Monopolies urged to handhold small businesses
Monkagedi Gaothobogwe | Friday April 12, 2019 13:42
Speaking at a Competition Authority (CA) symposium themed An integrated business and competition at Avani on Wednesday, the academic who was the guest speaker, said if the nation wanted broad-based development that touches everyone’s lives in Botswana, “then we must do everything possible to support Small Micro & Medium Enterprises (SMMEs) and start-ups. More so now that we face challenges of unemployment and the working poor”.
Prof Totolo observed that while established businesses with subsidiaries may be adding value to their owners, such monopolistic tendencies currently presented additional challenge for small businesses and start-ups when it came to competition.
“These big businesses source majority of inputs for products they produce locally, from neighbouring countries such as South Africa where they are based. Yet, this is the same place where our SMMEs source their inputs as well. Because the integrated firm owns its value chain, it can procure the inputs at a lower price compared to the SMME. This makes the final goods from the small local business more expensive than the imported goods from the integrated firm. Consequently, the SMMEs are outcompeted in the market. When this happens the business closes and we have less employment, which translates to lower incomes and reduction in social welfare,” the BIUST Vice chancellor observed further.
Prof Totolo further challenged the CA to look critically at the type of business model it wants to drive to ensure that there is healthy competition in the market place across all sectors. The BIUST academic also suggested that big businesses can be required to deliberately address the issue of quality of SMMES products and services. “We need to do more to link our SMMEs to markets by encouraging, or even making it mandatory for big business to procure a certain percentage of what is on their floor space from SMMEs in the same line of business. This could be linked to big businesses’ corporate social responsibility mandate. If these two are linked, then big business will as a start be compelled to source a portion of inputs and products from SMMEs and ensure that some skills and in some instances technology transfer takes place,” Prof Totolo opined.
The BIUST leader further suggested that such a step would have to be accompanied with an obligation on the part of the big business to provide adequate training for the small business owners on how to get the product or service to the standard and level of quality of the big business. “In this way, a win-win solution is created. The size of the cake is increased, and each participant in the value chain gets a bigger share.”
Government enterprises should privatise certain functions
On government-owned enterprises, Prof Totolo said while the running of water and electricity reticulation has ensured that Batswana continued to get the essential services at affordable prices, a lot of inefficiencies such as production, service delivery and revenue collection continue to be incurred due to monopoly thereby impacting negatively on the business and reducing social welfare. “There is need, to carefully look at the service value chain with a view to introduce competition, raise efficiency and productivity. Perhaps, it would be wise to have different actors focused on production, distribution and revenue collection since doing so would allow for better focus and specialisation of resources directed at a specific mandate which would increase efficiency and productivity”.
Prof Totolo also said time has come for the monopoly of the Botswana Meat Commission (BMC) to be dismantled to allow for more players in the beef industry and creation of jobs in the sector. The BIUST boss said while the BMC monopoly no doubt served Batswana well at independence, today Botswana have players who can adhere to export requirements.
“Dismantling the monopoly and allowing for competition will increase efficiency and productivity and enable technology transfer and skills acquisition so that more people are able to participate in external markets. Successful entities will employ more people. Consumers would benefit from consuming better-quality meat at lower price,” he said.