By Sunil Sathebajee, Head of Business and SME Banking, Bank One
The UN General Assembly has declared June 27 as the International SME Day to recognise the importance and immense contribution of SMEs to global economies. As we celebrate this special day, Bank One would like to place on record and recognise the vital role SMEs play in local and global economies. Bank One understands and appreciates the hardships entrepreneurs go through to make a success of their enterprises.
Small and Nimble: Powering entire economies and employment
In Mauritius, as in the rest of the world, Small and Medium Enterprises (SMEs) act as a crucial engine of the national economy and employment. With their innovative mindsets, agile work methodology and competitive operations, they bring to the table unique ideas, breakthrough products, and improved processes, thus powering economic growth and employment. No wonder then that the Organisation for Economic Cooperation and Development lauds entrepreneurship as the engine that lies at the heart of economic growth.
Indeed, SMEs account for the majority of businesses worldwide and are important contributors to job creation and global economic development. The World Bank estimates that SMEs represent about 90% of businesses and more than 50% of employment worldwide. In Mauritius, SMEs represented 99% of all enterprises, 50% of employment, 35.7% of Gross Value Added and around 12% of total exports, according to a 2019 handbook by the Ministry of Industrial Development, SMEs and Cooperatives.
Resilience in the face of constant crises
With SMEs shoring up Mauritius across economic and employment paradigms, it is unfortunate indeed that the last three years have sorely tested the entrepreneurial spirit in the island economy. With COVID-19 raging for two long years and then being closely followed by the invasion of Ukraine by Russia, the period since the start of 2020 has been most trying for the SME sector.
In particular, the pandemic impacted global trade, which dropped significantly following the lockdown and subsequent prohibitive sanitary measures imposed by different countries. The situation proved to be more alarming for SMEs as they were too resource constrained to adapt to a changing context. A survey conducted by the International Trade Centre in 2020 on 4,467 SMEs in 132 countries revealed that 55% of the respondents were strongly affected by the global pandemic and one-fifth of them were on the verge of closing down their operations permanently in the near future. In Mauritius, in addition to being economically affected by the lockdown, SMEs faced problems in raw material imports due to the international supply chain disruption caused by COVID-19.
For businesses that have been hit hard by the pandemic and are looking to make a strong comeback, now is the time to uncover and seize these opportunities as the pandemic has upended traditional businesses and created new norms.
Despite all the challenges, difficulties and crises plaguing them, SMEs have been most resilient and agile in the face of these constant tremors that have shaken their very foundation. However, while SMEs have succeeded in weathering the storms so far, trusting to their resilience alone is not enough. Here in Mauritius, the Government acknowledges the role that SMEs play in furthering economic growth, employment and exports, and has consciously set up a conducive framework for their progress in these tough times.
Government laying the groundwork for supporting SMEs
Indeed, over the last two years, the Government has provided its full support to SMEs through the Wage Assistance Scheme and financing of additional remuneration. For the way forward, the recently read Mauritius Budget 2022-23 comes as welcome respite for the SME sector, with a slew of supportive measures for entrepreneurs. One of the most lauded announcements of Budget 2022-23 is the proposed amendment to the definition of SMEs.
Noting that SMEs are the driving force of growth and employment to the island, the Finance Minister unveiled an enlarged definition of SMEs towards increasing the assistance provided to them. Thus, the turnover threshold for micro enterprises has been increased from Rs 2 M to Rs 10 M, that for small enterprises from Rs 2 M – Rs 10 M to Rs 10 M – Rs 30 M and for medium enterprises from Rs 10 M – Rs 50 M to Rs 30 M – Rs 100 M. In addition, a new category of mid-market enterprises with turnover from Rs 100 M to Rs 250 M has been included under the SME Act. This enlarged definition will effectively enable some 142,000 enterprises to benefit from improved access to government support programmes and financing.
In addition, Budget 2022-23 also announced the intention of the Mauritius Investment Corporation to set up a Venture Capital Fund of Rs 5 B aimed at SMEs and mid-market enterprises.
Innovation set to provide the impetus from good to great
Finally, to not just survive but thrive and succeed to the next level, SMEs need to innovate and lay the groundwork to face potential changes and disruptions that will undoubtedly follow in the not-so-distant future. SMEs should always remember that challenges bring opportunities, and the biggest window of opportunity that COVID-19 brought in its wake is increasing digitalisation. SMEs must innovate and develop new ways of doing things. Indeed, new technologies have been proven to be important assets in helping countries to recover from disruptions caused by the pandemic.
Now is the time to truly realise this sector’s potential for taking the economy from good to great, with SMEs powering the digitisation of the economy with all the agility, innovation and resilience at their command. At Bank One, we would like to stress that we are here to help SMEs start, manage and grow their enterprise. So let us help you take your business from good to great.
