Local small businesses in Eswatini are struggling to survive due to increasing competition from foreign-owned businesses, rising operating costs, and limited access to finance. Economist Dr. George H. Choongwa, Coordinator at the Southern African Research Foundation for Economic Development (SARFED), has raised concerns about the survival and contribution of these small and medium-sized enterprises (SMEs) to economic growth. SMEs are regarded as the backbone of sustainable economic growth and development.
Dr. Choongwa's policy brief, titled 'Local SMEs might face extinction due to foreign takeovers: Government to guard against business failure,' cautions that without stronger policy interventions, indigenous businesses could increasingly struggle to compete, potentially contributing to economic stagnation. He notes that local SMEs face both external and internal economic pressures that threaten their survival and competitiveness. The vulnerability of local enterprises within supply chains is a major concern.
Many local SMEs operate under a business model in which they supply established firms through confirmed orders but often wait for periods of at least 30 days to receive payment. This arrangement creates working capital pressures, particularly when businesses are simultaneously dealing with escalating commodity prices and disruptions in global markets. Dr. Choongwa warns that some enterprises may struggle to sustain operations while waiting for payments.
The challenges facing SMEs are linked to the country's broader socioeconomic conditions, including unemployment, inequality, and declining household purchasing power. Unemployment among young people aged between 15 and 24 years stands at more than 52 per cent. Approximately 54 per cent of the population lived below the Lower Middle Income Consumption poverty line of US$4.20 per day in 2021.
The country's Gini coefficient of 51.2 indicates uneven income distribution. Escalating living costs disproportionately affect lower-income households, which spend a larger share of their income on essential goods and services such as food, fuel, housing, and electricity. Lower-income households spend between 40 and 50 per cent of their income on basic essentials.
Dr. Choongwa cautions that persistent inflation could erode the country's middle-income population by pushing more households towards poverty, with wider implications for economic security and the country's development ambitions. Failure to introduce policies that strengthen local enterprises could result in foreign businesses gaining greater dominance in the domestic market.
Dr. Choongwa emphasises that the issue should not be treated as a political matter but rather approached through comparative economic analysis and practical policy interventions. Improving the competitiveness of local businesses should not necessarily mean restricting foreign participation but creating a fairer business environment in which indigenous enterprises can become more sustainable.
Key points
- Local SMEs in Eswatini face extinction threats from foreign competition, rising operating costs, and limited access to finance.
- The country's socioeconomic conditions, including unemployment and inequality, exacerbate the challenges facing SMEs.
- Policy interventions are necessary to strengthen local enterprises and create a fairer business environment.
