Small businesses in developing countries: A glimpse at the Guyana situation

While the Small Business Act of Guyana (2004) provides a legal context that both defines the small business and sets out the paradigms within which such businesses operate, the growth and development of the small business sector has not, up until now, advanced to a level that might have been anticipated. There are a number of reasons for this, most of them associated with the fact that those entities that we define as small businesses are a large, loose, and diverse group; they are held together by no institutional structure and many, perhaps most of them, are still to grow to the point where they generate sufficient confidence (and by extension, support) amongst key local business institutions, not least commercial banks and high profile Business Support Organizations, the latter having been set up to substantively serve the interests of larger businesses anyway.

Here in Guyana (as is the case in most other countries) small businesses are independent non-subsidiary operations that provide various types of goods and services on a limited scale, which is what separates them from medium-sized and large firms. Here, an explanation is required about numbers of employees. In developed countries the numbers can go as high as upward of one hundred. Here in Guyana most small businesses employ far more modest numbers, less than a dozen in many cases.

Interestingly, local small businesses, particularly family-run micro-businesses, have demonstrated a tendency for what one might call stamina without growth, that is, a capacity to survive, (as we say in Guyana, ‘to keep their heads above water”) without demonstrating any definitive signs of going forward. This can be attributed largely to the fact that their day-to-day running is low-investment in nature insofar as there are few overheads, little or no salary-related burdens and reliable, albeit decidedly modest markets. Low investment, in effect, invariably means limited returns.

Small business growth requires a practicable and implementable business development plan. Business development refers to those pursuits and processes aimed at creating and effecting growth.  Business development is, by definition, the fashioning of long-term value for a business that is based on the creation of relationships that metamorphose into long-term customers, markets, and relationships.

Setting aside access to capital associated with creating the small business and ensuring its growth and survival for an initial period (which can vary in its duration from one instance to another) some of the other crucial challenges are linked to the Business Development Skills (or lack thereof) of the small business owners. In essence, business development should be seen as a marketing tactic. It embraces branding, expansion in markets, new user acquisition, and awareness.

Another important function of Business Development reposes in the use of partnerships in selling to the right customers. To be successful in Business Development the partnership must be built on strong relationships. As it happens, it is not customary for newly emerging small businesses in Guyana to possess a strong Business Development dimension. Most local small business owners appear to have a preference for working alone and here is where they often deny themselves access to support skills and funding which they lack in the first place and which are critical to taking the businesses forward.

While the extent of the contribution of small/micro businesses to the overall growth of the Guyana economy is unclear and probably quite small, anyway, what is known is that these businesses often make the difference between survival and destitution for poor families. Some of them have even served as avenues to greater things.

Elsewhere small businesses are known to play a key role as a provider of employment. In Nigeria, for example, upwards of 90 per cent of enterprises in the country are SME’s and these reportedly employ an average of 50% of the country’s working population and contribute to around 50% of the country’s industrial output.

Contextually, one of the great weaknesses of the small business sector in Guyana is the severe scarcity of even some of the most basic information on the extent of their impact on the overall economy. It is a shortcoming which, over the years, neither the state agencies nor the Business Support Organizations have seriously sought to rectify.

Here in Guyana the role of small businesses go even further. Some, particularly in the agro-processing sector, actually serve to drive innovation and competition in several economic sectors. Additionally, credit for the promotion of indigenous products and the spread of indigenous entrepreneurship also goes to the small business sector. To a lesser but by no means insignificant extent, some small businesses pursuits have provided goods that serve import-substitution purposes while stimulating exports.

For the reasons outlined, ensuring that small businesses survive and (more importantly) grow, is critical to the overall economic growth of the country.

Small businesses in Guyana continue to face serious challenges that compromise their growth and reduce their ability to compete favourably with bigger companies. Here, the biggest example to date, has been the sloth in implementing the clause of the Small Business Act that allows small businesses to tender for modest but potentially lucrative state contracts. This is a matter on which the Stabroek Business has repeatedly (and only recently) commented. Another concern has to do with the small financial allocations assigned to the state-run Small Business Bureau to help oversee and push small business growth across the country.

With finance having historically been the major stumbling block to the growth of the small business sector, the advent of the Small Business Bureau (SBB) was thought to be an important measure in pursuit of accelerated growth. However, the impact of the SBB has been limited, first, by the continual increase in the number of small businesses and, in effect, the greater weightiness of the burden which the institution has had to bear. At the same time the effectiveness of the SBB has been limited by the paltriness of its financial allocation and as a consequence, its constrained ability to support the sustained growth of emerging business enterprises.

While, over the years, various strategies have been tried in an effort to reduce this problem, it still remains to be solved. Small business owners have been claiming that financial institutions set far too stringent conditions for borrowing. The financial institutions (mostly banks) in response state that the small business owners often do not present business proposals that inspire confidence. There are instances of justification for these claims on both sides. Government, it has to be said, continues to turn a blind eye to enforcing tax obligations for a large swathe of the small business sector, though new rules, associated with qualification by small businesses to state contracts threaten to put an end to that.

If small businesses are to grow in Guyana several issues will have to be addressed. The following are important but by no means exhaustive.

Access to infrastructure: SMEs need adequate infrastructural facilities including equipment, power, water, and transportation, among others in order reduce their production costs and contribute to the cost effectiveness of their operations. Here, the end effect of enhancing competitiveness on both the local and external markets is the most significant positive return. What has been found in some instances here in Guyana is that where the cost of production is high, standards fall and the goods produced are as a result, not competitive.

Management skills: Management skills are critical to small business development. Here in Guyana, it is a major weakness. Proper management and entrepreneurial skills, adequate recording and accounting skills, are important for the growth of small businesses. Local enterprises appear, only now, to be waking up to this reality and a growing number of training options are beginning to emerge.

Creativity: Here in Guyana there is a dire need for small businesses to benefit from training and mentoring that will lead small businesses in the direction of enhanced creativity. There are numerous examples of what one might call ‘one-product wonders’ in the small business sector where the producer simply has no idea as to where to either enhance the existing product or to create new ones. Deficiencies in creativity are also present in packaging and labelling.

Market Awareness: If small businesses are to grow and prosper they need to understand the nature of the market, who their consumers are and who their competitors are. The major focus of small businesses should be on what represents their competitive edge and what can be an edge over major competitors in the market.

Effective communication skills and strategies: As the saying goes, the first impression lasts longer; it takes only a few minutes to either gain or lose the attention and interest of a potential client. Effective communication skills are important in generating and sustaining the interest and trust of a consumer. Small business owners and employees should undergo training in effective communication to gain insights on how best to engage potential and existing clients. There is no persuasive evidence that such training is commonplace in Guyana.

Collaboration and partnership:  Building of partnerships with other entities that offer complementary products and services will help in creating awareness and also boost sales of SMEs. What may well contribute to a deficiency in this area in Guyana is the seeming preference for small business proprietors to work alone.

Conclusion

Small businesses are critical to the growth and development of Guyana, particularly in the area of employment creation. More efforts and strategies should, therefore, be put in place to ensure that these businesses thrive. Setting aside their role in employment creation, small businesses in Guyana are also an important component to improving the quality of life of people, eradicating poverty and also encouraging production for both local and foreign markets.

Going forward, government, the established private sector, including the Business Support Organizations as well as banks and other lending institutions, must seek to steer small business policy in a direction that promises meaningful returns.