Cries of the SMEs as economy tightens
Mbongeni Mguni | Tuesday November 4, 2025 13:59
On Wednesday, Absa Bank Botswana managing director, Keabetswe Pheko-Moshagane, reminded a gathering in Gaborone about the stark reality facing many Small to Medium Enterprises, especially those in their nascent stages.
According to the prominent banker, the failure rate amongst SMEs in the country remains at over 80%, with 60% failing within the first 18 months.
The figures underline the difficult many SMEs face in not only starting up, but remaining afloat, a situation only worsened by the fiscal challenges afflicting their biggest customer, government.
SMEs are not only dependent on government in terms of funding, but more importantly in terms of procurement, with some estimates suggesting that the various ministries, departments and quasi-government entities account for up to 85% of SMEs revenues.
The squeeze on government’s revenues thus is a major knock on SMEs, in a year in which other opportunities in the economy have been restrained due to, again, both government spending cutbacks, and the associated broader economic contraction.
And yet, SMEs are key economic sector, in terms of employment creation, innovation as well as their impact on wider economic challenges such as both intergenerational and rural poverty, inequality, rampant rural-urban migration and others.
Earlier this year, reports emerged that government was battling to settle invoices to its vendors and suppliers, running up large arrears positions that threatened many SMEs, forcing many into costly credit arrangements, operational cutbacks or closures.
Buca Matenge, a seasoned entrepreneur with 25 years’ experience in the SME sector, knows the strain small businesses are under all too well.
“As a minister once said, sepache se makgwagwa, but for SMEs, ga se makgwakgwa, ga seyo,” he told the inaugural Bank Gaborone Insights and Impact roundtable on Tuesday. “Everyone who spends has tightened their belts affecting your caterers, flowers, suppliers of water, basics that you used to consume, from corporates to government. “This means then there's no business for SMEs, which then leads to cash flow crisis, and they cannot be sustainable on a daily basis. “The only people that are enjoying right now are bo machonisa because then we now have to run to them and borrow P10,000 that’s then required as P20,000 and before you know it, it’s debt after debt. “And so, you borrow from family, try to sustain, but even for them, it’s tough.”
The government’s cash flow challenges have only worsened the situation.
“Where it used to take 30 days, sometimes 60 days to pay these services to the SMEs, now it takes longer or sometimes never. “I see a lot of businesses collapsing, and I see a lot of ‘in the matter between’, and it's simply because many SMEs are getting into challenges that we can't solve,” he said.
Since the 1970s, government has rolled out parastatals, programmes, policies and billions of Pula in supporting SMEs’ establishment and growth.
Other major economic players as well, such as the mines, established citizen procurement programmes designed to support SMEs, while numerous banks availed funding linked to these supplier development programmes.
The challenge, experts agree, is that over the decades, government has maintained its position as the primary economic actor, the biggest procurer across its various arms. From accommodation by travelling civil servants in remote areas, to the water bottles supplied during conferences, government spending still anchors SME activity and survival.
The pivot towards a private led-economy, long demanded by numerous studies, has been delayed by the comforts provided by steady mineral revenues, particularly diamonds, and world-beating economic growth over the decades.
Matenge has a response to the opinion that SMEs grew over-reliant on government over the decades and failed to stand up on their own.
“Who hasn't been relying on government? “From the private sector, we all have been relying on government, we all have been relying on diamonds. “So it should not come as a surprise that SMEs have. “We should have been, as a culture, seeing what's going to come, and practically started changing to what was ahead. “And this is where we are now.”
The new National Development Plan 12 (NDP) represents the strongest pivot to a private sector-led economy, but between now and when its fruits begin to bear fruit, the 80% failure rate will haunt the minds of many entrepreneurs, as government remains at the centre of the stage.
There are, however, high hopes for the new NDP, which has been seeded with numerous private sector project ideas and opens up space for private capital in the public infrastructure space. The manufacturing sector, in particular, receives priority attention in the plan, in recognition of its potential as a citizen-driven economic game-changer with ramifications for import substitution, employment creation and diversification.
On Wednesday, the Botswana Exporters and Manufacturers Association (BEMA) welcomed the NDP12, noting that it aligned “strongly with our long-standing advocacy for an export-led and manufacturing-driven economy”.
The 30-year old association has more than 2,000 members, of which about 60% are classified as SMEs.
BEMA said while the new plan was a commendable vision for transforming Botswana’s manufacturing landscape “words alone are not enough”.
“The sector requires urgent, practical and coordinated action to prevent further collapse and to realise the ambitions set out in NDP 12,” the Association said. “BEMA members have voiced concerns that despite recurrent strategies and policy statements in the past National Development Plans, implementation remains weak. “There is a growing sentiment that government interventions tend to favour foreign investors while local manufacturers struggle with access to finance, markets and targeted support. “This imbalance undermines the development of a sustainable and competitive domestic manufacturing base.”
The Association said there is need for immediate activation of practical measures to rescue struggling local manufacturers, targeted funding mechanisms and fiscal incentives for domestic industries as well as strong collaboration between government and industry practitioners to ensure policies are informed by ground realities.
“The future of Botswana’s industrialisation depends on empowering local producers and building a manufacturing ecosystem that supports innovation, competitiveness and export growth. “BEMA stands ready to partner with the Ministry of Trade and Entrepreneurship in turning these plans into tangible outcomes.”
For the country’s SMEs, including those in the manufacturing sector, much is riding on the NDP12, as the birth-pangs of transformation afflict budget revenues and every corner of the economy.