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Entrepreneurship development – What should our governments be doing? (II)

In our attempt to discuss what our governments should be doing to develop entrepreneurship in our country, we will need to first understand what the…

In our attempt to discuss what our governments should be doing to develop entrepreneurship in our country, we will need to first understand what the problems of entrepreneurs are and what the entrepreneurs are doing or not about them. Partly, it is the gaps between and around the two that we should be looking up to the governments to help bridge. Furthermore, in trying to understand what the problems are, we will need to conduct a robust root cause analysis so that we can get to the real cause(s) rather than get obsessed with the symptoms that are visible to us. Thankfully, there is a lot of literature on the challenges on entrepreneurs and of entrepreneurship in Nigeria. Similarly, root cause analysis is a reasonably easy exercise we can always conduct on any issue.

As a basis for the conversation here, we will look up to the results of the survey conducted in 2020 by the reputable consulting firm of PricewaterhouseCoopers (‘PwC’) to bring out what the problems are. We summarise the results of the survey as follows:

  • (Difficulty in) ‘obtaining finance’ at 22%,
  • ‘Finding customers’ at 16%
  • ‘Infrastructure deficit’ at 15%
  • ‘Insufficient cash flow’ at 14%
  • ‘Multiple taxation’ at 7%
  • ‘Competition’ at 7%
  • ‘Unskilled workforce’ at 7%
  • ‘Advancements in technology and technology disruptions’ at 5%
  • ‘Regulatory challenges’ at 4%
  • ‘Corruption’ at 2%
  • ‘Slow judiciary/court processes’ at 1%

Now, let us first try to distinguish between ‘entrepreneurial problems’ and ‘entrepreneurial challenges’.

Entrepreneurial challenges and Entrepreneurial problems: Our entrepreneurs need to understand that entrepreneurial opportunities are almost always surrounded by entrepreneurial challenges. Entrepreneurial challenges are the natural and unnatural difficulties and obstacles that entrepreneurs must face and need to surmount in pursuit of their entrepreneurship dreams. Entrepreneurial challenges might not be easy to resolve but are almost always within the entrepreneur’s sphere on control. How vast a sphere of control the entrepreneur is able to build determines how much the entrepreneur can do and, consequently, achieve.

Entrepreneurial problems, on the other hand, are largely out of the control of the entrepreneur. Entrepreneurs should just do the best they can based on their sphere of control and influence and how far they want to go. Take the issue of ‘Infrastructure deficit’ and specifically lack of sufficient electricity. This is an entrepreneurial problem that needs not to be there. It has killed businesses that were otherwise flourishing or rendered them less profitable. Yet, it is partly addressed by entrepreneurs creating their alternative energy solutions depending on their situation as we see with roadside photocopy centres and multi-billion Naira bottling plants respectively.

Understanding the root cause of a challenge or problem: Root cause analysis is about digging out what the true cause of a problem is or are. Whilst the symptoms of a problem may need to be managed on a short-term basis, the long-term sustainable solution is always about finding and fixing the real cause. The principles of root cause analysis are:

  • Striving to bring out the root cause of a problem rather than its symptoms,
  • Realising that there can be more than one symptom,
  • Focusing on the ‘how’ and ‘why’,
  • Being detailed and methodical,
  • Understanding that there can be more than one cause,
  • Developing a remedy.

My preferred method of root cause analysis is the ‘5-Why Analysis’ said to be developed by Sakichi Toyoda of Toyota fame. This is about repeatedly asking ‘why’ to enable you peel off the layers of symptoms to get to the core of the problem. The objective is to go beyond apparent reasons by asking more ‘whys’. The general rule of thumb is to ask five ‘whys’. However, you may need to ask fewer or more to get to the root of a problem at hand. Take the difficulty in ‘obtaining finance’ issue. Ask yourself why MSME entrepreneurs find it difficult to get finance in Nigeria. Then ask why? And again and again, until you get to the core. For me, my conclusion is that our MSMEs entrepreneurs find it difficult to get finance for three reasons:

  1. They do not deliver the results they either promise or are expected of them by financiers and investors. (This might not necessarily be because they have not actually achieved the results but probably because they have not disclosed it!)
  2. They do not honour their fiduciary and contractual obligations to investors and lenders. (Sometimes, they may have legitimate explanations for the failure, but lack the trust capital to draw from.)
  3. They do not keep records that are complete and verifiable.

According to PwC the pre-Covid-19 funding gap for MSMEs in Nigeria is about N617 billion annually. As Deng Xiaoping said, “it doesn’t matter whether the cat is black or white, as long as it catches mice!” So, it doesn’t matter how this funding gap is legitimately bridged annually. Interestingly, by December 17, 2021, and over the previous few years, the Central Bank of Nigeria (‘CBN’) alone had commendably disbursed a total of over N5.1 trillion to businesses in the country through various interventions. Of that amount, over N2.1 trillion went to the agricultural sector and MSMEs! But the repayment rate of Anchor Borrowers’ loans ranges between 24% (as claimed by the IMF) and 52% (as announced by the CBN). Even at 52%, the repayment rate is not good if we are to rebuild a trust culture that is required to ease this challenge. Me thinks, therefore, that ‘difficulty in getting funds’ is probably just a symptom of many MSMEs’ entrepreneurial incompetence and dishonesty. The dual factors will exhaust public institutions and keep off private financial institutions from providing funds. What we probably need, hence, is to begin to reeducate our MSME entrepreneurs on the imperative of being credible and trustworthy in addition to any technical education they may need!

Next week, we will begin to take up specific measures we believe our governments should pursue to develop entrepreneurship in our country.

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