Business Day editorial: Big hopes for small businesses

NO TWO ways about it – if the economy is to grow and transform, small and medium enterprises (SMEs) must play a pivotal role.

That much has been emphasised by the renewed focus on the sector in recent times, with the TT Stock Exchange, the Central Bank and the Ministry of Finance all last week issuing strong appeals for SMEs to become integrated in market mechanisms and for larger organisations to mentor them in this process.

Credit union officials too today believe expanding their services beyond traditional members to businesses could be a natural extension of their ethos.

Now is hardly the ideal time to make wistful suggestions about organisational change and cultural shifts within the SME sector.

The covid19 pandemic accelerated an already tepid outlook for many SMEs, who have been contending with a range of inimical factors, some from abroad, some local.

But it is easy to understand the eagerness of fiscal regulators to court these companies at precisely this time.

Central Bank figures suggest the SME sector contributes 30 per cent to GDP and employs over 200,000 people. Globally, SMEs account for about 60 per cent of employment, according to some estimates.

All over the world, economies are being forced to shift their moorings. We are no exception. There is a great need to cut back on reliance on energy revenues and on imports.

There is also growing realisation of the ways in which productivity can be bolstered through better use of “novel” technology, much of which is now actually a standard part of the fabric of doing business abroad. For example, contactless payment is only now being widely adopted here.

Businesses can miss out if they are slow to change. That poses problems when it comes to stimulating growth and encouraging innovation.

Several factors, however, stand in the way of getting SMEs on board. In addition to a lack of technology adoption, these entities are still recovering from the pandemic (and there are some who feel not enough stimulus support has been offered by the state).

Additionally, there are low levels of participation in international value chains, a lack of proper and up-to-date documentation, poor debt-repayment records, non-adherence to statutory obligations and an inability to meet corporate government standards.

This means access to financing is not easy, a gap which credit unions could potentially address, though by no means is this a straightforward matter given the need for regulation of that sector as well and given the troubles that have ensued when credit unions are subject to lax regulation.

Perhaps more straightforward is Finance Minister Colm Imbert’s call for larger firms to play a role in mentoring SMEs.

This might appear to run counter to the idea of market competition, but if such relationships are all about developing synergies and working relationships, they can be mutually beneficial.

It might seem like a fantasy to call for SMEs to get listed on the stock market, a move which comes with greater levels of scrutiny and, potentially, wider levels of share ownership in entities accustomed to sticking to who and what they know and doing things their own way.

But this must be a part of the transformation in the coming years. SMEs must grow if the non-energy sector is to succeed in this country.