SURVEY. Of the SME in the Prilep Region. Valentin Parapanski Liesl Muench Prilep Region Enterprise Development Agency (PREDA)

Transcription

1 SURVEY Of the SME in the Prilep Region Valentin Parapanski Liesl Muench Prilep Region Enterprise Development Agency (PREDA) Prilep, January 2003

2 Table of Contents 1. Introduction Rational and Objective of Survey Methodology Findings General Findings Awareness about PREDA: Attendance at Training Interest in Participation in Trainings provided by PREDA: Support Wanted from PREDA Knowledge about Credit Lines Willingness to Pay for Business Services Sector-specific Findings Textile Sector Food Processing Marble and Granite Extraction and Processing Other Industrial Sectors Service Sector Trade Sector Summary of Findings Recommendations Ideas for Activities... 9

3 1. Introduction In former times, the economy was pre-dominated by large firms. They were the most important economic players regarding employment and production in the region. Before the collapse of the Yugoslavian Republic, there were 17 large firms existing in Prilep. A total of 12,000 workers used to work in those firms. Since the Republic of Macedonia became independent, all 17 firms have been undergoing a privatisation process; in 6 firms this process is still ongoing. 7 firms, representing 40%, have been closed down, their workers made redundant. The 6 firms presently under privatisation have stillongoing production, using their old property, capital, fixed assets, in particular the machines, and in some cases also some additional investment goods, but they have cut down on the number of workers to about 30% to 50% of their original work force. 4 firms were able to improve their performance to become more competitive on the national and international markets, not least, by using modern management techniques and counting on competent teams to handle problems in a professional way. The major parts of the business entities in Prilep nowadays are micro, small or medium-sized firms with up to 150 employees. Some of them have been derived from big firms, which were privatised and downscaled, but the biggest percentage of SMEs were formed by people made redundant during the transition process and unable to find work elsewhere or otherwise. Thus, most of the SMEs have not been established based on the wish to start an entrepreneurial activity or on becoming independent, but on the necessity to survive and to create the means for their own living for themselves and their family. However, there are an increasing number of people in the town, who have started businesses because they saw good opportunities for making a good profit by serving the local market with needed goods and services. 2. Rational and Objective of Survey Most of the SMEs started their businesses without prior knowledge of business planning, marketing knowledge or management techniques; some of them did not even have any professional skills or experience in the field that they have opened their businesses. Therefore, many firms are struggling to survive and the number of firms closing down every year equals the number of firms starting their operations. In order to support SMEs to overcome their deficiencies, PREDA is supporting consultants and institutions to offer good-quality business development services and / or information. Many small firms report that they would be willing to pay for these kinds of services, if those services would be made available in the Prilep region and if the prices were reasonable in relation to the benefits received from such services. In order to identify the concrete needs of SMEs from PREDA, and to find potential clients for the institution PREDA and its partners, PREDA decided to carry out this survey. Apart from the primary reasons, it was expected that - by conducting this survey in the way that it was done - the awareness for BDS, as well as awareness of the existence of the institution PREDA, would rise to encourage more and more people approach PREDA and use the services offered. It was seen as one step to increase the importance of PREDA within the local society. 3. Methodology The survey was carried out between August and November 2002, among 100 SMEs with up to 150 employees actively working in Prilep 1. Those firms were selected from several sources, such as: the official Yellow Pages, a list of firms obtained from the local branch of the Ministry of Economy, personal contacts and information and 1 It should be noted, that on there were national elections, which did not make the discussions with the business people any easier. 3

4 recommendations from other firms. After the identification of the SMEs, a selection was made according to their sector of activity and their known success or failure. The selected firms were contacted for appointments directly by the interviewer. It helped that the person from PREDA, who carried out the survey, was, and is, part of the business sector himself and is known around town for his business activities. It can be assumed that there was a mutual understanding between the interviewer and the respondent and that many local businessmen were speaking more openly with one of their own than with somebody else. The interview as such was also not carried out in the classical way. The interviewer set appointments with the owners of the firms and involved them in some kind of informal conversation or discussion over a coffee or he met them in a coffee shop. During those conversations, he never used a questionnaire or took written notes. The results of those conversations were transcribed into the questionnaires after the completion of the interview. This approach was used, because PREDA has started to realize a certain hostility by SMEs to be interviewed or surveyed. Many small firms are afraid of the political circumstances at the moment, and fear that the data collected would reach Ministries and / or inspections - having potentially a negative influence on their work. During the conversations the following questions were asked: - What is the main sector your firm is working in? - What is the main activity of your firm? - Do you know PREDA? - Have you have attended any training before? - Are you interested in attending training events organized by PREDA? - How could PREDA help you to become more successful with your firm? - Are you familiar with credit lines and do you use any of them? - Are you interested in gaining business information, for example, information about credit lines, and / or contacts with other firms? - Would you pay for these kinds of services? - What are your future plans? - How many workers do you have? The 100 surveyed firms belong to the following sectors: Production: 53% Service: 24% Trade: 23% Most of the interviewed SMEs (53%) belonged to the production sector due to the importance of this sector for the project. It is believed that the work of PREDA might have the biggest impact within this sector. However, the other two sectors should not be neglected, because they often serve as entry point to entrepreneurship. Many production firms had started with a trade or service firm before they started their production activities. Often the need for production, or the awareness of a business opportunity, arises from the selling and buying of goods or services. The largest number of the surveyed companies have production of textile as their occupation (14), followed by the food-processing sector (8), and the firms extracting and processing marble and granite (6). 4

5 4. Findings 4.1 General Findings Awareness about PREDA: 55% of the surveyed owners of the firms stated that they knew about PREDA, 40% were not aware of the existence of PREDA in town and 5% answered with yes and no. However, it seems that many small entrepreneurs may have heard about PREDA but are not really aware of the kind of activities or services offered. Yes No Yes/No 55% 40% 5% Attendance at Training 47% of the surveyed persons have attended some kind of training or seminars in the past, while 43% have never attended such trainings or seminars. Yes No 47% 43% Interest in Participation in Trainings provided by PREDA: 70% of the surveyed business owners were generally interested in participating in training organized by PREDA, but most of them only if that training would bring them some clear benefits. 8% of the interviewed SMEs were not interested in training, 9% said that they might attend, if the right training was offered, 7% did not know if they would attend training or not, and 6% were undecided as to whether or not they would be interested in training. Yes No I do not know Yes/no Maybe 70% 8% 7% 6% 9% When asked for the type of training they would be most interested in, they most often stated marketing, management and training for their employees etc Support Wanted from PREDA 24% of the owners of firms answered that they would like PREDA primarily to organize seminars and training on different topics, 17% would like to see PREDA offer financial support, 14% expressed the need for contacts with other firms. Training 24% Financial Support 17% Contacts to Firms 14% 5

6 4.1.5 Knowledge about Credit Lines 50% of all respondents knew something about credit lines, but only a very small number have ever applied for credit, 48% had no information about where to find financial support, 2% were not interested in knowing more about credit lines or getting financial support. When asked this question, mostly the first answer was that it is very difficult to get access to credit in Prilep, disregarding the high interest rates imposed by banks for credit. Knowledge about Credit Lines 50% No Information on Financial Support 48% Not Interested in Credit 2% Willingness to Pay for Business Services A high percentage of the firm owners (96%) would pay for business services 2, if they were to see a benefit from such service for the success of their firms. 3% stated that they did not have any need for such services and only one firm did not know whether it would pay or not, even if there would be some benefit for the firm arising form this service. Yes 96% No 3% Yes/No 1% 4.2 Sector-specific Findings Textile Sector The largest numbers of the companies interviewed belonged to the textile sector (14%). At present there are about 20 textile firms active in the region of Prilep, employing about 1,500 employees. The textile sector is growing and has good potential for employment. As the most important problem within the sector, the interviewed entrepreneurs stated the lack of qualified staff available on the local labour market. Many interviewed business people expressed the need for proper training facilities in which their staff could become qualified for their work in production. Prilep has attracted, over recent years, several firms, in particular from Greece, which produce inloan production for bigger firms in Europe or the USA. This kind of production requires highly specialized skills. Training the staff on-the-job within the firms is a timeconsuming task and implies the danger of losing some of the production. Most of those firms working in loan production receive the exact amount of raw materials from their contractors to produce the exact agreed upon number of pieces of cloth. The Ministry 2 Large numbers of the SMEs are already paying for business services in town, such as accounting and legal services. 6

7 of Finance and Economy supports the training of textile workers with up to 50%, but up until now, the textile sector has not found an appropriate way to deliver such training programs in Prilep. Many of the owners of the firms expressed the need for a training centre, in which a large number of potential employees of the textile firms could be trained. Many of the owners of the firms would be interested in engaging more people, if qualified staff were available on the local market. A training program of three months could be financed partly by the textile firms and would be cheaper for them, than training staff on-the-job Food Processing The second biggest number of firms interviewed (8%) belonged to the food-processing sector. This sector can also be considered as an important one for the region, because of its benefits for agricultural and horticultural development, which is hardly exploited. A similar situation can be also found regarding the processing of agricultural goods produced in the area, which is currently underdeveloped. However, there are 30 to 40 food-processing firms in the SME sector, employing about 500 employees. In addition to those small firms there are three big food-processing factories in Prilep, Zito Luks with about 150 workers, Vitaminka- with about 500 workers, and the Tobacco Factory with about 1,800 long-term employees and 500 seasonal workers. Owners of the small firms stated mostly, that the purchasing power within the region is weak and that they have difficulties to place their products outside Prilep or Macedonia. Most of them are interested in gaining access to information about contacts with firms able to market their products within Macedonia or abroad. Many are also interested in being informed about credit lines available for small producers Marble and Granite Extraction and Processing The third largest number of surveyed firms extract and process marble and granite (6%). This is one of the most dynamic sectors in the region and has a good potential for employment opportunities over the next few years. At present, there are approximately 30 small firms existing in this sector, with about 900 workers, in addition to the big marble factory with 500 workers. This number is increasing constantly, and Prilep is known internationally for its high quality marble. As the most important problem for the sector, the interviewed owners of mines stated the lack of qualified staff available on the local labour market. There are some training facilities within the country the most well known are in Skopje and in Stip, where the National Faculty of Mining is located but due to high costs, in particular regarding the travel costs, neither potential miners, nor the owners of mines are making use of those facilities. Many of the interviewed firms in this sector stated a need for an appropriate training for miners in the region as one of the major constraints for the growth of the sector. At present, the training of miners is often done on-the-job within the mines, which could be extremely dangerous if handling explosive materials and it has often caused in the past substantial damage to the equipment, not counting the input of human resources needed for one-to-one training on the job. The training should take place in Prilep in order to avoid high travel costs. A trainer, possessing all necessary skills and certifications (diploma) is available locally; the interest in such courses is large, both at the mines as well as with the miners. Such training could have a direct contribution to make in decreasing the unemployment in the region. 7

8 4.2.4 Other Industrial Sectors Several other firms from the industrial sector were interviewed. They belonged to the following branches: Branches No. Firms % of Firms Wood processing industry 4 4% Production of paper 3 3% PVC 3 3% Metal industry 2 2% Chemical industry 3 3% Production of building material 1 1% Electro industry 1 1% Production of tires 2 2% The problems of these firms are similar. Most often they state as their needs: more information on credit lines and financial support, more information on prices and access to raw material or investment goods, and contacts and links to other businesses Service Sector 24 firms from the service sector, representing about 12 different sub-sectors, were interviewed. Most of them expressed as their most pressing problems access to credit lines and financial support, and information and contacts to other businesses. Most of the firms interviewed within the service sector were taxi companies (7), this being a dynamic sub-sector with substantial employment opportunities. This sub-sector is relatively new in the region. The first taxi company opened at the end of 1995 with only 5 vehicles. Today, there are about 20 companies, with 350 vehicles in total, adding up to about 1000 drivers and about 50 dispatchers. One of the biggest problems of the taxi companies is the lack of qualified staff. The demand is, in particular, for qualified dispatchers knowing how to direct taxi vehicles to the right location, but also the need for qualified taxi drivers able to react to the dispatchers, with good knowledge of the streets in town and good behaviour towards clients is very high. Presently, many people from all different professions are employed by the taxi companies, not least because the taxi service sector is relatively easy to enter it requires at first only a valid driving license and serves for numerous persons as a (re-)entry point to the labour market, for example, after university, or after having been dismissed from another job. Since the fluctuation within the taxi service sector is very high, there is an ample need to qualify new staff. Training in this field should be carried out by a local expert and would have the potential to increase employment in the city, thus having a positive impact on the local unemployment rate Trade Sector 23 interviewed firms belonged to the trade sector, representing about 14 different subsectors. Most owners of businesses in the trade sector were particularly concerned about the overall and general economic situation, in particular the low purchasing power of a large part of the population. The needs expressed by the owners of shops and retail stores concentrate mostly on access to financial support, access to information and access to contacts with (potential) clients and firms. 8

9 4.3 Summary of Findings PREDA is beginning to become more and more known in town. Many people are interested in training or other services provided by PREDA, and half of the business owners interviewed have first-hand experience with training measures and seminars. The same number is aware of the existence of credit lines. Many firms want PREDA to organize training and seminars in different fields, particularly in skill development, but also in management, marketing and business planning. Others wanted PREDA to facilitate access to credit or links to other firms. Almost all interviewed firms were willing to pay for services, if those services would provide some benefits for the firm. 5. Recommendations SMEs in Prilep have several expectations towards PREDA. They are interested in training, in access to financial support, in provision of information and in contacts with other firms and / or clients. In respect of the findings of the survey, the following recommendations could be given: 1. There is a clear need for training measures in town, in particular for the development of vocational skills, but also for business skills such as business planning, marketing and management. For vocational skill development, trainers can be found locally, for example in the sub-sectors of mining, textile, and taxi services during the survey several potential trainers were identified; for the business skills training, a trainer might have to be sought on a national level (or amongst PREDA s partners or staff), but it is recommended for PREDA also to become more active in this field. These training sessions should be carried out in one place, a place, which can be recognized by the local business sector in the end as the place for SMEs to go to for training. It makes more sense to have one well-equipped training place, preferably with several training rooms working to capacity instead of several poorly equipped training rooms or places not working to capacity. 2. There is a large demand for information for the local small business sector. PREDA could become a focal point for gathering information, for example, by establishing an information centre accessible to all SMEs, providing many different kinds of information, for example on credit lines, on investment goods, on fairs, on consulting services available in Prilep and Macedonia, on donor programs and projects, custom tariffs, etc. An information centre could also facilitate easier communication between the SME sector and PREDA and would allow PREDA to react and respond more directly to their needs. 6. Ideas for Activities During the implementation of the survey several ideas for activities occurred during the interviews with the different owners of SMEs, for example; 1. For Employees of SMEs Skill Development Course for Miners (A Course for Beginners on Basic Skills and Handling Equipment and a Course for Miners with some Experience on Handling Explosives) Skill Development Course for Taxi Service Sector (A Course for Taxi Drivers and a Course for Dispatchers on Basic Skills and Equipment) Skill Development Course for Textile Sector (A Course for Beginners on Basic Skills and Handling Equipment for Loan and Home Production) 9

10 Skill Development Course for Wood processing Sector (A Course for Beginners on Basic Skills and Handling Equipment) Skill Development Course for Hairdressers (A Course for Beginners for Basic Skills) 2. For Owners of SMEs Business Planning Courses Marketing Courses Course on Change Management Course on Vision Building Information Event on Credit Lines Course on Use of Internet 3. Information List of consultants working in Prilep List of credit lines accessible in Prilep List of Fairs in Macedonia, Europe and beyond List of donor funded projects and programs in Macedonia List of training offered by other institutions in Prilep Internet Research to find products or services upon request 4. Others Organization of tours to Fairs Links with institutions in Skopje for SME support services (e.g. Training, collaboration, joint-venture, fair participation, support, visa for fairs, etc.) 10