RESTRUCTURING OF THE SMALL AND MEDUIM ENTERPRISE...

REPORT

ON THE

RESTRUCTURING OF THE

SMALL AND MEDIUM ENTERPRISES

DEVELOPMENT AUTHORITY

OFFICE OF PUBLIC SECTOR GOVERNANCE (OPSG)

PRIME MINISTER’S OFFICE JUNE 2013

Report on the Restructuring of the Small And Medium Enterprises Development Authority

TABLE OF CONTENTS

1.0 INTRODUCTION 31.1 Background 31.2 Terms of Reference 31.3 Methodology 3

2.0 THE SMALL AND MEDIUM ENTERPRISES DEVELOPMENT 5AUTHORITY2.1 Role and Objectives 52.2 Operations 72.3 Vision and Mission of the SMEDA 72.4 Structure of the SMEDA 72.5 SMEDA Services 8

3.0 ORGANISATION STRUCTURE AND HUMAN RESOURCES 103.1 Organisation Structure of SMEDA 113.2 Merger of SMIDO and NHPA 11

4.0 SMEDA FINANCIAL POSITION 134.1 Current Financial Situation 134.2 Financial Performance 134.3 SMEDA Shops Operation 14

5.0 OVERVIEW OF THE SME’S SECTOR 165.1 Contribution of the SME Sector to the Economy 165.2 Problems facing the SME’s sector 165.3 SME’s supporting institutions 175.4 Multitude of Schemes for SME’s financing 18

6.0 PROPOSED ORGANISATION STRUCTURE FOR SMEDA 20

7.0 TEN NEW PROPOSALS FOR A MORE EFFECTIVE SMEDA 22

8.0 CONCLUSION 25

Office of Public Sector Governance (OPSG) Prime Minister’s Office


1.0 INTRODUCTION

1.1 Background

1.1.1 The Small and Medium Enterprises Development Authority (SMEDA) is a

parastatal body established under the Small and Medium Enterprises

Development Authority Act 2009 to make better provision for the promotion and

development of small and medium enterprises. This Act repealed and replaced the

Small Enterprises and Handicraft Development Act 2005 under which the Small

Enterprises and Handicraft Development Authority (SEHDA) was created following

the merger of the Small and Medium Industries Development Organisation

(SMIDO) and the National Handicraft Promotion Agency (NHPA). SMEDA

operates under the aegis of the Ministry of Business, Enterprise and Cooperatives.

1.1.2 The new legislation provides new definitions for small and medium enterprises on

the basis of turnover (a small enterprise less than Rs.10 M, and a medium

enterprise between Rs.10 M to Rs.50 M). As per the SMEDA Act, the SME

definition includes enterprises in all economic sectors. In order to avoid detailed

sector-specific criteria, turnover criteria is used across sectors i.e. no

differentiation between services and manufacturing sectors has been made for

small enterprises, and the thresholds for small manufacturing firms also reflect

small service firms.

1.2 Terms of Reference

1.2.1 The Office of Public Sector Governance (OPSG) has been requested to provide

support to parastatal bodies in collaboration with line Ministries, in the preparation

of their restructuring plans. SMEDA has been identified as one of the parastatal

bodies needing a restructuring plan in 2013 with an objective of reaching a 5%

return on its capital investment. The restructuring plan needs to be approved by

Cabinet before the end of the year so as to meet the KPI of the European Union.

1.3 Methodology

1.3.1 For the purpose of this assignment the following methodology and approach have

been adopted:



(i) Meeting and discussions with the Managing Director and staff of the SMEDA.

(ii) Discussion on future orientation of the SMEDA with the Management and

Ministry of Business, Enterprise and Cooperatives.

(iii) Analysis of the financial statements of the SMEDA

(iv) Analysis of various schemes for SME’s financing

(v) Analysis of services provided by other SME’s supporting institutions

(vi) Discussion with The Federation of SME’s



2.0 THE SMALL AND MEDIUM ENTERPRISES DEVELOPMENT AUTHORITY

2.1 Role and Objectives

2.1.1 The Small and Medium Enterprises Development Authority (SMEDA) operates

under the aegis of the Ministry of Business, Enterprise and Cooperatives and

provides support and facilitates the development of entrepreneurship and SMEs in

Mauritius. SMEDA is governed by a Board whose mission is to establish SMEDA

as the institution to promote, serve, support and strengthen SMES to face up the

challenges of globalization.

2.1.2 The objectives of the SMEDA are, among others, to promote a conducive

business environment and empower SME’s to emerge and grow; provide a service

delivery network which increases the contribution of SMEs in the national

economy and enhances economic growth; enhance the competitiveness of SMEs;

to devise and implement development support programmes and schemes for

SMEs; and to facilitate, assist and provide the necessary support to SMEs to gain

market access and business opportunities and to compete successfully in the

national and international markets;

2.1.3 The functions of the Authority as provided by Section 5 of the Act are as follows:

(i) Provide core support services, particularly entrepreneurship development,

business facilities, counseling and mentoring services;

(ii) Implement and operate a registration scheme for SMEs;

(iii) Facilitate access to industrial space, finance and other productive

resources;

(iv)Empower product specific and sector specific SMEs to enhance their

delivery capabilities;

(v) Coordinate with other support organizations and stakeholders in the

fulfillment of its objectives;

(vi)Facilitate networking among SMEs and the development of linkages

between large enterprises and SMEs

(vii) Promote technological and management capabilities of SMEs;



(viii) Ensure that SMEs; in respect of which a registration certificate is issued,

benefit from every incentive which the government grants to them, and

assist them to obtain the incentives;

(ix) Identify best practices and disseminate them to SMEs;

(x) Organize and encourage participation of SMEs in fairs;

(xi)Conduct surveys in the SMEs sector and provide market intelligence for

those enterprises, including providing reports on various economic

indicators;

(xii) Implement, coordinate and monitor assistance programme provided to

SMEs;

(xiii) Collaborate with other local and international agencies dealing with SMEs,

to develop the local SMEs through:

Skills enhancement programmes for their officer; and

Participation in seminars, workshop and capacity building

programmes;

(xiv) Identify projects for the development and promotion of SMEs;

(xv) Facilitate and coordinate research relating to the development of SMEs;

(xvi) Sensitize the public at large on entrepreneurship;

(xvii) Provide incubator facilities for SMEs;

(xviii) Devise and review policies relating to SMEs;

(xix) Coordinate initiatives of public sector agencies and of the private sector

relating to SMEs;

(xx) Coordinate entrepreneurship activities carried out by public sector

agencies and the private sector.

2.1.4 The major services to be provided comprise, inter alia, adequate and appropriate

support and assistance by SME support institutions to enterprises, dissemination

of information and awareness of SMEs on available support as well as facilitation

of enterprises through ease of doing business. The performance indicators for the

SME sector for 2013 under the Ministry’s PBB are the preparation of 50 business

plans for start ups and industries



2.2 Operations of the SMEDA

2.2.1 The activities of the Authority are carried out by the six divisions namely: Business

Development, Training and skills Development, Marketing and Promotion,

Business Support; Administration and Finance, and Documentation and Research

Centre.

2.2.2 The priority objective for the SME sector according to the PBB Document

Estimates 2013 and Indicative Estimates 2014 & 2015 would be to increase share

of SMEs’ contribution to the GDP. However, no percentage has been given for the

expected increase in GDP. The CSO Census of Small Establishments released in

2007 revealed that 92,000 SMEs employed 209,000 persons and accounted for

20.8% of GDP. Accordingly, the sector accounted for around 41% of total

employment and generated a gross output worth Rs.42.1 bn. The next census is

underway.

2.2.3 The operations of SMEDA involve primarily the provision of core support services

to SMEs, particularly entrepreneurship development, business facilities,

counseling and mentoring services; implementation and operation of a registration

scheme for SMEs; and facilitate access to industrial space, finance and other

productive resources. The main services are provided by the Business Facilitation

and Counseling Unit and the SME Resource and Technology Centre (SRTC).

2.2.4 The Business Facilitation and Counseling Unit of SMEDA assist people who intend

to set up their own business. Information is provided to potential entrepreneurs on

how to find and develop a business idea, where to seek assistance, how to

prepare a business plan and the necessary clearances and permits required to

start an enterprise. Assistance is also provided to existing entrepreneurs who want

to expand, diversify or modernize their business. The services of the Business

Facilitation and Counseling Unit are provided at the head office at Coromandel

and at two outstations at Goodlands and Rose Belle.

2.2.5 The SME Resource and Technology Centre (SRTC) enables entrepreneurs to

obtain the necessary information on business ideas, new technology, and sourcing

of raw materials, amongst others.



2.2.6 Other programmes have been launched at the SMEDA incubator Centre to

supplement the existing activities of SMEDA. These are the Start-Ups

Entrepreneur Scheme, the Digital Literacy Programme and Cloud Computing,

Creative Craft Incubators in Ceramics and Pottery, Pyrography, Silk Painting,

Fashion and Design, Coconut Craft, Wood Craft/ Sculpture, Painting on Wood and

Ship Models.

2.3 Vision and Mission of the SMEDA

2.3.1 The vision of SMEDA is to be the centre of excellence for servicing SMEs.

Whereas its mission is to establish SMEDA as the institution to promote, serve,

support and strengthen SMES to face up the challenges of globalization.

2.4 Structure of the SMEDA

2.4.1 The SMEDA is administered by a Board known as the Small and Medium

Enterprises Development Board, which consists of a Chairman and Members of

the various Ministries responsible for the subject of SMEs, Finance, Industry,

Cooperatives, Environment, Youth and Sports, as well as from these organizations

directly related to the promotion and development of small and medium

enterprises. The Managing Director is the Chief Executive officer responsible for

the execution of the policies of the Board and for the control and management of

the day-to-day business and activities of the organization. She is supported in her

task by officers of various cadres.

2.4.2 SMEDA head office is at Coromandel and operates an office at Curepipe, Rose

Belle, Triolet, Bon Accueil and a branch in Rodrigues.

2.5 SMEDA Services

2.5.1 SMEDA provides a variety of services to the SME’s but with little success. SMEDA

should not aim at servicing all the 100, 000 SME’s because it is simply not feasible

and not cost effective and lot of them will survive and prosper without the support

of SMEDA. It should rather concentrate on those which need badly its assistance

and provide them all round support for them to grow. With the phasing out of the

duty free and tax rebate to SME’s registered with SMEDA, less entrepreneurs are



inclined to seek registration. SMEDA should move closer to the entrepreneurs

instead of expecting them to come to its head office at Coromandel.

2.5.2 SMEDA should be able to establish its priority sectors and use the information

available at the Registrar of Companies on new enterprises being registered and

monitor them closely especially at the infant stage.

2.5.3 There is a need to define the micro enterprise which should obviously become the

major clients for SMEDA, small and medium already defined in the Act.

2.5.4 Table 1 below shows that SMEDA, during the last 7 years, has been able to

register some 2000 new SME’s a year, out of which an average of 640 were still in

operation. This gives an indication that mortality rate is very high that 2 out of 3 do

not survive.

Table 1: Small and Medium Enterprises registered during the period 2005 – 2012

EnterprisesIn Operation 2005

New Registered 2005 - 2012

Total Registered 2012

New In Operation 2012

Total in Operation 2012

Food & Beverages 473 1884 2357 607 1081Leather & Garments 886 1819 2705 670 1556Wood & Furniture 262 236 498 98 360Paper Products & Printing

69 72 141 26 95

Chemical, Rubber, Plastic

46 62 108 28 74

Handicrafts, Pottery Ceramics

476 990 1466 373 849

Jewellery & Related Items

67 63 130 27 94

Fabricated Metal Products

251 338 589 126 377

Profession/Vocation/Occup

764 2274 3038 788 1552

Trade & Commerce 1463 5054 6517 1431 2894Business Support Service Sector

67 158 225 48 115

Others 338 866 1204 248 586Total 5,162 13,816 18,978 4,470 9,632

(Source: SMEDA)



3.0 ORGANISATION STRUCTURE AND HUMAN RESOURCES

3.1. Organisation Structure of SMEDA

3.1.1 SMEDA is presently headed by a Managing Director who is supported by a

Director, 4 Managers and 5 Assistant Managers. It has a total workforce of one

hundred staff and its organization chart is shown below.

ORGANISATION CHART OF SMEDA

A detailed Organi

3.1.2 The four Managers are responsible for the following operations:

Administration and Finance

Training and Skills Development

Business Development and Support

Marketing and Promotion

3.1.3 The technical staff comprises only of twelve Business Development Officers and

seven Extension Officers. Out of the 100 staff on the establishment of SMEDA,

nine staff are posted in Rodrigues. It has been reported that the posts of some

fifteen staff who are over fifty would be phased out as per the last PRB report.

These comprise the post of Director and other Extension Officers, amongst others.


SMEDA BOARD

MANAGING DIRECTOR

Director

Manager (1)Marketing

&Promotion

Manager (1)Business

Development & Support (V)

Manager (1)Training & Skills Dev.

Manager (1)Administration &

Finance Assistant Manager (Research Unit)

Assistant Manager Research Unit


3.1.4 As a general rule, an organisation should be staffed in such a way that two third or

more of its workforce are involved directly in the core functions of the organisation.

Staffed involved in supporting services should be at the minimum. At SMEDA, the

opposite may apply. As frontline staff, there are only 12 Business Development

Officers and 7 Extension Officers and they are expected to service the SME’s

across the island. The remainder is doing office or other duties.

3.2 Merger of Small and Medium Industries Development Organisation (SMIDO) and the National Handicraft Promotion Agency (NHPA)

3.2.1 The present bulky and heavy structure of the SMEDA is the result of the merger in

2005 of the then Small and Medium Industries Development Organisation

(SMIDO) and the National Handicraft Promotion Agency (NHPA) into the Small

Enterprises and Handicraft Development Authority (SEHDA). This SEHDA was

renamed SMEDA with enactment of the new law on small enterprises in 2009.

3.2.2 Prior to the merger SMIDO had 45 employees and NHPA had 67 and SEHDA was

set up with all these employees without any attempt to propose a conducive

structure for the SEHDA for it to deliver according to its redefined mandate as

provided in the Act. The International Development Partners (IDP) Ltd in its report

on the merger proposed a reduction of 48 employees but apparently was not acted

upon. A new Act was proposed in 2009 to set up the SMEDA and again the

institutional capacity weaknesses were not addressed. In the meantime, 4 CEO’s

were appointed to revamp the institution but with mitigated success.

3.2.3 The number of staff at the SMEDA and there age analysis is depicted in table 2

below.



Table 2: Age analysis of staff of the SMEDA

Grades 18-30 yrs

31-40 yrs

41-50yrs

51-60yrs

60 +yrs

Total

Managing Director 1 1Director 1 1Manager 2 1 3Assistant Manager 2 3 5Administrative Officer, Commercial Executive 1 1 2Accountant 1 1IT Officer 1 1Business Analyst/Business Development Officer/Marketing Officer/Training Coordinator 1 7 4 12Information, Research & Documentation Officer 1 1 2Confidential Secretary 1 1Marketing Assistant –Handicraft (ROD) 1 1Senior Extension Officer 1 1Accounts Clerk, Asst Procurement & Supply Officer, Executive Officer

1 11

14 8

Extension Officer 3 3 1 7Senior Clerk/Word Processing Officer 1 1Technical Assistant 2 2Clerical Officer/ Higher Clerical OfficerClerk/ Word Processing Officer

2 2 1 2 7

Receptionist/Word Processing Officer 1 1Receptionist/Telephone Operator 1 1Handy Worker (Skilled)Driver/Office Attendant 2 4 6General Assistant 1 1Office Attendant 4 1 2 7Watchman 1 1Stores Attendant 1 1General Worker 3 2 3 4 1 13Shop Assistants , Sales Persons (NRB) 1 4 5 2 12 Total 7 24 33 29 6 99

(Source: SMEDA)



4.0 FINANCIAL POSITION OF SMEDA

4.1 The Current Financial Situation4.1.1 All assets and funds of the former Small Enterprise Handicraft and Development

Agency (SEHDA) have been vested in the Small and Medium Enterprises

Development Authority (SMEDA). It has thus received total assets worth of Rs 92

million from the SEHDA including Cash at Banks amounting to Rs 38.9 M. The

Authority has received grants from Government to the tune of Rs.34 M for the

financial years 2010, 2011 and 2012 and the same amount has been earmarked

for the years 2013, 2014 and 2015.

4.2 Financial Performance4.2.1 The financial performance of the SMEDA for the last three years 2010 to 2012 is

shown in table 3 below:

Table 3: Financial performance of SMEDA for the period 2010 - 2012

Financial Year 2010 2011 2012Revenue 35.8 49.2 36.8

Other Income 10.5 11.7 12.5

Total Income 46.3 60.8 49.4

Administrative Expenses (36.1) (34.5) (33.0)

Other Operating Expenses (16.2) (27.8) (25.7)

Deficit (6.0) (1.6) (9.4)(Source: SMEDA)

4.2.2 SMEDA has realised losses to the tune of Rs 6.0M, Rs 1.6M and Rs 9.4M for the

years 2010, 2011 and 2012 respectively. The major cost of the Authority is staff

cost which accounts for around 70% of total cost.

4.2.3 SMEDA is late with the preparation of its Financial Statement, the latest audited

accounts were in respect of the year ending December 2010.

4.2.4 SMEDA during the last few years was not given the level of grants asked for to

maintain its operations. As a result it had to use its own reserves to finance its

budget. With Government willingness to shift its support from institutions to SME’s



directly, this is not expected to change. Table 4 below illustrates the budget

discipline imposed by MOFED.

Table 4: Budget discipline of the SMEDA

SMEDAProposals

Approved by MOFED

SMEDAReserve

Total Budget

Rs M Rs M Rs M Rs M

2007-08 49.8 22.0 13.5 35.5

2009-09 50.5 33.5 8.3 41.8

2009 (6 mths) 37.5 15.0 9.6 24.6

2010 70.6 34.0 13.0 47.0

2011 69.5 34.0 13.0 47.0

2012 63.5 34.0 11.0 45.0

2013 51.7 34.0 6.0 40.0

(Source: SMEDA)

4.3 SMEDA Shops Operations

4.3.1 SMEDA operates 4 shops where handicraft products of SME’s are sold at a profit.

In addition to the Airport, it has shops at Caudan, Mahebourg and Rodrigues. It

has made surpluses averaging to Rs 6 million during the last 3 years. Table 5

below shows the sales per shop for the period 2010-12, the airport shop being the

highest performing and practicing 100% mark up on its products.

Table 5: Turnover generated by the handicraft shops of the SMEDA

2010 2011 2012

Rs M Rs M Rs M

Airport 10.6 13.7 13.4

Caudan 0.9 1.3 0.8

Rodrigues 0.1 0.2 0.2

Other shops 0.6 0.5 0.8

Total 12.2 15.7 15.1(Source: SMEDA)



4.3.2 SMEDA has just closed certain shops at Grand Bay, Astrolabe and Chamarel

which were found to be underperforming. It is now planning to open new shops in

shopping malls and major hotels. Given the large number of tourist visiting the

country, SMEDA is expecting this measure will help to boost its sales in the years

to come.

4.3.3 SMEDA should ensure that the operation of each shop is profitable, that is a

minimum level of sales should be achieved to cover all its cost as a cost centre.



5.0 OVERVIEW OF THE SME SECTOR

5.1 Contribution of SME Sector to the Economy

5.1.1 Small and Medium Enterprises remains an important segment of the Mauritian

economy as they contribute significantly to wealth creation, employment

generation and poverty alleviation. It is established that SME’s, being labour

intensive, require less investment for job creation than large firms.

5.1.2 It is estimated that SMEs in operation are around 140,000 and are contributing

around 37% of our GDP, some 120 billion rupees worth of output and are

employing around 250, 000 people. However, there were only some 18,978 such

enterprises registered with SMEDA as at December 2012. The number of

enterprises in operation was 9, 632 and they were employing 25,942 people. It is

estimated that around 15% of SME’s are registered with the SMEDA.

5.1.3 SMEs are operating in wide ranging sectors from food and beverages; leather and

garments, wood and furniture; paper products and printing, chemical, rubber and

plastic, handicrafts, pottery and ceramic, jewellery and related items to trade and

commerce.

5.1.4 The sectors in which the SMEs are operating are already experiencing

unprecedented challenges as a result of trade liberalization in line with the

globalisation process, the WTO regulations and the dismantling of safety nets

(Multi-fibre Agreement, Sugar Protocol). This situation is further aggravated by

very tough competition from imported and imitated products from low cost

countries in particular China.

5.2 Problems facing the SME’s Sector

5.2.1 According to operators in this sector, SMES are faced with constraints relating to

finance, skilled labour, training facilities, marketing, business development

services, infrastructure, technology and institutional support framework. The

schemes for SMES are dispersed among too many support institutions (SMEDA,

NICE, NWEC, DBM, EM and MBGS). This is creating confusion among SMEs and

hence the low take up on schemes. The participation of SMEs in public



procurement is also low despite preferential margins. Low productivity, product

and market concentration also constitute major weaknesses.

5.2.2 Bank lending against security is difficult to obtain and bureaucracy continues to

pose other impediments to their growth. The SME sector is also having problems

to survive, thrive and move into exports.

5.2.3 With the gradual rise in production cost, Mauritius is no longer a low-cost

producer. Rising production costs unmatched by productivity gains, inadequate

multi-skills, logistics constraints, lack of capabilities in ancillary services, design

development, a narrow base for technology diffusion and absorption, altogether

constitute major hurdles.

5.2.4 The SME sector continues to be constrained by lack of finance and financial

instruments, high rate of interest and high rentals, the short reimbursement period,

and a lack of commercial and industrial space.

5.3 SME’s Supporting Institutions

5.3.1 There are a number of institutions which have been set up by Government over

the years to provide support to SME’s under different ministries. These institutions

even if they have attracted large amount of resources have not necessarily

delivered as expected. These institutions are illustrated below and a matrix

showing the services provided by SME’s by the various agencies is at Annex I.

5.3.2 SMEDA has been set up to provide better support to SME’s. It receives some Rs

34 M subsidies a year and its services have limited impact due to the fact that it

does not possess the right skills to deliver according to its mandate.

5.3.3 Enterprise Mauritius which operates under the Ministry of Commerce and Industry

is promoting mainly export oriented industries. It does have a SME’s desk and

provide technical assistance to SME’s contemplating the export market.

5.3.4 National Women Entrepreneur Council operates under the Ministry of Gender

Equality and has a Division working with women entrepreneurs. It also does

counseling and refer SME’s to SMEDA for further technical support.



5.3.5 Development Bank of Mauritius operating also as an SME’s bank providing

financing to SME’s through a number of SME’s schemes. Its procedures are

reportedly too cumbersome for small entrepreneurs. As a result, subsidies

channeled to SME’s remain grossly unutilized.

5.3.6 Mauritius Business Growth Scheme has just been set up under MOBECC to

finance new businesses including SME’s with good business plan. It has been

structured and staffed with people with skills in business analysis.

5.3.7 There is a pressing need to coordinate the activities of the various SME’s

supporting agencies. Initially, there was an ambitious project to merge together all

the major SME’s supporting institutions (DBM, SMEDA, NWEC) under one roof

and under MOBECC. This could not be achieved. Then the setting up of a Board

to coordinate the activities of all of them were proposed under the UBEB ( Unified

Business Enterprise Board) where they will all be represented. This also could not

be achieved. Now an Inter Agency Committee (IAC) has been set up under

MOBECC to streamline the services offered to SME’s by the different agencies.

This committee is expected to propose a coordinated action plan for SMEs support

by September 2013.

5.4 Multitude of Schemes for SME’s Funding

5.4.1 Over the years, Government conscious of the difficulties of small enterprises to

find funding for their projects, has developed a number of schemes for SME’s.

Commercial banks find such projects too risky for them. As a result, many

programmes have been proposed and administered across a range of public

sector institutions. These include Small and Medium Enterprise Development

Authority (SMEDA), Enterprise Mauritius (EM), National Women Entrepreneur

Council (NWEC), National Productivity and Competitiveness Council (NPCC), and

National Institute for Cooperative Entrepreneurship. The objective of these

institutions is also to promote enterprise growth promote competitiveness,

generate new employment opportunities and help export-oriented companies to

remain competitive. The various schemes are shown at Annex II.



5.4.2 The National Resilience Fund was set up in January 2012 under the Finance and

Audit (National Resilience Fund) Regulations to further support enterprise

development. The NRF operates two types of schemes i.e. financing and

business development. The NRF, funds specific projects while the operating costs

(salaries, rent, utilities) of the various implementing agencies are paid through the

annual budget. The NRF is currently supporting 22 different schemes, the majority

of which are schemes of financial support (loan guarantees, equity participation,

debt restructuring).

5.4.3 These funds meant for SME’s financing remain largely unknown to them. SMEDA,

here, has a role to play. It should counsel all its SME’s on the various financing

opportunities and help them to tap these resources.



6.0 PROPOSED ORGANISATION STRUCTURE FOR SMEDA

6.1 SMEDA in the future should have 4 divisions, each one headed by a Manager and

organised as shown in the Chart below. The 5 posts of Assistant Managers should

be phased out over the years.

6.2 SMEDA should have a dedicated division for Handicraft which will also be

responsible for the shops and marketing activities.

6.3 SMEDA appears to be a bulky organisation. This is mainly due to the result of the

merger with the National Handicraft Promotion Authority some seven years back.

It has now too many grades with complex reporting lines. It should aim at a leaner

and more flexible structure and becomes a performing organisation. Its size should

drastically be reduced to attain an optimum structure.


BOARD

GENERAL MANAGER

GANAGING DIREGENERALC

TOR

BUSINESS DEVELOPMENT

SERVICES

ADMIN & FINANCE

RESEARCH & DEVELOPMENT

HAHNRDRAF H HANDICRAFT

NDICRAFTHHH

BFCT

BDS - on contract

Regional Offices

Admin/IT

Finance

Procurement

HR

Research

Training

Statistics

Handicraft

Shops

Promotion

Fairs


6.4 The IDP Report, at page 38, has already identified 35 posts that are no longer

required and this is still valid. SMEDA should use this as a basis to redefine its

staffing structure.

6.5 Staff reduction may be achieved by not replacing those going on retirement or

redeploying those surplus to requirement to other public bodies or by offering an

attractive retirement through an early retirement scheme. Certain grades like

General Workers, Office Attendants and Drivers are in oversupply. The IDP report

in 2006 already identified 35 employees that needed to be made redundant and is

still valid.

6.6 Certain minor grades can be merged together to promote multiskilling and at the

same time provides more flexibility to management. There is an urgent need to

recruit a Human Resource Officer who should, as a priority, streamline the grades

and update all the scheme of services.

6.7 SMEDA needs staff with the required skills for it to deliver according to its mandate

as provided by Section 5 of the Act. These skills may either be recruited or

outsourced or combination of both. There is an urgent need to recruit more

Business Development Officers. Thus, it is recommended that 12 Business

Development Officers be recruited on contract.

6.8 SMEDA has made a request to recruit a number of position. However, only a

Human Resource Officer, an Accounts Officer and an Internal Control Officer

appear to be justified and are being supported.

6.9 The Human Resource Officer, once recruited, should as a priority address the

issues mentioned above.



7.0 TEN NEW PROPOSALS FOR A MORE EFFECTIVE SMEDA

7.1 Enhance Board Composition – too many Ministries’ representatives7.1.1 The present Board appears weak in terms of entrepreneurial skills and knowledge.

There are too many Ministries’ representatives (5 out of 13) who contribute little in

furthering SMEDA’s objectives. More people with entrepreneurial/ business

background need to be present on the Board.

7.2 Strategic Plan and Action plan7.2.1 The Act 2009 provides at Section 21 that the Board once set up should prepare a

year strategic plan and an action plan for the new SMEDA. This has never been

done. SMEDA should consider this as a priority if it wants to have a real impact on

the SME’s sector. Many of the measures proposed in this Report can find their

way in the new strategic plan of SMEDA.

7.3 Introduce Annual Performance Agreement with Parent Ministry7.3.1 SMEDA should be more performance oriented. It should, henceforth, agree with its

parent ministry in advance on its performance targets for each year. OPSG can

provide guidance on this exercise which is also provided for by the Codes of

Corporate Governance for state owned enterprises.

7.4 Rightsizing of SMEDA7.4.1 SMEDA is a heavy organisation with more than 100 employees. The previous

SMIDO was operating with only 45 staff. SMEDA should aim at reducing its

staffing strength to 70 after taking into account recruitment of additional technical

staff.

7.5 Reduction in non-technical Staff7.5.1 SMEDA should aim at reducing gradually its workforce. The 35 employees

identified by the IDP Report as surplus to requirement should be removed.

Employees going on retirement should not be replaced, it can consider

redeployment of unrequired employees to other Government Bodies as recently

done for the setting up of the MCIA at the Ministry of Agro-Industry and finally

propose an early retirement scheme for those who may instead opt for leaving

their jobs.



7.6 Recruitment of more Technical Staff7.6.1 SMEDA even if it is oversized lacks the necessary skills in house to allow it to

deliver according to its mandate. There is a need with the proposed reduction in its

workforce to increase in parallel the number of Business Development Officers

within the same budget level. 12 BDO’s may thus be recruited to provide more

support to SME’s.

7.7 20 Business Consultants funded by National Resilience Fund or MBGS7.7.1 SMEDA should start with the registration of Business Consultants to counsel and

support SME’s. Professionals and degree holders with knowledge on business

and experience should be invited to register themselves with the SMEDA. Thus,

20 Business Consultants to be funded by NRF can immediately be recruited on

contract. Each one will have a SME’s portfolio which will be monitored by SMEDA

staff. The object should be to take on charge 500 SME’s especially smaller ones

and help them to grow in the next three years and this can easily be measured in

terms of business turnover and job creation. This will cost Rs 10 million a year. A

project proposal form is at Annex III.

7.8 Setting up of Research Unit7.8.1 The Research Unit being set up should be able to identify new business

opportunities sector wise and advise entrepreneurs on new business

opportunities. Existing staff should be redeployed to this new Unit.

7.9 Decentralisation for more proximity with SME’s7.9.1 SMEDA should gradually decentralise its activities to its regional offices and move

closer to the SME’s. For SMEDA to be successful its services should be known

and easily accessible, such is not the case presently.

7.10 Club des Entrepreneurs across the island and Rodrigues7.10.1 Club des Entrepreneurs or Entrepreneur Café to be set up on regional basis

across the island to promote experience sharing and mentoring among

entrepreneurs. 40 such clubs should be set up by SMEDA during the next two

years across the island and Rodrigues. SMEDA should arrange, via its Ministry,



for them to have access to government owned buildings in their localities for their

meetings on weekly or fortnightly basis. Buildings presently used as Community

Welfare Centre, Social Welfare Centre, Social Hall, Youth Centre, Women Centre

and other local authorities halls can be used for this project. This project if,

successfully implemented, may have a tremendous impact in the development of

the SME’s sector and at little cost.

7.10.2 The financial projection of SMEDA for the next 4 years, taking these reforms into

consideration, is shown at Annex IV. It shows that SMEDA, in addition to

improving significantly its services to SME’s, will move from a loss making position

to generate a 5% return on its Equity as from 2015.



8.0 Conclusion

8.1 SMEDA should focus on start- ups, micro and small enterprises which have a

huge potential for growth and work with them to expand and become strong

businesses and be prepared to explore the export market if necessary. Thus, it will

have more success stories to show and use them to promote entrepreneurship in

the country. It should also start rewarding the highest performing entrepreneurs in

each sector. The end result should be a stronger and thriving SME sector in

Mauritius.

8.2 Once the SMEDA has been successfully restructured, Government can consider,

as a second phase, bringing all the SME’s supporting institutions under a single

roof to achieve maximum efficiency.



Annex I

Matrix of Services Provided by the Major Institutions

SERVICESSMEDA MBGS

UnitEM NWEC DBM

1 Business Counselling 2 Business plan elaboration 3 Provision of management training 4 Provision of technical training 5 Registration, leading to preferential treatment 6 Entrepreneurship development 7 Business fora 8 Development of sub-sector strategies 9 Marketing advice, market intelligence

10 Participation in trade fairs 11 Access to finance 12 Research & Development support 13 Research and future projects 14 Common facilities 15 Advocacy, lobbying 16 Joint venture promotion 17 Export promotion 18 Access to Business Development Services 19 Financial support to start-up entrepreneurs 20 Mentoring/Coaching/Handholding services 21 Networking / Clustering 22 Company Diagnostic / Capability Assessment 23 Innovation / Creativity



Annex II

Schemes for SME Support

Scheme Objective Implementing Agency

Eligibility Criteria Funds earmarked

1. Mauritius Business Growth Scheme (MBGS). Start up Entrepreneurship Scheme

Monthly support of up to Rs 20, 000

Mauritius Business Growth scheme unit (MBGS)

Enterprise with less than one year of operation and registered as a company, firm, SME

Rs 700m (for both MBGS and Start Up Entrepreneurship Scheme)

2. Mauritius Business Growth Scheme (MBGS) – Technical Assistance 90-10 Payback Scheme

To facilitate growth in private sector economic activity

MBGS Unit

3. Market Development Support

Support participation in international trade fairs by manufacturers (both SMEs and non-SMEs)

Enterprise Mauritius

Enterprises already exporting and those which are export ready

Rs 400m

4. Participation in International Fairs SME Refund Scheme for SMEs only

To provide financial assistance to SMEs which are:

1. Already exporting or export-ready meet part of expenses2. Attending or visiting fairs3. Linked to technology, sourcing of raw materials or other specialized fairs


1. SMEs with turnover less than Rs 50m

2. SMEs in Manufacturing and Agricultural sector

Maximum Refund at Rs 200,000 per year irrespective of the number of trade fairs participated

5. Fair Trade Development

Support to co-operatives in obtaining “Fair Trade” certification

EM & MOBEC

6.

Lease Financing Scheme

To assist SMEs to acquire equipment to modernize their operations

SMEs having one year’s operation

Maximum leasing amount of Rs 10m

7. SME Financing Scheme

To assist SMEs in raising finance from commercial banks to meet their working capital needs and their expansion as well as create new jobs

Restructuring working groups

SMEs with turnover of less than Rs 10m and those with a turnover of above Rs 10m but less than Rs 50m

8. SME Refund Scheme (Tourism Sector)

To provide assistance to financial assistance to SMEs

Mauritius Tourism Promotion Agency (MTPA)

All enterprises categorized as SMEs (turnover less then Rs 50m) in the tourism sector as well as Export –ready enterprises

Maximum of Rs 200,000 per year irrespective of number of trade fairs the enterprise participates in.

9. SME Refund Scheme (Services Sector) “

Board of Investment

SME in the service category incorporated in Mauritius and registered with SMEDA with turnover less than Rs 50m

Maximum of Rs 200,000 per year, irrespective of the number of trade fairs the enterprise participation in. A grant of up to



Rs 20,000 for freight expenses incurred.

10.

Freight Refund Scheme

To meet 50% of freight costs for SMEs participating in regional fairs that consists of business to consumer sales in meeting 50% of their freight costs associated with regional exhibitions


Companies with an annual turnover of less than Rs 50m which are already exporting - ready

11.

International Bids Refund Scheme

To assist Mauritian Enterprises (SMEs) to participate in International Public Biddings by the cost of bidding


Only for International Bidding dealing with international public procurements considered

Refund the cost of buying bidding documents up to a maximum of Rs 75,000 per bidding document

12.

Access to industrial space

To provide industrial space to SMEs at affordable rates across the island

The State Land Development Company (SLDC)

SMEs which require small industrial space e.g mechanics, carpenters, metal workers, manufacturers and furniture makers

50% of discount to SMEs in the first three years

13.

Booster Micro Credit Loan Scheme

To finance projects of small enterprises

Development Bank of Mauritius

Entrepreneurs registered with NEF, SMEDA, AREU, IVTB, Tourism Authority, NCB

Rs 150,000 maximum loan amount

14.

Business Development Schemes

To finance projects Development Bank of Mauritius

Any individual company of SMEs duly registered. Projects recommended by EM, BOI, SMEDA, MTPA, NWEC

75% of project cost up to a ceiling of Rs 5m



Annex III

Small and Medium Enterprises Development Authority - SMEDA

Project – Recruitment of 20 Business Consultants

Recruitment of 20 Business consultants to help a portfolio of 500 small enterprises grow into medium and financed by NRF.

The project duration is 3 years and will be financed by the National Resilience Fund. A sum of Rs 10 M will be required yearly for consultants fees. A consultant fees is expected not to exceed Rs 50,000 a month.

Consultants will be recruited by SMEDA after registration of potential professionals with knowledge and experience in enterprise management.

The Business Consultant will be responsible for a portfolio of 25 small enterprises in a particular region and help them to double their turnover over a period of 3 years.

They will be responsible for the following duties -

KEY DUTIES:

1. To monitor the performance of a portfolio of 25 SMES.

2. To carry out site visits to provide assistance, guidance and support SMES through regular

follow-up, coaching and mentoring so as to enable the SMEs to expand their business.

3. To advise SME’s on new business opportunities, emerging customer needs and new

marketing strategy

4. To advise SME’s on efficiency gain throughout the value chain activities to improve the

competitiveness of their product/service

5. To examine operational problems faced by SMEs and advise them on how to overcome

these constraints.

6. To advise entrepreneurs who want to expand their business on the funds/schemes

available to this effect.

7. To carry out surveys, collect data and prepare reports on the performance of the SMES.

8. To report to the Manager, Business Development Services at SMEDA.



ANNEX IV

SMEDA - Financial Projection 2013-16

2012 2013 2014 2015 2016

Rs M Rs M Rs M Rs M Rs M Revenue

Shops sales 15.1 16.0 18.0 20.0 22.0Govt. Grant 35.7 35.0 40.0 40.0 40.0Other Income 1.0 1.1 1.2 1.3 1.4Grant from NRF - - 10.0 10.0 10.0

Total Revenue 51.8 52.1 69.2 71.3 73.4

Expenditure

SME’s products purchased 8.5 9.0 10.0 11.5 13.0Salaries & Wages 36.0 40.5 31.0 32.0 32.0Other operational Cost 10.7 10.0 10.0 11.0 11.0

20 Business Analyst (contract) - - 10.0 10.0 10.0Recruitment of 12 BDO’s & others - - 4.5 4.5 4.8Redundancy Cost - - 3.0

Total Expenditure (55.2) (59.5) (68.5) (69.0) (70.8)

Surplus/(Losses) (3.4) (7.4) 0.7 2.3 2.6

Return on Equity (Rs 19 M) - - 4% 12% 13.6%

1. It is assumed that Govt. Grant will have to be increased to Rs 40 M with the

implementation of PRB 2013.

2. 20 Business Consultants will be recruited on fee basis and paid through National

Resilience Fund or MBGS. They will be responsible to provide all round support to

a portfolio of 500 small enterprises and help them to grow during the next three

years. At the end of this period, enterprises with Turnover below Rs 5 M should be

doubled and those above Rs 5 M should show at least a 50% increase.

3. 35 employees will be removed from the payroll as from 2014 through either

redeployment or early retirement. A provision of Rs 3 M has been made as

incentives for the employees above 55 who may opt for early retirement.



4. 12 Business Development Officers, one Accounts Officer, one Internal Control

Officer and one Human Resource Officer will be recruited (after early retirement or

redeployment of the above mentioned 35 employee) to provide the SMEDA with

the right structure.

5. Under new arrangement, SMEDA can register more enterprises in priority sectors

by using more effectively its access to the Companies Division Register for new

businesses, prepare some 100 business plans a year and monitoring visits should

be increased tenfold given that proximity with the entrepreneurs is the key.

6. The SMEDA with the reforms proposed will be able, in addition to perform at a

higher level, shows surplus from its operation as from 2014 and a 5% return on its

Equity as from 2015.


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