Can small, medium and micro enterprises survive in public procurement?. Lessons from Botswana
| Pages | 90-110 |
| Published date | 04 June 2018 |
| DOI | https://doi.org/10.1108/JOPP-06-2018-006 |
| Date | 04 June 2018 |
| Author | Thuso Mphela,John P.W. Shunda |
| Subject Matter | Public policy & environmental management,Politics,Public adminstration & management,Government,Economics,Public finance/economics,Taxation/public revenue |
Can small, medium and micro
enterprises survive in public
procurement?
Lessons from Botswana
Thuso Mphela and John P.W. Shunda
University of Botswana, Gaborone, Botswana
Abstract
Purpose –The paper aims to investigate challenges facing small-, medium- and micro-sized enterprises
(SMMEs)in public procurementin Botswana from the view of a buyer.
Design/methodology/approach –The researchers conducted consultative workshops, succeeded by
focus groups and follow-up telephone interviews, to collect and validate data. A total of 75 procurement
officersfrom central government ministries and local governments participatedin the study.
Findings –Results indicate thatSMMEs find it difficult to deal with public procurement because of lack of
capacity, unfairbias against SMMEs, inefficient government payment systems,unfair competition from their
larger and established counterparts and centralized public procurement. The paper recommends a
comprehensive integrated framework, improvement of SMME capacity and adopting policies to ensure
greater publicprocurement market access.
Keywords Public procurement
Paper type Research paper
Introduction
Contributions by small- and medium-sized enterprises (SMEs), known as small-, medium-
and micro-sized enterprises (SMMEs) in Botswana, to gross domestic product (GDP) and
employment creation are recognized across the globe. In Botswana, the SMME sector
contributes 75 per cent of formal sector employment (BIDPA, 2007) versus just above 3 per
cent created by the mining sector(Siphambe, 2007). While the mining sector of the economy
continues to be the largest contributor to Botswana GDP, representing a proportion of 20.3
per cent (2012) a 10 per cent drop from 30.3 per cent in 2011, non-mining sectors including
construction and financial and businessservices sectors grew slightly over the same period
(Bank of Botswana Annual Report, 2012,67). As a demonstration of commitment to SMME
development, the Government of Botswana established the Citizen Entrepreneurial
Development Agency (CEDA) in 2001 necessitated by the collapse of the Financial
Assistance Policy, which gave grants to businesses to manufacture in Botswana. The
government through the NationalDevelopment Plan 9 (NDP 9) (2003-2004) had as one of the
major policy thrusts a “Strategy for Development”comprising economic diversification,
employment creation and poverty reduction. From this, the government institutionalized
local enterprise agency (LEA) in 2004 aimed at assisting the SMMEs in the form of
promoting entrepreneurial culture, identification of business opportunities, and promoting
local and international linkages between SMMEs, governments, large businesses, etc. In
addition, a policy on SMME which was enacted by parliamentin 1998 was reviewed in 2003
to achieve the following objectives:
JOPP
18,2
90
Journalof Public Procurement
Vol.18 No. 2, 2018
pp. 90-110
© Emerald Publishing Limited
1535-0118
DOI 10.1108/JOPP-06-2018-006
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1535-0118.htm
to foster citizen entrepreneurship and empowerment;
to promote SMME exports;
to achieve economic diversification;
to encourage the development of a competitive and sustainable SMME community;
to promote the development of vertical and horizontal linkages between SMMEs
and primary industries in agriculture, mining and tourism; and
to promote efficiency in the delivery of service (Policy on Small Medium and Micro
Enterprises in Botswana, 2003).
Kattel and Lember (2010) argue thatpublic procurement in itself is inherently inefficientand
consequently suffers from a challenge of under-delivery. According to detractors of public
procurement, discriminatory procurement policies of Governments lead to market failure
due to inefficient distribution of resources andloss of benefits of open competition. In their
view, this has left governments in developing countries wanting to advance the
developmental agenda of publicprocurement in a precarious situation in justifying the need
to take this route. In Botswana, the government introducedthe Local Procurement Program
(LPP) in 1997 on a three-year trial. Throughthis program, the government would reserve 30
per cent of all public purchases for locallybased manufacturers. This initiative was further
reviewed in the “Use of Locally Manufactured Goods and Services”as a presidential
directive in 2004 (World Trade Organisation,2018, p. 90). The President of Botswana, in his
State of the Nation address, posited that “If the pricing is competitive central government,
local authorities and parastatals will be instructed to procure from such companies with
immediate effect”(Khama, 2009, p. 6). Many developing countries tend to use protectionist
policies or discriminatory procurement that would normally bar open competitionand give
preference to local suppliers arguing for protection of infant industries (Kattel and Lember,
2010). In Botswana, where governmentis a major consumer of goods and services (USA and
Foreign Commercial Service and USA Department of State, 2012), the relevance of public
procurement to SMMEdevelopment in the country cannot be readily overstated.
Further, in 2010, the Government of Botswana approved a National Economic
Diversification Drive, a strategy aimedat diversifying the economy. One of the key drivers
of this strategy is public procurement, through which a proportion of government
expenditure will be reserved for local products. With an estimated public procurement
expenditure of 9-13 per cent (1997 figures) of GDP in Middle East and Africa(Wittig, 1999),
Botswana has a significant chance to make an impact on economic diversification through
this reservation policy.A study on the impact of policy initiatives on SMME motivation and
growth in Botswana found that SMMEs find general tendering and preferential purchasing
policies unfavorable (Muranda et al., 2011). Further analysis by the same authors revealed
that the size of a business played a role in influencing the perception of the firm on
preferential purchasingpolicy, i.e. the smaller the firm, the more unfavorablethe preferential
purchasing policy was perceived.However, the study does not establish the reasons for this.
From this conclusion, thereis evidence that these policies did not have the desired impactof
increasing participation of SMMEs in public procurement. This paperdiscusses challenges
that confront SMMEs in public procurement, hinderingpromotion of entrepreneurship and
sustainable development in Botswana. To date, a full-fledged study on the role of public
procurement in SMME development has never been undertaken in Botswana, and this
research aims to fill thatgap.
As discussed earlier, the relevance of SMMEs to economies cannot be overemphasized.
However, the publicprocurement landscape is not always friendly to SMMEsdespite efforts
Public
procurement:
lessons from
Botswana
91
To continue reading
Request your trial