by Lipton Matthews
It is common knowledge that small and medium-sized enterprises (SMEs) play a pivotal role in fostering job creation, economic growth and innovation in market economies. According to the European Commission, small businesses provide more than 20 million jobs in the European Union and it was also estimated that 85 per cent of net new jobs in the EU between 2002 and 2010 were created by small businesses.
Although these enterprises are expected to rescue Jamaica from its economic abyss, successive administrations have not promoted an environment to facilitate the growth of dynamic SMEs. Limited access to credit is usually given as a reason for the failure rate among small businesses, but as one commentator remarked recently: “I would suggest that governments seeking venture development and job creation focus on entrepreneurial development before building a venture capital infrastructure. Putting financial development ahead of entrepreneurial growth is likely to result in mediocre results, at best, and a waste of scarce resources, at worst.”
Many factors, including inadequate government support, exorbitant interest rates and even the managerial capabilities of small business owners, have been blamed for the dismal performance of the SME sector, but we cannot rely on anecdotal evidence.
For example, based on the findings of the Branson Centre for Entrepreneurship survey, most small business operators pay little attention to bookkeeping. However, we cannot, therefore, conclude that the majority of Jamaica’s small-business people are deficient in accounting, since the sample size was rather limited and the research never intended to assess the reasons for the high failure among small businesses.
Developed countries are known for commissioning studies to examine the nature of an ever-changing SME sector and we should follow suit if we are serious about the prosperity of Jamaican businesses. We must also be realistic. Jamaica needs smart entrepreneurs who will discover niche sectors and tap into the global market, not hustlers.
Therefore, the importance of technology in creating competitive SMEs cannot be overstated. A recent study conducted by Boston Consulting Group, showed that regardless of their country, entrepreneurs who were early technology adopters increased their annual revenues 15 per cent faster than competitors. They were also able to create jobs twice as fast as other small businesses.
Grants could be provided to offset the cost of upgrading technology for small businesses. The World Bank, and the IDB are possible sources of financing for such a project. This administration could prove to Jamaicans that it is serious about creating wealth and not just populist social programmes by lobbying for this programme.
Lipton Matthews is a first year law student and is unusual in being a Libertarian-Conservative Jamaican Adolescent who believes in the virtues of Capitalism. He can be reached at firstname.lastname@example.org.
This article originally appeared in print as the Letter of the Day in the Letter to the Editor in the Jamaica Gleaner, on Saturday March 15th, 2014.