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Giving recognition to SMEs through licensing

Written by  Sam Majamanda

Phalombe, December 16, 2019: Unregistered Small and Medium Enterprises (SMEs) lose out on many business prospects.

Southern Region Manager for Small and Medium Enterprise Development Institute (SMEDI) Lucy Limbe says most lucrative business opportunities are offered to registered firms hence the need for all SMEs to get registered.

 “Serious business people don’t deal with non-registered businesses because they want every deal between them and their business partners to be legal. As such, registering a business is a step into winning good business,” Limbe says.

Many Malawians are either in small or medium entrepreneurship for a living. But, as Limbe says, many of them do not grow because they are not properly registered.

“Most Malawians consider SMEs as the easiest way of doing business because they are not bothered with the rigorous activities involved in the registration process, let alone regular payment of taxes.

“But in the end, non-registration, usually, has some effect on their businesses,” Limbe explains.

Phalombe District Assistant Trade Officer Aubrey Mwamadi concurs with Limbe that SMEs fail to grow because they are not registered.

Mwamadi says most SMEs fail to grab lucrative tenders that non-governmental organisations (NGOs) and government institutions offer in the district because they are not registered.

“Despite having a huge turn-over of businesses in the district, only a few SMEs are registered with the office of the Registrar General and the Malawi Revenue Authority (MRA).

“As such, when tenders are announced, a larger percentage of businesses that compete and win are usually from other districts,” he says.
Mwamadi says entrepreneurs ought to know that supply business brings more returns than retail business.

“That’s why most of the businesses that grow quickly are the ones that sell in bulk. So, if a business is not registered, it means, technically, that it is denying itself growth,” Mwamadi says.

He explains that since institutions prefer to deal with registered businesses only, it is suicidal for SMEs to keep running unregistered.

“Registration is not just standard practice but a requirement in the public procurement procedures. Businesses which are registered easily get recognition as law abiding.

“They pay taxes and contribute to national development, that is why government recognises them and gives them more deals as opposed to non-registered ones,” Mwamadi says.

He further explains that the beauty about dealing with government and NGOs is that bids and tenders in the two sectors keep on coming.

“As such, a business that positions itself for such opportunities has potential for growth,” he says.

Malawi Government established SMEDI in February, 2013 as one way of ensuring that SMEs eventually grow into big entities while operating legally in the country.

SMEDI came into being through an operations’ merger of the Small Enterprise Development Organisation (SEDOM), the Development of Malawian Enterprises Trust (DEMAT) and the Medium Enterprise Development Institute (MEDI).

Its main mission is to promote the development and growth of sustainable micro, small and medium enterprises in the country.

From mid 2018, SMEDI embarked on a mission to sensitise SMEs on issues of business registration and facilitate the registration process for small enterprises in rural areas.

At Chitekesa in Phalombe and Namphungo in Mulanje, SMEDI created understanding of the benefits of business registration and provided an on-the-spot registration opportunity to those who were ready to register.

“We have been to Mwanza, Neno, Phalombe and Mulanje where we met SMEs with whom we discussed the benefits of running registered businesses as opposed to operating illegally,” says Ahad Kayesa of SMEDI.

Kayesa further says the campaign continues to other districts as the organisation’s objective is to ensure that all businesses in the country are registered.

“This will also facilitate compliance to payment of taxes through the MRA.

“A business that is not paying tax operates illegally according to the laws of Malawi; as such, by assisting business people to register and start paying tax, we are reducing lawlessness,” Kayesa says.

In addition, SMEDI is also mandated to facilitate access to finance, information and markets for SMEs and to provide relevant needs-based business development services.

But while some small-scale business persons appreciate the need to register their businesses, they bemoan lack of registration offices in rural areas and that it takes long to get registered at the office of the Registrar General.

Mulawiha Kashoti from Phalombe says he has been failing to register his business due to the length of time the office of the Registrar General in Blantyre takes to issue the license.

He says much as the business registration cost is relatively cheap (K2, 000), the idea of travelling to Blantyre now and again to check on the progress of the registration process dissuades those in rural areas.

“Some of us understand the importance of registering our businesses but the registration process itself proves tedious to a rural business-person like me.

“Given these on-the-spot registration opportunities, I am sure many will register their businesses,” Kashoti says.

He acknowledges that unregistered businesses lose out as they do not participate in bulk sales at NGO and government institutions.

“Even securing loans becomes very difficult for a business that is not registered,” Kashoti says.

Section 3 of the Business Names Registration Act of Malawi requires that every business operating in the country be registered and the Act criminalises unlicensed businesses.

To this effect, SMEDI is advocating for SMEs to run legally recognised businesses.

“A business grows when it wins bulk sale opportunities and acquires business loans; but these opportunities are for registered businesses.

“Institutions involved with business registrations such as MRA and the Office of the Director of Public Procurement should consider decentralising their functions to district level so that they can be easily accessible,” Kashoti says.

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