INTERNATIONAL UNIVERSITY OF MANAGEMENT

SCHOOL OF MANAGEMENT AND SCIENCE

DEPARTMENT OF BUSINESS MANAGEMENT

THE CONTRIBUTION OF SMALL TO MEDIUM ENTREPRISES TO THE

DEVELOPMENT OF THE NAMIBIAN ECONOMY

A CASE STUDY OF THE MINISTRY OF TRADE AND INDUSTRY

BY

Klaudia T. Shigwedha

STUDENT NO : 1100 06151

A RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILMENT OF THE

REQUIREMENTS OF THE HONORS DEGREE IN BUSINESS ADMINISTRATION

SUPERVISOR : Dr. Matipira

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DATE / YEAR : 31 October 2014

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DECLARATION

I Klaudia T. Shigwedha, do hereby declare that the contents of

this research are totally my own intellectual property as

submitted to the International University of Management during

the 2014 academic year. In this research, virtually everything

was solely done by me except in instances where the work of

other scholars have been used, in such cases, APA style

referencing was used to acknowledge that the work was not my

own. This research has never and shall never be submitted to

any other awarding body, or any other institution for possible

evaluation and shall not entirely form part of this

researcher’s other works in the future.

........................................ ………………………………………

Student Signature Date

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DEDICATION

I dedicate this project to me parents who natured me from

tender age to be who I am now, they even encouraged me to

enrol into tertiary institution and for that I owe them

success. I also dedicate this study to the Almighty God for

being my creator, my protector and my guide right from the

start of the study till its conclusion. Lastly but not least,

I dedicate this study to the future researchers especially

those who shall trade in similar fields like this study and

who shall need and use and reference my material as part of

their work. May God bless you!

_____________֍Ω֍_____________

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ACKNOWLEDGEMENTS

This study would not have even kick started without the

following great people’s enormous contribution towards its

completion. I wish to acknowledge their tireless efforts for

the completion of this study.

Mr Bla Bla

Ms Bla Bla

Ms Bla Bla

Mr. Bla Bla (Supervisor)

Dr Bla Blab a ha ha

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ABSTRACT

The relevance of SMEs in any economy worldwide cannot be

overemphasized and this has dictated some policy reforms and

responses in many countries. This qualitative study shall

seek to engage a descriptive approach to assess the

relevance of SMEs in state and national economies in

Namibia. The main aim is to determine the extent of

relevance as well as the contribution of the SME sector in

the Namibian economy.

Some benchmarking research revealed that the SME sector in

Namibia has not been very relevant in the areas of

enterprise creation, employment, contribution to GDP and

export earnings as well as global competitiveness. The study

concluded that the government needs to do more to support

the SMEs and other stakeholders to enhance relevance of the

sector in the Namibian economy.

The Namibian government with the help of the Ministry of

Trade and Industry should formulate and implement policies

that foster industry cluster strategy, stimulate local

demand for products of the SMEs by making it mandatory for

the appliances and equipment needs of its institutions and

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agencies be 80% of products of SMEs in Namibia amongst

others. This study shall seek to use the Ministry of Trade

and Industry as a case in point since it is the incubation

center for the small to medium enterprises.

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Table of Contents1. INTRODUCTION & BACKGORUND......................................11.1. INTRODUCTION..................................................11.2. BACKGROUND OF THE STUDY.......................................21.3. PROBLEM STATEMENT.............................................31.4. PURPOSE OF STUDY..............................................31.5. RESEARCH OBJECTIVES...........................................31.6. RESEARCH QUESTIONS............................................41.7. LIMITATIONS...................................................41.8. DELIMITATION OF STUDY.........................................41.9. SCOPE OF THE STUDY............................................51.9.1. SUBJECT SCOPE...............................................51.9.2. GEOGRAPHICAL SCOPE..........................................51.9.3. TIME SCOPE..................................................51.9.4. POPULATION SCOPE............................................61.10. DEFINITION OF TERMS.........................................61.11. STRUCTURE OF THE STUDY......................................61.12. CONCLUSION..................................................72. LITERATURE REVIEW..............................................82.1. INTRODUCTION..................................................82.2. THEORETICAL FRAMEWORK.........................................82.2.1. CRITERIA TO DEFINE AN SME...................................82.3. HOW GOVERNMENT ASSISTENCE CAN LEAD TO SME PRODUCTIVITY........92.5. IMPACT OF GOVERNMENT INTERVENTIONS ON SMES...................112.5.1. CHALLENGES THAT SMES FACE..................................132.6. THE CONTRIBUTION SMES TO AN ECONOMY..........................142.7. COMMITMENT...................................................162.8. EMPLOYEE EVALUATIONS.........................................172.9. RELATIONSHIP BETWEEN THE RECRUITMENT AND SELECTION PROCESS AND EMPLOYEE TURNOVER AND PERFORMANCE.................................172.10. CONCLUSION.................................................183. RESEARCH METHODOLOGY..........................................19

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3.1. INTRODUCTION.................................................193.2. RESEARCH DESIGN..............................................193.3. POPULATION...................................................193.4. SAMPLE SIZE..................................................203.5. COLLECTION AND RECORDING OF DATA.............................203.6. MEASUREMENT INSTRUMENTS......................................203.7. RESEARCH ETHICS..............................................213.8. CONCLUSION...................................................214. DATA ANALYSIS AND RESULTS.....................................224.1. INTRODUCTION.................................................224.2. RESEARCH ANALYSIS AND INTERPRETATION.........................224.3. INTEPRETATION OF RESULTS.....................................284.3.1. THE RECRUITMENT AND SELECTION PROCESS AT NAC...............284.4. CONCLUSION...................................................325. CONCLUSION AND RECOMMENDATIONS................................335.1. INTRODUCTION.................................................335.2. RECOMMENDATIONS..............................................335.3. CONCLUDING REMARKS...........................................345.4. IMPLICATION OF THE RESULTS...................................345.5. FUTURE RESEARCH SUGGESTIONS..................................355.6. CONCLUSION...................................................35

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CHAPTER ONE

1.INTRODUCTION & BACKGORUND

1.1. INTRODUCTION

There are previous attempts in studies to show the

relevance of small and medium enterprises (SMEs) in the

growth and development processes of the developed

economies, and highlight the fact that SMEs are very

relevant as engines through which the growth and

development objectives of developing countries can be

achieved.

Among the areas of relevance are employment, contribution

to gross domestic product (GDP) and export commodities

according to Oni et al, 2012

Okwu (2011) however noted that SMEs provide employment,

produce goods and services and, thus in a way, contribute

to the general growth of the society and economy as a

whole. Daniels et al, 1993 contends that SMEs employ

approximately 22% of the adult population in developing

countries however, (Henriques, 1998) considers

development of the SME sector crucial for the achievement

of broader development objectives of eradication of

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poverty, economic development as well as and the

promotion of more democratic and pluralist societies.

The 2005 United Nations Conference on Trade and

Development (UNCTAD) noted that small and medium-sized

enterprises (SMEs) are important agents of development

throughout the world, and that promoting a country’s SME

sector is vital for sustainable high employment rate and

income generation and, as such, critical for achieving

sustainable growth. UNCTAD (2005) further contended that,

despite the general recognition that SMEs are important

contributors to the domestic economy, not many

governments have framed policies to enhance their

contribution or increase their competitiveness. Most

central governments have no reliable statistics on what

the SMEs actually contribute to the fiscus. Lack of a

uniform definition, high cost of an industrial census,

and the fact that many SMEs do their own things without

government control explains that the reasons for poor

statistics on SMEs. This may have contributed to the less

emphasis on SMEs sector development in Namibia and, thus,

the neglect of its relevance.

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This paper deliberated the contribution of small and

medium enterprises (SMEs) in the

Namibian economy within the context of enterprise

creation, employment generation, contribution to export

earnings and global competitiveness. The paper included

five Chapters.

1.2. BACKGROUND OF THE STUDY

This study was done to partially fulfil the requirements of

the Bachelor in Human Resources Degree while on the other

hand, it came to explore the possible contributions that the

small to medium enterprises make towards the overall

Namibian economy. This qualitative study was a study that

opened not only the researcher’s eyes, but potentially of

future researchers in similar fields. The main case in point

was the Ministry of Trade and Industry because it registers

and support SMEs. The SME sector carries great hopes and

great burdens in the evolution of all of the transitional

economies like Namibia. Governments must step up their

support of such sectors as their sustained and healthy

growth is not only necessary but crucial for the development

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of low to medium income earners who can’t be entirely

absorbed in the private sector. This study sought all the

answers pertaining to the contribution of the SMEs to the

growth and development of a country’s economy. It covered 5

chapters which included the second one which dealt with

review of literature, the research methodology as well as

the analysis of findings as well as the conclusion and

recommendations. The questionnaire was attached at the very

end of the study which was a template which was used during

the data collection period recorded in the research

methodology.

1.3. PROBLEM STATEMENT

This study was designed to solve problems that has arisen

within the Namibian economy, it brought the contribution

that SMEs make towards the economic growth and development

of the Namibia under the spotlight. The public domain was

awash with complaints from the SMEs that they were not

getting the necessary recognition and support from Central

Government so this study came in handy to assess their

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importance to the economy as well as to justify their need

for such support.

The SMEs further complained about their victimization by

large scale and/or foreign companies which made the industry

less competitive and conducive for small scale companies. In

a way this study sought to justify the existence of small

scale enterprises as well as to highlight the continuous

contribution they make to the growth of the Namibian

economy.

1.4. PURPOSE OF STUDY

The main purpose of this study was to highlight the

contribution that the SMEs make to the overall success of

the Namibian economy. In tandem with that, the research

objectives and questions were outlined as follows.

1.5. RESEARCH OBJECTIVES

The main objectives of this study were set as follows:-

To scrutinize the quantifiable contribution that the

SMEs are making to the overall Namibian economy.

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To assess how the nature of assistance that the SMEs

receive from the Central Government through the

Ministry of Trade and Industry.

To check the meaningfulness of the SMEs contribution

and sustainability to the economy and to the

eradication of unemployment in Namibia.

1.6. RESEARCH QUESTIONS

These questions were derived from the objectives stated

above

What percentage of the GDP is contributed by SMEs?

What sort of help do the SMEs receive from the

government and how far does it go in helping them out

of their capital blues?

How durable is the government assistance to the SMEs?

1.7. LIMITATIONS

This research had to overcome a host of limitations in

its quest towards its completion. Obviously the

researcher being a student, resources were a challenge to

mobilize to fund the study, arranging interviews was also

another challenge too. Sometimes, respondents were either

too busy to attend to this researcher or they were

preoccupied with the issues of their businesses they

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couldn’t spare a second to attend, so these constraints

made the researcher to conduct the study in Windhoek

only. However, in spite of those limitations, the study

went on well and its findings were not compromised

either.

1.8. DELIMITATION OF STUDY

The study focused only on Ministry of Trade and

Industries department of SME Support Center. This made

life easier because the researcher was running out of

time and finances so he narrowed in on this department.

Even though one department was chosen, all interviews

were done individually and the respondents were advised

not to share information amongst themselves.

1.9. SCOPE OF THE STUDY

1.9.1. SUBJECT SCOPE

The subject scope was confined to the contribution

of SMEs to the Namibian economy a case of Ministry

of Trade and Industry. The study could have been

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broader to include other Ministries but the only

challenge was that it would have ended up very broad

and difficult to carry out especially with the

limited time and resources there was.

1.9.2. GEOGRAPHICAL SCOPE

This study was confined to both primary and

secondary data obtained from the Ministry of Trade

and Industry Namibia situated next to NamPower

Convention Center. The study sought as much

information that could be available from Windhoek

even though a provision was made in case there was

information that was needed to be collected from out

of town, telephone interviews were made.

1.9.3. TIME SCOPE

This research was carried out within 3 weeks in the

month of August 2014. The arrangement and analysis

of the data took another 2 weeks into September

2014. The completion of the entire project was done

by end of October 2014.

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1.9.4. POPULATION SCOPE

The population from which a sample was selected

comprised respondents from the SME Support

department at Ministry of Trade and Industry. This

was because they are the ones directly dealing with

aspects of the SMEs. The staff compliment in this

department was recorded to be 12 employees. The

sample size was discussed in the methodology

chapter.

1.10. DEFINITION OF TERMS

Having gone through the entire study, this researcher

noted some difficult terms that needed to be defined to

make life easier for future scholars who might want to

use this study as the basis for their studies too. These

are defined as follows:-

Ministry of Trade and Industry – this is a branch of

government which deals with the facilitation of local

and international trade involving Namibia. They also

assist SMEs to grow though the provision of SME support

finance. The definition was confined to this even

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though the Ministry also have a mandate to register

patents and the like.

SME – Small to Medium Enterprise is a company that

operate at a small scale with less than 50 employees

and/or the revenue of less than NAD50 000 per month.

1.11. STRUCTURE OF THE STUDY

This research was conducted on location at the Ministry

of Trade and Industry at its Headquarter. 10 respondents

out of the total of 12 employees were selected to

participate in the study. Even though some slight

logistical challenges led to the delay in completion of

this project, it finally came to completion.

Overally, 10 questionnaires were administered

concurrently with the conducting of the interviews. The

filling of questionnaires was the most hectic and tiring

after which the data was collated and arranged into a

presentable manner understandable by even a lay person.

At the conclusion of the research, recommendations were

made.

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1.12. CONCLUSION

In conclusion, the purpose of this study was to

investigate the contribution that SMEs make towards the

Namibian economy with mush reference to the Ministry of

Trade and Industry. In the next chapter the literature

was reviewed with a possible link towards the aspects of

this study.

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CHAPTER TWO

2.LITERATURE REVIEW

2.1. INTRODUCTION

This chapter discussed the historic studies and previous

literature that past scholars did which was related to

this research. The topics discussed under this chapter

was closely linked to the research objectives as well as

the research questions.

Since this research topic was not researched much by

previous scholars, so much in a broader view to the

reader on the contribution of SMEs to the economy, this

paper managed to scavenge for the little information that

was available.

2.2. THEORETICAL FRAMEWORK

2.2.1. CRITERIA TO DEFINE AN SME.

Various agencies, institutions and authors have

conceptualized and defined small and medium enterprises

(SMEs) in their own unique ways. Beckley (1989) defines

small and medium scale enterprises varies according to

context, author and countries. Organization for Economic

12

Cooperation and Development (OECD), 2004 explained that

how SMEs are defined usually depends upon the scale of

and structure of business in the economy and varies from

one country to the next. The concepts and definitions are

usually on the basis of size or amount of investment in

assets, annual turnover and number of employees. For

example, in the USA, Britain and Canada, small scale

business is defined in terms of annual turnover and the

number of paid employees.

Britain conceives small scale business as that industry

with annual turnover of 2 million pounds or less, with

fewer than 200 paid employees (Ekpeyong & Nyang, 1992)

while Japan defines small scale enterprises as those

manufacturing with 100 million yen paid up capital and

300 employees.

However, Ogechukwu (2006) identifies more general and

comprehensive criteria for defining small and medium

scale enterprises in different countries to include

number of employees, annual turnover, local operations,

sales volumes, financial strength, managers and owners

autonomy, relatively small markets compared to their

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industries and capital usually supplied by individual or

shareholders.

The factors that govern the performance and relevance of

the SMEs include policy of the government such as

regulation and deregulation, infrastructure, access to

external finance, technology, competition and corruption

in the business environment in which they operate. Quite

a lot of studies have attempted to scrutinize how the

factors affect the performance and, thus, enhance or

becloud the relevance of the SMEs in state and national

economies.

2.3. HOW GOVERNMENT ASSISTENCE CAN LEAD TO SME PRODUCTIVITY

Dollar, Hallward-Driemeier and Mengistae (2005) used the

World Bank Enterprise data to study how infrastructure,

access to external finance and frequency of yearly visits

by relevant government agencies affect productivity,

wages, profits and growth rates of outputs of firms in

countries like Bangladesh, China, and Pakistan. Dollar

et.al found that infrastructure is the most important

element in explaining performance and, by extension,

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relevance of the SMEs in these countries. They came to a

conclusion that suitable infrastructure enhances

productivity, higher returns, and higher economic growth

rates. In his other study, Dollar et al. (2006) used a

samples from SMEs in Bangladesh, Brazil, China, Honduras,

India, Nicaragua, Pakistan and Peru to establish that

infrastructure facilitates international integration via

foreign ownership and exporting.

Fernandes (2008) noted that infrastructure enhances SMEs’

performance and relevance in Bangladesh. In order to

examine the relationship between some of the determinants

of SMEs performance and relevance, on the one hand, and

relative size of SMEs’ sector, on the other hand,

Ayyagari, Beck and Demirguc-Kunt (2005) used a cross-

country database on contribution to employment in

Manufacturing and GDP across 76 countries. Among other

findings, they established a stronger support for the

hypothesis that a large SME sector is due to a competitive

environment that allows and encourages entry of new

innovative firms.

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In a study that Kayanula and Quartey (2000) carried, they

assessed the policy environment aimed at promoting SMEs in

Ghana and Malawi. They considered access to finance,

access to appropriate technology, existing laws, rules and

regulation as well as institutional capacity. SMEs’

performance and relevance indicators in the study were

management skills and training, potential for future

growth of employment and turnover as well as contribution

to poverty eradication. They established that limited

access to finance and appropriate technology, management

skills and training, deterring existing laws, rules and

regulation are among the constraints that impede the

development and relevance of the sector.

2.4. FACTORS THAT AFFECT SME PRODUCTIVITY AND EFFECTIVE CONTRIBUTION TO THE ECONOMY

A critical symptom of bad political environment is

corruption or the abuse of public office for personal

gain. Shleifer and Vishny (1993) highlighted that

corruption is potentially dangerous. Under the auspices

of the World Bank, some recent micro studies found

corruption to be more damaging than taxation. Using

Ugandan firm data set on bribery payments, Fisman and

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Svensson (2007) discovered that both have a negative

effect on SME. Similarly, Cai et al. (2011) used a large

sample of the Chinese companies, and established that

corruption has a significant negative effects on firm

productivity. They also discovered that the negative

effects diminishes with high tax burdens and bad

government services. This suggests that private returns

accrue to the enterprises in bribing the government.

Hallward-Driemeier Scott and Lixin (2006) worked on the

World Bank Investment Climate Survey to study the effect

of labour regulation on SMEs’ sales growth, investment

rate, total factor productivity and employment growth in

five Chinese cities. They came to a conclusion that firms

perform better and tend to be more relevant under

flexible labour regulation. Likewise, Dong and Xu (2008,

2009) expounded on the fact that during the past two

decades, China adopted remarkable labour flexibility and

achieved economic growth.

Some studies have attempted to examine the constraints to

relevance of SMEs in the Nigerian economy. Obamuyi (2007)

concluded that poor credit worthiness, lack of collateral

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security, poor-project package and the constraint imposed

on banks’ capital by regulations were among the several

factors responsible for banks’ attitude of restricted

loan portfolio to the SMEs. Akinbogun (2008) noted that

while Nigerian physical environment and people’s culture

have been favourable towards the business enterprises,

the infrastructural facilities and government policies

have not. He therefore examined the impact of

infrastructure and government policies on survival of

small-scale ceramic industries in South-West of Nigeria,

and found that infrastructural facilities and government

policies have not encouraged viable small-scale ceramic

industries in Nigeria. This has serious implication for

their relevance in the states and national economies.

2.5. IMPACT OF GOVERNMENT INTERVENTIONS ON SMES.

In order to examine the impact of government intervention

on the growth of the SMEs in Imo State, Nigeria Onwukwe

and Ifeanacho (2011) used primary data on some SMEs, and

found that policy formulation and implementation

constitute a major constraint to growth of the SME sector

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and, thus, its relevance despite several specialized

institutions in charge of micro credit and policy

instruments to enhance development of the SMEs.

In another related study, Oni and Daniya (2012) examined

the role of government and other financial institutions

in the development of SMEs in Nigeria. Employing

deductive approach, they concluded that the government

still needs to do a lot in terms of policy formulation in

order to complement the efforts of financial

institutions. Thus, they recommended, among other things,

establishment of more micro finance institutions to serve

the grass root financial needs of the SMEs.

The Nigerian Government has used various policies and

incentives in attempts to promote and enhance performance

and relevance of the SMEs. Olorunshola (2003) clarified

that the Government has introduced policy measures

through national development plans, annual budgets and

its agencies to provide financial assistance, training

and some infrastructural support to SMEs. The Government

has been lively in the following areas amongst others:

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Funding and setting up industrial areas and

estates and incubation centers

Providing local finance through its agencies – the

Central Bank, Ministry of Trade and Industries and

through the Development Bank as well as the

Chamber of Commerce and Industry.

Assisting and guaranteeing external finance

through the World Bank, African Development Bank

and other international institutions willing to,

and capable of assisting Namibia SMEs;

Facilitating the establishment of the National

Directorate of Employment (NDE) which also

initiates the setting up of new SMEs;

Setting up of the one-time National Economic

Reconstruction Fund (NERFUND) which is a source of

medium to long-term local and foreign loans for

small and medium scale businesses, particularly

those located in the rural areas;

Initiating the then Family Economic Advancement

Programme (FEAP); and

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Provision of technical, training and advisory

assistance programmes through establishment of

Industrial Development Centres, etc.

2.5.1. CHALLENGES THAT SMES FACE

Problems of the SME sector the world over seem to have

been so common and highlighted and discussed in the

literature by various institutions, agencies and authors

(World Bank, 1989). Maijama’a (2004) notes that the

condition under which SMEs are operating in the world

over is terrible. Akinbogun (2008) observes that the

manufacturing sector at all levels is performing below

expectation, and traces the nonperformance mainly to the

unfavorable economic environment. In the same vein,

Owoseye (2011) explains that the major complaints by the

SME operators have been lack of funds and unfavorable

business environment. To ensure SME-friendly business

environment, Maijama’a (2004) however believes

government’s provision of appropriate monetary and fiscal

policies, reliable infrastructure such as electricity,

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water, roads, railway and telecommunication, security of

life and property, and vibrant SME support institutions.

Specifically, Namibia’s Vision 2030 policy document on

SMEs (2004) identifies certain exogenous and endogenous

factors that constitute problems to SMEs’ performance and

relevance. These include inadequate institutional

support, poor infrastructure, limited or no access to

external finance, weak corporate governance, poor

business partnership culture, low human capital

formation, low level of technology adoption, and

insufficient innovation.

2.6. THE CONTRIBUTION SMES TO AN ECONOMY

According to Nigeria’s Vision 2020 NTWG on SMEs (2009:

27), SMEs are known to have significant relevance to all

world’s economies. In most parts of the world they

constitute about 90 percent of all business enterprises.

This and particularly their strong forward, backward and

intra-linkages with all other businesses, establishes

SMEs as the drivers of any economy and the engines of

22

economic development worldwide. With this they are able

to generate employment, create wealth and reduce poverty

incidence index.”

The above emphasis by the NTWG on SMEs (2009) clearly

shows that both developed and developing countries have

come to recognize the importance of the SME sector and

its relationship to large enterprises and the global

relevance that many countries are looking for in the

world economy. Many African governments have come to see

that running their own businesses is an inefficient

endeavor. Therefore, there are compelling arguments for

the development of a dynamic and competitive private

sector as a mechanism for the distribution of resources,

goods and services (Anheier and Seibel, 1987; Schmitz,

1995; White, 2004).

Akoga and Balcioglu (2010) explain the increasing policy

attention accorded the SMEs within the context of the

role they are expected to play in providing the driving

force for the industrialization and overall development

of the economy, in addition to their significant roles in

meeting some basic economic and industrial development

23

objectives. The various perspectives from which the

relevance of the SMEs in the state and national economies

has been considered include:

i. Training Ground for the Development and Growth of

Indigenous Entrepreneurs (Ayozie, 2006; Ogunleye

2004; Kelby, 1988). This agrees to Casson’s (1982)

view that by acting as a seedbed or nursery, usually

for indigenous population, they serve as vehicles

for the propagation and diffusion of innovative

ideas for far-reaching dimensions. They are more

flexible and can easily adapt to changes in the

external environment. In Italy, Ireland and Germany,

SMEs contribute to research and development (R&D) in

order to enhance their specialization along the

value chain and become successful global service

providers (Nigeria Vision 2020 NTWG on SMEs, 2009).

ii. Strengthening Industrial Inter-Linkages (Benzing,

Chu and Kara, 2009; Fabayo, 2009;

By producing intermediate products for use in large-scale

enterprises, the SMEs contribute to enhancing industrial

inter-linkages. This has been adduced as one of the

24

reasons for the increased interest which developing

countries have shown in the promotion of SMEs since the

1970s. SMEs in the US are given a position of prominence

in their national policy as the ‘backbone of the American

economy and the path to success for many Americans.

iii. Transition Channel from Traditional to Modern

Industrial Sector (Stefanovic et al. (2009);

Robichaud et al. (2001), Owualah, 1987). The SME

sector serves as the channel through which

traditional industry transits to modern industrial

sector. Thus, in developed and developing countries,

the SME sector has served and continues to serve as

the springboard for launching the economy into a

vibrant modern sector. This supports the United

Nations’ (1984) view that a fledging SMEs sector can

be a means of achieving a smooth transition from the

traditional to the modern industrial sector.

iv. Dispersal of Economic Activity (Akoga and Balcioglu,

2010; The SMEs assist in the dispersal of economic

activities thereby encouraging the modernization of

such activities outside the urban areas and, thus,

25

provide effective means resource mobilization and

mitigation of rural-urban drift.

v. Enterprise/Employment Creation, Employment

Generation and Poverty Reduction (Angahar, 2012) The

SMEs have been accepted as the engines through which

the growth objectives of developing countries can be

achieved. The manufacturing sector SMEs in Republic

of Korea contributed the highest at 81.9 percent

among developed economies. In Brazil, SMEs represent

81.4 percent of 4.6 million enterprises with 54

percent investing in social responsibility. The

Brazilian SMEs have been classified as the real

motors behind the country’s economic advancement

(Nigeria Vision 2020 NTWG on SMEs, 2009).

2.7. COMMITMENT

Employees that feel as though the company has made a

commitment to employee success tend to perform better,

according to Personnel Systems Associates (2014).

Commitment means offering a competitive rate of pay and

benefits package, offering assistance in paying for

26

employee's higher education costs, developing a regular

training schedule that keeps employees updated on company

changes and gives pertinent information for employees to

do their jobs and upgrading equipment to make sure that

employees have the most efficient technology available to

do their work. Commitment shown by the company is

returned in the form of commitment from employees.

2.8. EMPLOYEE EVALUATIONS

Chron, (2014) defined an effective employee evaluation as

an interactive process where the manager gives his input

on the employee's performance, and the employee gets the

chance to point out what she has learned throughout the

year. Managers create a plan along with the employee for

the coming year on how the employee can develop and

improve their performance. Comprehensive employee

evaluations are important to the ongoing performance of

employees.

In their arguments, they do not seem to mention the fact

of recruitment and selection seems to have a direct or

indirect impact on employee performance which is an

27

effective ingredient that this research is so much

looking.

2.9. RELATIONSHIP BETWEEN THE RECRUITMENT AND SELECTION PROCESS AND EMPLOYEE TURNOVER AND PERFORMANCE.

Ganon (1971) noted that the link that exist between

recruitment and selection exist because of the sources

from which the recruitment will have been done. He

concluded that, high school referrals, newspaper

referrals as well as recruiting agency referrals are not

good sources to recruit from. On the other hand, employee

referrals coming from other companies are good sources of

recruitment and selection.

NI Business Infor (2014) believes that a good recruitment

and selection process can help reduce the turnover of new

starters. But if the business suffers from the loss of

long-term employees then one may need to look at wider

issues such as organisational structure or management

style.

28

2.10. CONCLUSION

Having looked at the articles and reviewed them, it was

now left for the data collection to take place.

Nevertheless, previous studies conducted on the subject

of SMEs’ contribution to economies were instrumental to

the development of this study. Chapter 3 covered the

research and methodology, whereby the design and method

of how the study was carried was highlighted.

29

CHAPTER 3

3.RESEARCH METHODOLOGY

3.1. INTRODUCTION

This research required a methodology that understood

qualitatively, the justification of the existence of SMEs

in an economy, the researcher’s main emphasis was on the

Ministry of Trade and Industry so as to describe and

understand ideas, beliefs and values. The reason behind

the selection of this research type was that, it

benefited the researcher and probably those who shall use

this study for their future studies not to find data that

can be enumerated but find possible qualitative answers

to why things are happening the way they are happening.

This research went deep in the reason why things are

happening the way they are and this chapter built on the

previous review of literature to carry the research

forward.

3.2. RESEARCH DESIGN

This research topic was of a qualitative nature, and was

primarily composed of secondary data which was collected

30

from journals and periodicals at the Ministry of Trade

and Industry. Data was collected by using the SMEs

support programmes.

The data which was received was of descriptive and non-

statistical in nature. The descriptive strategy that was

adopted in this study was one that used to answer

questions or test hypotheses and determines and reports

the way things were. This method could enable readers to

better understand today’s world and better prepare SME’s

to contribute meaningfully to the economy at large.

3.3. POPULATION

As discussed earlier, the population of this research was

taken from the 12 employees at the SME Support Department

at the Ministry of Trade and Industry. This constituted

the total staff compliment at the target department which

allowed the researcher to sap a great deal of

information.

3.4. SAMPLE SIZE

31

From this target population, 10 respondents were selected

to take part in the study which represented over 80% of

the population. This was a good representation of the

entire population such that the results collected from

this study were conclusive and represented the overall

views of the whole population.

3.5. COLLECTION AND RECORDING OF DATA

Collection of data took place without much challenges

from day one till the last day. Even though most of the

planned formal interviews had to be done informally the

study managed to collect all the necessary information

required. The right path was followed, the respondents

were informed that they are part of a research but they

were immediately assured that their responses were not

going to be used for any other purpose other than

investigative. Recorders were also used to maintain

accuracy and note books were used to record the main

points in the research.

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3.6. MEASUREMENT INSTRUMENTS

The researcher used questionnaires in a semi-structured

interview as an instrument to collect primary data, due

to the sensitive nature of the topic so participants were

allowed to exercise their right to remain anonymous and

confidential. Search engines and the IUM library were the

tool utilized to search for secondary data such as

periodicals and journals.

3.7. RESEARCH ETHICS

In line with the ethical standards of research, the

researcher made sure that the consent forms are given

to all respondents which stated the overall purpose and

any risk or benefits respondents were to benefit from

for their participation. All information obtained from

respondents was kept with utmost confidence and they

were informed of such a decision and they were told

that the use of any such information was for academic

purposes only and that they would be requested to write

a consent letter if the information is to be used for

any other purpose.

33

Feedback of results was given to respondents and

individual autonomy was respected. Autonomy means

freedom to decide what to do. Even when participants

signed consent forms they were made aware that they are

free to withdraw from the study any time during the

course of the data collection process.

Since Plagiarism in academia is equated to theft of

intellectual property, which violates professional and

ethical values, any work of other authors used in the

study was acknowledged and referenced according to the

American Psychological Association (APA) referencing

style.

3.8. CONCLUSION

This chapter laid bare the procedure for the

collection of the data, it was followed by the data

analysis and interpretation of the results. The next

chapter was the backbone that made this study a

success. This was so because failure to decode the

data collected from this study would have rendered the

entire study worthless both now and in the future.

34

35

CHAPTER FOUR

4.DATA ANALYSIS AND RESULTS

4.1. INTRODUCTION

This chapter involved the data analysis as well as the

attachment of meaning to the data collected. Figures

and qualitative information had no academic meaning

until it became decoded in this Chapter to give the

meaning which could be useful to future researchers.

In that regard, this chapter formed the greater part

of the whole study ranked according to importance.

Results were interpreted herein, with the use of

graphs and tables to explain the findings and enhance

their meanings.

4.2. RESEARCH ANALYSIS AND INTERPRETATION

Questionnaire responses

Question 1

10 respondents volunteered to participate in this study,

and of those 10, 1 was in the range of 19-27, 5 were in

36

the age range of 28-36, 3 were in the range of 37-45 and

1 was above 46 years old.

The information was then presented in a pie chart to show

the demographics of the respondents as presented below.

Respondents' Demographics

Group A Group B Group C Group D Group E

Source: Klaudia Shigwedha (2014)

Question 2

The respondents stated that they were all employees at

the Ministry of Trade and Industry and that they all had

been at the SME support department for a minimum of 6

months. Their information was then arranged in a tabular

form as follows:

37

Age Group Average years at MTI

19 - 27 <1

28 - 36 1

37 - 45 3

45+ 5

The table shows that the Age group 19-27 has been in the

company for few years than others, this could be

attributed to the mainly due to the fact that most of the

respondents in this age group were still students of

various tertiary institutions some had just graduated in

less than a year before so that was the reason why they

had less than a year with the Ministry.

All respondents who took part in this study who fell in

the age group 28 - 36 age group, had more than a year due

to them being at the Ministry for longer, some even

migrated from other Ministries. The respondents within

the 37 – 45 age group had more years of experience and

had knew much about the topic of this research that is

why they were instrumental to the study. Moreover the 45

upwards age group were the ones with more years at the

38

Ministry of Trade and Industry due to their joining the

Ministry quiet earlier than the rest. This gave a

balanced view about the Ministry, with the younger ones

representing fresher perspectives about the Ministry and

the elderly and more experienced representing the more

insight about the organisation and how it works. Question

3

Almost all respondents knew the meaning of the

abbreviation SME. They knew that it was meant Small to

Medium Enterprises. However some didn’t know the criteria

to show that this is a small to medium enterprise. Some

said SME were companies owned by individuals.

Question 4

The respondents said that their relevance can never be

underestimated as they represent the opportunity for

young business organisation. They said these are the

breeding ground for bigger companies. They also said that

these SMEs provide a third employment alternative when a

person is not absorbed in the public sector or the large

private sector. They also contribute towards the GDP of

39

the country at large as some of them are into exporting

of products earning the country the much needed foreign

currency. The respondents further alluded the

contribution towards poverty alleviation to the SMEs.

They help make formally disadvantaged persons to be able

to sustain themselves. They also venture into service

provision such as has never been provided in the country.

Question 5

The responses from this question could best be summarised

in the following pie chart:-

Impact of SMEs in the Namibian economy

Too much Not that much Average Insignificant I don’t know

Source: Klaudia Shigwedha (2014)

40

The pie chart represented what the respondents believed

to be the contribution that the SMEs made and continue to

make to the Namibian economy. One said that they didn’t

know whether SMEs were that important or not. Those who

believed that SMEs were of not that much importance cited

reason that because they are small therefore their

contribution was like a drop in the ocean.

Question 6

The researcher first thought this question triggered

biased responses until they were shown evidence about how

the government support SMEs in Namibia. They all were

convinced the Government of Namibia is doing the best

they can to support the SMEs.

Question 7

The Government supports SMEs in various ways including

the following ways:

They register them at the Ministry of Trade, and

register them as SMEs at the same Ministry before

referring them to the Ministry of Finance for tax

41

registration which will allow them to compete for

tenders.

They set aside a certain amount of the budget for

the support of SMEs.

They conduct Expos and Trade Fairs through the

Ministry of Regional and Local Government, Rural

Housing and Development through their local

authorities and town councils. The SMEs can also

participate to encourage profitability.

The DBN has been set up to assist SMEs when they

need Venture Capital as well as credit facilities.

The Ministry of Trade has also shielded the SMEs

from brutal foreign companies for example through

the introduction of Trade Embargoes as well as

import tariffs and quotas. An example was given of

the chicken quotas introduced against the SA

exporters.

The government has also built facilities for them

like the Kapana facilities, meat and Vegetable

Markets, Incubation Centers, SMEs Centers,

Irrigation schemes so as to empower the SMEs.

42

The Government has also introduced interventions

like the

Question 8

The government often face challenges in their execution

of their mandate to assist SMEs. The challenges include:-

Corruption within the rank and file of the

government such that the funds earmarked for the

SMEs will end up being siphoned to private pockets.

Misuse, some SMEs connive with contractors so as to

get a loan under the pretence that they want to use

the funds to fund the tender yet they use it for

private purposes.

Some SMEs do not know of the existence of such a

facility and they remain in the dark about it.

The Government sometimes fails to reach all SMEs as

some of them are not properly registered yet some

are registered but they owe the Ministry of Finance

through outstanding taxes. Some do not even have

Bank accounts so their traceability is not always

successful.

43

Most SMEs don’t have adequate collateral that will

increase the risk portfolio of the SMEs which will

make it difficult to extend credit lines without

thinking twice about it.

Question 9

All respondents believed that the Government support that

SMEs receive will go a long way in making them grow one

day. Only one respondent had a different opinion who said

that some SMEs will die SMEs they will never grow

especially those businesses which does not have the

capacity to grow like the Kapana and the like.

Question 10

The responses were presented in a tabular form.

Correlation Number of respondents

Strong correlation 6

Weak Positive Correlation 3

No correlation 1

Weak negative correlation -44

Strong negative correlation -

Source: Klaudia Shigwedha (2014)

Question 11

Question 12

Long term benefits of Government support to SMEs was

listed as follows:-

Achievement of Vision 2030.

Economy growing as these supported SMEs will grow to

become larger organisations.

Eradication of extreme poverty through the support

of poor and formerly disadvantaged societies.

Better living standards for all the Namibian people.

Question 13

All recommendations were included in the recommendations

section after the findings.

45

4.3. INTEPRETATION OF RESULTS

Based on the findings, the data collected can conclude

that SMEs are doing their best to contribute meaningfully

to the economy of the country. They are trying their best

based on the challenges they face. The Government is also

doing their best to support them meaningfully even though

they face many challenges some of which goes beyond their

control yet some are manmade. The vast ness of the

economy and the number of meaningful SMEs contributing

directly to the economy seem to work to the ratio of

1:10.

SMEs contribute differently depending on their nature and

status. Some contribute directly through paying taxes,

and reducing employment levels though directly

4.3.1. THE RECRUITMENT AND SELECTION PROCESS AT NAC

The recruitment and selection at NAC as learnt from this

study was presented in the following way:

46

1. Vacancy arises due to employee leaving, dying or being

incompetent or is created probably due to a new

department created.

2. The Human Resources Department is informed of the

vacancy and the urgency with which they are supposed to

advertise it and get it filled.

3. HR flights a comprehensive advert in at least three top

daily newspapers, and at least 1 weekly.

4. HR conducts interviews with the help of the members of

the requesting departments to select the best

candidates for the job.

5. Successful candidates are selected and called again for

a second interview

6. HR recommends the recruitment of the successful

candidate(s) from the selected ones.

7. Letter of appointment is given to the candidate with

the salary and date of commencement.

8. Induction training and posting will take place soon

after.

These can be summarised in a diagram as follows;-

47

Source: Anna Negumbo (2014)

This study learnt the many reasons why people do not

perform at work. The following were the reasons.

Laziness – the employees are lazy and do not want to

put a lot of effort because they want an increment

or they have just gotten used to the system they are

not afraid anymore. It was noted that most employees

48

when they join the company, they are hardworking but

the more they stay the more complacent they become.

Some employees do not perform to their maximum

capacity because they are mainly in and out of the

hospital some due to some chronic sickness. Others

when the gossip spread that they are HIV positive,

face discrimination which emotionally affect them in

every way that they won’t concentrate at work.

Other employees have many other businesses and farms

such that their attention shifts to those extra

activities. Employees leave early on Fridays because

they want to attend to their other businesses and

farms. Some don’t come on Mondays probably because

they would not have finished their business so they

take leave. Some bring suspicious Doctor’s letters

to get away with this. Some answer personal calls

during work times. This contributes to

unproductivity at Namibia Airports Company.

Unproductivity to some is due to the lack of

motivation and inner drive to work hard. Most people

said that they are paid below average salaries but

49

an interview with one senior employee at NAC

revealed that NAC is one of the best paying State-

Owned enterprises in the country, so no one must

give an excuse about non-performance.

The study further, noted the reasons why people leave

the organisation. They are listed below:-

Looking for greener pastures – most employees

leave to join other SOEs in similar fields like

the Air Namibia etc. They leave to better

themselves financially or join other companies

offering better incentives.

To pursue further studies – some leave to further

their studies both locally and international with

most of the leavers going overseas to do Masters

in Business Administration. Few will bother

coming back but most will leave for good.

Some resign under pressure due to investigations

going on. A case in point was one employee who

upon realizing that they were under

investigations went on sick leave, and

compassionate after the sick leave and then after

50

that went with a doctor’s letter stating that

they were not in a proper state of mind. They

were declared mentally ill and are still on leave

a year on. Those are some of the issues that

force people to leave.

4.4. CONCLUSION

In conclusion, it could be noted that as the research came

to an end, the many ideas raised were important especially

for future researches. To wrap up the chapter, the main

points about the research findings were that the target

population was from the Human Resources Department of NAC

and were forthcoming with their valuable contribution

towards this study. The majority agreed that there is no

direct link between the recruitment/selection process and

the employee performance/turnover.

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CHAPTER FIVE

5. CONCLUSION AND RECOMMENDATIONS

5.1. INTRODUCTION

In this chapter, the curtain was closing on the study and

to close down the study concluding remarks were made

after which recommendations iced the cake.

5.2. RECOMMENDATIONS

In light of this study, the following recommendations can

be made based on the findings there from.

Namibia Airports Company must always seek to

continuously develop its workforce through Staff

Development Programs aimed retaining the employees and

ensuring that they feel part of the overall vision of

NAC.

Motivation of employees is one of the most important

tool in ensuring that people stay longer at NAC. This

can be in the form of remunerations, gifts and awards,

non-financial rewards like paid holidays for best

performing employees, paid school fees for those who

wish to further their studies.

52

The researcher faced a lot of challenges as employees

were difficult to access due to a punishing work

schedule. If it is possible, most SOEs may have a

department which deals with helping scholars with any

information they might need.

Over and above all, there must be a private-public-

partnership between SOEs and Tertiary Institutions so

as to strengthen the relationships and build mutual

benefits to each other.

5.3. CONCLUDING REMARKS

This study was conclusive and was a success having

collected the desired information, it comes to a close

having found out that there is no relationship between

the recruitment and selection process at NAC and the

employee performance as well as employee turnover.

There were language barriers that took its toll on

some respondents with the researcher being from a

tribe that spoke a different language from the one

53

that the respondents spoke, the challenges were

insurmountable.

These conclusion will be useful in future studies as

well as in other companies especially SOEs.

5.4. IMPLICATION OF THE RESULTS

Drawing conclusion from the results of this research,

one can come to the conclusion that there is little or

no link between the two variables in question. .

However, this study shaded more light on the potential

ways to improve the recruitment and selection

processes that could likely improve the rate of

employee turnover.

The researcher acknowledges the fact that the sample

size was well representative of the opinions of the

entire population as the sample almost represented 75%

of the entire support staff in the HR department at

NAC. The results therefrom present the true

representation of the cross section of any population

there by validating the results. The research

objectives were well set out and the results imply

54

that according to the research objectives, there could

be a need for more studies around this topic as was

suggested in the potential future research areas.

.

5.5. FUTURE RESEARCH SUGGESTIONS

This study added to the body of knowledge in one way

or another, and even though it contributes to the body

of knowledge, it could not cover all the sectors of

Human Resources. There were definitely loop holes that

could not be covered by this study. For example the

aspect of the challenges that SOEs face as far as

Human Resources Management is concerned. In that

regard, the net was left widely cast with the hope

that future scholars could tap into the vast knowledge

presented by this study and take it up from where this

researcher left so that they can pursue future studies

along similar lines.

55

5.6. CONCLUSION

Based on the data analysis, it can be concluded that good

employment tests facilitate the selection of creative

employees in the public sector.

Proper selection interview facilitates the selection of

productive personnel whose contribution to the

organization enhances its profitability.

Apart from the recruitment and selection methods,

training, development and motivation of workers, it can

be expected that education background, years of

experience in the job and sex play vital role in

enhancing the performance of employees in corporate

organizations.

56