Exploring the Predominant Business Risks Faced by Manufacturing Smes in Bulawayo

Nothando Tshuma, Emmanuel Sibanda and Tsepeso Setoboli
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Nothando Tshuma: University of Zambia
Emmanuel Sibanda: University of Zambia
Tsepeso Setoboli: National University of Science and Technology

International Journal of Research and Scientific Innovation, 2024, vol. 11, issue 11, 616-636

Abstract: This study explores the key business risks encountered by manufacturing small and medium enterprises (SMEs) in Bulawayo, Zimbabwe. Utilizing a mixed methods research design, data was collected through questionnaire and interviews. A total of 226 SMEs were selected using a stratified random sampling method. The results indicate that operational risks are the most significant, closely followed by financial risks. These challenges pose serious threats to the sustainability and growth of SMEs in Bulawayo. The research highlights that operational risks, including issues with production processes, supply chain interruptions, and machinery failures, are the foremost concerns for manufacturing SMEs in Bulawayo. Financial risks, such as limited credit access, cash flow difficulties, and volatile exchange rates, also greatly affect these businesses. To address operational risks, SMEs should enhance production efficiency and minimize waste, implement a strict maintenance schedule for machinery to avoid unexpected breakdowns, and cultivate relationships with multiple suppliers to prevent reliance on a single source, particularly local suppliers to lessen the impact of international supply chain disruptions. Addressing financial risks requires collaboration with financial institutions and mobile service providers to develop customized financing solutions for SMEs, such as low-interest loans, microfinance options, and credit guarantee schemes. Implementing strong cash flow management strategies, such as accurate forecasting and budgeting, can also improve liquidity. Additionally, SMEs should consider financial tools like forward contracts or options to protect against currency fluctuations and explore pricing their products in stable currencies to reduce exchange rate risks. To enhance SMEs’ understanding and utilization of futures contracts, the government could initiate targeted awareness campaigns and organize training sessions that explain the benefits and functions in straightforward terms. Furthermore, establishing robust systems and controls is essential for ensuring long-term sustainability and growth. Policymakers should adopt stringent monetary and fiscal policies, promote foreign investment, and diversify the economy to stabilize Zimbabwe’s currency and mitigate risks for manufacturing SMEs, while enhancing transparency, improving regulatory frameworks, and seeking international support to provide a resilient economic environment.

Date: 2024
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