Part One

There is growing evidence of the participation of small businesses in both formal and informal tenders. Small businesses face many challenges in conducting business with both the public and private sectors especially when supplying goods and services. Normally, conditions of supply are set for the suppliers, calling for certain performance beyond the capacity of the supplying organisation.

In 2003 a businessman and war veterans, ordered pumps, based in the Midlands Province, to supply water pumps and pipes. The pumps and pipes are yet to be delivered although the supplier was paid in full by a local bank. The issue is presently under litigation as the projects are still in limbo. According to the Sunday Mail of 15 January 2006, the Mashonaland West Provincial Medical Director dissolved Chinhoyi Provincial Hospital’s central buying unit following irregularities in food purchases. This paralysed operations at the institution resulting in patients being discharged prematurely.  The Sunday Mail of 12 March 2006 reported that Harare City fathers cancelled a contract with an advertising company after the company failed to adhere to a contract sealed in 2002, requiring it to maintain road islands in return for free advertising.  

The challenge is how small businesses can participate in tenders to the satisfaction of buyers and be profitable at the same time. Sometimes, they participate to the detriment of the institutions they are supposed to be serving. At times they do not participate at all. Why is it that many small businesses do not participate in public and private tenders? Why is it that those who participate end up supplying substandard services and products?

Many authorities have indicated that the Zimbabwean economy is in a meltdown state. The Zimbabwe Independent of January 2006 provided insight into the state of the country’s economy based on budget statements from 1999 to 2006. 

Year                            Initial Estimate                     Actual Outrun

1999                           3.20%                                     1.20%2000                                                                          -4.20%2001                          -2.80%                                   -7.30%2002                          -5.30%                                   -11.90%2003                          -7.30%                                   -13.20%2004                          -8.50%                                   -2.50%2005                           3.50%                                    -2.50%2006                           2.00%                         

The economy, as depicted in the above statistics, has resulted in large-scale business downsizing and in some cases closing down. Many people have been retrenched. The unemployment figures are estimated at 80 percent. A large number of the unemployed have sought economic refuge overseas with estimates saying that 3 million live in the diaspora. The remnants have tried their hand in business activities giving rise to the proliferation of formal and informal small businesses to fill the gap created by the demise of big businesses. Such small businesses now play the role that was previously played by large organisations. 

The development of micro and small sector enterprises (SMEs) significantly contributes to employment creation and poverty reduction. Many governments in developing countries have made efforts to support such enterprises by coming up with policies to enhance new business set ups and growth. Policies can protect an enterprise from unfair competition, a consumer from unscrupulous business practices, and society at large from unhealthy or detrimental practices. Essentially, the regulatory burden on the private sector should be as modest as possible- mindful of the need to protect citizens from unsafe products, the environmental degradation and unfair employment practices.

One of the measures used to evaluate small business growth is in the number of people employed. However, most of the SMEs were necessity driven hence limited in their ability to create jobs. Markets influence employment decisions of SMEs owner managers more than any other factor. Employment growth in the SMEs and improvement in job quality are connected to market opportunities that the owner-managers perceive. Small business growth must have a clear indication of growth in employment. In this regard governments should facilitate and enhance the access SMEs have to markets by creating for them opportunities to broaden their market base and deepen their market penetration. Reinecke and White cite market forces as the most influential factor in employment decisions from 1999 to 2001 as follows: 

Factors Positively Influencing Employment Decisions in Surveyed SMEs (mentions in percentages) (Reinecke and White: 2004)

 Across the countries, the owner-managers perceive the market (demand for their products and services) as the main influence on positive employment. It is therefore without doubt that one of the major drivers of SMEs success is access to markets. This view is not fully supported by some who state that businesses are influenced not only by markets but the regulatory and institutional environment established by governments. Efforts to improve the regulatory and institutional environment within which businesses operate allow for far more rapid impact than inherently longer haul education and skills strategies. The World Bank’s Doing Business in 2005 supports the argument that regulatory reform is important to small enterprise growth.

This argument however should not be used to discredit the notion that markets are essential for SMEs establishment and growth. Policies militate against SMEs entry to international markets. Policy biases against SMEs also arise due to discrimination in domestic markets. For example, public tenders are often designed and implemented in a manner that makes it difficult or even impossible for SMEs to participate. In many countries, SMEs face enormous obstacles in obtaining public contracts since tenders which are usually not transparent are often designed for large enterprises. Creating new trade opportunities for SMEs not only involves creating special schemes or policies that open new markets but also requires a legal and regulatory framework that is enabling and competitive. 

In response to over regulation, Supply Management (April 2004) pointed out that the need for SMEs to produce three years of accounts in the United Kingdom had been relaxed to help them meet tendering requirements. It further stated that only contracts of limited value were being awarded to help reduce the risk involved to clients.