A Nation of Entrepreneurs: The first step of a long journey

Creating independent SMEs It is very important to create the necessary policies for the small businesses to help them succeed. However, it is also important to give them the necessary space so that they can eventually stand on their own, otherwise we risk creating eternally dependent companies. So instead of helping them they might be totally dependent on the government and as such in the long term the SMEs might not be sustainable when the safety nets disappear. We saw that with our sugar and our textile industries. We need to know ‘where to draw the line’. That said, there are several institutions that deal with the entrepreneurship folder. We might eliminate duplicity in order to optimise costs and improve efficiency.

It’s better to have a single national agency that handles everything for SMEs than have multiple institutions that operate independently. In the same breath, we must also reform the ‘Licensing’ of SMEs. Instead of having a long list of different permits, it’s better to categorise several activities under one license. This will facilitate not only the administration, but also reduce costs. Government can also consider giving some respite on ‘Trade Fee’, say during the first two years of operation, this will benefit enormously for small businesses that are unable to achieve a good turnover at the beginning. On financing, with more than ten thousand SMEs in Mauritius, they should seriously consider creating ‘Credit Unions’ and contribute to finance their joint marketing. Finally, government must encourage exchanges between our friendly countries, for example, to benefit our entrepreneurs short-term placements in companies abroad, to familiarise them with advanced knowledge on systems and techniques.

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Dr Bhavish Jugurnath: “A crucial need for Economic Growth in 2016”. News on Sunday approaches Dr Bravish Jugurnath from Divine Whitefield Consultants to provide some insights in achieving success by SMEs.

As the world economy continues to move towards increased integration, some of the greatest opportunities for Small-to-Medium Sized Enterprises (SMEs) will derive from their ability to participate in the global marketplace while sustainably increasing their competitiveness, says Dr Bhavish Jugurnath. “It is generally accepted that SMEs are becoming increasingly important in terms of employment, wealth creation, and the development of innovation. SMEs in the USA, Europe, Japan, Taiwan and China contribute to nearly 80%, directly and indirectly, of their respective GDP’s as well as exports. Similarly, the economic success of the Mauritian economy cannot be solely attributed to large enterprises since the entrepreneurial role of the Mauritian SMEs has also contributed to the impressive performance of the island. “ He says today SMEs have a critical role to play in the expansion of the economy of Mauritius. Based on statistical figures, SMEs add to approximately 38 per cent of Gross Domestic Product (GDP), manufacture some 125 billion rupees worth of output every year and create employment for some 255,000 people. Consequently, it is vital to preserve the durable economic growth of the state which can be attained by making sure that the biggest amount of SMEs contribute to the economy. The development of SMEs in Mauritius contributes to the increase in the gross domestic product, creation of new jobs and reduction of the unemployment rate, substitution of imports and higher export competitiveness of the domestic economy. SMEs are a source of innovation and play a significant role in uniform regional development. In this regard, various innovative proposals and conveniences in the form of finance, skills and logistics are being offered to additionally support SMEs. Rs 20, 000 (USD 666) is being provided to start-ups so that they can sustain their living costs for the starting month.  Also, in trying to boost up entrepreneurial movements, sensitization campaigns and fairs for small operators are being held across the island all year long by the Small & Medium Enterprises Development Authority (SMEDA). Proposal for Vibrating the SME Sector Globalisation has ushered in new opportunities as well as challenges for SMEs. Currently, only a small part of the SME sector is able to identify and exploit these opportunities and deal with the challenges. The majority of SMEs, however, has been less able or unable to exploit the benefits of globalisation and, to add to the situation, are frequently under pressure on the local or domestic markets from cheaper imports and foreign competition. A major objective of work to promote the development of the SME sector is therefore necessary to equip local SMEs to better meet the challenges of globalisation and to benefit from its opportunities. Mauritius’s small domestic market makes it necessary for local enterprises to internationalise, often at a relatively early stage of their growth. In particular, emerging markets, especially in Africa, represent a major opportunity for local enterprises in the next decade and beyond. These markets will increasingly demand solutions in areas which Mauritius companies have strengths in – such as Financial Services, Manufacturing, Sugar Production, property development, water/waste solutions, transport and healthcare. Mauritius-based companies which can seize these huge opportunities could potentially become globally competitive companies (GCCs). Considering that the majority of SMEs exist and operate locally, governments play an essential role in stimulating SME development. This is especially reflected in the establishment of a favourable business climate at the local level by providing the necessary institutional infrastructure which provides business information, services and training for SMEs, as well as various forms of financial support. To this end, the Government can do much more to help companies access capital, build capabilities, establish networks and nurture talent. Market Financing of SMEs SMEs with good capabilities, particularly those in non high-tech sectors, face challenges in raising patient growth capital as they are typically not large enough to interest private equity, nor able to provide sufficiently attractive returns in a relatively short time horizon for venture capital firms. Government could catalyse supply of growth capital to Mauritius-based enterprises through co-investing with the private sector. Government intervention should create the incentive for private equity financing of Mauritius-based SMEs through co-investment funds. Government, as co-investor, should rely principally on private sector expertise to assess investment worthiness, so as not to erode commercial discipline in investment decisions. Need for Market-based solutions and specialist institutions As the overseas business opportunities for Mauritius companies expand, the need for cross-border financing will increase. Mauritius corporates require funding for three major purposes: (a) trade finance and credit insurance for exports and imports; (b) internationalisation finance (funding of overseas plants and operations); and (c) project finance. However, in each area, there exist structural constraints that limit the local market’s capacity to lend. This has been accentuated by the global economic crisis, which has reduced banks’ capacity for cross border finance. Going forward, commercial banks will increasingly utilise specialist financial institutions like ECAs (Export Credit Agencies) and EXIM (Export-Import) banks to complement their activities. Given these structural limitations, there is a need for Government to help plug these gaps in cross-border financing capacity through market-based solutions and institutions. Specialist financial institutions like ECAs and EXIM banks have helped complement private financial institutions in several other markets, and have gained importance since the crisis. A specialised institution along similar lines in Mauritius could support the market by performing the following functions: (a) Risk and credit insurance for trade finance; (b) Guarantees for loans by commercial banks for overseas investments (c) Guarantees for project finance and where necessary, co-financing with commercial banks. Attracting and Retaining Talent Education and training contribute enormously to the development of the knowledge-based economy and consequently to economic development in general. From the SME point of view, education and training for entrepreneurship and availability of skills are vital development factors. Enterprises need talent, as well as requisite domain expertise and management capabilities to drive their growth. However, many local enterprises lack exposure and profile as employers. Hence, they face the perennial difficulty of attracting and retaining their fair share of talent. Going forward, there is a need for longer-term and enhanced programmes such as Executive Training Programmes for SMEs that build up a sustained pipeline of talent and a ready pool of professional advice and business expertise that SMEs can tap on. To this end government could (i) formalise and broaden the scope of internship programmes at the polytechnic and undergraduate levels; and (ii) facilitate a ready network of advisors and mentors to provide strategic advice, functional and domain-specific expertise to local enterprises. Empower local trade organisations to drive growth Local trade organisations, such as trade associations and chambers, can serve as strategic platforms that provide capability building support, networking opportunities, and business insights. Relying on their networks and expertise, trade organisations can potentially be an important pillar of support for corporates, complementing government support programmes by offering customised outreach and assistance that better target unique industry needs. Currently, trade organisations are already involved in manpower development, networkingand consultancy/information services. There is scope to empower them to take on greater responsibilities and roles, and encourage industry-led initiatives to foster a more cohesive and synergistic enterprise community.