SME Financial Inclusivity for Sustainable Entrepreneurship in Namibia During COVID-19

Introduction

COVID-19, also called SARS-CoV-2 has caused a twin crisis: First, the pandemic has placed an unprecedented burden on many health systems worldwide, second approved measures for infection control have caused an economic crisis by bringing a greater segment of economic activity to an abrupt halt (Kuckertz, et.al, 2020). There are several ways the pandemic has affected economies, especially SMEs featuring both supply and demand sides (Cusmano & Raes, 2020). On the supply side, there is a general reduction in the supply of labour, as most workers are unwell besides movements are restricted. On the demand side, there is sudden loss of demand and revenue for Small and Medium Enterprises (SMEs) that have severely curtailed their ability to operate leading to serious liquidity constraints. Concomitantly, consumers have experienced loss of income, fear of contagion and heightened uncertainty leading to reduced consumer spending and consumption. These factors taken together contribute to reduced business and consumer confidence. In this scenario, SMEs are likely to be more vulnerable to ‘social distancing’ than established companies (Cusmano & Raes, 2020) due to size related factors like scope and scale. Similarly from the public perspective, the pandemic came at a time when several years of neoliberalism policies had depleted state capacity to respond to public crisis (Saad-Filho, 2020). Governments have embraced strategies for superior market based efficiency; entrenched deindustrialization through the globalization of production and built fragile financial structures, all in pursuit of short-term profitability. These factors taken together suggest that Covid-19 pandemic causes challenges for businesses such as health and safety, supply chain disruptions, labour force morbidity, cash flow interruptions, decreased consumer demand and increased marketing costs. SMEs are particularly exposed to the COVID-19 pandemic’s economic effects due to their limited financial resources and borrowing capacity. These challenges suggest that the future and priority of businesses and their governance should instead be to achieve resilience and sustainability, and not efficiency alone.

In Namibia like many other emerging economies, a thriving SMEs sector is instrumental in ensuring economic development through job creation and economic growth, and therefore are agents for reducing poverty. The Ministry of Industrialisation, Trade and SME Development (MITSMED) (2016) reiterates this position by maintaining that a strong, independent and expanding Medium, Small and Micro-Enterprises (MSMEs), which for this study will only be (SMEs) to align it with the international literature is key in driving economic growth, innovation, economic development and job creation. SMEs are instrumental where the scale and diversity of large businesses is insufficient in meeting the demands for new investments and employment opportunities. In Namibia, an estimated 33,700 SMEs provide some form of employment and income to 160,000 Namibian citizens, which is about one third of the nation’s labour force; besides the sector contributes approximately 12% of Namibia’s GDP (MITSMED, 2016). This finding supports the view of Tetteh and Burn (2001) who argue that the role of SMEs in the economy need no more emphasis, in the UK for example at the start of 2002 SMEs employed 55.6 percent of the workforce, 99.8 percent of firms were classified as SMEs, and accounted for an estimated 52% of total business turnover. Featuring prominently in this statistics is the services sector which accounts for 71.8 per cent, and includes businesses in retailing, hotels and restaurants, transport and communications, financial services, business services, education, health and social work, and other services (Fitzgerald & Alonso, 2005).