Bahamas SME Act Needs New Direction

INTER-STAKEHOLDER SYNERGY:

“Diligently transforming the Bahamas SME Development Act from formulation to implementation”

By Mark A. Turnquest

After my organization hosted the first Small Business Summit in 2009, it was evident that The Bahamas needed a national strategic plan for the development of small and medium sized enterprises (SMEs). However, our country, for 38 years, has had a flaw for not developing a practical strategic national plan for anything (crime, economic development. immigration etc).

Industry leaders from the professional and medical services; manufacturing, agriculture, fisheries, wholesale merchandizing and retail; construction, tourism, hospitality, commercial banks and government indicated during the 2009 Small Business Summit that an Act to developed the SME sector was far overdue. As a result, a report was developed to identify how this SME could be formulated and implemented in an effective and efficient manner. This report: Act As One: The Importance of Stakeholders’ Collaborative Efforts When Developing the Small Business Act of The Bahamas, can be viewed at http://www.markturnquestconsulting.com/Entrepreneurship.html, After consulting with the government, I applaud the Ministry of Finance team for creating the political will to develop the Bahamas SME Development Act and to create a new strategic framework to enhance the productivity level of the sector.

However, there were too many questionable decisions in 2010 on how to perform infrastructural development (mainly the road improvement works) and what formula of tax increases to apply on import duties. I hope that these two decisions will not reduce the effectiveness of the SME Development Act in the future. In 2010, the main focus to stimulate the SME sector should have been to provide incentives and concessions to mitigate the impact of the recession. There was a small window of opportunity to “stop the bleeding” and it was not taken advantage of, hence, I witness hundreds of SME failures and the death of many entrepreneurial dreams. Governments must realize that sometimes negative effects of policy decisions without proper consultations are sometimes irreversible.

My main concern with the formulation process so far is that there has been limited participation by the Act’s main stakeholders- SMEs. If this had occurred, then the $7,500 Jump Start Program (Grant Funding) would not have been given a green light. The grant is not enough and other sources of funding are required by local and international financial Institutions to be pooled together to benefit new and existing SMEs.

 Other concerns are as follows:

·         There should be town meetings with the wider SME community in order to gather information about the major problems and opportunities facing the sector;

·         In addition, there needs to be more industry-specific (construction, agriculture, merchandising, hospitality, manufacturing, technical services, tourism, hospitality, fashion design etc) discussions, so that local and international issues that affect individual industries could be addressed in the Act.

The formulation process of the SME Development Act needs to be evaluated and corrective measures should take place. I am aware that there were consultation with The Inter-American Development Bank, The Bahamas Chamber of Commerce and Employers Confederation and a few others, but this not an effective  way to develop  such an important Act. There needs to be “inter-stakeholder synergy”; this means that more trade organizations, banks, industry leaders and especially SME owners should be involved in the formulation process before the Act is debated in Parliament.  

This inter-stakeholder synergy between the government, NGOs, trade associations, financial institutions, industry leaders and SMEs owners would align resources and capabilities to craft a SME Act that is meaningful to the sector. Although this Act should not precede a strategic national plan for SME development, it is a good start because our SME sector is lagging behind in competitiveness, globally.

The main policies that must be adapted by key stakeholders when diligently transforming the Act from formulation to implementation are as follows:

GOVERNMENT

I.            Ensure that possible amalgamation of Bahamas Agricultural Industrial Corporation,  Bahamas Development Bank  and Bahamas Entrepreneurial Venture Fund focuses on leveraging the  strengths and correcting the weaknesses of the organizations; 

II.            The new SME development framework that is being developed must be structured to eliminate financial and non-financial decision making based on political influences. This is the main reason why the Bahamas Development Bank is near bankruptcy;

III.            Focus on family island development but keep the  natural, heritage  and cultural resources of each island;

IV.            Reduce the barriers that make it almost impossible for SMEs to access international funding; 

V.            Promote and encourage e-commerce activities and remove policies that make opening on-line merchant accounts very difficult;

VI.            Adapt public policy tools to SME needs: especially facilitating SMEs’ participation in the public procurement process;

VII.            Consider creating a Ministry or Department of Commerce to protect the SME sector from the EPA and to develop strategies to improve on its 5% contribution to GDP.  To view an article that addresses the importance of a Ministry of Commerce, log on to:

     http://markaturnquest.blogspot.com/2011/07/bahamas-minsitry-of-commerce-is-needed.html

COMMERCIAL BANKS

I.            Partner with government and international leading institutions to develop comprehensive SME Funding Scheme (SFS) so that more financial support can be extended to SMEs;

II.            The $7,500 grant that is currently being offered to a  few SMEs by the government could be used as a down payment so that local and international banks, and private investors could give more meaningful funding in order to prevent business failure due to undercapitalization;

III.            Focus on packaging loans extended to SME that have built-in accounting management, human resources and marketing support programs at an affordable cost for at least a year.

  

THE BAHAMAS CHAMBER OF COMMERCE AND EMPLOYERS’ CONFEDERATION

I.            Focus on providing new SMEs with more market information about various industries. The organization should partner with The College of the Bahamas and the Inter-American Development Bank to perform more market research on the economy of the Bahamas;

II.            Become more visible in the SME market (over the hill) and remove the perception that the organization only focuses on big businesses;

III.            Encourage professional and trade associations, and SMEs to become more knowledgeable about the pros and cons of the Economic Partnership Agreement (EPA).

SMEs (NEW & ASSISTING)

       I.            SMEs must be committed to acting in a socially responsible manner ( paying business licenses, NIB, correct custom duties etc);

    II.            SMEs must become knowledge about all aspects of their business model ( operations, marketing, accounting/finance, human resources etc);

 III.            All SMEs must have sound marketing, management, human resource and accounting systems. SMEs must invest in the Quickbooks Accounting Software; it is an invaluable tool for businesses.          

THE BAHAMIAN CONSUMER

At the heart of the new Act, there should be the conviction that achieving the best possible framework conditions for SMEs depends first and foremost on society’s recognition of entrepreneurs.

Bahamian consumers must support the implementation of the new Act and SME framework to buy authentic Bahamian made products and discourage criminal activities that would negatively affect local SMEs. The Bahamian consumers should understand that vibrant SMEs will make The Bahamas more robust to stand against the uncertainty of business cycles (especially recessions and depressions).

Finally, Framers of the initial draft of the Act must consider the following important matters:

         I.            Ensure that presidents of trade and professionals associations clearly identify problems that their members are experiencing from local regulations and international competitors;

      II.            Build in major incentives in the Act for entrepreneurial ventures that creates innovative  products, delivery systems, operational structures and marketing strategies in film making, fashion design, e-commerce, information technology, agriculture, manufacturing, education, software development, art and handicraft;

   III.            Create added concessions to protect “socially responsibly” SMEs that employ over 25 Bahamians during future recessions;

   IV.            Provide special assistance to local SMEs that focuses highly on exporting authentic Bahamian products and creative services;

      V.            Provide regulatory policies to protect the management consultancy sector from unfair and unethical practices that are performed by international service providers.

I hope that the initial draft of SME Development Act is brought to the business community by September 2011.  The government must host a series of town meetings and workshops so that all aspects of this Act could be diligently crafted. My advice to the government is not to dilute the process, but have adequate consultation with SMEs owners and not to force this Act down the throats of SMEs owners. The government must understand that this is an important Act and not to delay communicating the contents of it to SMEs throughout the Bahamas.

In addition, Members of Parliament must become more involved in the formulation of the Act. They should immediately host meetings and obtain information about the challenges and other issues that SMEs are experiencing in their constituencies. This is important so that they (MPs) can have intellectual debates when discussing this Act in the House of Assembly.

 I would like for SMEs to contact me so that we can ensure that is Act is diligently formulated and implemented. To contact me call 326-6748 / 427-3640 or log on to www.markturnquestconsulting.com.

THE KISS OF DEATH FOR SMALL BUSINESSES

Published On:Thursday, July 28, 2011

By NEIL HARTNELL
Tribune Business Editor
 
THE New Providence Road Improvement Project has proved to be "the kiss of death" for many small Bahamian-owned businesses in the Robinson Road and Market Street areas, a leading consultant to the sector telling Tribune Business "at least 25" had gone out of business.
 
Mark A. Turnquest, of Mark A. Turnquest Consulting, which provides advisory services to small and medium-sized businesses, said that when combined with the effects of the recession, the Project's roadworks had been too much for many companies to bear.
 
"That was the kiss of death," he told Tribune Business. "The recession started it, and the roadworks finished it. That was like the kiss of death for people on Robinson Road, East Street, Market Street and Blue Hill Road. Because of that, a lot of them are out of business."
 
When asked by Tribune Business how many small firms had been forced to close their doors, Mr Turnquest, whose own office is based on Robinson Road, said it was "at least 25 on Robinson Road and Market Street. I can physically see it. You're looking at a lot of businesses that could not even survive that".
 
Adding that it "could be more", given that he was not as aware of the impact on Blue Hill Road and East Street-based businesses, Mr Turnquest said he and others on Robinson Road had been forced to endure its closure for six to eight months.
 
Some firms, he added, were still only earning $20 a day in revenue. Given the road closures and access issues created by the roadworks, even long-standing loyal patrons have avoided driving to businesses in the impacted areas. The New Providence Road Improvement Project's unintended consequences have been to further exacerbate the problems facing many Bahamian-owned businesses due to the slump in consumer spending and demand.
 
Mr Turnquest said planning for the Road Improvement Project should not have taken place in isolation, adding that the Government could have achieved the twin objectives of infrastructure development and aiding entrepreneurs if it had considered both together.
 
Compensation
 
He even went so far as to suggest that the $120 million Inter-American Development Bank (IDB) loan that is financing the New Providence Road Improvement Project should have included provisions to pay impacted business owners compensation for revenue losses that resulted.
 
"You have to have what I call a National Vision to do these things - to be creative and to help entrepreneurs, and also to develop infrastructure," Mr Turnquest said. "But you cannot do one and not think about the other.
 
"The IDB, along with the Government, should have done a Business Assessment Report to determine the negative effects of the roadworks, and compensation should have been packaged in the loan, so that a business received a percentage of their losses.
 
"That would have been a better approach than killing the businesses off and leaving them to die."
Rather than extend the National Insurance Board's (NIB) unemployment benefit queue, Mr Turnquest reiterated that the Government should have introduced temporary incentives aimed specifically at small businesses, with the aim of encouraging them to maintain staffing levels.
 
For those companies employing between 10-15 persons or more, Mr Turnquest said the Ingraham administration should have given them a one-year break on paying the employer component of National Insurance Board (NIB) contributions.
 
This, he added, should have been introduced once it became clear just how prolonged and deep the recession was likely to be, along with a 10 per cent reduction on all import duty payments for every business operating for at least three years.
 
The Government also needed to work with Bahamian commercial banks to encourage them to be "more friendly" to entrepreneurs and companies with viable business plans and good track records.
 
Banks
 
"That is why we're in the mess we are in now, because the Government does not want to work with the banks and financial institutions the way they should," Mr Turnquest said. "Because of that, there is no harmony between the two."
 
He added that when he spoke to Scotiabank (Bahamas) three months ago, the financial institution was unaware of efforts to develop the Small and Medium-Sized Enterprise Development Bill or what was likely to be included in it.
 
Reiterating his plea for all involved in financing and supporting Bahamian small businesses to come together to make "one plus one equal three, not two", Mr Turnquest added: "We are already at a competitive disadvantage because we are the last country in the Caribbean to have a Small Business Act.
 
"The only thing going for us is that we have good foreign reserves levels and a lot of foreign direct investment......... Ask any small and medium-sized business now, they will not know what is going on and how they can contribute to the Act. If they'd consulted with SMEs, they'd not have given the $7,500 Jump Start grant the green light, because it could not work."

A Small Business Act of The Bahamas is needed

Small businesses to act as one

A report on the importance of stakeholders' collaboration in nurturing the Small Business Act for The Bahamas

Published: Date: Updated: Author:

The Bahamas Investor Magazine June 22, 2010 January 12, 2011 Mark A Turnquest

1.0 Introduction

Small and medium-sized enterprises (SMEs) in The Bahamas will soon be able to compete globally, as public and private executives are presently crafting the Small Business Act (SBA) of The Bahamas. The SBA is forecasted to be legislated during 2011. It will stimulate economic growth and mitigate the negative impact of future recessions on the Bahamian economy.

2.0 The mission of the SBA

The SBA, from a domestic perspective, will provide the foundation on which to improve the economic conditions of The Bahamas. From an international perspective, it will attract foreign investors who want to partner with local entrepreneurs in fields such as e-commerce, manufacturing, agriculture, and information technology. These industries are tremendously underserved and underdeveloped. These types of investments would diversify the Bahamian economy, which relies heavily on tourism and financial services. The SBA will revitalize the entrepreneurial spirit in all islands of The Bahamas and will outline policies and initiatives that would assist in the development of SMEs–a major driving force of the economy.

The SBA will increase the national economic value of SMEs in The Bahamas. In addition, its purpose is to synchronize and unify the efforts of the government, financial lending institutions, non-governmental organizations (NGOs), SMEs and other stakeholders as it relates to small business development in The Bahamas. Most importantly, the SBA will identify how local and international investors and entrepreneurs can qualify for incentive and stimulus programmes when it comes to financing and developing innovative products and services.

3.0 The importance of the SBA

The major reason why there is not an explicit master plan for SME development in The Bahamas is because of the absence of an SBA to drive national strategies.

There are six important reasons why the SBA must be crafted:

1) The SBA will encourage Bahamians to become entrepreneurs because it will outline incentives/concessions that will be rewarded for:

The development of new innovative products /services;

The hiring of a specific number of Bahamians;

Increasing government revenues due to a significant amount of payment made for National Insurance, customs duties, property taxes, license fees, etc.

2) The SBA will increase foreign direct investments, because international investors, who are entrepreneurial, will partner with local Bahamians to develop innovative products and services in underserved and undeveloped industries.

3) The SBA will keep many existing businesses open during a recession, because it will provide incentives/ concessions to businesses that employ a moderate amount of staff, are up to date with National Insurance payments and customs duties, and contribute to making The Bahamas more competitive globally.

4) The SBA will encourage Family Island development by providing incentives/concessions to Bahamians who want to open small businesses on a Family Island that will increase the employment rate, improve the infrastructure of the island, encourage Bahamians to reside there permanently, and entice more domestic and foreign tourists to visit.

5) The SBA will increase the gross domestic product (GDP) of The Bahamas, because it will eventually reduce the importation of foreign products and services, increase compensation to employees, increase business profits, increase government income and increase interest payments to Bahamians.

6) The SBA will reduce the national debt, because it will decrease government spending, particularly on hiring civil servants, and increase government licenses, fees and taxes, as more businesses will be operating in The Bahamas.

4.0 The impact of the SBA on stakeholders

The SBA should impact the decision making process of the following organizations: government, SMEs (new entrepreneurs, existing business owners), financial lending institutions, NGOs, professional/trade associations in the following manner:

Government:

Incentive programmes will be developed to encourage the creation of innovative products or services that will improve economic development;

Business recovery programmes will not focus on unemployment hand-outs, but will assist businesses owners in maintaining current employment levels;

The Bahamas Development Bank, the Bahamas Agriculture and Industrial Corp and the Bahamas Entrepreneurial Venture Fund would harmonize policies and procedures to become more effective and efficient when catering to SMEs.

SMEs (new entrepreneurs):

New entrepreneurs that create innovative products or services will have easy access to financial funding and business support services.

SMEs (existing businesses):

SMEs that operate in a socially responsible manner (are up-to date in NIB and custom duty payments etc) will find it less arduous to access financial funding and stimulus packages during economic downturns.
Financial lending institutions:

Commercial banks, credit unions, and government financial funding programmes would focus on providing adequate capital to variable SMEs in introductory, growth and maturity stages of the business life cycle.
There will be a collaborative effort by all financial lending institutions to develop various funding packages that address all financial requirements of viable SMEs.

NGOs (trade associations/other):

The Bahamas Chamber of Commerce, the Inter-American Development Bank, The College of The Bahamas (and other colleges), the International Labour Organization, the Inter-American Institute For Cooperation on Agriculture and The Bahamas Business Association would collaborate efforts to develop SMEs and possibly set up an advisory and regulatory board to oversee the enforcement of the SBA.
Professional associations:

Business, accounting, medical, technical, fishing, agriculture associations, among others, would lobby for industries specific programmes/concessions/ incentives that would increase competitive capabilities to offset any negative impact of the European Partnership Agreement (EPA).

5.0 The basic structure of the SBA

The basic structure of the SBA will have five major components:

1) A clear definition of an SME
The national definition of an SME will be based on the combination of the following: industry, annual sales, employment level and ownership (capital structure).
This definition may or may not separate the wording of “small businesses” and “medium-sized businesses.”
Stakeholders that cater to SMEs will be requested to honor this definition.

2) Incentives, concessions and stimulus programmes

The present Incentive/Concession Legislation will be encompassed in the SBA.
The SBA will outline new incentives and concessions that would be received by SMEs for developing innovative products and services that contribute to the country’s economic development.
The SBA will introduce stimulus programmes that will be available to selective SMEs to mitigate the negative impact of future recessions.
These SMEs must be “socially responsible,” maintain a specific employment level and show signs of vitality.
The SBA will explicitly indicate which SMEs are eligible for incentives, concessions and stimulus packages.

3) National SME financial funding scheme

Government lending agencies, commercial banks, credit unions and other financial lending institutions will collaborate and pool together resources to develop a National SME Financial Lending Scheme (NFS).
The NFS will make it easy to access capital for various stages of an SME’s life cycle (introductory, growth, restructuring, recovery, etc).

The NFS will have clear policies, and loan packages will be categorized into specific programmes based on financial requirements (needs).The NFS will be properly overseen by the SBA Regulatory and Advisory Board.

4) Business support programmes (BSPs)

BSPs will be available to all SMEs. SMEs will have access to accountants, lawyers, business, marketing, human resources and financial consultants who sign up and are approved by the SBA Regulatory and Advisory Board to offer their services at affordable rates.

BSPs will consist of training, coaching and consulting initiatives. Mentors/consultants will be assigned to SMEs on a need-by-need or contractual bases.BSPs and financial funding via the NFS will be linked together, so that SMEs will have a greater chance to operate viable businesses.

5) SBA Regulatory and Advisory Board

The SBA will identify the roles and responsibilities of a Regulatory and Advisory Board that would oversee the enforcement of the SBA.
Public and private sector executives will be selected to this Board. Members of this Board will be mandated not to make decisions based on political, gender or cultural motives.
This Board will have the authority to make recommendations to modify particulars of the SBA based on economic conditions or the request of stakeholders.

6.0 Conclusion

The major benefit of the SBA will be that, through its aggressive financial and overall SME support policies, the Bahamian economy would become diversified and hence be more protected against future recessions.

A Bahamas Ministry of Commerce is needed

Published On:Thursday, June 10, 2010

By MARK A TUNRQUEST
 
I HAVE observed (from a non-partisan political view) the political behaviour of both governments and commercial banks in relation to the development of small and medium-sized enterprises (SMEs) in the Bahamas for the last 10 years. In my observation, the following five main situations have occurred:
 
* The absence of a national plan for SMEs' development. Only recently, a SME Development Act is said to be scheduled for legislation in 2011.
 
* Lack of a consistent effort to provide adequate financing and business support services to SMEs. Commercial banks only provide 1 per cent of capital financing to SMEs, and the Government inadequately assists SME owners with business support services once they commence operations.
 
* The lack of collaboration between government and banks to develop a sophisticated approach towards SMEs. The commercial banks (local and foreign) make in excess of $300 million in profits annually, and have failed to assist the Government with implementing strategies that can help SMEs to contribute more to GDP. SMEs currently only contribute 5 per cent of GDP.
 
* National Budgets are prepared without prior consultation with key stakeholders in the private sector. The individuals in government who formulate the annual budget always fail to inform key stakeholders in the private sector about tax increases or major policy adjustments that could negatively impact their business operations. Only after uproar from those affected does the Government sometimes alter tax increases etc. This could be prevented if consultation begins three months before the Budget is prepared.
 
* The lack of foresight to diversify the economy. Over the years we have had a Ministry of Finance, Ministry of Financial Services and a Domestic Investment Board. However, SMEs have not received serious attention because the sector was - and is - overshadowed by the focus to develop the tourism and financial services sectors. All governments have failed to diversify the economy because SMEs presently only contribute 5 per cent of GDP.
 
MISSION OF THE
MINISTRY OF
COMMERCE
 
My advice to the FNM government is to create a Ministry of Commerce without incurring any costs or expenses. Simply transfer a few existing staff from the Ministry of Finance and empower the present Minister of State for Finance to head it. If additional persons are needed, I am optimistic that business persons from the private sector would volunteer their services (on an advisory board) to improve the economic conditions of the Bahamas because it would be in their best interests to do so. I would be a volunteer if asked.
The Ministry of Commerce's mission would to be to create policies and strategies that increase SMEs' contribution to GDP and to diversify the economy. Large businesses, owned by Bahamians, would continue to receive government and public support. However, a special goal will be to immediately develop the SME sector because it has been neglected for too long by stakeholders who were supposed to assist in its growth and development.
 
GOALS OF THE
MINISTRY OF
COMMERCE
 
The main goals of the Ministry of Commerce would be to:
 
* Spearhead the formulation and implementation of the Bahamas SME Development Act. The Ministry would work closely with both the public and private sectors to ensure the focus of the Act is to create and sustain SME development in the Bahamas.
 
* Establish a Family Island Development Board. This board will be responsible for formulating strategy and implementation plans on how we can shift about 1/3 of the population from Nassau to various Family Islands.
Each Family Island will be analysed to determine its economic, social and cultural potential, so that financial and other incentives can be offered to Bahamians who want to open complementary businesses and reside permanently on a Family Island. This initiative will increase the employment rate, improve the infrastructure of the Family Islands, encourage Bahamians to reside there permanently and entice more domestic and foreign tourists to the various islands. This Board will work closely with the Ministry of Tourism and BAIC.
 
* Encourage local commercial banks and international financial lending institutions to invest more in the Bahamas. The Ministry of Commerce will be an advocate for Bahamian banks to retain more of their profits for the purpose of providing adequate financial resources to viable SMEs. The Ministry will work directly with the Central Bank of The Bahamas to ensure that Bahamians SMEs can have easy access to international financing.
 
* Have regular meeting with professional organisations and unions. This will allow the Ministry of Commerce to be knowledgeable about industry-specific problems and opportunities.
 
* Oversee the management of all government agencies that cater to businesses. BAIC, the Bahamas Entrepreneurial Venture Fund, Business License and Evaluation Department and the Bahamas Development Bank etc, would be mandated to synchronise activities that provide effective and efficient services to SMEs.
 
* Liaise with business organisations such as the Chamber of Commerce, Bahamas Business Association and community groups in order to determine their needs and concerns, so that they can be addressed in a timely manner.
 
* Establish consumer and business protection agencies. These agencies would be responsible for ensuring that both the buyer and seller behave in a socially responsible manner when exchanging money for goods or services. In addition, the Ministry could partner with the Royal Bahamas Police Force and the National Crime Committee to reduce all types of crime.
 
* Establish an Infrastructure Development Committee. This committee will work closely with the following: BEC, Water and Sewerage Corporation, Ministry of Public Works and Transport, Bus and Taxi Unions etc. The mission of this committee would be to analyse the infrastructure requirements of the entire Bahamas for the next 10-15 years. This will prevent the outcry of business owners when infrastructural upgrading (road reversals, highway restructuring and 'road digging' projects) negatively affect their livelihood. If this occurs then business plans and models could be adjusted well in advance.
 
* Collaborate with international organisations such as the IDB, ILO, IICA and CEDA to prepare Bahamian businesses to compete globally. The Ministry of Commerce will provide information in a timely manner about how international trade agreements (such as the EPA) and becoming a member of international organisations (WTO) would affect local SMEs.
 
* Encourage learning institutions and business support organisations to provide innovative and affordable services to SMEs. The College of the Bahamas and other tertiary institutions would be required to conduct more primary research initiatives on how to improve local industries and markets. Accountants, lawyers, business, marketing, human resources and financial consultants would be given motivation (via grants) to reduce the price of basic services.
 
* Finally, the Ministry of Commerce will ensure that the Bahamas constantly experiences economic development. This could be accomplished by:
 
* Encouraging other government ministries and departments to focus on operational effectiveness and efficiency.
 
* Developing initiatives that reduce the nation's debt, unemployment and inflation levels.
 
* Developing initiatives that increase foreign direct investment, GDP and economic diversity.
 
* Developing initiatives to reduce crime and protect our environment.
 
I hope that the FNM government will create the Ministry of Commerce because it is important to the economic development and diversification of the Bahamas.
 
NB: The author can be contacted at telephone: (242) 326-6748 /427-3640

Bahamas needs a SME Funding Scheme

Published On:Wednesday, July 27, 2011
 
By NEIL HARTNELL
 
 
Tribune Business Editor
 
A 'NATIONAL SMALL and Medium-Sized Enterprise Funding Scheme' was yesterday touted as "the only way" to finance a viable entrepreneurial sector, a leading consultant telling Tribune Business that the business community lacked a sustainable "middle class".

Mark Turnquest, head of Mark A. Turnquest Consulting, an adviser to many small and medium-sized companies, argued that just like Bahamian society there was a "big gap between the have's and have not's" in the business community, contrasting major employers such as Atlantis with locally-owned Over-the-Hill businesses that were "suffering".

"We don't have middle class businesses," Mr Turnquest told Tribune Business. "The medium-sized enterprises are the most important ones, as they can hire more people and are more sustainable. That is what we lack."

Welcoming the imminent arrival of the Small and Medium-Sized Enterprises Development Bill, which the Government hopes to have ready when Parliament returns, Mr Turnquest accused both major parties of using the Bahamian business ownership concept as a "political ploy", and of failing to "understand the market" for such companies.

"We are weak when it comes to having a lot of viable businesses, and that's because of a lack of commitment by both the PLP and FNM to focus on small business development from a sustainability point of view."

Mr Turnquest, who sets out his thoughts on the Small and Medium-Sized Enterprises Development Bill and its implementation in a column in tomorrow's Tribune Business, added that rather than focus on more 'Mom and Pop' stores, the Bahamas should instead target "creative markets" that would generate export earnings.
Arguing that the Bahamas was not maximising its export potential, Mr Turnquest told Tribune Business that focusing small and medium-sized business development in this area was "the only way" to grow their current 5 per cent share of per annum gross domestic product (GDP).

"The emphasis is not actually focused on creative markets," he said. "Markets dealing with e-commerce, information technology (IT), innovative manufacturing.

"Those creative economies, if we can actually invest more in the productive processes, we can diversify the economy more. Because we can't export the way we should, there's too much of a burden on the local economy. We are weak in exporting our talents.

"The Government needs to focus on creating avenues for the export of authentic creative products. That's what we need. I'm not an advocate for too many 'Mom and Pop' stores. To increase the 5 per cent share of GDP small and medium-sized businesses have now, we have to be more innovative in exporting and bringing more money into the country."

Reiterating that the Government's Jump Start programme, which would provide a maximum of $7,500 per entrepreneur to start their own business was not enough to ensure such ventures were sustainable, Mr Turnquest urged that this initiative be "packaged" with other available financing sources - banks, 'angel investors' and other local/international capital sources.

"I don't believe in the grant process of $7,500 at all," he told Tribune Business. "Not only is it not enough, but I challenge the Government to work with the banks, investors with international funding, to package those with the lending policies they have.

"I can tell you from experience that this $7,500 they are going to give entrepreneurs has to be packaged together. Otherwise it is going to get the entrepreneur into trouble. It's almost going to be a waste, and it's not actually going to benefit the economy in the long run."

The maximum Jump Start grant, Mr Turnquest said, was just enough to cover a first and last month's rent and enable a businessman to start operations. Yet to ensure the venture lasted for "six months' down the line", he argued that another $30,000 in financing was required, especially "to stop the competition beating up on you".

The small business consultant suggested that the $7,500 grant almost be used as "a downpayment" to obtain other forms of financing, leading to his call for a National Small and Medium-Sized Enterprise Funding Scheme that brought together all potential funding partners.

"I am an advocate for some type of Small and Medium-Sized Enterprise Funding Scheme, where you have to identify the requirements of new and existing businesses, their financing needs, and how they will benefit from receiving the money," Mr Turnquest told Tribune Business.

"You only give money to companies and entrepreneurs who have the capacity to pay it back. I feel there needs to be one lending scheme, where people are put into different sectors based on the business cycle. This all needs to be under one roof, rather than put together by individuals not in synergy."
Apart from bringing together the commercial banks, foreign and local 'angel investors' and other potential private sector financiers, Mr Turnquest said such a scheme should also seek to unify the various government agencies - such as the Bahamas Agricultural Industrial Corporation (BAIC), Bahamas Development Bank (BDB) and Bahamas Entrepreneurial Venture Fund.

This would eliminate duplication and enhance productivity through combining resources, with Mr Turnquest also urging the Government to do more to allow potential foreign financiers of small and medium-sized enterprises access to the Bahamian market.

"I'm an advocate for foreign financial institutions having access to our local market," he added. "The local market cannot sometimes afford the amount of money needed to drive the SME market.

"There are a lot of foreign investors out there, but because of the Central Bank exchange control regulations, think they can't. If they can relax that and involve individuals who want to invest in the Bahamas, we would be in a better position."