MUCH has been written about the pivotal role that small and medium sized enterprises (SMEs) play in the economic development of Saint Lucia. Not only are they crucial for nation building, but also for national innovativeness and competitiveness. Socio-economic paradigm shifts cannot happen without them; and poverty cannot be reduced without them. They are what produce a country’s middle class. Therefore, there is little doubt that SMEs, when treated as an economic sector, can become the engine of social and economic growth.
Still, our record at generating start-ups or at quickly turning smallish firms into medium size firms is average. In all fairness, over the years several useful programmes and policies have been put in place to guide and assist SMEs in realizing their full business potential and in generating employment.
Evidence of this sector’s importance is found in the “Industrial Policy of St. Lucia” where it states: “The micro and small enterprise sector is the backbone of the St. Lucian industrial economy.” According to Saint Lucia’s Ministry of Commerce and Industry, over 80% of businesses on the island are SMEs operating in areas such as construction, agriculture, transportation, manufacturing, hospitality and cosmetology.
However there is still an incredible amount of work to be done in terms of institutional incentives, access, information and value generation. The Small Enterprise Development Unit (SEDU) has identified some of the challenges SMEs face including lack of market research & information, human resource constraints, poor cash flow management and limited access to finance. Recently, the Saint Lucia Trade Export Promotion Agency (TEPA) in collaboration with the Caribbean Export Development Agency (CEDA) held training programmes for small and medium sized businesses with a view to building capacity in exporters and enterprises, thereby helping them grow and become more competitive.
A TEPA press release on the programme read, “The initiative will seek to raise the level of productivity and profitability within SMEs, through the Experiential Learning Methodology (i.e. case study based and driven by practical examples and assignments.”
I believe such efforts are commendable especially since it has become crystal clear that accessing international markets is no longer simply an option for Saint Lucian SMEs, but a economic necessity. Saint Lucian companies can no longer afford to focus solely on the domestic and regional markets. If they wish to grow, they must take steps towards increasing scale and scope, and trading internationally.
The critical question I suppose is: How can we promote an enterprise culture or forge an entrepreneurial spirit in Saint Lucia which can help catapult greater wealth and job creation?
It’s quite instructive how governments around the world have responded to the challenges of SMEs against the backdrop of globalization, competition and technology. In order to assist SMEs, policymakers’ attention has focused on supporting working capital, easing access to finance and implementing a better regulation agenda that addresses issues such as licensing, registration and taxation. They have also been hard at work in providing SMEs with the tools and skills needed to become better suppliers and distributors.
SMEs particularly in the agricultural sector in Saint Lucia continue to struggle to access growth capital. Both policy-makers and financial institutions need to do more to help these enterprises access finance. The Saint Lucia Chamber of Commerce, Industry and Agriculture has a huge role to play here. Notwithstanding the good work it has done over the years, I believe that now more than ever, with the assistance of the ministry of international trade, it can provide even more crucial support to SMEs seeking to expand through the provision of the following services: international networking opportunities, trade documentation services, international trade training, and the facilitation of trade missions. Particularly useful would be the development of knowledge and information resources to guide SMEs through the red tape challenge associated with international activity, and to help them access all appropriate sources of funding.
In terms of the role the education system can play in fostering entrepreneurial growth, perhaps the time has come for us to introduce “manufacturing science” and “entrepreneurship” into our various curricula at all levels of our school system. As is most evident in countries like India, Germany and increasingly China, courses in manufacturing science are critical in developing early entrepreneurial and creativity skills to help young people start their own business rather than waiting for someone else to provide them with a job. Statistical evidence in emerging economies has demonstrated that manufacturing has the largest multiplier of all sectors of the economy and is of vital importance in maintaining a nation’s innovative capacity. Manufacturing employs workers at all skill and education levels and may be critical to other high value-added sectors of the economy including our vital tourism industry.
A few weeks ago, in seeking to address the role of fiscal incentives to foster SME growth, I wrote: “The answer to our unemployment woes may well lie within the sphere of private sector business nurturing and development. Although foreign direct investment (FDI) is essential, more critical is the support and incentives provided to entrepreneurs, and small and medium size enterprises (SMEs), either through targeted business development policies or fiscal stimuli. SMEs are the lifeblood of a country’s economy; they are essential to generating good jobs. Long recognized as crucial to economic development, entrepreneurs and SMEs are increasingly seen as crucial for sustainable recovery and for a strong middle class, a source of economic growth. A strong middle class provides a stable consumer base that drives productive investment. Hence, tax policy is one of the most obvious policy levers that policymakers control to alter the incentives of firms and entrepreneurs. When business tax structures are well-designed, government facilitates investment in the emerging firms that create jobs.”
Saint Lucia has the potential to build its SMEs on the strength and initiative of its creative arts industry. Unfortunately, the lack of technical, structural and financial investment in the creative and literary arts industry (perhaps due to scarce financial resources in the first place) bodes ill for our local economy since it could have given this country a unique advantage in a world evermore reliant on the knowledge economy. For all we know, this could be the elusive answer to our unemployment problem. The point is ,if we are to truly make an economic success of the creative industries in Saint Lucia, we must aim to strengthen the sector, promote intellectual property rights and invest in the next generation of content creators to keep the flow of IP coming. The economic benefits could be huge.
Research on the subject of the importance and success of SMEs in many developed and emerging economies has left us with three general lessons. First, you do not need to try to build your own version of Silicon Valley to prosper; it is often better to focus on your traditional strengths in “old-fashioned” industries. Second, niches that appear tiny can produce huge global markets. The third lesson is that developing nations can secure and preserve high-quality jobs in a vast array of local industries so long as they are willing to focus and innovate.
For comments, write to Clementwulf@hotmail.com – Clement Wulf-Soulage is a Management Economist, Published Author and Former University Lecturer.