Mbabane: The Southern African Research Foundation for economic development (SARFED) has advised that government should consider sustainability of SMEs through the development of the cottage industry which would boost both rural and urban entrepreneurship.
A cottage industry is a collection of related businesses at domestic level.
In its weekly paper, the economic and business commentary Vol.4, Issue 37, November 2020, SARFED says research indicates that the cottage industry sector development is a catalyst for entrepreneurial development as countries like India, Bangladesh, China, Tanzania, Mauritius, and Sudan had already adopted it which gave positive outcomes for the alleviation of poverty especially at micro level.
“The understanding to the development of the cottage industry is that this sector is key for the development of any economy including Eswatini and that it has the potential to positively affect other levels of the economy which includes: micro, meso, and macroeconomic levels”.
The paper states that it is anticipated that by the year 2021, about 50 percent of the Small and medium-sized enterprises (SMEs) are likely to collapse in Eswatini due to COVID-19 crisis. The implication to this negative outcome is in two folds; one being loss of income for people involved in SMEs as well as shrinking of the industrial development sector.
With this, the cottage industry has the capacity to boost the economy through the SME development in the country. It improves not only the business ecosystem of the country, but also has the potential to create a sustainable integrative ecosystem for three strategic economic sectors the SMEs (which is also the informal private sector), the formal private sector, and the government which is also the public sector.
While the level of unemployment is expected to be higher than the 22 percent due to COVID-19 crisis which has left many companies with no options but to lay off thousands of labour force, the national strategy for sustainable development and inclusive growth through 2030 and the strategic road map for 2019–2022, guide the development and economic recovery of Eswatini, as it recognize the critical dimensions of human development, including poverty reduction, employment creation, gender equity and social integration.
The key priority sectors include agriculture, agro-processing, social assistance and emergency preparedness and response. For this to have been achieved there is need for an effective and result based development of the cottage industrial sector in Eswatini.
According to SARFED one key advantage of developing this sector is that it did not only broaden the market base for the local entrepreneurs, but it is a skills and human capital development framework which contributed to the development of the sustainable human capital development in Eswatini.
The fact that the cottage industry has potential to grow exponentially, it has the capacity to form both horizontal and vertical integration which would eventually boost industrial supply chain for various industries in the country. This would eventually attract both local and foreign direct investments to the country.