J’can business needs a better mix
LAST YEAR, The University of the West Indies celebrated its 70th anniversary. There was a special event held on the Mona campus where the university’s significant achievement was highlighted on video. The UWI had accomplished the remarkable feat of producing 20 of the Caribbean’s prime ministers.
As I watched the video, I was impressed with the university’s achievement, especially as I was on campus with some of the students who would eventually become leaders in the public sphere.
But I couldn’t help but think, wouldn’t it have been an even greater achievement if the university had also produced 20 leading entrepreneurs who headed advanced companies, including owning major global engineering firms; been in the forefront of technological change in domestic agriculture; were leading industrialists; owned and developed hotel chains throughout the Caribbean, Europe, and North and South America; and spearheaded a multinational corporation based on the outstanding creative talent in the region and the diaspora? I could recite so many stories of missed opportunities and misplaced emphases that have accounted for the graduates of our leading university being badly under-represented in leadership roles in Caribbean conglomerates, global enterprises, and in large-scale, technologically driven industrial domestic corporations in the private sector.
If the university had produced outstanding graduates to be leaders in the private sector, this could have spawned more growth of advanced companies with export potential and could have been an incubator facilitating appropriate skill sets for entrepreneurs. Our visible trade deficit shows that we import more than three times the value of what we export. That ratio is going to get worse as the mining sector, which contributes a large percentage to export earnings, is going to lose one of its major players over the next two years.
An unfortunate thing is that our business mix – in terms of type, scale, size, scope – is not able to respond to the country’s pressing need for sharp increases in production. This was borne out in a recent study done by the Planning Institute of Jamaica.
The new survey, Jamaica Survey of Establishments, conducted by the Statistical Institute of Jamaica (STATIN), funded by the World Bank, was published by the Planning Institute of Jamaica (PIOJ).
The survey found that one out of 10 establishments (local businesses in urban centres) has accessed a business loan, and seven out of 10 establishments do not have Internet access. The survey covered establishments that employed a minimum of three persons on a continuous basis. What is really significant about this survey is that many politicians and business leaders have been declaring that high interest rates have been stifling business growth. But the low take-up of loans suggests that expansive monetary policy designed to stimulate economic growth will have limited impact. If 90 per cent of small businesses are not borrowing, and most are not part of the formal economy, it is unlikely that enlarged liquidity or declines in interest rates will be sufficient to spur economic growth. There is a preoccupation, almost a romance, by so many in the country that Government should be providing much more in benefits to small, medium, and micro businesses (MSME) as these are the real engines of growth. If these businesses are not availing themselves of appropriate ratios as far as loan-to-equity financing goes, and most have no Internet connectivity, the transformation we need in our economy through innovation and technology will be largely absent. What is even more disappointing is the mix of businesses and their lack of emphasis on exports. The survey found that 11 per cent were accommodation and food, one-third operated motor vehicle sales or repair, and another third operated in the wholesale and retail trade.
Finance Minister Dr Nigel Clarke, in his analysis of the data, emphasised that “the only way we are going to get growth is if businesses, because of competition, find it necessary to invest in technology, making their services more efficient”.
Most businesses are import driven, and just a few place any emphasis on exports.
The findings of this survey are consistent with the level of underinvestment in capital goods and technology over several decades that have accounted for our lacklustre growth performance. There is an absence of significant breakthroughs and innovation in the product and service offerings at many of our annual trade, product, and service expositions. This tells us that research and development and entrepreneurial vision are not keeping pace with global developments. Analysing the Jamaica Establishment Survey, what comes through to me is that some distinction should be made between self-employment and entrepreneurship. This is very important in the Jamaican context. A 2017 Global Entrepreneurship Motor (GEM) Jamaica Country Report found that 84 per cent of Jamaicans were extremely confident that they had the required skills to start a business, and their fear of failure was very low. That high figure suggests a strong belief in self and not necessarily any adequate preparation, training, skill set, or competence to set up a business with structure, accounting discipline, and guidelines for growth.
The preponderance of low wages in Jamaica among so many income groups and the reality of underemployment provide an impetus for entrepreneurship. Unfortunately, as the Global Entrepreneurship Monitor discovered, 95 per cent of employed Jamaicans say they have not been involved in the development of anything new over the last three years.
That tells me that productivity gains and innovation are not there to drive increases in output, irrespective of fiscal easing and monetary expansion. However, such loosening of government policies could bolster demand for imports, thereby putting additional pressure on our dollar. The structural weakness of Jamaica’s economy is caused by the lack of advanced companies that can be a hive of well-trained, highly skilled professionals to become leaders of the pack as new entrepreneurs.
At the same time, an adequate number of advanced companies would provide markets and inputs for many startups and small to medium-size businesses on the move. Entrepreneurs with a natural flair or instinct, sharp mind, good sense of business, heightened risk disposition, ideal leadership qualities, and fascination with technology and innovation must emerge to transform the country and awaken it from the slumber as portrayed in the recent Jamaica Survey of Establishments.
The country has made fantastic strides in macroeconomic stability. Hopefully, innovative entrepreneurial institutes at UTech, UWI, Northern Caribbean University, and the Branson Centre of Entrepreneurship will play a crucial role in helping entrepreneurs be drivers of economic growth.