing efficiency.65 Online advertising has strong targeting and tracking abilities.It allows a seller to better attribute the response to a specific type of advertising and assess the individual impact on s

246、pecific consumers.Digital marketing is especially useful for targeting international buyers.Firms must increase the use of websites and social media platforms as advertising and marketing platforms,and as an entry point to international markets.On the other hand,offline advertising is effective at b

247、rand building.It can better differentiate a brand from 26PROMOTING SME COMPETITIVENESS IN ESWATINIits competitors in the minds of consumers by building brand awareness.66 In sum,business marketing and promotional activities,both online and offline,need to intensify among Swazi firms.Figure13 Womenan

248、dyouth-ledfirmsmorelikelytoadvertiseonlineAdvertisingNoneOnly offlineOnline and offlineOnly online18%26%20%36%0%5%10%15%20%25%30%35%40%Men-ledWomen-ledNon-youth-ledYouth-ledGenderAgeShare of respondentsOnly online advertising54%11%14%23%Note:The survey asked,In the last year,did this company engage

249、in any of the following forms of advertising:1.Leaflet,poster,or newspaper advertising;2.Radio or television advertising;3.Internet or social media advertising?Source:ITC calculations based on SME competitiveness data collected in Eswatini.High dependence on foreign suppliers Firms are increasingly

250、relying on and outsourcing non-core activities to external suppliers.Suppliers contribute to the ability of firms to meet customer requirements and expectations and,in some cases,to comply with legal and regulatory requirements.67 Some firms therefore evaluate suppliers by measuring and monitoring s

251、upplier performance to ensure compliance with the firms requirements and to uncover opportunities for cost reduction,risk mitigation and continuous improvement.68 Assessing suppliers is one of the most important components of supply chain management and influences the long-term commitments and perfo

252、rmance of the firm.69 Indeed,supplier assessment has been positively linked with firms quality performance.70 This underscores the importance of effective supplier selection and assessment.In Eswatini,more than half of the survey respondents have assessed suppliers.however,as noted in the previous s

253、ection,monitoring is sporadic at best:only 15%of respondents assess their suppliers regularly.Moreover,women-led firms assess their suppliers less often than men-led firms:9%of the former evaluate their suppliers often compared to 21%of firms run by men.Exporters and importers assess suppliers more

254、often than non-exporters and non-importers.Diversification of the supplier base is critical as it allows firms to switch sourcing to adapt to changing market conditions and customer needs.This became apparent during the pandemic,when companies were cut off from their main suppliers and had an urgent

255、 imperative to diversify input sources.Survey evidence from Benin and Cambodia shows that firms with a more diversified base of suppliers had less difficulty accessing inputs during the pandemic than those relying on fewer suppliers.71 Companies interviewed in Eswatini that had more suppliers also c

256、oped better:they tended to be less concerned about their recovery from the pandemic.Most Swazi firms have one to three suppliers,and small,medium-sized and large companies tend to have more suppliers than micro firms(Figure 14).There is substantial 27ChAPTER 3 FOSTERING CONNECTIONS TO IMPROVE MARKET

257、 ACCESS reliance on the biggest supplier,with 54%strongly relying on their top supplier.It is harder for smaller firms to afford in terms of cash,time and stress the management of sourcing from multiple suppliers.Large,sophisticated companies can invest in tools that give accurate and immediate info

258、rmation on production networks.however,there are benefits from diversification of sourcing,even for small firms,in terms of an efficient management of risks.72 Figure 14 Most Swazi companies rely on one main supplier 62%38%52%48%0%10%20%30%40%50%60%70%One to threeMore than threeShare of respondentsN

259、umber of suppliersMicroOther54%36%10%Strong relianceAverage relianceLittle relianceNote:The survey asked,how many suppliers do you have?and Please rate your reliance on your biggest supplier.Source:ITC calculations based on SME competitiveness data collected in Eswatini.Shutterstock28PROMOTING SME C

260、OMPETITIVENESS IN ESWATINIMany Swazi companies do not source their inputs locally.This suggests that domestic suppliers are unable to produce in the quantity,quality and timeliness required by local buyers.Indeed,previous research suggests that scarcity of local inputs is an issue in Eswatini.73 Con

261、gruently,the SME Competitiveness Survey finds that 61%of manufacturing firms and 44%of service firms import inputs from foreign countries,notably neighbouring South Africa.Of these,27%of manufacturing firms source all their inputs from South Africa or Mozambique and almost 40%of services firms sourc

262、e inputs solely from South Africa,Mozambique,China,Egypt,India or Namibia.While many companies commonly import production inputs,this is also associated with additional costs.Obtaining all inputs from outside the domestic market is risky,as the supply of these inputs is more susceptible to fluctuati

263、ons in trade costs.Improving the competitiveness of locally produced inputs will stimulate forward and backward value chain linkages in Eswatini.Local suppliers must develop their own competitiveness to trump imported inputs efficiently,including by adopting better management practices and innovativ

264、e means of production.Shutterstock29ChAPTER 3 FOSTERING CONNECTIONS TO IMPROVE MARKET ACCESS Policy insights:Strengthening market intelligence to boost exportsImproving access to market information is a key policy objective to strengthen the competitiveness of SMEs in Eswatini.Market intelligence ca

265、n illuminate a pathway to new market niches and expansion of existing enterprises,paving the way for the growth of small businesses.however,the survey evidence in Eswatini indicates that Swazi firms have little understanding of current clients,never mind potential new ones at home and abroad.Improvi

266、ng understanding of market demands,and leveraging them as incentives for improved SME practices and innovation,is an urgent imperative.In its efforts to improve access to market intelligence for SME growth,the kingdom could draw inspiration from countries that have successfully built models for mark

267、et intelligence dissemination that foster SME expansion and eventual participation in international trade.One example is the development of small business development centres in Latin American countries,which provide productive linkages,supplier development,business advice,technical assistance and t

268、raining.74 In El Salvador,a network of 14 micro and small enterprise development centres75 has provided training to nearly 3,000 small business clients who created 2,343 new jobs and generated$16 million in sales.76BSOs such as the Eswatini Investment Promotion Authority,SEDCO and the National Agric

269、ultural Marketing Board,as well as sector associations,play an important role in disseminating information and providing business support services.When BSOs are efficient,they provide effective support to SMEs through advocacy,networking,direct services and market development.77 At the same time,bus

270、inesses must learn how to use the information to benefit from it.Support services such as training in digital marketing,branding and promotional activities,as well as participation in international trade and investment fairs,are valuable for SMEs seeking to export or attract investment.Improving the

271、 capacity and service quality of BSOs will promote SME engagement and a tailoring of programmes to meet their requirements.Swazi BSOs must cooperate more to minimize gaps and duplication in the services they offer.They also need to seize opportunities to support their clients/members and be more con

272、fident in reaching out to relevant partners.78Business collaboration is another important source of obtaining market information among surveyed firms.The Government and BSOs could facilitate business meetups and sector-level networking events(online or in-person)to promote exchange of information an

273、d opportunities to collaborate.Cross-value chain programmes can facilitate learning about clients and leveraging that knowledge for growth.In Costa Rica,for example,the Productive Linkages programme linked domestic firms to multinational corporations,which helped them increase their performance and

274、acquire new and better buyers.79 ITCChapter 4Responding to changing market demands Lack of innovation impedes competitiveness 32Credit constraints cripple business operations 36Investing in environmental measures pays off 3832PROMOTING SME COMPETITIVENESS IN ESWATINIResponding to changing market dem

275、ands Todays companies must be flexible to adapt to changes in market conditions.As the business landscape evolves rapidly,firms need to take stock of changes in the business environment and quickly respond by transforming their business model.Companies mobilize financial resources,capital and skills

276、 and invest them in innovation to improve their competitiveness.Access to finance and appropriately skilled workers are key ingredients in this process.Survey evidence suggests that Swazi firms lag behind in innovation,research and development(R&D),and the skills needed to pursue them.Limited access

277、 to financial institutions is a major obstacle to the operations of most firms,and particularly microenterprises and women-led companies.In agrifood value chains,modern technologies are rarely used and few firms have upgraded to value-added products and processes.While only a quarter of surveyed fir

278、ms have invested in sustainability measures such as water-efficient technologies,those that do have reaped substantial benefits.Lack of innovation impedes competitiveness When companies conduct research and development activities,they can generate innovative goods and systems needed to stay ahead in

279、 an ever-changing competitive landscape.80 Among African firms,innovation has been shown to increase the range and quality of goods and services and improve production capacity and flexibility.81 In Eswatini,innovation benefits firms,especially through increased market share and enhanced business pr

280、ocesses.82The competitiveness survey finds low levels of innovation and R&D investment among respondents.One in five(19%)surveyed Swazi firms frequently develops and implements new or improved products or processes,while about half reported rarely doing so and the rest(33%)innovate occasionally(Figu

281、re 15).Survey evidence also shows that manufacturing firms(excluding those in the agrifood sector)innovate more frequently than agrifood and services firms.Shutterstock33ChAPTER 4 RESPONDING TO ChANGING MARKET DEMANDS R&D activities foster innovation,but few Swazi firms invest substantial resources

282、in R&D.More than two-thirds(70%)of surveyed firms have committed only limited resources or none at all to R&D projects.This is consistent with other evidence that private sector expenditure on R&D in Eswatini has been particularly low at 0.003%of GDP in 2015,compared to 0.32%in South Africa.83Figure

283、 15 Limited innovation and low resource commitment to R&D48%70%33%23%19%7%0%20%40%60%80%100%Innovation frequencyR&D investmentShare of respondentsLowAverageHighNote:The survey asked,Please rate the frequency with which your company develops and implements new or improved processes or products and Pl

284、ease estimate the level of resources your company commits to research and development.Source:ITC calculations based on SME competitiveness data collected in Eswatini.The lack of innovation among most surveyed firms may be testament to a poor business ecosystem for such activities in Eswatini.Investm

285、ent in knowledge creation,through human capital development,research and university-industry linkages,is low in the kingdom.Combined total public and private gross expenditure on R&D was 0.26%of the countrys GDP in 2016,lower than the continental target of 1%of GDP.84 Lack of resources,access to inf

286、ormation and technology,as well as policy limitations and inflexible regulation,have historically inhibited innovation in Eswatini.There have been policy efforts to encourage innovation,such as investment in a science and technology park.Nonetheless previous research suggests that a weak innovation

287、strategy has muted such investments and delayed industrial development in the country.85 Shutterstock34PROMOTING SME COMPETITIVENESS IN ESWATINIBox 3 Innovation in Swazi agrifood value chains Eswatinis agribusiness sector has considerable potential for value-added products,import substitution and ni

288、che market exports.86 Innovations in the agrifood sector take place through upgrading the terms of engagement in value chains.87 Process upgrading involves adopting better technologies and processes that improve production efficiency.The SME Competitiveness Survey in Eswatini finds that more than 80

289、%of farmers use tractors and hand tools,such as pitchforks,to cultivate or collect harvests.In addition,9%use animal-drawn equipment.Only 2%of the responding farmers use more sophisticated technology,such as the mechanical harvester,while none use power tillers or pruning machines.The switch to more

290、 efficient technologies would upgrade processes and productivity to the level required for competitive inclusion of smallholders into international agrifood value chains.88Product upgrading in the agrifood value chain includes improving product quality through standards and certification.however,ver

291、y few agrifood firms were certified to an international standard:just 4.5%of them said they held an international certificate.Given the prevalence of food safety and other standards as requirements for agricultural exports,improving product quality and farming techniques can facilitate certification

292、 and other product upgrades that grant suppliers a competitive advantage for participation in high value-added chains.89Functional upgrading occurs through the take-up of new tasks that add value,enabling value chain actors to earn more,but it is rare among value chain participants in Eswatini.Most

293、surveyed agrifood firms sell their products in their raw form without performing value-added activities.Only one-third of them are involved in value addition,such as cleaning,packaging,freezing,processing and certified production(Figure 16).There are opportunities to take up additional distribution

294、and processing functions and develop new market channels.Figure 16 One-third of agrifood businesses focus on value additionNot engagedin valueaddition,53%Engagedin valueaddition,34%26%26%3%1%1%0%5%10%15%20%25%30%Cleaning,sortingand/or gradingWeighting andpackagingChilling/freezingCertified productio

295、nProcessing activitiesShare of agrifood firms engagedin value-addition activitiesNote:The survey asked,What value-addition activities,if any,does this establishment undertake for selling its products?and What type of machinery or equipment do you use for production activities?Source:ITC calculations

296、 based on SME competitiveness data collected in Eswatini.Connecting with other actors in the business ecosystem is one way to facilitate innovative upgrading strategies among agricultural value chain actors.90 Most(88%)of the surveyed farmers have already seen the value of networks and received tech

297、nical advice,notably from other farmers,government agricultural extension services and farmer associations.9135ChAPTER 4 RESPONDING TO ChANGING MARKET DEMANDS Intellectual property laws in Eswatini are outdated and lack enforcement.92 Survey results reveal that almost all firms(97%)never sought info

298、rmation or services related to intellectual property rights protection or innovation support.This further confirms the rarity of innovation and intellectual property registration.Challenges regarding the countrys intellectual property regulatory framework must be addressed to incentivize R&D investm

299、ents and innovation.In this context,it is promising that collaboration among firms in a sector such as information sharing and cooperating to solve common problems seems to be correlated with innovation.This is particularly true among services firms.The survey found that services firms that collabor

300、ate often with other services firms tend to innovate more frequently.For instance,35%of those that extensively collaborate and 42%that share market information said they often innovate,compared to just 6%of those that rarely cooperate or share market information.This implies that there are collabora

301、tive networks among innovative firms that are striving to improve their offerings.The findings are in line with previous studies where community clusters act as a pathway for SME innovation.93 Combining efforts and expertise benefits SMEs that lack sufficient knowledge about markets and resources to

302、 innovate individually.Innovative firms in Africa,including Eswatini,have been found to rely heavily on information provided by external sources such as input suppliers and customers for innovation.94 The frequency of innovation also depends on whether a man or woman leads the company.The survey evi

303、dence shows that women-led firms innovate and invest in R&D less than men-led firms.For example,54%of women-led firms rarely engage in innovation activities compared to 41%of men-led firms.While 79%of women-led firms reported low R&D investment,the share among men-led firms was 59%.To innovate,firms

304、 need skilled labour to identify and exploit new ideas.however,only one-third of surveyed firms in Eswatini reported an abundance of skilled workers for hire.Services firms tend to report a higher availability of skilled workers for hire than agrifood and manufacturing firms.however,these are mainly

305、 services firms in the most highly populated regions of hhohho and Manzini,where firms are more likely to find suitably skilled employees.Identifying and selecting suitably skilled workers is vital for innovation.95 This means an established and structured hiring process is essential.The survey show

306、s that two-thirds of companies have weak hiring processes,which makes it harder for them to find the best candidates.Firms with a strong hiring process were more likely to obtain a good match between workers and company needs.Shutterstock36PROMOTING SME COMPETITIVENESS IN ESWATINICredit constraints

307、cripple business operationsAccess to finance is crucial for firms innovation and growth.96 It stimulates investments in productive resources and R&D.In many countries,SMEs are less likely to receive bank loans or other lines of credit than large firms,creating a financing gap.97 Instead,they rely on

308、 internal funds,cash from friends and family,or other informal moneylenders to run their enterprises.98 Although informal sources tend to yield limited funds and high interest rates are exploitative in nature,market frictions(e.g.lack of information,discrimination,price barriers),regulatory barriers

309、 and/or the absence of financial institutions often limit access to formal credit.99Swazi firms use a mix of financing sources to bankroll company operations.Personal savings are the primary source of financing for surveyed companies,accounting for 41%of the total responses(Figure 17).This is follow

310、ed by company savings,family or friends,cooperatives and banks.Previous research confirms the high reliance on informal finance.100Companies with four employees or fewer rely mainly on personal savings and financial support from family and friends.Only 2%had received financing from commercial banks.

311、On the other hand,larger firms tend to rely more on company savings than personal savings,and 10%have borrowed from commercial banks.Banks are the main source of formal borrowing by men-led firms,and cooperatives were relatively more popular among women-led firms.This is consistent with previous evi

312、dence that fewer women than men have bank accounts in Eswatini.It also backs up past evidence that non-bank financial institutions,including cooperatives such as the Savings and Credit Cooperatives of Eswatini,are the driving force of womens financial inclusion in the country.101Figure17 Microfirmsm

313、ainlyfinanceusingtheirownfunds41%47%28%21%15%32%15%19%9%5%2%10%7%6%8%12%11%14%0%20%40%60%80%100%AllMicroOtherSizeShare of responsesPersonal savingsCompany savingsFamily or friendsBankCooperativesOtherNote:The survey asked,In the last year,did your establishment access loans,grants or other financial

314、 support?Source:ITC calculations based on SME competitiveness data collected in Eswatini.Youth-led firms mainly access funding from internal and informal sources,namely personal and company savings,and family and friends.On the other hand,non-youth-led firms obtain financial support from a wider var

315、iety of external sources,including government funds and equity investors.Financial institutions may perceive young owners or managers as higher risk clients due to their limited collateral or business experience.For this reason,banks may hesitate before unlocking formal financing for young entrepren

316、eurs,which forces them to rely on their own savings and informal lenders.10237ChAPTER 4 RESPONDING TO ChANGING MARKET DEMANDS Only 19%of the surveyed Swazi firms had applied for a loan in the past three years(Figure 18)and micro firms were less likely than larger firms to seek a loan.When small,medi

317、um-sized and large firms did not apply for a loan,it was most often because they did not need one.But for micro firms,it was because they did not think it would be approved.The gender of the business lead also plays a role in the decision to apply for a loan.Men-led firms did not request a loan main

318、ly because they did not need it,while women-led firms did not apply because they did not think it would be approved.Among companies that did not apply for a loan in the past three years,81%would have applied if they had been more confident of getting it and if the terms were good.Figure18 Highoutsta

319、ndingdemandforgoodfinance19%81%Applied for a loanDid not apply for a loan19%81%0%10%20%30%40%50%60%70%80%90%Would notapplyWouldapplyApplication to loan if terms were goodShare of respondentsNote:The survey asked,have this establishment in fact applied for a loan in the last three years?Source:ITC ca

320、lculations based on SME competitiveness data collected in Eswatini.The data reflect the fact that many firms want financing,but do not get it.Fifty-seven percent of the survey respondents said access to financial institutions is a considerable obstacle to current operations.Micro firms tend to cite

321、this problem more than larger firms:49%of large,medium-sized and small firms are severely burdened by difficulty accessing financial institutions compared to 61%of micro firms.Like in many countries,banks in Eswatini often consider lending to SMEs as unviable.The lack of competition in the countrys

322、banking market further generates a tendency among banks to rely more on established medium-sized and large enterprises.Moreover,the lack of a credit registry and a regulated private credit bureau poses challenges for potential SME borrowers,leading to heavy reliance on collateral and current salary

323、for loan decisions.103 There is an ongoing effort to create an asset registry,expected to benefit the countrys numerous micro-sized and informal firms,including those without acceptable collateral,such as farmers operating on common land that cannot be collateralized.The Government has tried to ease

324、 SME access to finance,for example,by launching the Small Scale Enterprise Loan Guarantee Scheme and by drafting development plans and policies such as the Micro Finance Policy,the National Financial Inclusion Strategy,the Small,Micro&Medium Enterprise policy and Financial Sector Development Strateg

325、y.however,Swazi SMEs still consider lack of finance as the most binding constraint at start-up and during operation,and a vast majority remain excluded from accessing formal credit.10438PROMOTING SME COMPETITIVENESS IN ESWATINIInvesting in environmental measures pays off Being a largely agricultural

326、-based economy with limited adaptive capacity,Eswatini is highly vulnerable to the impacts of climate change.105 Recognizing the environmental risks at hand,29%of the firms surveyed in the manufacturing,agrifood and services sectors have adopted measures to adapt to environmental change.The most pop

327、ular measures that firms have invested in are improved irrigation systems and soil management practices.Large,medium-sized and small firms and men-led firms more frequently adopted such measures than micro and women-led firms.The local environmental issues most frequently cited are excess rain,storm

328、 and flood,and unreliable access to water(Figure 19).Several respondents described floods caused by heavy rains that damage crops as a severe problem.In Eswatini,floods seep away essential nutrients in the soil,prompting farmers to use fertilizers and decreasing water quality and availability.106 On

329、e manufacturing company in Manzini also pointed to plastic waste and the lack of a waste management system.Inadequate chemical and waste management programmes threaten the countrys biodiversity and natural ecosystem,including essential lifelines such as the Usushwana River.107 The Government is step

330、ping up efforts to improve waste management,but it remains one of the most pressing issues faced by the country.108 Investing in climate-smart technologies is vital to strengthen firm resilience and mitigating the effects of climate change.however,not many firms consider it as an immediate concern.A

331、 quarter of surveyed firms had Figure19 Swazifirmsworryaboutexcessrainandwateraccess6%7%7%12%13%20%35%0%10%20%30%40%DroughtOther temperature changesWasteExcess heatOthersAccess to waterExcess rain,storm and floodShare of respondentsNote:The survey asked,What are the local environmental issues that a

332、re important for your firm?Please describe in detail.Source:ITC calculations based on SME competitiveness data collected in Eswatini.Shutterstock39ChAPTER 4 RESPONDING TO ChANGING MARKET DEMANDS invested in measures to reduce their negative impact on the environment.Notable among the actions adopted

333、 are investments in more water-efficient technologies,waste management systems and sustainable(e.g.recyclable)packaging.Investing in these environmental measures seems to be paying off for Swazi firms.Nearly all firms(98%)investing in sustainability measures said they saw opportunities and benefits for their business from these efforts.Among opportunities presented by the sustainability investment