Ministry of Trade has issued an order compelling government ministries, departments and agencies (MDAs) to award certain listed businesses to small-scale entreprises (SMEs) in the country.
The SMEs Order, which was gazetted on December 14 2020, is expected to widen the tax base as it will encourage SMEs plying informally to formalise their businesses.
Some of the businesses enlisted to be awarded to SMEs include supply of fertilisers, teaching and learning materials, classroom furniture, hospital fittings and uniforms and gear for government security agencies, among others.
Minister of Trade Sosten Gwengwe told journalists in Lilongwe on Tuesday that the SMEs Order was necessary because small businesses are facing a myriad of challenges such as stiff competition from big businesses.
“Government procurement is one of the best ways of sharing the cake of our economy that has potential to spur equitable income distribution that could reach all corners of the economy,” he said.
For instance, the analysis by the Ministry Trade shows that 70 percent of the K1.731 trillion in the 2019/20 Budget was spent on procurement of goods and services.
The analysis further indicates that K1.1 trillion of the total budget was spent on government procurement yet SMEs share was less than 20 percent.
In the 2020/21 National Budget, Ministry of Finance said government will introduce several initiatives aimed at reaching out to the informal sector to register their businesses to expand the tax base as government only deals with registered firms.
Ministry of Finance spokesperson Williams Banda said in a written response on Wednesday that government was keen to widen the tax base in line with the national budget assumptions.
“SMEs form a large part of the informal sector that will be brought into the tax band, thereby widening the tax base through the SME Order,” he said.
In reaction to the SMEs Order, Chamber for Small and Medium Businesses Association executive secretary James Chiutsi said the move will entice small businesses to get registered, observing that if they are not formal, then they will miss out on government business.
“We, however, have a caution because every law is as good as the people behind it. We implore enforcers in the government systems to implement this fairly,” he said.
On his part, Public Procurement and Disposal of Assets Authority (PPDA) director general Elias Hausi said the gazetted list was not exhaustive as the authority will be amending by adding or removing items through a consultation process.
He said for the sake of transparency and accountability, PPDA will be publishing how MDAs are adhering to the order at the end of every quarter, adding that there will be penalties to non-compliant institutions.