MSME Development Policy

REPUBLIC OF ZAMBIA
MINISTRY OF COMMERCE, TRADE AND

INDUSTRY
The
Micro, Small and Medium Enterprise Development
Policy
(FINAL REVISED DRAFT)
NOVEMBER 2008
TABLE OF CONTENTS
LIST OF ACRONYMS ...................................................................................................... 3

FOREWORD ...................................................................................................................... 4
ACKNOWLEDGEMENTS ................................................................................................ 5
WORKING DEFINITIONS………………………… ……………………………….6
1.0 Historical Background of the MSMEs Sector in Zambia ....................................... 6
1.2 Situation Analysis ................................................................................................. 11
2.0 Vision and Rationale ............................................................................................. 13
2.1 Rationale ................................................................................................................. 13
2.2 Policy Goal............................................................................................................. 13
2.3 Guiding Principles ................................................................................................. 13
2.4 Policy objectives .................................................................................................... 14
2.5 Definition of Micro small and Medium Enterprises (MSMEs) .............................. 14
3.0 Policy Focus Areas and Strategies ........................................................................ 17
3.1 Focus Areas ............................................................................................................. 17
3.2 Policy Statements and Strategies ............................................................................ 18
4.0 Implementation Framework .................................................................................. 30
4.1 Main Actors, their roles and responsibilities .......................................................... 30
4.2 Inter-ministerial Cooperation and Collaboration .................................................... 32
4.3 Time Frame for Implementation ............................................................................. 32
5.0 Legal Frame work ................................................................................................. 33
6.0 Resource Mobilization .......................................................................................... 34
7.0 Monitoring and Evaluation ......................................................................................... 35
Annexes............................................................................................................................. 36
Annex i: Themetic issues ............................................................................................. 36
Annex ii: List of people interviewed ........................................................................... 38
Annex iii: References .................................................................................................... 39
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Micro, Small and Medium Enterprise Development Policy

LIST OF ACRONYMS
BAs Business Association
COMET Copper Mining Enterprises Trust Limited
CPI Consumer Price Index
CTI Commerce, Trade and Industry
CSO Central Statistical Office
DBA District Business Association
EBZ Export Board of Zambia
FDI Foreign Direct Investment
FNDP Fifth National Development Plan
GDP Domestic Gross Product
GIDD Gender in Development Division
GRZ Government of the Republic of Zambia
HIPC Highly Indebted Poor Countries
HIV / AIDS Human Immunodeficiency Virus Acquired Immunodeficiency Syndrome
IC Incubators
ICs Ignition Development Centres
ILO International Labour Organization
IPR Intellectual Capacity Rights
MCTI Ministry of Commerce and Trade Industry
MGDs Millennium Development Goals
MSBCs Micro Sector Business Centres
MSME Micro Small and Medium Enterprise
NAPSA National Pensions Scheme Authority
NELMP National Employment and Labour Market Policy
NCSR National Council for Scientific Research
NCMSMEs National Council for Micro, Small and Medium Enterprise
NISIR National Institute of Scientific and Industrial Research
NGO Non Governmental Organization
NTBC National Technology Business Centre
PACRO Patents and Companies Registration Office
PRSP Poverty Reduction Strategy Paper
SEDB Small Enterprises Development Board
SED ACT Small Enterprises Development Act
SIDO Small Industries Development Organization
SMEs Small and Medium Enterprises
SSIAZ Small Scale Industries Association of Zambia
TEVETA Technical Vocational and Training
TDAU Technology Development and Advisory Unit
TICs Technology Innovation Centres
UNIDO United Nations Industrial Development Organization
VIS Village Industry Service
WEDAZ Woman Entrepreneurship Development Association of Zambia
ZABS Zambia Bureau of Standards
ZACSMBA Zambia Chamber of Small and Medium Business Association
ZDA Zambia Development Agency
ZEPZA Zambia Export Processing Zambia Authority
ZNCB Zambia National Commercial Bank
ZRA Zambia Revenue Authority
ZVCF Zambia Venture Capital Fund
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FOREWORD
Micro, Small and Medium Enterprises cut across all sectors of Zambia’s economy and provide
one of the most prolific sources of employment and wealth creation and are a breeding ground for
industries.
The development of Micro, Small, and Medium Enterprises (MSMEs) is viewed as one of the
sustainable ways of reducing the levels of poverty and improving the quality of life of households
through wealth and job creation. The contribution of MSMEs to economic growth and
sustainable development is now widely acknowledged. MSMEs are believed to deepen the
manufacturing sector, foster competitiveness and help in achieving a more equitable distribution
of the benefits of economic growth, thereby help in alleviating some of the problems associated
with uneven income distribution. MSMEs achieve this by generating more employment for
limited capital investment, acting as a ‘seedbed’ for the development of entrepreneurial talent,
playing and supplying the lower income groups with inexpensive consumer goods and services.
MSME also act as a buffer in times of economic recession.
Zambia recognised the need to diversify her economy and reduce over-dependency on mining
exports. The preferred strategy was production of non traditional export products and creation of
Micro, Small and Medium Enterprises. This approach encouraged firms to produce for the
domestic market, however, the capacity to grow and to export was still very limited.
Through an Act of Parliament, Government established the Small Industries Development

Organisation (SIDO) to promote the Micro, Small and Medium Enterprise sector. SIDO was
established to cater for financing needs of small-scale companies as defined in the SID Act. In
1996, SIDO was transformed into Small Enterprises Development Board (SEDB) through the
1996 Small Enterprise Development (SED) Act and, in 2006 it was amalgamated into the Zambia
Development Agency (ZDA Act No. 11 of 2006) as an MSE Division.
However, in the absence of an MSME Policy, development of the sector and coordination of
development interventions has remained a major challenge in this country. It is anticipated that
the challenges facing the MSME sector shall be resolved through strengthening of the capacity of
MSE Division of the Zambia Development Agency, establishment of an independent National
Council for Micro, Small and Medium Enterprise Development and the implementation of the
provisions of the MSME Policy.
This Policy provides for the active support and participation of all key stakeholders in MSME
development. The hallmark of this Policy is partnership and an enabling environment.
Felix Mutati, M.P.

Minister
MINISTRY OF COMMERCE, TRADE AND INDUSTRY
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ACKNOWLEDGEMENTS
The Micro, Small and Medium Enterprise Development Policy is a Product of extensive
research, and consultations with various stakeholders, private sector, government
ministries, donors and civil society. The Policy development process is indebted to the
following organisations and individuals for their valued inputs.
The European Union (EU) that funded the initial process and finalization of the policy
document and the International Labour Organization (ILO) for their technical advisory
role.
The technical input provided by various institutions, including Zambia Chamber of Small
and Medium Business Associations (ZCMBA) and the University of Zambia is also
highly appreciated.
The role played by Government Sector Ministries and other stakeholders for their
comments on the various drafts of the Policy is applauded. These comments were highly
valuable and expanded the depth and scope of the Policy document.
The role played by Dr. Mwene Mwinga of Kane Consult in conducting the research,
developing the draft Policy document is also acknowledged.
Lastly, the unwavering commitment of officials from of the Ministry of Commerce,

Trade, and Industry in ensuring that the policy development process comes to fruition is
highly commended.
Davidson M. Chilipamushi
PERMANENT SECRETARY
MINISTRY OF COMMERCE, TRADE AND INDUSTRY
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WORKING DEFINITIONS
Administrative Barriers
Refers to the legislation that affects business entry and licensing, the tax and customs
administration and company registration.
Business Development Services

Facilitating the small enterprises’ access to quality business development services and
business information, at an affordable price
Proudly Zambian
Refers to ‘Buy Local Campaign’ aimed at promoting the consumption of quality
locally produced goods and services for wealth creation and employment generation.
Citizens Economic Empowerment

Refers to Government initiative aimed at promoting the empowerment of targeted
citizens and companies in order to increase their meaningful participation in the
economy and reduce income inequalities.
Credit Reference Bureau

Credit Bureaus Reference agencies act as central repositories for personal data. They
compile and maintain credit reports for anyone who has a credit history.
Enabling Environment
Enabling environment is the expression that encompasses government policies that
focus on creating and maintaining an overall macroeconomic environment that brings
together suppliers and consumers in an inter-firm co-operation manner.
Entrepreneurial Culture
Refers to the practice of starting new organizations or revitalizing mature
organizations, particularly new businesses generally in response to identified
opportunities.
Informal Sector
Refers to economic activity that is neither taxed nor monitored by the government
and is not included in the government's Gross National Product (GNP) as opposed to
a formal economy.
Legal and Regulatory Framework

Law and legislation that governs the operations of a business.
Microfinance
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Microfinance typically refers to micro credit, savings, insurance, money transfers, and
other financial products targeted at poor and low-income people.
Micro Small Business Centre

Refers to open sheds built in strategic locations in various parts of the urban centers
with proper facilities (water, electricity, toilets). Each small business is given an
appropriate space to do their business.
Millennium Development Goals

The Millennium Development Goals (MDGs) are eight goals to be achieved by 2015
that respond to the world's main development challenges.
Multi Facility Economic Zones

These are specific geographic areas or premises with the highest quality of physical
and social infrastructure that attract investments in manufacturing and acts as engine
for economic growth, wealth and job creation and increase foreign exchange
earnings.
Poverty
Poverty is deprivation of access to those things which make a life of dignity possible,
including not only food, shelter and safe drinking water, but also such as 'intangibles'
as the opportunity to learn, to engage in meaningful employment
Poverty Reduction Strategy Paper (PRSP)

A poverty reduction strategy paper describes the macroeconomic, structural, and
social policies and programmes that a country will pursue over a period of time.
Private Sector Development Reform Programme (PSDRP)

The PSD Reform Programme is Government Reform Programme aimed at having the
foundation for faster, sustained and private sector led economic growth by
implementing a comprehensive PSD Reform Action Plan for enhancing the business
and investment climate and restore investor confidence.
Small Aggregate Initiative

Refers to the forming of joint ventures among small industrialists (existing) wishing
to expand but hindered by the same constraints such as lack of funds/skilled
personnel.
Triangle of Hope Initiative

Refers to the initiative by the Government of the Republic of Zambia with the support
of the Japanese Government (JICA) aimed at accelerating economic growth and
development in Zambia’s key economic sectors including trade, tourism, health and
manufacturing, among others.
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1.0 Historical Background of the MSMEs Sector in Zambia
It is an internationally recognised fact that Micro Small and Medium Enterprises
(MSMEs) play an important role in the economic development of many countries. The
aggregate contribution of MSMEs to national development cannot be over looked.
According to UNDP (2004), MSME have the highest capital: employment ratio and are a
source of income for a broader layer of the population. The development of MSMEs is
viewed as one sustainable way of reducing the levels of poverty and improving the
quality of life of households through wealth and job creation. The contribution of
MSMEs to employment, growth, and sustainable development is a widely acknowledged
fact.
MSMEs are believed to deepen the manufacturing sector, foster competitiveness and
help in achieving a more equitable distribution of the benefits of economic growth
thereby helping in alleviating problems associated with uneven income distribution.
MSMEs achieve this by generating more employment for limited capital investment,
acting as ‘seed bed’ for the development of entrepreneurial talent, playing an important
role of training citizens to run enterprise, supplying the lower income groups with
affordable consumer goods and services. MSMEs also act as buffers in times of
economic recession.
International experience has shown that MSME are becoming major contributors to
economic growth. In India, MSMEs are said to contribute 70% towards Gross Domestic
Product (GDP) and to account for over 90% of all industrial units. In Central Asia,
Kyrgyzstan, there are 36 MSMEs for every 1000 citizens contributing 44% of GDP.
According to a 1996 Baseline Survey on micro and small enterprises in Zambia, the
sector consists of approximately 97% of all enterprises in the country and employ 18% of
the labour force of whom 47% are women (Parker, 1996).
As early as 1981, the Zambian government recognised the importance of the MSME
sector and its contribution to economic development. At the same time, the government
recognised the challenges that the sector was facing and through the Small Industries
Development (SID) Act of 1981 made an attempt to enhance the effectiveness of the
sector’s contribution to the national economy by establishing the Small Enteprise
Development Organisation (SIDO). In support of the SID Act, provisions were made the
Fourth National Development Plan of 1989 to provide infrastructure for operations of
MSMEs, promote access to credit by MSMEs with growth potential and to improve
production capacities of MSMEs with the view to increase incomes and employment.
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The strategies to achieve the above-stated objectives included:-
i) Provision of collective services, infrastructure, and specialized tools and
equipment for common use by MSMEs with growth potential.
ii) Establishment of innovative institutionalised credit facilities tailored to meet the
needs of MSMEs.
iii) Promotion use of appropriate technology and of available local resources;
iv) Encourage the formation of small cooperatives
v) Promote the upgrading of skills through formalized training schemes in terms of
extension advisory services.
The resources to the MSME sector were made available through the Small Industries
Development Organisation (SIDO), the Development Bank of Zambia (DBZ) and the
Village Industries Services (VIS), which were the primary source of small enterprises
support.
However, the above mentioned strategies did not quite succeed in facilitating growth and
development of the MSME sector partly because:-
a) Specified targets to be achieved were not set and strategies to be employed to

achieve those targets were not well defined.
b) These MSME support institutions suffered from inadequate funding and poor
management resulting in their inability to effectively and meaningfully service
the sector.
c) Private enterprise to which the MSME sector belongs was not proactively
encouraged by the State.
After 1991, the economy was liberalised and private enterprise was encouraged as
evidenced by the establishment of the Industrial, Commercial and Trade Policy in
December 1994 with pronouncements that government would:-
a) Devise a strategy, with the participation of the private sector, to encourage the
growth of small enterprises;
b) Encourage local governments to review their infrastructure services and licensing
regulations so as to support small enterprises;
c) Provide legislation and incentives that promote rapid growth of the MSME
sector;
d) Decentralize business registration to enable the MSME sector to operate
efficiently and have access to incentives; and
e) Review and harmonize all existing laws and regulations with a view to identifying
and removing impediments to the operations of the MSME sector.
In 1996, in recognition of the challenges still facing the MSME sector and with the view
to the enhance the further development of the MSME sector, government revised the SID
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Act and replaced it with the Small Enterprises Development (SED) Act. Among the
salient features of the SED Act were the incentives provisions which included the
following:-
a) Exemption from payment of tax on income for the first three to five years;
b) Operating a manufacturing enterprise for the first five years without a
manufacturing licence required for such an enterprise under any law;
c) Exemption from the payment of licensing fees required for such an enterprise
under any law;
d) Exemption from Trading Licence for an enterprise registered under the SED Act;
e) Exemption from payment of tax on income received from rentals on buildings or
premises for use by micro and small enterprises;
f) Exemption from the payment of rates on factory premises;
g) Exemption from payment of tax on income or interest payable by any financial
institution providing loan, or other financial relief or facilities to registered micro
and small enterprises carrying on manufacturing activities;
h) Such institutions shall be allowed to maintain concessionary core liquid assets
ratios and reserve requirements.
i) Expenditure incurred on training staff that specialise in micro and small-scale
enterprise financing shall be treated as tax deductible for purposes.
Most of these incentives were however never implemented partly because the systems for
their implementation were never put in place.
The development of the MSME sector is critical to the achievement of broader national
development goals outlined in the Fifth National Development Plan (FNDP) and in the
Vision 2030.
These include:-
• To reduce unemployment levels
• To increase participation of citizens in economic development
• To create avenues for equitable wealth distribution
• To increase utilisation and value addition of local raw materials
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1.2 Situation Analysis
The MSMEs sector in Zambia is characterised by business activities of enterprises
engaged in traditional industrial sectors, primarily in the production of goods and services
for domestic consumption. The primary objective of most of the enterprise owners is to
generate employment and income for personal requirements. Business activities among
most MSMEs are further by characterised by the use of low level technology and are
oriented towards local and less affluent market segments.
Since the introduction of structural economic reforms and the country’s transition to a
liberalised economy in 1991, there has been increased activity in the MSMEs sector. The
existence of a large MSMEs sector, of which over 90% are informal, has serious
implications on the functioning of the economy. There is however limited documented
information regarding the business activities of MSME sector and its contribution
towards the national development and economic growth. As a result, it is difficult to
estimate the total size of the private sector in Zambia as data from the Central Statistics
Office (CSO) do not disaggregate national output in relation to enterprise size.
The 1996 baseline survey on MSMEs further revealed that the Zambian MSME Sector
was dominated by enterprises with a workforce of less than 10 employees and that 52%
of all MSME business activities are based in rural areas. Within the MSME sector,
manufacturing activities account for 41% while trading account for 49%. Services
accounted for only 10%.
MSME business activities are largely in trading, simple manufacturing, and service
provision. Manufactured products in the MSME sector include textile products, wood
products, light engineering and metal fabrication, food processing, leather products,
handicrafts and ceramics to mention a few. The service sector include restaurants, hair
salons and barbershops, passenger and goods transport, simple building construction,
telecommunication services, business centre services and cleaning services. The trading
sector is concentrated in consumable products, industrial products, and agricultural inputs
and produce.
The current economic situation presents opportunities which if taken advantage of, can
lead to a vibrant MSME sector. These opportunities include implementation of macro-
economic reforms by Government which have resulted in substantial reduction in
inflation rates, a competitiveness private sector, liberalized trade policies and removal of
foreign exchange restrictions.
In addition, there are abundant natural resources which can be exploited through various
value addition activities to give Zambia competitive advantage.
However, although the MSME sector in Zambia has such great potential for economic
development, equitable wealth redistribution and poverty alleviation, it faces many
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business constraints and challenges which hinder growth and limit its ability to contribute
effectively to national economic development. According to the Ministry of Commerce
Trade and Industry (MCTI) (2006), these challenges and constraints include:-
• Limited access to markets,

• Limited access to appropriate technology, machinery and equipment
• Limited access to suitable business financing solutions
• Inadequate business infrastructure such as roads and telecommunication facilities
In addition to the constraints identified by MCTI, the MSME sector also faces the
following constraints;
• Limited technical and management skills

• Inadequate and unsuitable operating premises that can facilitate enterprise growth.
• Inadequate regulatory systems
• Excessive competition from unregulated importation of cheap products
All these business constraints and challenges manifest themselves in the failure by the
sector to grow into a viable bottom up development tool and an effective contributor to
national development as is the case with MSMEs in economies such as India, Central
Asia, and South Africa.
Government’s efforts to develop the MSME sector have continued and in 2006 through
the ZDA Act, the Small Enterprise Development Board was dissolved and its activities
were incorporated into the Zambia Development Agency (ZDA) under the SME
Division.
It is against this background that a need for a strategic and focused development of the
MSME sector in Zambia has arisen. This MSME Development Policy will provide much
needed guidance and direction on all activities and development efforts related to
MSMEs. This has been developed after various consultations with stakeholders.
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2.0 Vision and Rationale
This MSME Policy outlines the goal, objectives, strategies, and implementation
framework for all MSME development efforts in Zambia.
2.1 Rationale
The rationale for this Policy is to create a national vision and leadership for deliberate
development of the MSME sector and to facilitate creation and implementation of
relevant and effective sector legislation and regulatory framework. The Policy further
aims to define the sector, its actors, their roles, and responsibilities and to ensure
coordination and synergy in the implementation of MSME support activities.
2.2 Policy Goal

The goal of the Micro, Small, and Medium Enterprise Policy is to create a vibrant,
dynamic sector that contributes 20% of Gross Domestic Product and 30% annually to
creation of decent employment by the year 2015.
2.3 Guiding Principles

The pursuit of the goal of the MSME Policy shall be guided by the following principles.
• The policy will operate within the national socio-economic development agenda and
shall be aligned to the national development objectives outlined in the Fifth National
Development Plan, the Poverty Reduction Strategy Paper and the Vision 2030.
• Provisions of the policy shall be supported by appropriate legal, financial institutional
and national development frameworks;
• Implementation of the policy shall take into account regional and global best practices
in MSMES development in order to ensure that the sector is current with global
development trends.
• Government shall collaborate with private sector, cooperating partners non

governmental organisations, and other stakeholders to implement the MSME Policy.
• The Policy shall promote equality in opportunities and gender equity in its pursuit of
outcomes and will give emphasis on the role of women as economic actors in MSME
development.
• Vulnerable and disadvantaged persons will receive special attention under the
provision of the Policy.
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• The Policy shall uphold workers rights including promotion of safe working
conditions and prevention/mitigation of HIV/AIDS.
2.4 Policy objectives

The MSME Policy aims at achieving the following development objectives:-
i) To facilitate creation and development of viable Micro Small and Medium

Enterprises that contributes 30% towards annual employment creation and 20%
towards Gross Domestic Product by the year 2018.
ii) To facilitate an increase of 10% towards utilisation and value addition of local raw
materials in identified regional areas by the year 2018.
iii) To strengthening forward linkages between MSMEs and large scale companies by
facilitating an annual increase of 10% in subcontracting of MSME by large scale
ompanies.
vi) To improve productivity in the MSME sector by 10% by the year 2018.
v) To enhance Local Economic Development thereby stimulating broad based economic

growth by establishing five (5) Business Incubators and five (5) Industrial Parks in
identified locations by the year 2018.
2.5 Definition of Micro Small and Medium Enterprises (MSMEs)
The topology of Zambian MSMEs has changed over time thereby creating the need for
redefinition of the different categories of enterprises in the sector. Proper classification
of enterprises is a prerequisite for successful targeting of support programmes and
incentives provision. In this regard, MSMEs in Zambia shall be defined based on the
following business variables:-
• Total fixed Investments
• Sales Turnover
• Number of employees.
• Legal status
Below is the official Zambian definition of Enterprises in the MSME sector.
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2.5.1 Micro Enterprises
A micro enterprise shall be any business enterprise registered with the Registrar of
Companies;
i) Whose total investment excluding land and buildings shall be up to Eighty Million
Kwacha (K80, 000,000).
ii) Whose annual turnover shall be up to One hundred and Fifty Million Kwacha
(K150,000,000).
iii) Employing up to ten (10) persons.
2.5.2. Small Enterprises

A small enterprise shall be any business enterprise registered with the Registrar of
Companies;
i) Whose total investment, excluding land and building
- In the case of manufacturing and processing enterprises, shall be between Eighty
Million and Two Hundred Million Kwacha (K80,000,000 – K200, 000,000) in
plant and machinery;
- In the case of trading and service providing enterprises shall be up to One
Hundred and Million (K150,000, 000) Kwacha.
ii) Whose annual turnover shall be between One Hundred and fifty Million and Two
Hundred and Fifty Million (K151,000- K300,000,000) Kwacha.
iii) Employing between eleven and forty nine (11- 50) persons.
2.5.3 Medium Enterprises

A medium enterprise shall be any business enterprise larger than a small enterprise
registered with the Registrar of companies;
i) Whose total investment, excluding land and building;

- In the case of manufacturing and processing enterprises, shall be
between Two Hundred Million and Five Hundred Million (K201, 000,000
–K500, 000, 000) Kwacha in plant and machinery,
- In the case of trading and service providing shall be between One Hundred
and Fifty One Million and three Hundred Mullion (K151, 000,000 –
K300,000,000) Kwacha.
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(ii) Whose annual turnover shall be between Three Hundred Million and eight
Hundred Million) (K300,000 ,000 - K800,000,00).
(iii) Employing between Fifty One and One Hundred (51 -100) persons.
2.5.4 Informal Enterprise

An informal enterprise shall be any business enterprise not registered with the Registrar
of Companies;
i) Whose total investments excluding Land and Building shall be up to Fifty

Million (K50, 000,000) Kwacha.
ii) Employing less than Ten (10) persons.
To qualify as micro, small or medium enterprise under the above mentioned categories,
the legal status and total investment criteria must be met together with at least one other
criterion.
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3.0 Policy Focus Areas and Strategies
A number of focus areas have been identified in to order to concentrate MSME
development efforts and maximise utilisation of resources and to ensure that resources
are not spread thinly over a very broad area of development activities.
3.1 Focus Areas

The following are the areas on which MSME development efforts will be focused during
the ten year implementation period of this Policy. The focus areas have been categorised
into three development pillars of Capacity, Access and Operating Environment.
A. Capacity
1) Entrepreneurship development
2) Innovation and technological capacity of MSME
C. Access
3) MSMEs access to market opportunities
4) MSMEs access to business development services
5) MSMEs access to appropriate business finance
6) Access to appropriate operating premises and business Infrastructure
C. Operating environment
7) Local Economic Development
8) Representation of MSMEs interests
9) Cross cutting issues (HIV/AIDS and Gender)
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3.2 Policy Statements and Strategies
In pursuing the policy provisions it is important that policy strategies are clearly outlined
in order to address the challenges and constraints faced by MSMEs whilst at the same
achieving the policy goal and short term development objectives indicated above.
Effective development of the MSME sector will require well articulated strategies,
existence of a conducive environment including appropriate legal and regulatory frame
work, a well defined implementation framework, and an efficient and effective
information and feed back system. Below are the intervention strategies for the identified
focus areas.
3.2.1 Entrepreneurship Development
3.2.1.1 Context
The culture of Entrepreneurship and business practice still is not well developed among
Zambian citizens. This could be related to a cultural mind set of dependency and a low
propensity for risk taking. This has resulted in low levels of entrepreneurial ability and
business management competency among most MSMEs. These low levels of
entrepreneurial skill and management competency have limited the ability of most
MSMEs to grow beyond establishment phase. Therefore, for MSMEs in the sector to
achieve sustainable qualitative growth and for citizens to be oriented towards business
there is need to build entrepreneurial capacity through a deliberate entrepreneurship
development system.
3.2.1.2 Policy statement

Government shall advocate for a culture of Entrepreneurship among citizens and shall
facilitate development of market demand driven training in entrepreneurship and business
management.
3.2.1.3 Objective
The objectives of interventions under this focus area are:-
• To inculcate a culture of entrepreneurship among citizens and facilitate
development of entrepreneurship and enterprise management skills critical to the
growth of MSMEs.
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3.2.1.4 Policy Strategies
i) In conjunction with TEVETA and Ministry of Education facilitate entrepreneurship
training at all levels of the education system.
ii) Through Schools and Institutes of higher education develop different entrepreneurial
schemes to inculcate a culture of entrepreneurship among young citizens.
iii) Organise national and regional entrepreneurship fairs and competitions to stimulate
entrepreneurial thinking and action among citizens.
iv) In liaison with TEVETA design market demand led entrepreneurship and business
management training for different levels of MSMEs.
v) Develop the capacity of Business Development Service (BDS) Providers in rural and
urban areas to offer high quality entrepreneurship and business management training
and other required BDS Services.
vi) Establish Institutes of Micro, Small and Medium Enterprises and Entrepreneurship in
selected business schools to spearhead MSME research, entrepreneurship, and
enterprise management training.
vii) Develop youth enterprise development programmes that promote establishment of

MSMEs among the youth.
3.2.2 Innovation and technological capacity of MSME
3.2.2.1 Context
Innovation is essential for maintaining competitiveness of an enterprise and of its
products/services. Most MSMEs however have limitations in this area and have no access
to new innovative production processes. In additions, innovations among MSMEs are not
well documented and protected. Further, MSMEs have limitations in accessing new
technologies which can help improve product quality and productivity

Government shall through appropriate agencies promote innovation among MSMEs and
shall facilitate access by MSMEs to modern and appropriate technology.
3.2.2.3 Objective
To improve innovation and level of technology and technical know-how among MSMEs.

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i) Establish within the Business Incubation Centres, Technology Innovation Centres
(TICs) offering common facility, technology upgrading and Research and
Development related services to MSME sector.
ii) Promote creativity and innovation in the MSME sector through establishment of
annual award schemes that recognize innovations and technology development within
the sector.
iii Develop and implement technology upgrade projects in major MSME Clusters,
Business Incubators and Industrial Parks.
iii) Build the capacity of existing technology Service Providers (e.g TDAU and National
Institute for Industrial and Scientific Research) to effectively deliver support to
MSME.
iv) Enter into bilateral and multilateral agreements with international organisations
involved in technology transfer and upgrading in order to improve access by MSMEs.
v) Through appropriate government agencies, regulate and maintain a register of
imported technologies to discourage dumping of obsolete and dangerous
technologies.
vi) Develop a system for promotion, diffusion, and commercialisation of indigenously
developed technologies.
vii) Establish links among universities, technical institutions and MSME Incubation
Centres to facilitate research and effective utilization of new technologies.
viii) Improve MSMEs access to and effective use of the existing intellectual property
system to enhance their creativity and innovate capacity and to enable them derive
the full benefits of their innovations in the market place.
ix) In collaboration with TEVETA, build the capacity of Technical Training Institutions
to provide technology management training and to develop partnerships with MSME
Associations.
x) Improve women’s’ access to modern and appropriate technology.
xi) Upgrade National Productivity Centres within MLSS to develop productivity
benchmarks and to monitor productivity in the MSME sector.
xii) In collaboration with the Ministry of Science, Technology, and Vocational Training,
National Technology Business Centre (NTBC), the University of Zambia
Technology Development and Advisory Unit, and the National Institute for
Scientific and Industrial Research, develop programmes that assist MSMEs with
equipment, processes, and product development.
20
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3.2.3 Access to Marketing Opportunities
3.2.3.1 Context
MSMEs have limited capacity to identify and effectively reach both local and export
markets. This is due in part to limited access to information on what market
opportunities are available, and limited knowledge and skills on how to reach these
markets.
3.2.3.2 Policy Statement

Government shall through designated agencies and in collaboration with identified
stakeholders facilitate MSMEs access to local and export markets.
3.2.3.3 Objective
To broaden MSMEs access to more lucrative local and export markets.

i) Conduct market studies to identify viable market niches which MSMEs can target
with their goods and services and disseminate information to MSME representative
organisations.
ii) Develop and implement value chain analysis and development programmes for
specific sub-sectors. e.g. Food Processing sector.
iii) Develop and implement a programme on preferential access by MSMEs to
government contracts through the CEEC Act.
iv) Develop and implement Business brokering and subcontracting programmes that
facilitate access by MSMEs to sub-contracting services with large-scale businesses.
v) Initiate discussions and sign trade agreements with neighbouring countries
(particularly DRC, Namibia, Angola, Mozambique and Zambia) to open up export
market opportunities for MSMEs.
vi) Facilitate implementation of MSME Trade Shows and Exhibitions with the view to
showcase MSME capacities, products and services.
vii) Facilitate participation of MSMEs in International Fairs and in Trade Missions.
viii) Facilitate training of MSMEs in marketing skills and export marketing procedures
and requirements, particularly in association with Z.I.M.
ix) In cooperation with the Zambia Bureau of Standards promote adherence to prescribed
product standards as a means to enhance the competitiveness of MSME on the local
and export market.
21
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3.2.4 MSMEs access to Business Development Services
3.2.4.1 Context
Most MSMEs require guidance and hand holding to grow into independent established
business entities. This support is more effective when delivered in a well-coordinated
holistic manner that can create positive impact on enterprise performance. Currently
however, the Sector has limited access to comprehensive integrated business
development support.

Government shall through designated agencies and in cooperation with Development
Organisations, facilitate MSMEs access to comprehensive business development support.
3.2.4.3 Objective
To improve access by MSMEs in rural and urban areas to business development support
in key business areas that facilitate enterprise stability and growth.

i) Through research, develop a thorough understanding of the demand and supply side
of Business Development Services in Zambia.
ii) Develop a data base and a system for managing MSME sector information and
literature including data collection, system operations and maintenance, and
information dissemination mechanisms.
iii) Conduct MSME surveys and baseline studies to establish the size and status of the
sector in Zambia
iv) Maintain an electronic register of the various categories of MSMEs
v) Develop and implement pilot model business development support programmes in

two urban and two rural provinces of Zambia
vi) Build the capacity of existing Business Development Services Providers in different
provinces to effectively deliver support services to MSMEs in the area of business
registration, advisory and mentoring services, business planning, marketing, Business
linkages and brokering.
vii) In collaboration with the Registrar of Companies, facilitate formalization of
Enterprises in the MSME sector by promoting the benefits of formalisation,
decentralising registration procedures and reducing the cost and time for registration.
viii) Develop and implement incentives that make it attractive for MSMEs to operate
registered businesses and raise awareness of the benefits of operating a formal
business.
22
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ix) Conduct mobile business clinics to popularize MSMEs use of business development
support services.
x) In collaboration with private sector Accounting and Auditing Firms, facilitate

provision of tailor-made accounting, auditing and taxation services to MSMEs.
xi) Strengthen the capacity of standards and quality assurance organisations (e.g.
ZABS and Food and Drug Board) to deliver support services to the MSME sector.
xii) Develop and implement cost-effective business development programmes tailor-
made to specific needs of MSME at different levels of growth.
xiii) Establish an MSME Capacity Building Fund to be administered by the Zambia
Development Agency
xiv) Facilitate establishment of an umbrella Association of Business Development
Service Providers to promote self-regulation and systematic use of existing
government systems in the provinces.
3.2.5 MSMEs access to appropriate Business Finance
3.2.5.1 Context
Business Finance is a critical input in the creation, development and expansion any
enterprise. MSMEs have difficulties in accessing appropriate business finance to suit
their growth requirements. It addition, the cost of finance is relatively high and is
sometimes beyond the reach of most MSMEs. The terms and conditions for accessing
business finance are also very demanding. The problems of MSMEs access to finance are
on both the supply side and the demand side.

Government shall collaborate with relevant stakeholders to facilitate development of
financing programmes and schemes to enhance MSMEs access to appropriate business
financing.
3.2.5.3 Objectives
To improve MSMEs’ access to appropriate business financing that effectively facilitates
enterprise establishment, growth and expansion.
23
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i) Establish part of the CEE Development Fund as a graduated financing vehicle for
developing the MSME Sector with a view to transform it into an economic
stronghold.
ii) Through relevant government agencies, engage financial institutions into developing
suitable business financing products for MSMEs. These should include equity,
leasing, hire purchase, trade finance, and investment financing.
iii) Strengthen the capacity of development banks to provide growth-oriented financing

solutions to MSMEs.
iv) In collaboration with the Credit Reference Bureau, provide referral to confirm credit
worthiness of specific MSMEs.
v) In collaboration with the Lusaka Stock Exchange, operationalise the secondary market
for MSMEs on the Stock Exchange to create alternative sources of business
financing.
vi) Provide incentives to Financial Institutions in order to encourage lending to MSMEs.
vii) Establish Credit Guarantee Schemes to improve access and minimise collateral
constraints among MSMEs.
3.2.6 Access to appropriate operating premises and business infrastructure
3.2.6.1 Context
The MSME sector lacks systematically structured and developed business premises and
infrastructure that can facilitate the growth of individual enterprises and of the sector as a
whole. Inadequate operating premises and infrastructure impacts negatively on
enterprises at all levels and raises the cost of doing businesses. To MSMEs, poor business
infrastructure, especially in the rural areas, poses a great challenge to doing business.

Government shall in collaboration with private sector facilitate development of suitable
operating premises for MSMEs in rural and urban areas of the country.
3.2.6.3 Objective
To improve MSMEs’ access to appropriate and affordable business infrastructure and
operating premises in order to enhance progression and growth of individual Enterprises.
24
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i) Facilitate development of Business Incubators and Industrial Parks in at least three
provinces in the next five years.
ii) Enter into strategic alliances with local industrial estate developers to facilitate
development of designated MSME Industrial Parks and Incubators in different parts
of Zambia.
vi) Designate land and establish Multi Facility Economic Zones with a focus on
developing suitable Infrastructure for MSMEs in different parts of the country.
v) Develop guidelines on management and operation of Business Incubators and
Industrial Parks.
3.2.7 Local Economic Development
3.2.7.1 Context
Local Economic development plays a critical role in the development of urban and peri-
urban areas. Local economic development contributes to the growth of the local
economies in terms of absorbing local labour force, slowing urban migration,
contributing to national income growth, effective and efficient utilization of local
resources through value addition, and promoting a more equitable distribution of income.
In addition, Local Economic Development facilitates development of local infrastructure.
Local Economic development is a regional development strategy that places emphasis on
development of local competitive advantage.

Government is committed to a bottom-up development approach and shall facilitate
development of local business infrastructure in localized areas in both urban and peri-
urban areas.
3.2.7.3 Objective
To stimulate localised economic activity and develop appropriate MSME business
infrastructure in both urban and rural areas.

i) Develop the capacity of local authorities to establish and management Multi Facility
Economic Zones targeted at MSMEs in order to stimulate local economic
development.
25
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ii) Collaborate with private sector real estate developers to construct Business Industrial
parks in selected parts of the country to facilitate access by MSMEs to appropriate
operating premises.
iii) Provide guidelines and incentives for business premises development programmes
such as build-operate-transfer or build-own-operate schemes.
iv) Development value chain and cluster development programmes to jump start local
economic development and enhance utilisation and value addition of local resources.
v) Facilitate development of rural business infrastructure to improve the competitiveness

of identified business areas.
vi) Promote establishment of business linkages between agricultural farming blocks,

large Companies and MSMEs in order to establish enhance marketing channels.
vii) Provide tax incentives to stimulate development of MSMEs in rural and peri-
urban areas.
viii) Develop Industrial Clusters in localities where there is competitive advantage in

producing particular products and services.
ix) In collaboration with private sector service providers, improve MSMEs access to
telecommunication, internet, and banking services.
x) In collaboration with Road Development Agency and Local Municipal Councils
improve access roads to central business premises and Industrial Parks.
xi) In collaboration with MULG, local councils and market associations/cooperatives,

improve local markets and access to BDS and appropriate financing
xii Strengthen the operations and delivery of member services to associations of local
marketers, and improve their prospects for formalisation.
3.2.8 Representation of MSMEs Interests
3.2.8.1 Context
Business associations and other MSMEs grouping have an important role to play in
lobbying and advocating for the interests of MSMEs with government and other
stakeholders and for mobilising MSMEs into a formidable force for national
development. In Zambia most existing MSME business associations are weak and have
with limited capacity to effectively play their role. There is therefore need for measures
26
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for institutional strengthening of associations at various levels to be put in place in order
to promote the growth and stability of the MSME sector.

Government shall encourage effective representation of MSME interests at various fora
through support towards systematic development of MSME representative bodies.
3.2.8.3 Objective
To strengthen the capacity of MSME representative organisations to articulate MSMEs
needs and interests, and to mobilise MSMEs for active participation in economic
development.

i) Establish strategic partnerships with key MSME apex representative organisations.
ii) Implement joint baseline studies on the population and status of MSMEs in Zambia.
iii) Build the capacity of the apex MSME representative bodies to successfully provide
support to members.
iv) Broaden the outreach of existing MSME representative bodies to effectively include
the various MSME sub-sectors.
v) Promote vertical and horizontal networking linkages between different MSME
representative bodies.
vi) Strengthen the capacity of the various MSME representative bodies to articulate their
needs and coordinate their views.
vii) Facilitate peer learning for small business associations through exchange visits and
study tours to countries with best MSME practices
3.2.9 Cross Cutting Issues

a) HIV/AIDS
3.2.9.1a Context
Zambia is one of the Sub-Saharan African countries worst affected by the HIV/ AIDS
pandemic. It is estimated that about one million Zambians are infected with HIV.
27
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HIV/AIDS has a negative impact on families, communities and business establishments
and can result in lowered productivity in an enterprise.
3.2.9.2a Policy Statement

Government shall promote development of HIV and AIDS prevention and mitigation
programmes in order to minimise their negative efforts on work places and productivity.
3.2.9.3a Objective
To strengthen the capacity of MSMEs to mitigate the negative effects of HIV/AIDs on
their businesses.
3.2.9.4a Policy Strategies

i) Create increased awareness on the negative impact of HIV/AIDS on business
operations.
ii) Conduct training for MSMEs on strategies for mitigation of HIV/AIDS negative
impact and development of HIV/AIDS workplace programmes.
iii) Develop capacity in advocacy, management, eradication and monitoring of MSMEs
response at all levels.
b) Gender
3.2.9.1b Context
It is recognised that gender plays a significant role in national development. However,
more often there exist gender disparities and imbalances in access to economic and
business opportunities resulting from gender insensitive legislation and administrative
systems. There is therefore need to take deliberate steps to eliminate all forms of
discrimination in access to opportunities.
3.2.9.2b Policy Statement

Government shall ensure equity in participation of both men and women in all initiatives
pertaining to MSMEs development
3.2.9.3b Objective
To facilitate equitable access and effective participation of men and women all MSME
developmental programmes.
28
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3.2.9.4b Policy Strategies
i) Identify factors that inhibit men and women, from effectively participating in various
MSME development programmes and develop strategies to overcome these
hindrances.
ii) Build the capacity of MSMEs development organisations including associations of

women entrepreneurs, to design programmes that take into account the specific needs
and challenges that women entrepreneurs face.
iii) Develop special programmes that specifically target vulnerable members of local
communities such as women, youth and other people with disabilities
29
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4.0 Implementation Framework
Facilitation of the smooth implementation of the policy strategy will depend on clarity of
who are the actors and their corresponding roles and responsibilities. While MSMEs
development activities cut across institutional mandates of various government
Ministries, Agencies, Local Authorities, NGOs and development partners, there is need
for a clear demarcation of responsibilities and accountabilities. The implementation
framework shall operate at four main levels as follows:-
4.1 Main Actors, their roles and responsibilities

The current institutional framework for MSME support in Zambia is highly fragmented
and requires restructuring to ensure better coordination among various agencies or
players. Below is the new Institutional and implementation framework for MSME
Development.
4.1.1 Ministry of Commerce Trade and Industry

The Ministry of Commerce Trade and Industry (MCTI) shall be lead government
body on matters relating to MSME development. In pursuance of the goal of the
MSME Development Policy, MCTI shall have the ultimate responsibility of
providing an enabling economic environment conducive for growth of the MSME
sector by putting in place the requisite Institutional framework.
The main role of MCTI shall be to develop relevant policies of MSME development
and to provide policy level direction on all matters related to MSME development.
MCTI will be responsible for providing and maintaining government’s goodwill
and commitment to the development of the MSME sector and will oversee the
implementation of the MSME policy provisions.
4.1.2 The Enterprise Development Council

Although, in principle, it is the Ministry of Commerce, Trade and Industry which
takes the lead in matters relating to the MSME sector, it is important that there is an
independent National Enterprise Development Council (NEDC) that can help build
national consensus on matters relating to MSME development.
The National Enterprise Development Council shall be the apex advisory body on
MSME development and shall comprise eleven (11) members drawn from
government and government agencies, private sector and MSME Associations. The
recommended representation shall be three (3) from MSME Apex Associations,
three (3) from private sector and two (2) government ministries and three (3) from
relevant government agencies.
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The role of the National Enterprise Development Council shall be to coordinate
views of various stakeholders involved in MSME development to oversee the
overall implementation of the MSME Policy, and to provide advice and guidance
during the process of implementation.
4.1.3 Zambia Development Agency - MSE Division

The MSE Division of the Zambia Development Agency shall be responsible for
operationalising this government policy through various focused programmes on
MSME development. The ZDA, MSE Division shall be responsible for
establishing strategic partnerships with various MSME Development Organisations
and for building the capacity of these organisations to effectively deliver services to
MSMEs. The MSE Division shall be responsible for developing, coordinating and
monitoring and documenting all MSME development interventions.
In addition, ZDA MSE Division shall be responsible for regulating the MSME
sector and its various implementing organisations and structures and ensuring that
all MSME development activities create synergy and are directed at achieving set
national goals and objectives. ZDA shall also be responsible for liaising with other
government programmes and agencies involved in programmes and support
activities related to MSME Development. Further, ZDA shall be responsible for
conducting research and surveys on any aspects related to MSME development and
for coordinating and monitoring the quality of MSME interventions by intermediary
organisations.
4.1.4 MSME Development Organisations

The MSME Development Organisation shall be all intermediary organisations
actively involved in delivery of various support services to the MSME sector.
These intermediary organisations shall be responsible for the actual delivery of
services to MSMEs in different parts of the country. The intermediary
implementing organisations will include MSME development Organisations, Donor
projects, Private Sector organisations and Non Governmental Organisations
(NGOs) and MSME Umbrella Associations.
4.1.5 Micro Small and Medium Enterprises and MSME Associations

The various individual MSMEs and their local or sectoral Associations in different
parts of Zambia will be the target beneficiaries of all MSME development support
interventions. The local MSME Associations will be responsible for mobilising
their members and positioning them strategically to benefit from the various support
activities that will be put in place.
31
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4.2 Inter-ministerial Cooperation and Collaboration
The Ministry of Commerce Trade and Industry will collaborate with other government
institutions and departments, local authorities and other stakeholders involved in the
development of the MSME sector. In particular, the Ministry shall liaise with and
maintain close working relationship with the following institutions:
i) Ministry of Agriculture and Cooperatives in order to promote the development of
agro-processing industries and related agri-business activities
ii) Ministry of Lands to facilitate allocation of land for development into Business
Incubators and industrial Parks.
iii) Ministry of Science, Technology and Vocational Training to support efforts in
improving research and the development (R&D), technology adaptation and technical
skills training.
iv) Ministry of Tourism, Environment and Natural Resources, and the Environmental
Council of Zambia on environment safety and protection issues.
v) Ministry of Labour and Social Security and Ministry of Sport, Youth and Child
Development to promote good labour practices in the MSME sector, to monitor
issues of child labour and to ensure decent work practices.
vi) Ministry of Housing and Local Government and Local Authorities to ensure adequate
support to MSME development activities at local level and to ensure effective
decentralization of government services to the MSME sector such as the provision of
different business licenses.
4.3 Time Frame for Implementation

The MSME Development Policy will be implemented over a period of ten (10) years
beginning in 2008. Government ensure alignment of the various other policies and
development initiatives that have a bearing on implementation of the provision of this
policy. This policy will also be closely aligned with other government initiatives outlined
in the Fifth National Development Plan (NDP).
32
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5.0 Legal Frame work
An appropriate and facilitative regulatory framework is a prerequisite to the successful
implementation of the MSME Policy. The Zambia Development Agency (ZDA) Act of
2006 is the main legal provision for development of the MSME sector in Zambia and is
the principle legislation under which the MSME Development Policy shall operate.
However, other pieces of legislation have a bearing on the successful implementation of

the MSME Development Policy. These include:-
• The Companies Act, Cap 388 which provides for legalisation of business
operations in Zambia through registration of companies, trade marks, industrial
designs and patents.
• The CEE Act of 2006 which provides for economic empowerment of citizens
through the practice of enterprise and provision of the empowerment fund.
• The Banking and Financial Services Act, Cap 287 which regulates provision of
banking and financials services
• The Income Tax Act, Cap 323 which governs taxation of profits of limited
companies and incomes of enterprises under the Business Name Registration set
up.
There is therefore need to ensure that these laws are synchronised to ensure harmonised
implementation of interventions and incentives provisions.
The implementations of the various strategies of the MSME Development Policy may
involve programmes which are beyond the mandate of the Ministry of Commerce Trade
and Industry In the event that certain legislation impedes effective implementation of the
MSME Policy, the Ministry of Commerce Trade and Industry shall work proactively to
remove any such impediments by collaborating closely with relevant Institutions to
ensure that appropriate reforms are made to the legislation in question.
33
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6.0 Resource Mobilization
Successful implementation of the MSME Policy will depend on timely availability of
financial resources for implementation of recommended interventions strategies. The
government through the Ministry of Commerce Trade and Industry shall be ultimately
responsible for mobilising necessary resources for development of the MSME sector.
The Government will endeavour to identify both internal and external sources of finances
for development of the MSME sector. In this regard, the Ministry of Commerce Trade
and Industry shall involve the private sector through Private Public Partnerships,
Cooperating Partners and other stakeholders to mobile resources for developing the
MSME sector.
In particular, financial resources for implementation of strategies recommended in this

Policy shall be mobilised from:-
• National budgetary allocations
• Contributions and investments from private sector
• Contributions from multilateral and bilateral cooperating Partners
• Allocations to MSMEs from the Empowerment Fund of the Citizens Economic
Empowerment Commission.
• User fees for various services rendered to MSMEs
The National Enterprise Development Council shall be responsible for ensuring that
mobilised resources are redistributed equitably among the various MSME development
interventions and that they effectively utilised and transparently accounted for.
34
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7.0 Monitoring and Evaluation
The Ministry of Commerce Trade and Industry shall be ultimately responsible for
monitoring and evaluating the implementation of the provision of this Policy. The
Ministry shall conduct period monitoring exercises to assess adherence to the provisions
of the policy and to determine whether interventions activities are contributing towards
achievement of the policy goal and identified development objectives. The Ministry shall
conduct at least one monitoring exercise per year.
More regular monitoring activities shall be conducted by the MSE Division of the
Zambia Development Agency to examine effectiveness of intervention activities being
delivered by intermediary organisations and to assess the overall impact of MSME
support activities on the performance of the sector. The ZDA will conduct at least two
monitoring visits per year and will conduct an impact assessment exercise every two
years. ZDA will prepare and disseminate to stakeholders bi-annual progress reports and
an impact assessment report every two years.
The ZDA will in turn ensure that registered intermediary organisations have put in place
monitoring and evaluation systems for the interventions that they will be involved in.
MSME intermediary development organisations will conduct monitoring exercise once
every quarter and shall be will required to prepare quarterly monitoring reports.
The focus of monitoring and evaluation efforts will be in three key areas of:-
• Technical performance to assess quality, effectiveness, and relevancy of

intervention activities in achieving set objectives.
• Time performance to ensure that programmes and projects are implemented on

schedule and that they are being implemented within stipulated time frames.
• Cost performance to review the relationship between projected cost of

interventions, actual expenditure, and the resulting outputs.
35
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Annexes
Annex i: THEMETIC ISSUES
In addition to the proposed government strategies presented in the MSME Development
Policy, there are issues which are crosscutting in nature. This section presents a number
of thematic issues which are vital for the successful implementation of the MSME
Development Policy. They include:-
1) The relevance, effectiveness, and sustainability of the proposed policy

The effectiveness of this policy will depend to some extent on the provisions of ZDA Act
of 2006. This Act has been recommended for revision in order to enhance its relevant to
national development.
Recommendations for amendment of relevance to the MSME Development Policy

include inclusion of the Triangle of Hope provision of incentives to cater for MSMEs and
rural enterprises and harmonisation with the CEE Act.
This Policy has been prepares as a living document with flexibility for adjustment and
amendment to suit the operating environment and to respond to external factors that
impact on MSME development.
2) Consistency of Policy with existing legislation that impacts on operations of

MSME sector
This Policy is consistency with the provisions of the TEVET Act which advocates for
promotion of a culture of entrepreneurship among citizens through entrepreneurship
training for TEVET trainees, informal sector operators and the micro, small and medium
enterprises.
It is also consistent with the provisions of the CEE Act which promotes active
participation of citizens in the economy and which encourages scaling up of investments
in regional areas.
This Policy is also consistent with:-

• Section 12 of the ZDA Act on Trade and Industrial Development which recommends
strategies such as development of the capacity of business enterprises to trade in an
international competitive market and facilitating protection of infant industries.
• Section 17 of the ZDA Act on Investment Promotion and Guarantee which advocates
for capacity building strategies for national investors.
36
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3) Policy documents having a bearing on the MSME sector
Existing Policy document which have a bearing on the MSME Sector include:-
• The Technical Vocational and Entrepreneurship (TEVET) Policy, which aims

at among other things to act as a vehicle for improved productivity and income
generation and as an instrument for minimising inequalities among people.
• The National Employment and Labour Market Policy whose focus is on

providing an enabling environment for all Zambia at work places.
4) Implication of policies under line ministries on MSMEs

The Ministries of Youth, Sport and Child Development, Science, Technology and
Vocational Training, Labour and Social Security, Local Government and Housing,
Agriculture and Cooperatives and Community Development Social Services have bearing
on the activities of the MSME sector. Each Ministry has a component on employment
creation.
• The Ministry of Youth, Sport and Child Development and Agriculture and
Cooperatives provide training in the fields of entrepreneurship, management and
production.
• The Ministry of Science, Technology and Vocational Training, provide training in
entrepreneurship, accounting and managerial skills.
• Ministry of Labour, responsible for implementing the National Employment and
Labour Market Policy and Zambia Decent Work Country Programme
• The Ministry of Agriculture and Cooperatives provide skills training for small
scale farmers to develop and improve their productivity and create employment;
• Ministry of Local Government and Housing provide land, infrastructure and
licensing, are also responsible for district administration and are in charge of
decentralization and have a unit that constructs houses and provide credit for the
poor communities.
• The Ministry of Community Development and Social Services provides material
and monetary assistance to the aged, people with disabilities, disadvantaged, poor
families and women’s groups.
• Gender in Development Division and Ministry of Women and Gender in
Development responsible for implementing the Joint Gender Support Programme.
Currently, the policies in the line ministries identified above are parallel to this MSME
Policy because collaboration structures have not yet been established. There will
therefore be need to establish collaboration with the identified Ministries in order to
create cohesion in the delivery of support activities.
37
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Annex ii: List of people interviewed
1) Mr. John Paton, Team Leader, Capacity Building for Private Sector Development,
MCTI
2) Mr. S. Siakalenge, Director Planning, MCTI
3) Ms Viola Chipere, Chief Economist, Industry, MCTI
4) Mr. Mandesi C. Kaumba, MSME Technical Advisor, MCTI
5) Mr. John A. Mulongoti, Acting Chief Economist, Industrial Monitoring and
Evaluator, MCTI
6) Mr. Solomon Simutowe, Economist, MCTI

7) Mr. Timothy Siakazila, Chairperson, Zambia Chamber of Small and Medium
Business Association (ZCSMBA)
8) Ms. A. M. Banda Bobo, Registrar, Patents and Companies Registration Office
(PACRO)
9) Mr. Mutale Ng’andu, Director Planning, PACRO
10) Mr. Maxwell D. Sichula, Executive Secretary, Zambia Chamber of Small and
Medium Business Associations (ZCSMBA)
11) Ms. Edina M. Mudenda, Director, Non-Bank Financial Institutions Supervision
12) Mr. Mukuka W.B. Nuukwe, National President, Small Scale Industries
Association of Zambia (SSIAZ).
13) Mr. Efreda Chulu, Director, Census and Statistics Organisation.
14) Mr. Nteema Muzandu, Acting Inspector, Zambia Bureau of Standards
15) Dr. Tambatamba, TDAU, University of Zambia
16) Mr. Gerry Finnegan, ILO Regional Director, ( Zambia, Malawi and Mozambique)
17) Ms. M.M. Hampango, Director of Planning, Ministry of Youth and Sport and
Child Development
18) Ms. Maderine Bbalo Mbuta, Director of Planning, Ministry of Labour and Social
Services
38
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Annex iii: References
1. Citizens Economic Empowerment Act 2006. Republic of Zambia
2. Development of Micro and Small Enterprises for Health and Employment creation
for poverty Reduction, a Session Paper. Ministry of Labour and Human Resource
Development, Republic of Kenya, 2007.
3. Empowering Small Enterprises in Zimbabwe. World Bank Discussion Paper No. 379.
1977
4. Fifth National Development Plan, 2006 – 2010, December 2006. Ministry of Finance
and National Planning
5. Guide to writing National Policy Documents and Cabinet Memorandum, July 2002.
Republic of Zambia.
6. Draft Report on Small and Medium Enterprises Survey 2003 -2004. Ministry of
Commerce Trade and Industry
7. Micro and Small-Scale Enterprises in Zimbabwe: Results of a Country Wide Survey
by Michel A. Mc Pherson, Michigan State University World Bank, 1991, Gemini
Technical Report 25.
8. Micro and Small Enterprises Development Strategy, Ministry of Trade and Industry,
Republic of Ethiopia, November, 1997
9. Policy Document, Ministry of Labour and Social Security - NELMP
10. Policy Document, Ministry of Youth and Sport and child Development
11. Policy Document , Ministry of Community Development and Social Protection
12. Policy Document, Ministry of Local Government and Housing
13. Report training in “Enterprises Networking Regional Development” December, 2002.
JICA.
14. Report on the Review of the Development Agency (ZDA) Act 2006. 2007. Zambia
Business Forum.
15. Small Enterprise Development Act, 1996. Republic of Zambia
16. Vision 2030 “ A prosperous middle – income Nation by 2030, Republic of Zambia,
December 2006
17. The Zambia Development Agency Act, 2006. Republic of Zambia
39
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18. Medium and Small Enterprise Basic Law, Law No. 154 July 1963 (Seminar on Small
Industry Development, 1996. Nagoya International Training Centre, Japan
International Corporation Agency.
19. Outline of Small and Medium Enterprise Polices of the Japanese Government, 1995,
Small Enterprise Agency
20. The Triangle of Hope Initiative
40
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REPUBLIC OF ZAMBIA

MINISTRY OF COMMERCE, TRADE AND

(FINAL REVISED DRAFT)

LIST OF ACRONYMS ...................................................................................................... 3

Micro, Small and Medium Enterprise Development Policy

Micro, Small and Medium Enterprise Development Policy

Through an Act of Parliament, Government established the Small Industries Development

Felix Mutati, M.P.

Micro, Small and Medium Enterprise Development Policy

Lastly, the unwavering commitment of officials from of the Ministry of Commerce,

Micro, Small and Medium Enterprise Development Policy

Business Development Services

Citizens Economic Empowerment

Credit Reference Bureau

Legal and Regulatory Framework

Micro, Small and Medium Enterprise Development Policy

Micro Small Business Centre

Millennium Development Goals

Multi Facility Economic Zones

Poverty Reduction Strategy Paper (PRSP)

Private Sector Development Reform Programme (PSDRP)

Small Aggregate Initiative

Triangle of Hope Initiative

Micro, Small and Medium Enterprise Development Policy

Micro, Small and Medium Enterprise Development Policy

a) Specified targets to be achieved were not set and strategies to be employed to

Micro, Small and Medium Enterprise Development Policy

Micro, Small and Medium Enterprise Development Policy

Micro, Small and Medium Enterprise Development Policy

• Limited access to markets,

• Limited technical and management skills

Micro, Small and Medium Enterprise Development Policy

2.2 Policy Goal

2.3 Guiding Principles

• Government shall collaborate with private sector, cooperating partners non

Micro, Small and Medium Enterprise Development Policy

2.4 Policy objectives

i) To facilitate creation and development of viable Micro Small and Medium

v) To enhance Local Economic Development thereby stimulating broad based economic

2.5 Definition of Micro Small and Medium Enterprises (MSMEs)

Below is the official Zambian definition of Enterprises in the MSME sector.

Micro, Small and Medium Enterprise Development Policy

2.5.2. Small Enterprises

2.5.3 Medium Enterprises

i) Whose total investment, excluding land and building;

Micro, Small and Medium Enterprise Development Policy

2.5.4 Informal Enterprise

i) Whose total investments excluding Land and Building shall be up to Fifty

ii) Employing less than Ten (10) persons.

Micro, Small and Medium Enterprise Development Policy

3.1 Focus Areas

Micro, Small and Medium Enterprise Development Policy

3.2.1 Entrepreneurship Development

3.2.1.2 Policy statement

Micro, Small and Medium Enterprise Development Policy

vii) Develop youth enterprise development programmes that promote establishment of

3.2.2 Innovation and technological capacity of MSME

3.2.2.2 Policy statement

3.2.2.4 Policy Strategies

Micro, Small and Medium Enterprise Development Policy