For too long, we have focused on the challenge of finance and enabling environment for SMEs to operate in Nigeria. We have committed so much energy and resources to the study of the financial challenges facing SMEs in the country – initial capital, interest rates, public utilities and such. An equally substantial amount of resources have been spent in helping them build capacity, which is very important. These are worthy causes and I believe it is safe to say that they have not been in vain, despite the fact that the sector is still in the woods in many respects. Although finance remains a great challenge to the sector, we have learned from these efforts that we cannot consider it their greatest challenge. There are definitely other impediments to the growth of SMEs, some of them even more challenging than finance.
The undisputedly worthy role of the SME sector in economic development has been celebrated, not just in Nigeria but all over the world. In fact the praise of the sector has been practically turned into songs for all and sundry to sing. Thus, the sector has been recognised and promoted as a veritable source of massive employment as well as other critical supportive contributions to the economy of nations. If other competing sectors had the voice to complain, the world would have heard the loud sound of their jealousy and indignation. Needless to recount all the financial packages put out to support the SME sector in recent times in Nigeria. Practically every group of stakeholders have put up some kind of support facility, financial and otherwise, for the sector. More particularly, the Central Bank has done a lot in this regard through its Development Finance initiatives. The development initiatives are mainly focused on the agricultural sector, rural development and micro, small and medium enterprises.Several funds have been launched to bring its plans in these areas to fruition.
There is the Small and Medium Enterprises Equity Investment Fund (SMEEIS) – an accumulation of 10 per cent of the profit after tax of all deposit money banks for on-lending to the SME sector. There is also the Micro, Small and Medium Enterprises Development Fund (MSMEDF), which seeks not only to promote the sector but to empower more women entrepreneurs financially, to mention just these two. There is therefore more than enough financial resources available out there for SMEs to access. What may be of concern is the ability of the operators in the sector to meet the different requirements for the disbursement of the funds. This is probably the major reason behind the low rate of disbursement recorded so far. But this is not the main problem of the SME sector. Those conditions may appear tedious to the SMEs but they are mostly intended to help them run properly as structured institutions. And this coheres with the global objective of recruiting them into the formal sector.
Operating small businesses in Nigeria has never been so challenging. The current shortage of honour and grace is wreaking havoc in that sector. One only needs to come close to operators to know what dishonest staff have done to these hapless patriots trying to promote development in their country. Pilfering and stealing of anything in sight is the order of the day. There is fraud at every link in the chain. This is more pronounced among manufacturing SMEs. They are waging a daily and very distracting battle with staff that have little or no commitment to the companies that gave them succour. This is the situation across the length and breadth of the country – a product of the wonderful leadership we have given to the people over the years.
In a recent interview with an SME manufacturer, in the industrial raw material processing segment, I was told the very sorry story of how pilfering has become the bane of manufacturers in that class. The technical staff of the firm, who are ordinarily well-motivated, connive with suppliers of spare parts to defraud the company. They use many tricks but the simplest is to recommend the replacement of a good spare part; get a new one to be supplied but not installed (actually nothing will be supplied in most cases). If at all the part is ever supplied, it is only a motioning process because the part will be quickly taken back by the supplier while the old one is cleaned out and reinstalled. The company incurs an unwarranted expenditure.
This is the kind of fraud developed and perfected in many government corporations like the former National Electric Power Authority (NEPA), whereby contractors were paid for parts not supplied. Technical staff in the stores will agree with contractors and after shuffling papers, payment is made for transformers and other parts already in stock in the store. That may remind us of the fuel subsidy fraud. Almost exactly the same thing and people went away with billions and nothing happened. This and other tricks have spread to the fragile SME sector that the poor entrepreneurs are gasping for air. This is just but a tip of the iceberg of the challenges faced in the SME sector.
There is a national epidemic of dishonesty among employees and we need to stop and think about it. Sadly, when one considers that the criminal justice system is not immune to the malaise then hope wanes. Part of the challenge of high unemployment in the country is the falling rate of new enterprises being established. Apart from the effects of the recession, which has handicapped everyone, including those that would have venture out on their own, many are afraid of setting up companies because of large scale dishonesty among potential staffers. In fact the conventional wisdom now is for everyone to desist from setting up a company unless they are going to run it themselves. How many companies can one run by oneself? And it is not as though being present completely solves the problem.
This challenge is a big minus for entrepreneurship and development. People are so afraid, and rightly so, to set up companies because the battle against pilferage is more than that of developing the business of the company. Most staff are simply busy looking for what to steal – from forks and knives to tumbles and table mats in hotels, to all kinds of equipment, including cars and generators in government houses and higher places. There is no loyalty, perhaps because of the warped reward system and damage caused by nepotism and other evils. Loyalty has been thrown to the wind.
We know the fish cannot be fresh if the head smells. The head of the Nigerian fish has been smelling for decades everywhere, but more particularly in the public services. The reward system has been completely destroyed and the patriotic zeal is dead, even among those privileged to hold public offices. Those who work hard and keep to honesty are now an endangered species. The system is promoting self-preservation and destroying commitment to the group interest of Nigeria. Granted that this may be the truth, is that why we should leave everyone to their one device? We have to begin afresh and lead by relaunching the drive towards those virtues that made us great. Creating jobs by setting up shops to employ other Nigerians is a virtue that must be promoted. It should not be a punishment to the job creator.
It is only recently that those in the hospitality business began to implement some controls that allowed owners of hotels to see any meaningful reward for their investments. The rooms were sold for the account of the managers and the staff; the purchasing department was a drain pipe while stealing of food items was a thriving activity. With the widespread use of access controls some savings are being achieved on occupancy revenue, among the operators in the hospitality industry.
I believe we need to find solutions to these kinds of challenges. We should all join hands – thinkers, civil society groups, trade unions and governments, to evolve lasting solutions to these problems. We cannot leave the hapless entrepreneurs to deal with these challenges alone. It is beyond them. The operators may be encouraged to institute proper systems and procedures but this is usually limited by their level of education and resources available for implementing control systems. Pilfering may be an internal problem and a natural attendant to human aggregation. However, what we have is not only endemic but has begun to chip off at the fibre of our entrepreneurial spirit. We need to arise and check it.