Chapter 5: The role of SMMEs in the formal and informal economy in Zambia: the challenges involved in promoting them and including them in competition regulation
The development of an economy in any country is closely linked with the development of the small business sector. Formal and informal small businesses are often the nurseries of bigger companies, even multi- nationals, which have become a symbol of industrialisation. As the foundation of the industrial base of a country, small businesses therefore need policies and legal frameworks to facilitate their development. The role of government is indispensable in ensuring that the course of industrial growth and development is not obstructed by anticompetitive or abusive market practices that may frustrate the entry and growth of small businesses. The small business environment thrives in countries like the United States, India and China. And there are signs of this in Zambia too. A walk in the high-density residential areas, known as ‘compounds’, shows thriving businesses along the streets, both in and outside homes, and on every corner. Even in the leafy suburbs, the ‘home shop’ has become a common feature. The people running these businesses are the millions of self-employed that the formal sector has not been able to absorb. The businesses offer a way for people with relatively low levels of education or training, finance and social sophistication to enter into economically gainful activities and thus establish their own social safety net. However, the challenges for small formal and informal businesses are many. They range from lack of finance to high capital finance costs. For example, for some, packaging, location and logistics hamper expansion into upmarket segments as well as expansion of existing capacities.
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