The Impact of micro, small and medium Enterprises on Job Creation

Inhaltsverzeichnis

CERTIFICATION

DECLARATION

DEDICATION

ACKNOWLEDGEMENTS

ABSTRACT

TABLE OF CONTENTS

LIST OF FIGURES

LIST OF TABLES

ACRONYMS AND ABBREVIATIONS

DEFINITION OF TERMS

CHAPER ONE
1. INTRODUCTION
1.1 Background of the Study
1.2 Statement of the Problem
1.3 Aim of the Study
1.4 Objectives of the Study
1.5 Research Questions
1.6 Importance of the Study
1.7 Theoretical Framework

CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 Definition of micro small and medium enterprise
2.1.1 Micro scale enterprise
2.1.2 Small scale enterprise
2.1.3 Medium scale enterprise
2.1.4 Informal enterprise
2.2 Role of Micro Small and Medium Enterprise in Economic Development
2.3 Financing of Small and Medium Scale Enterprises in Zambia
2.4 Government Inadequacies towards Micro Small and Medium Enterprises in Zambia

CHAPTER THREE
3.0 RESEARCH METHODOLOGY
3.1 Study Area
3.2 Research Design
3.3 Data Collection Methods
3.4 Data Analysis

CHAPER FOUR
4.0 RESEARCH FINDINGS
4.1 Number of registered and unregistered Businesses
4.1.1 Registered Businesses
4.1.2 Unregistered Businesses
4.2 Number and types of Jobs created
4.2.1 Agriculture sector
4.2.2 Construction sector
4.2.3 Mining sector
4.2.4 Manufacturing sector
4.2.4 Services sector
4.2.5 Trading sector
4.3 Types of jobs
4.3.1 Casual
4.3.2 Permanent
4.3.3 Contract
4.3.4 Part time
4.3.5 Temporary
4.4 Level of skill
4.4.1 Skilled jobs
4.4.2 Semi-skilled jobs
4.4.3 Unskilled jobs
4.5 Gender among levels of skill

CHAPER FIVE
5.0 DISCUSSION, CONCLUSION AND RECOMMENDATIONS
5.1 DISCUSSION
5.1.1 Number of registered and unregistered Businesses
5.1.2 Number and types of jobs created
5.1.3 Level of skills
5.2 CONCLUSION
5.3 RECOMMENDATIONS

REFERENCES

Figure 1 Theoretical Framework

Figure 2 Map of the study area

Figure 3 Number of registered and unregistered businesses

Figure 4 Number of jobs created by sector for period 2010-2015

Figure 5 SMEs ferrying cassava farm produce to Democratic Republic of Congo

Figure 6 Ventilation improved pit latrines under construction

Figure 7 Ventilated improved pit latrines at slab level

Figure 8 SME inspecting construction of ventilated pit latrines

Figure 9 Completed ventilated improved latrines

Figure 10 Water weir across Mansa River constructed by a SME

Figure 11 Metal fabrication products

Figure 12 Traders awaiting to disembark from the boat enroute to mansa to sell the fish

Figure 13 Types of casual jobs

Figure 14 Types of permanent jobs

Figure 15 Types of contract jobs

Figure 16 Types of part time jobs

Figure 17 Types of temporary jobs

Figure 18 Gender by skills level

Table 1 Basic social and economic indicators for the period 1991 - 1999

Table 2 Enterprise distribution by density per province

Table 3 Registered Businesses

Table 4 Unregistered Businesses

Table 5 Types of Jobs

Table 6 Skilled

Table 7 Semi skilled

Table 8 Unskilled

Table 9 Total investment approvals and employment in Zambia for 1993 - 2006

CRONYMNS AND ABBREVIATIONS

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THE IMPACT OF MICRO, SMALL AND MEDIUM SCALE ENTERPRISES ON JOB CREATION IN LUAPULA PROVINCE: A CASE STUDY OF MANSA DISTRICT

By Happy Musumali

A Dissertation Submitted in Partial Fulfilment of the Requirements for the Award of Degree of Master of Business Administration of Mulungushi University July 2016

Firstly, I am greatly indebted to the Lord Jesus Christ for His grace upon life, for giving wisdom and knowledge that has made me reach this far. I wish to acknowledge with sincere gratitude and appreciation Dr. Chomba Chansa, my supervisor, for his professional advice and guidance during the proposal formulation, research and writing of the dissertation.

My gratitude goes to Mr. Charles Kabamba at Zambia Chamber of Commerce and Industry in Mansa office who was instrumental during collection of data.

Further gratitude goes to my wife Clara Muluta Musumali and all my family members that have stood by me offering their love, spiritual and moral support. Special thanks to my Elder Brother John Kafula Musumali, whose invaluable contribution to my education has always been unwavering.

Last but not the least, my gratitude goes to Mr. Ocean Matimba, Principal of Mansa Trades who provided research assistants that distributed and collected questionnaires.

ABSTRACT

The aim of the study was to investigate the impact of Micro, Small and Medium Enterprises on job creation in Mansa District of Luapula Province. The objectives of the study were to; i) determine the number of registered and unregistered businesses, ii) determine the number and types of jobs created and the level of skills. Data for the study were collected between July 2015 and June 2016. Primary data were collected using structured questionnaires and secondary data were obtained from published literature and reports. Data collected were analysed using Statistical Package for Social Science version 16.0 and Microsoft Excel 2013. The study investigated the impact of Micro, Small and Medium Enterprises on job creation in Mansa District for the period 2010 - 2015.

Results obtained showed that 18 (40 percent) were registered and 27 (60 percent) were not registered. Of the registered businesses 6 (33 percent) were in the service sector and 4 (22 percent) were in the construction sector respectively. Majority of the unregistered businesses 11 (41 percent) were in the agriculture sector, and the least 1 (4 percent) were in manufacturing. Regarding the number and types of jobs created, a total of 3,368 jobs were created of which 1,127 (34 percent) were in agriculture sector, 955 (28 percent) were in construction sector and the least 194 (8 percent) were in trading. The total number of employees, were 3,368 of which 1,011 were permanent, 503 were on contract, 338 were on part time, 169 were temporal and 1,347 were casuals. The results also showed that out of a total of 3,368 jobs created, 1,984 (59 percent) were unskilled jobs, 787 (23 percent) were semi-skilled jobs and 597 (18 percent) were skilled jobs.

This study has established that micro, small and medium scale enterprises created 3,368 jobs between the years 2010 to 2015, which was 76 percent of all jobs in Mansa. Based on these findings I recommend that further research will be required on the jobs created in other districts of the province.

(i) Formal sector

Refers to all production units that are registered with a tax and/or a licensing authority. Example of tax and licensing authorities in Zambia are the Zambia Revenue Authority and local Authority.

(ii) Informal sector

Refers to all production units that are not registered with a tax or licensing authority.

(iii) Formal employment

Is the type of employment in which employees are entitled to social security coverage and contract in addition to annual paid leave or such entitlement.

(vi) Informal employment

Is the type of employment characterised by lack of an entitlement to annual paid leave and absence of social security. The type of employment is found in both the formal sector and informal sector production units.

(v) Enterprise

Defined as any entity, regardless of its legal form, engaged in economic activities and includes self-employed people, family business, partnerships and social economy and craft enterprises.

(vi) Skill

A skill is the learned ability to carry out pre-determined results often with the minimum outlay of time, energy or both.

(vii) Part-time employment

Defined as employment under a contract of service that stipulates working hours of at least one-fifth less than the number of hours, specified in a collective agreement made in accordance with the industrial and labour relations Act.

(viii) Permanent employment

Defined as;

(a) employment that exceeds six months, is not casual work and is under a written contract of service or
(b) position in an undertaking that is necessary for the continued or sustainable operation of the undertaking or is core to the objectives of the undertaking.

(ix) Temporary employment

Defined as service under a contract service where a person is engaged to do relief work in the absence of a substantive employee, and may include employment which is part-time but does not include a person engaged on a short term contract.

(x) Casual employment Defined as;

(a) work that is not permanent in nature.
(b) work that does not require any skill in the performance of the work to be done.
(c) terms provide for payment at an hourly rate, payable at the end of each day.

(xi) Contract of service

Defined as an agreement establishing an employment relationship between two or more parties whether express or implied, and if express whether oral or in writing.

1.0 INTRODUCTION

The Chapter provides the background information to the impact of Micro, Small and Medium Enterprises (MSMEs) on Job creation in Luapula Province a case study of Mansa District. It explains the statement of the research problem, purpose, objectives, research questions and Theoretical Framework.

The Living Conditions Monitoring Survey (2002-2003) revealed that the poverty levels, which stood at 73 percent in 2000, increased in 2002 to 2003 to 80 percent. An examination of the Human Development Index (HDI), whose calculation has been consistent, revealed that poverty has deteriorated over the years. The country had slipped in its international ranking on the Human development Index. Out of 173 states Zambia ranked number 153 in 2002 before slipping further down to 163 in 2003. The Human development Report (2010) revealed that the country had improved its ranking to 150th from 164th position out of 177 countries in the 2005 Human development Report. The survey identified job creation as one of the strategies to reduce poverty and unemployment levels in Zambia.

1.1 Background of the study

Micro, small and medium scale enterprises was a major tool used by developed nations to attain socio- economic development. In recent times, small scale industrial sector has become the backbone of modern day economies in creation of employment in the informal sector, increasing the tax base for the country and improving incomes for the low earners (MCTI, 2007; IOF, 2002). Historical facts show that prior to the late 19th century, cottage industries for instance mostly small and medium scale businesses controlled the economy of Europe. The Industrial Revolution changed the status quo and introduced mass production (Thomas, 2001). The twin oil shocks during the 1970s however, undermined the mass production model, which triggered the unexpected reappraisal of the role and importance of small and medium sized enterprises in the global economy (Wendrell, 2003).

In Zambia, the practice of Small and Medium enterprise sector has had no policy since independence in 1964. Chisala (2008) reviewed that the country had no special legal framework aimed at promoting small and medium scale enterprises because the economy was enjoying the high global prices of copper in the world hence ignoring micro, small and medium enterprises sector. Copper prices eventually collapsed in the mid 1970s at the time when oil prices soared to United States Dollar 53.54/barrel. With decreasing profitability in the copper industry the Zambian government sought alternative ways of sustaining its economy (Chisala, 2008). Since the United Nation Independence Party (UNIP) government’s era subsequent administrations have formulated policies to foster creation of financial institutions designed to provide lending services to micro, small and medium enterprises. Despite such efforts the country still faces major challenges to provide financial assistance to the sector in order to enhance job creation through MSMEs.

The small and medium enterprises survey (2003-2004), indicated that from 1991 to 2001, Zambia experienced the most severe economic recession largely owing to public policy shifts. The drastic opening up of the domestic market to low cost and high quality foreign products made the hitherto protected and inefficient local producers to be uncompetitive. In order to stay afloat, most of enterprises were forced to restructure and reduction of labour ranked among the first options. Where downsizing was not attainable, most of the firms closed down. The result was a decline in the gross and domestic product and employment, and in the absence of corresponding social protection measures, poverty increased drastically among Zambians (Table 1).

Table 1 Basic social and economic indicators for the period 1991-1999

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Source: www.zamstats.gov.zm

The continued deterioration in the performance of the economy and hence the living conditions in spite of the adoption of free market economic policies induced government to explore an alternative development strategy within the free market economic framework. In collaboration with the external and local cooperating partners, the Poverty Reduction Strategy Paper (PRSP) anchored on the Millennium Development Goals (MDGs), was adopted as the principal national policy. Through the poverty reduction strategy paper, Zambia hoped to attain the minimum social and economic pre-conditions necessary for take-off on to the path of sustainable development.

In line with its multi sectoral approach to national development, the Government, through the poverty reduction strategy paper identified the small and medium enterprises sector as one of the instruments to economic recovery, employment creation and poverty reduction. The government realized that small and medium enterprises development contributes to poverty reduction through creation of employment either through the start-up of new small and medium or the expansion of existing ones. Job creation in the small and medium enterprises sector provides income to the poor such as the poor owners of enterprises; the working poor who are employed in enterprises; the dependants of such poor workers and owners; the unemployed who may obtain employment from small enterprises, and the poor people who purchase goods and services from small enterprises.

1.2 Statement of the problem

Despite the increasing opportunities for job creation under micro, small and medium enterprises in Zambia, very little had been done to analyse the impact of the sector to facilitate its growth in Zambia. Studies carried out by Mbuta (2007) indicated that only 500,000 (12.5 percent) of the potential labour force of 4,000,000 Zambians were in formal employment, the remaining 3,500,000 (87.5 percent) were engaged in informal employment, signifying the importance of the sector to the economy. Another study by Nuwagaba (2015) indicated that there was no clarity on micro, small and medium enterprises operations in Zambia particularly with regard to documentation of their activities and contribution to the country’s economic development. This study will therefore, collect data on the number of small and medium enterprises, the number of employees and types of jobs created which would help determine the MSMEs’ contribution to job creation and gross domestic product (GDP).

1.3 Aim of the study

The aim of this study was to investigate the impact of of Micro, Small and Medium Enterprises on the number and types of jobs created in Mansa District of Luapula Province.

1.4 Objectives of the study

Objectives of the study are to;

i) Determine the number of registered and unregistered Micro, Small and Medium Enterprises in Mansa District for the period 2010 - 2015.
ii) Determine the number and types of jobs created through Micro, Small and Medium Enterprises in Mansa District for the period 2010 - 2015.
iii) Determine the level of skills among employees under Micro, Small and Medium Enterprises in Mansa District for the period 2010 - 2015.

1.5 Research questions

i) What is the number of registered and unregistered micro, small and medium enterprises in Mansa district?
ii) What is the number and type of jobs created by micro, small and medium enterprises Mansa district?
iii) What are the levels of skills of micro, small and medium enterprises in Mansa district?

1.6 Importance of the study

The importance of this study was to underscore the significance impact of micro, small and medium enterprise on job creation and poverty reduction in Mansa district.

1.5 Theoretical framework

Job creation which is the dependent variable can be influenced by a number of independent factors, including type of sector, level of skills, location, organisational culture, funding, regulatory requirement, gender, registration, and job type. This research investigated factors which influence job creation based on the framework below (Figure 1).

When business enterprises are established, the entrepreneurs are faced with a choice of whether to remain informal or register with Patents and Companies Registration Agency (PACRA). The small and medium enterprises survey (2003-2004) showed that very low levels of formality as only 2 percent of micro small and medium enterprises were registered with patents and companies registration agency at that time, which resulted in very few enterprises who had access to incentives such as funding that government provided to the sector through the SED Act of 1996 as the precondition was that they had to be registered with the patents and companies registration agency. Among the reasons for the low levels of formality included regulatory and administrative barriers, fees, financial requirements, corruption and criminality. Albeit the number of beneficiary micro, small and medium enterprises being small, financial assistance was readily available as the results showed that 7.2 percent of the micro enterprises accessed loans at one point while the figure was 25 percent for small scale enterprises. Medium sized enterprises had a much higher access at 86 percent.

The types of jobs that were created were affected by the sector type, location of business, the natural resources existing in the district and the province for instance water, land and minerals influenced the type jobs that were predominant in the district. The low entrepreneurship, skills and technological levels coupled with leadership styles, had been a huge hindrance to the growth of small and medium scale enterprises and regarding gender, a higher proportion of men exhibited a higher entrepreneurial level than women.

Against these contributions to the national economy, Zambian SMEs had faced a horde of business constraints that include inaccessible markets for their produce, shortage of inputs for many engaged in agriculture sector, inaccessible finance from banks, poor transport facilities especially the state of feeder roads and lack of appropriate tools/machinery, lack of skilled labour, shortage of shop/rental, Space, unavailable utility services such as unreliable water and power supply, and technical problems. According to a World Bank Report of 1997, Zambian firms of all sizes identified the lack of access to credit, excessive competition from imports, insufficient demand and infrastructural weaknesses as their most pressing constraints. (Parker 1996) All these business constraints are manifestations of market failures which appear to be endemic in the SMEs sector and which justify government intervention by way of relevant policies.

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Figure 1 Theoretical framework

2.0 LITERATURE REVIEW

This chapter provides some literature on micro, small and medium enterprises. It outlined the definition, role of micro, small and medium enterprises in economic development, financing of small and medium enterprises in Zambia and government inadequacies towards micro, small and medium enterprises outlined in sections 2.1 to 2.4 below.

The small and medium enterprises survey (2003-2004), indicated that Luapula province exhibited very strong culture of entrepreneurship, in spite of the low infrastructural development and a limited market, the province constitutes 16.8 percent of all small and medium enterprises in Zambia thereby capturing a second position from Copperbelt province. In per capita terms, Luapula province has the highest density of small and medium enterprises at 13 per 100 persons (Table 2)

Table 2 Enterprise distribution by density per province

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Source: Researchers’ Field Work, 2004; LCMS 2004

Luapula Province has enormous reserves of copper ore deposits and several other mineral deposits. With the privatization of the mining sector, potential opportunities have become attractive. Metals available include copper, iron, Manganese, Gemstones, Silver, Gold, Rubby, Emerald, Green Tourmaline, and Blue Sky among others. These minerals are available in every district in the province. Mining currently takes place but at a small scale level which requires joint ventures with companies with machinery in order to increase the extraction rate of these minerals from the ground. The present operations duplicate a negative theme that has been recurrent throughout the history of Africa. The raw materials are being removed from the continent, with limited benefits to the people, and processed somewhere else in the world for the benefit of outsiders. For instance, the price that small scale enterprises sale manganese raw ore is K520 to K700 per tonne (United States Dollar 52 to United States Dollars 70 per tonne) compared to the price for pure manganese on the international market K16,530 (United States Dollars 1,653 per tonne).

2.1 Definition of micro, small and medium enterprise

Small and Medium Scale enterprises vary with culture and peculiar circumstances of the person attempting the definition. The definitions depend on the purpose and the policies which govern Micro, Small and Medium Enterprise sector in each country (Chishala, 2008). Three parameters generally apply, singly or in combination, capital investment, volume of production or turnover of business and the number of employees. During the period 2003-2004 a survey on small and medium enterprises was carried out which updated the definition of micro, small and medium Scale Enterprises based on the capital investment, turnover of business and number of employees,.

2.1.1 Micro scale enterprises

A micro enterprise was defined as any business enterprise registered with the Registrar of companies whose;

(i) total investment excluding land and buildings shall be up to K80, 000 (United States Dollars 8,000).
(ii) annual turnover was up to K150,000 (United States Dollars 15,000).
(iii) number of employees was up to ten (10) person.

2.1.2 Small scale enterprises

A small enterprise was defined as any business enterprise registered with the Registrar of companies whose;

(i) total investment, excluding land and building for manufacturing and processing enterprises, was between K80,000 - K200, 000 (United States Dollars 8,000 - 20,000) in plant and machinery, for trading and service providing enterprises shall K150,000 (United States Dollars 15,000).
(ii) annual turnover was between K151,000 - K300,000 (United States Dollars 15,100 -30,000).
(iii) number of employees was between eleven and forty nine (11- 50) persons.

2.1.3 Medium scale enterprises

A medium enterprise was defined as any business enterprise larger than a small enterprise registered with the Registrar of companies whose;

(i) total investment, excluding land and building for manufacturing and processing enterprises, was K201,000 - K500, 000 in plant and machinery, for trading and service providing was K151, 000 - K300,000 (United States Dollars 15,100,000 - 30,000,000).
(ii) annual turnover was K300,000 - K800,000 (United States Dollars 30,000 - 80,000).
(iii) number of employee between Fifty One and One Hundred (51 -100) persons.

2.1.4 Informal Enterprises

An informal enterprise was defined as any business enterprise not registered with the Registrar of companies whose;

(i) total investments excluding Land and Building was up to K50, 000 (United States Dollars 5,000).
(ii) number of employees less than Ten (10) persons.

2.2 Role of Micro, Small and Medium Enterprises in Economic Development

In the European Union, micro, small and medium scale enterprises account for 99.9 percent of the 11.6 million businesses created in the bloc (World Bank, 2006a). In America, the United States, micro, small and medium scale enterprises created over 75 percent of the new jobs contributing 40 percent of Gross Domestic Product and 80 percent of the population got their first employment in the micro, small and medium scale enterprises (World Bank, 2000). In Japan, small and medium firms secured capital of up to one hundred million Japanese yen (US$ 925,926) and employees were involved in manufacturing.

In many countries in Africa, micro, small and medium enterprises have been at the forefront of accelerated economic growth (Nuwagaba, 2015). Most micro, small and medium enterprises in the Southern African Development Community (SADC) region employ at least about 50 employees depending on their size which reduces the burden of unemployment from states (Tshuma and Jari, 2013). In South Africa for example, micro, small and medium enterprises operated in all cities and provide employment for people, where about 4 million jobs are created in the 1980s while the formal sector only provide 7 percent of the jobs (Thamas, 1989 and Aymes, 1988) of the jobs. Most micro, small and medium enterprises operated in the informal sector with about 700,000 such business which together contributed between 16 to 40 percent of the country’s Gross National Product in 1980s. The micro, small and medium enterprises have played a bigger role in the social economic development of the country. Studies by Kromberg (2005) showed that they contributed 30 percent to Gross National Product.

In Tanzania, micro, small and medium enterprise contributed about 60 percent to the Gross National Product (Echengreen and Tong, 2005; Pyke et al., 2000) employing at least 4-49 persons with a capital of TZ shillings 5-800 million (United States Dollars 2301.18 - United States Dollars 347,647.73) and in some instances had capital of between TZ shillings 200-800 million (United States Dollars 92,047.13 - United States Dollars 347,647.73) employing above 49 people.

Operation of micro, small and medium enterprises is however difficult in many African countries partly due to corruption, the more reason why at least 70 percent of micro, small and medium enterprises reported corrupt practices as hindrance to their growth (World Bank, 2005). Most African economies were poor and corrupt and such practices made the operations of micro, small and medium enterprises very difficult and noncompliant a factor responsible for circumnavigating regulatory requirements (World Bank, 2005). The same study revealed that Ethiopia had more than 73,000 micro, small and medium enterprises which employed more than 551,075 out of a total population of 87.1 million people persons but the survival of micro, small and medium enterprises in Ethiopia remained a big challenge due to lack of political will and poor attitudes towards them. Generally there was a poor business environment (Devereux, 2010; Mader, and Winkler, 2013) for micro, small and medium enterprises to grow.

In Nigeria, the Nigerian bank for commerce and industry (NBCI) provided loans and equity investment to small businesses to help in the development of Micro, small and medium scale enterprises in the country (Anyanwu, 2001). In addition, the national economy recovery fund was established to promote micro, small and medium scale enterprises by providing medium to long term loans (5-10 years) to those in Agro-Allied industries, industrial support services mining, quarrying, equipment leasing and other ancillary projects. The Nigerian federal government provided their part contribution towards the project and the African development bank contributed the remaining counterpart fund (Izedomi, 2011). In addition, the formation of small and medium scale industries apex unit within the Central Bank of Nigeria assisted in the disbursement of World Bank $270 million loan to small scale entrepreneurs.

In Zambia, in 2014, of the 5,859,225 employed persons, 944,256 persons were working in the formal sector representing 16.1 percent while 4,914,969 persons were in the informal sector, representing 83.9 percent. In Luapula Province, of 411,845 employed persons, 25,044 were employed in the formal sector which represented 6.1 percent and 386,801 were employed in the informal sector which represented 93.9 percent (Zambia Labour force survey, 2014). Earlier in 2012, the Bank of Zambia, showed that micro, small and medium enterprises provided sustainable economic growth through job creation, development of entrepreneurial skills and had a potential to contribute significantly to export earnings (Gondwe, 2012). However, provision of finance to the micro, small and medium enterprises sector in Zambia still remained a challenge and a survey conducted by the World Bank (2007) identified poor access to finance as a major impediment to investment and growth in Zambia.

2.3 Financing of Small and Medium Scale Enterprises in Zambia

The Government has formulated and implemented legislative frameworks to create enabling environment for the development and promotion of micro, small and medium enterprises. Such instruments facilitated financing loans or equity participation and fiscal incentives designed to aid their growth and rapid development. It was on this basis that financial institutions such Zambia National Commercial Bank (ZANACO), Zambia National Building Society (ZNBS) and the Development Bank of Zambia (DBZ) were established through Acts of parliament from as far back as 1970 to provide financial services to micro, small and medium enterprises. Liberalisation of the public sector in 1991 provided financial services to MSMEs (ZSMES, 2003). The Small Industries Development Organisation (SIDO) Act of 1981 was enacted to enhance the contribution of the sector to the national economy. Other agencies and programmes were the Zambia Development Agency (ZDA), Industrial Cluster Development (ICD), Youth Empowerment (YE), Citizen Economic Empowerment Fund (CEEF), creation of Multi Facilities Economic Zones, Adoption of the Poverty Reduction Strategy Paper (PRSP, 2000) and the establishment of vision 2030 (GRZ, 2006), to enhance among other things the growth and development of MSMEs.

According to Gondwe (2012), commercial banks in Zambia had increased their support to realized MSME sector such that by end of December 2011, commercial banks financial support to Micro, Small and Medium Scale Enterprises had increased to 21 percent of total loans, an improvement from 17 percent in December, 2010. This was an increase of 68.9 percent or (K2,322.5 billion from K1,375.0 billion (United States Dollars 232.25 billion from United States Dollars 137.5 billion) in 2010.

2.4 Government Inadequacies towards Micro, Small and Medium Enterprises

According to Chisala (2008), macroeconomic reforms undertaken by the government of Zambia aimed at liberalisation of the economy and privatisation of state owned companies among others, had not benefited the sector. MSME continued to experience constraints that hinder their growth in Zambia.

Government in 2006, constituted a Task force team on Micro, Small and Medium scale Enterprises in Zambia to identify constraints. The task force identified major constraints affecting the Zambian micro, small and medium scale enterprise, as follows;

(i) inadequate policy framework thus the absence of a comprehensive policy framework to give direction to efforts and plans aimed at supporting the sector. The Zambia Development Agency Act of 2006, was far beyond the reach of most micro, small and medium scale enterprises. Under this Act, incentives were only granted to investors with qualifying assets of K5,000,000 (United States Dollars 500,000),
(ii) difficulties in filling skills level capacity gaps for micro, small and medium scale enterprise by the government,
(iii) ineffective and uncoordinated support schemes to effectively encourage micro, small and medium scale enterprise to meet both local and export markets,
(iv) inaccessibility to finance/or long term credits as only about 7.2 percent of Zambian micro, small and medium scale enterprise had accessed credit facility (Small and Medium Enterprise Survey, 2004),
(v) time it takes to get a loan was too long often exceeding three months,
(vi) political interference in the granting of loans as most beneficiaries were being selected mainly based on their political affliation, and
(vii) creation of Multi-Facility Economic Zones, generally targeted large and hi-tech companies which inevitably excluded MSMEs. Companies that were to operate in these zones would qualify for special incentives such as exemption from paying corporate tax, exemptions from paying import duty, (ZDA Act of 2006 and MFEZ regulation 2006). The importation of raw materials was to be duty free which stiffled the growth fled had injured the micro, small and medium scale enterprise who supply similar goods to the large companies as they become uncompetitive in terms of pricing.

3.0 RESEARCH METHODOLOGY

This chapter outlines the study area of the research, the research design used in assessing the impact of micro, small and medium enterprises on job creation in Mansa, data collection method and data analysis method used.

3.1 Study area

Luapula Province is located in the north of the country about 790 Kilometres from Lusaka the capital city of Zambia. Mansa is the provincial capital of Luapula located at coordinates 11.3499°S and 28.7664°E (Figure 2). It serves as an administrative and commercial headquarter. It has population of 263,584 out of which 206,442 were engaged in both the formal and informal sectors.

The major economic activities were farming and crops grown included maize, cassava, beans, groundnuts, sorghum, millet and sweet potatoes, fishing was also prevalent on Lake Mweru, Bangweulu and Luapula River and trading. The study area was purposively selected because it’s the provincial capital of Luapula Province and has the largest population in the province.

It also had more micro, small and medium enterprises that were active than any other town in the province.

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Figure 2 Map of the study area (Source: Luapula districts.png-Wikimedia commons)

3.2 Research design

The research design adopted for this study was descriptive. The type and source data were determined by the objectives of the study. The aim of the study was to investigate the impact of micro, small and medium enterprises on job creation in Mansa District. Two types of data were collected for the study, the primary and secondary data. The primary was obtained from respondents through the use of structured questionnaires to micro, small and medium scale business enterprises in Mansa. In certain cases, data was collected through personal interviews to augment the questionnaires which were administered by the researcher and enumerators.

The study population consisted of micro, small and medium scale enterprises engaged in manufacturing activities, trading, service provision, farmers and contractors. The sampling frame used constituted MSMEs membership with the Zambia Chamber of Small and Medium Business Association (ZCSMBA) and the National Association of Medium and Small Scale Contractors (NAMSSC) affiliated to Luapula Chamber of Commerce and Industry. This approach was adopted with the understanding that the larger share of membership in these two organisations was constituted of micro, small and medium enterprises. These organisations had a combined active and none active membership of forty five (45).

3.3 Data collection methods

The survey used one type of administered questionnaire containing both open ended and closed ended questions. Closed ended questions were designed to assist in the collection of facts or quantifiable aspects of data. Primary data were collected using structured questionnaires for the period 2010 to 2015 and secondary data were obtained from journals and other published materials. The questionnaire comprised of two sections, A and B. Section A contain items measuring the socio-demographic information of the owners of businesses while section B investigated the impact of micro, small and medium scale enterprises on job creation in Mansa District.

3.4 Data analysis

Two types of software such as the Statistical Package for Social Sciences (SPSS) and Microsoft Excel 2013 were used. The responses from individual questionnaires were coded and inputted on the SPSS platform and analysed, however where limitations were observed, data was exported to MS Excel for graphical presentation.

4.0 RESEARCH FINDINGS

This chapter presents major findings from this study as outlined in sections 4.1 to 4.3 below.

4.1 Number of registered and unregistered businesses

Registered businesses were 18 and unregistered were giving a total of 27 businesses (Figure 3).

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Figure 3 Registered and unregistered businesses

4.1.1 Registered businesses

From the total number of registered businesses, 6 (33 percent) were in service provision sector, 4 (22 percent) were in construction sector, 3 (17 percent) were in trading sector, 2 (11 percent) were in manufacturing and agriculture sectors respectively and 1 (6 percent) were in mining sector. Service provision sector was ranked first, followed by construction and the least sector was mining (Table 3).

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4.1.2 Unregistered businesses

Of the unregistered businesses, 11 (41 percent) were in agriculture sector, 6 (22 percent) were in construction sector, 4 (15 percent) were in trading sector, 3 (11 percent) were in service provision sector, 2 (7 percent) were engaged in mining sector and 1 (4 percent) manufacturing sector (Table 4).

Table 4 Unregistered businesses

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4.2 Number and types of jobs created

The findings of number and types ofjobs created by micro, small and medium enterprises were 3,368 jobs (Figure 4) and the main types were in agriculture 1,127 (35 percent) and 955 (28 percent) in construction sector (Figures 6 - Figure 10), 405 (12 percent) were in mining sector, 355 (11 percent) were in manufacturing sector (Figure 11), 334 (10 percent) were in service provision sector and 194 (6 percent) were in trading sector (Figure 12).

Out of the jobs created in all sectors, the enterprises were engaged in various business activities as outlined in sections 4.2.1 to 4.2.6.

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Number of jobs created

Figure 4 Number of jobs created by sector for the period 2010 - 2015 Mansa

4.2.1 Agriculture sector

There was a significantly larger number of jobs created in the agriculture sector (1,127 jobs). The main activities that were responsible for job creation in the sector were (Figure 5);

(i) Selling of farm produce.
(ii) Agri-business dealers selling agro products.
(iii) Growing farm produce.
(iv) Livestock.
(v) Fish farming

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Figure 5 Preparing to ferry cassava farm produce to Democratic Republic of Congo from Lake Mweru, Zambia

4.2.2 Construction sector

The second larger number of jobs created were in the construction sector (955 jobs). The main activities in the sector (Figure 6 - Figure 10) were;

(i) Construction of residential houses, schools, toilets at government schools.
(ii) Road construction and paving.
(iii) Block making.
(iv) Bridge construction.
(iv) Weir and dam construction
(v) Construction of health post.

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Figure 6 Ventilate improved pit latrine (VIP) under construction

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Figure 7 Ventilated improved pit latrine at slab level

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Figure 8 SME inspecting construction of ventilated improved pit latrine

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Figure 9 Completed ventilated improved pit latrine

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Figure 10 Water weir across Mansa River constructed by an SME

4.2.3 Mining sector

The third largest number of jobs created were in the mining sector (405 jobs). The main activities in the sector were;

(i) Sand mining
(ii) Magnesium mining
(iii) Quarry
(iv) Stone crushing

4.2.4 Manufacturing sector

The number of jobs created in the manufacturing sector were (353 jobs). The main activities in the sector (Figure 11) were;

(i) Carpentry and other wood based business.
(ii) Light engineering and metal fabrication.
(iii) Food processing such as honey.
(iv) Handicrafts. (v) Processing of semi-precious stones.
(vi) Ceramics.

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Figure 11 Metal fabrication products

4.2.5 Services sector

The number of jobs created in the service sector were (334 jobs). The main activities in the sector were;

(i) Restaurants and food production.
(ii) Passengers and goods transport.
(iii) Hair salons and barbershops.
(iv) Cleaning services.
(v) Catering services.

4.2.6 Trading sector

The number of jobs created in the trading sector were (194 jobs). The main activities in the sector (Figure 12) were;

(i) Sale of agricultural inputs.
(ii) Stationary and printing services.
(iii) Sale of consumables.

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Figure 12 Traders awaiting to disembark from the boat enroute to mansa to sell their fish on Lake Mweru, Luapula Province, Zambia

4.3 Types of jobs

Of the total of number of jobs created, 1,347 (40 percent) were casual jobs, 1,011 (30 percent) were permanent, 503 (15 percent) were contract jobs, 338 (10 percent) were part time and 169 (5 percent) were temporal (Table 6), the details of the number of various job titles are outlined in sections 4.3.1 to 4.3.5.

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4.3.1 Casuals

Of the total of number of 1,347 casual jobs created, 454 (34 percent) were slashing jobs, 405 (30 percent) were planting, 345 (25 percent) were harvesting jobs, and 143 (11 percent) were road maintenance jobs (Figure 13).

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Figure 13 Types of casual jobs

4.3.2 Permanent

Of the total number of 1,011 permanent jobs created, 350 (35 percent) were project jobs, 301 (30 percent) were operation and maintenance, 223 (22 percent) were sale and marketing jobs, 56 (6 percent) were accounts jobs, 45 (4 percent) were engineers and 36 (4 percent) were human resources jobs (Figure 14).

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Figure 14 Types of permanent jobs

4.3.3 Contract

The total number of contract jobs created were 503, out of which 205 (41 percent) were sales jobs, 120 (24 percent) were engineering jobs, 95 (19 percent) were marketing jobs, 55 (11 percent) were purchasing jobs and 28 (6 percent) were human resource jobs (Figure 15).

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Figure 15 Types of contract jobs

4.3.4 Part time

The total number of part time jobs created were 338, out of which 183 (54 percent) were sales jobs, 90 (27 percent) were accounting jobs, 45 (13 percent) were engineering jobs, 20 (6 percent) were purchasing jobs (Figure 16).

Purchasing,

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Figure 16 Types of part time jobs

4.3.5 Temporary

The total number of temporal jobs created were 169, out of which 75 (44 percent) were sales jobs, 43 (25 percent) were accounting jobs, 36 (21 percent) were operations jobs, and 15 (9 percent) were human resources jobs (Figure 17).

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Figure 17 Types of temporary jobs

4.4 Level of skills

Out of a total 3,368 jobs created, 1,984 (59 percent) were unskilled, 787 (23 percent) were semi-skilled and 597 (18 percent) were skilled, detailed in sections 4.4.1 to 4.4.3.

4.4.1 Skilled jobs

The total number of skilled jobs created were 597, out of which 201 (34 percent) were in construction sector, 186 (31 percent) were in agriculture sector, 100 (17 percent) were in manufacturing sector, 60 (10 percent) were service sector, 30 (5 percent) were in trading sector and 3 (3 percent) were in mining sector (Table 7).

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4.4.2 Semi skilled jobs

The total number of skilled jobs created were 787, out of which 394 (50 percent) were in agriculture sector, 152 (19 percent) were in construction sector, 74 (9 percent) were in service sector, 70 (9 percent) were manufacturing sector, 55 (7 percent) were in mining sector and 42 (5 percent) were in trading sector (Table 7).

Table 7 Semi skilled

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4.4.3 Unskilled jobs

The total number of skilled jobs created were 1,984, out of which 602 (30 percent) were in construction sector, 547 (19 percent) were in agriculture sector, 330 (17 percent) were in mining sector, 200 (10 percent) were services sector, 183 (9 percent) were in manufacturing sector and 122 (6 percent) were in trading sector (Table 8).

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4.5 Gender among levels of skill

The majority of employees 1,190 (60 percent) unskilled were male and 794 (40 percent) were female. Among the semi-skilled 417 (53 percent) were male and 370 (47 percent) were female and for the skilled 412 (69 percent) were male and 185 (31 percent) were female (Figure 18).

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Figure 18 Gender by skill Level

CHAPTER FIVE

5.0 DISCUSSION, CONCLUSION AND RECOMMENDATIONS

This chapter discusses key findings of the study and provides a conclusion and recommendations as outlined in sections 5.1 to 5.3 below.

5.1 Discussion

5.1.1 Number of registered and unregistered

Kromberg (2005) and Skinner (2006) carried out studies on the contribution of registered and unregistered micro, small and medium enterprises to gross national product and concluded that that in South Africa the sector contributed 30 percent to gross national product. This was for enterprises that were registered with the government, though the percentage could have been higher if enterprises were considered that have operated but not formally registered because of fear to pay state taxes. Nuwagaba (2015) in his study indicated that the sector in Zambia accounted for over 90 percent of enterprises operated in the informal sector without registration, which had resulted in loss of revenue in taxes.

Majority of businesses 51 percent were engaged in trading type of small and medium scale enterprise, followed by 18 percent and the least was and 4 percent were involved in mining. One of the overarching functions of the Zambia Development Agency is to develop entrepreneurship skills and business culture in the citizens of Zambia. The findings of the research had not departed from this function in that all the surveyed companies, the highest number of respondent were involved in Trading.

A total of 27 (60 percent) were not registered and 18 (40 percent) were registered. The findings of the research departed from one of the functions and benefits of registering with Zambia Development Agency; increase employment in Zambia and promote and facilitate development of micro and small businesses, provision of training technical services and business management skills, tax exemptions in Multi Facility Economic Zones (MFEZ) and exemption from paying tax for rural based small and medium scale enterprises. Small enterprises are not willing to register with the agency because of high registration fees that is, fees are categorised as Chamber of commerce K360 (United States Dollars 36), Zambia Development Agency K320 (United States Dollars 32) for small enterprises and K220 (United States Dollars 22) for micro enterprises and were not willing to pay tax. The findings agreed with the study conducted by Nuwagaba (2015).

With the high unemployment levels in the country, registration of enterprises calls for consented effort and support to reduce the high unemployment levels and therefore needs to be supported.

5.1.2 Number and types of jobs created

Nuwagaba (2015) in his study highlighted that investing in small and medium enterprises created employment opportunities. For instance a total investment of K 140,265,679 (United States Dollars 1,402,656,791) was made in the manufacturing sector for the period of 1993 - 2006 and this generated employment for 73,785 personnel, in agriculture with a total investment of K64,335,422 (United States Dollars 643,354,224) created 78,881 jobs (Figure 9) and the least jobs created were in the consultancy where a total of K94,303 (United States Dollars 943,032). This alludes to the fact that as more investment was directed in the sectors, more jobs were created because of the conducive environment created by the government.

Table 9 Total investment approvals and employment in Zambia for 1993 - 2006

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Source: ZDA, 2007

A total of 1,127 (35 percent) jobs created in agriculture sector, 955 (28 percent) in construction sector, 405 (12 percent) were in mining sector, 355 (11 percent) were in manufacturing sector, 334 (10 percent) were in service provision sector and 194 (6 percent) were in trading sector. Out of 1,347 casual jobs created, 454 (34 percent) were slashing jobs, 405 (30 percent) were planting, 345 (25 percent) were harvesting jobs, and 143 (11 percent) were road maintenance jobs. Out of 1,011 permanent jobs created, 350 (35 percent) were project jobs, 301 (30 percent) were operation and maintenance, 223 (22 percent) were sale and marketing jobs, 56 (6 percent) were accounts jobs, 45 (4 percent) were engineers and 36 (4 percent) were human resources jobs. Of the total number of 503 contract jobs created, 205 (41 percent) were sales jobs, 120 (24 percent) were engineering jobs, 95 (19 percent) were marketing jobs, 55 (11 percent) were purchasing jobs and 28 (6 percent) were human resource jobs. Of the total number of part time jobs created were 338, out of which 183 (54 percent) were sales jobs, 90 (27 percent) were accounting jobs, 45 (13 percent) were engineering jobs, 20 (6 percent) were purchasing jobs and of the total number of temporal jobs created were 169, out of which 75 (44 percent) were sales jobs, 43 (25 percent) were accounting jobs, 36 (21 percent) were operations jobs, and 15 (9 percent) were human resources jobs.

The findings showed that a large portion of casual staff were in agriculture, mining and construction sectors because of the type of work involved which is labour intensive. Trading had the lowest number of jobs created because trading had very lean organisation structures to support the functions of the business. The results agreed with Nuwagaba (2015) and I conclude that the agriculture sector is the highest and most active in job creation in the district.

The results obtained showed that the government strategies and interventions in creating a conducive environment in the sector in enhancing job creation and reduce unemployment levels were yielding results. These interventions include;

(i) establishment of the Patent and Company Registration Agency (PACRA) in all provincial centres,
(ii) establishment of Cooperatives use as vehicle for accessing loans,
(iii) establishment of the Zambia Chamber of Small and Medium Size Business Association (ZCSMBA) regional office,
(iv) introduction of 20 percent bidding stake for local contractors,
(v) creation of new districts that supports growth of Micro, Small and Medium Enterprises,
(vi) improvement of road network,
(vii) establishment of micro-finance banks and other financial lending institutions with specific micro, small and medium enterprise packages,
(viii) establishment of Social Cash Transfer Programme (SCT) through the Ministry of Community Development and Social Welfare (MCDSW), which was aimed at reducing extreme poverty and vulnerability benefiting eleven (11) districts in Luapula,
(ix) establishment of entrepreneurs’ financial centre in provincial centres.

5.1.3 Level of skills

Ekpenyong (2014) in his study on women entrepreneurship indicated that more women entrepreneurs were in agriculture business. This was attributed to the fact that agriculture plays a pivotal role in family support and employment generation. It required little or no capital to start agribusiness for instance poultry farms and vegetable farms. His findings were supported by the works of other researches; Adeyeni (2007) who indicated that women generally were hard working and contributed significantly to sustainable national development. Nuwagaba (2015) indicated that most micro, small and medium enterprises were characterised by use of low level technology and were oriented towards local and less affluent market segments. This was attributed to low skills levels within the various sub sectors.

Out of a total 3,368 jobs created, 1,984 (59 percent) were unskilled, 787 (23 percent) were semi-skilled and 597 (18 percent) were skilled.

The total number of skilled jobs created were 597, out of which 201 (34 percent) were in construction sector, 186 (31 percent) were in agriculture sector, 100 (17 percent) were in manufacturing sector, 60 (10 percent) were service sector, 30 (5 percent) were in trading sector and 3 (3 percent) were in mining sector.

Out of 787 skilled jobs created, 394 (50 percent) were in agriculture sector, 152 (19 percent) were in construction sector, 74 (9 percent) were in service sector, 70 (9 percent) were manufacturing sector, 55 (7 percent) were in mining sector and 42 (5 percent) were in trading sector. Out of 1,984 of skilled jobs created 602 (30 percent) were in construction sector, 547 (19 percent) were in agriculture sector, 330 (17 percent) were in mining sector, 200 (10 percent) were services sector, 183 (9 percent) were in manufacturing sector and 122 (6 percent) were in trading sector.

One of the functions of the Zambia Development Agency is to develop entrepreneurship skills and business culture in the citizens of Zambia and one of the benefits of registration with the agency is to receive training, technical services and business management skills and the third key objective of the study was to establish levels of skills among employees. The findings of the survey showed that the agriculture and construction industries had the highest number of unskilled staff due to labour intensive of the sectors.

A total of 1,190 (60 percent) unskilled were male and 794 (40 percent) were female. Among the semi-skilled 417 (53 percent) were male and 370 (47 percent) were female and for the skilled 412 (69 percent) were male and 185 (31 percent) were female. Female were restricted to certain jobs in the sectors that required a skill. The results agreed with the earlier studies by Nuwagaba (2015), Ekpenyong (2014) and Adeyeni (2007).

5.2 Conclusion

Based on the results reported under chapter four, I can conclude that a large number 18 (40 percent) were registered, out of which 6 (33 percent) were in service provision sector, 4 (22 percent) were in construction sector, 3 (17 percent) were in trading sector, 2 (11 percent) were in manufacturing and agriculture sectors respectively and 1 (6 percent) were in mining sector and 27 (60 percent) were not registered, out of which 11 (41 percent) were in agriculture sector, 6 (22 percent) were in construction sector, 4 (15 percent) were in trading sector, 3 (11 percent) were in service provision sector, 2 (7 percent) were engaged in mining sector and 1 (4 percent) manufacturing sector. A total of 3,368 jobs were created out of which the largest number of 1,127 jobs were created in the agriculture sector and the least 194 were in trading. Majority of the jobs created 60 percent were unskilled and a partly 17 percent were skilled. A total of 2,021 (60 percent) of all skills categories were male and 1,347 were female due to skill restrictions of female on certain jobs. The government had instituted interventions in the sector to enhance job creation and reduce unemployment levels. This study has established that micro, small and medium scale enterprises created 3,368 jobs which was 76 percent of all jobs in Mansa.

5.3 Recommendations

Following the discussions and findings of the research, below are the recommendations:

i) Introduction of MSMEs registration with statutory bodies through free registration with patents and companies registration agency (PACRA), tax holidays, tax exemptions for MSMEs employing at least 3-5 employees. To increase the number of registered businesses in the district, government should put in place a deliberate policy to register businesses for free or imposing a low and afford fee for registration to encourage small businesses to be registered with statutory bodies as well as implement the tax exemptions and holidays to small businesses as a way of encouraging them to grow their businesses. Once the tax base has been widened the contribution of SMEs to national economy would be significant.
ii) Increase contract stake of small scale contractors exploited by main contractors, for instance in the agriculture sector government to create a level playing field for the sector to thrive that is participation in large irrigation schemes and road contracts. The levels of exploitation is very high coupled with corruption by main contractors, who usually buyout smaller subcontractors. The scenario is detrimental to skills development of the local SMEs that desperately requires these skills to improve the capabilities of their human capital.
iii) Institute an extensive study survey on the general impact of MSMEs and its contribution to job creation and the economy in general.
iv) Provision of sustainable reliable power supply to the district, to enhance operations of the manufacturing sector. Manufacturing and engineering sectors are adversely affected by unstable power supply characterised of low voltage for most parts of the day. Small and medium enterprises which it difficult to operate their businesses and maintain or increase the staffing levels.
v) Training of business owners and staff. The ever increasing machinery of high technology on the market is a challenge to small business enterprises who are usually failing to couple up with new computer packages and equipment which required specialised skills which are lacking in most of the businesses, hence the need for training which will bring the current skills up to speed with the latest technology.

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