Last week, we commenced discussions on internal measures that our governments should be taking to foster entrepreneurship. As mentioned, internal measures are required to help prepare government officials and position agencies in understanding entrepreneurship problems. The measures will all revolve around strengthening the sincerity, congruence, willingness, capacity and passion of these officials and agencies towards helping to assuage and/or fully solve the problems as may be necessary or sufficient as well as create opportunities.
MSME statistics reveal how tough it is to start a business and make it a success. From the 1990s, only about 10% of startups succeed over the long run. Specifically, 20%, 45%, 65% and 75% fail within the first two, five, ten and fifteen years respectively. For those MSMEs that succeed, it takes two to three years to make a profit. Thus, given the failure rate, the more businesses a nation creates, the more will eventually succeed. In 2022, the top ten countries with most startups, in descending order, are the United States, India, United Kingdom, Canada, Australia, Indonesia, Germany, France, Spain and Brazil. Nigeria, which occupies one of the top seven spots of the most populous countries in the world along with the US, India, and Indonesia is not among those top ten. On the other hand, the top ten business-friendly countries are Sweden, United Kingdom, Norway Denmark, Finland, United States, Australia, New Zealand, Switzerland, and Germany. Nigeria, with perhaps more need to make the creation of new businesses easy is not among the top ten.
How do we earn a spot among the top countries with the highest number of startups in a year as well as to be a business-friendly country? I am of the opinion that, as with the private sector, the major inhibitions to overcoming the challenges to business posed directly by our public sector are largely people-related. Hence, other additional internal measures will also be largely people-related:
The Big Picture: One of the obsessions of officials and agencies in our country is with revenue generation. Indeed, governments need revenues to operate and part of the benefits of developing entrepreneurship in our communities and country is the increased revenues that will accrue to various tiers of government. But providing the right environment by the government is crucial to the sustainable success of entrepreneurships and their ability to generate more revenues.
The Nigeria Employers’ Consultative Association (‘NECA’) identified up to fifty taxes, levies, and fees imposed by the federal, state, and local governments on businesses. Many of these charges are multiplicated, thereby adding to the total costs of doing business which either makes entry more difficult than should otherwise be or erode the profitability of those that are operational, making capital appreciation and, therefore, growth more difficult. Our government officials and agencies need to realise that 1% of payroll or turnover charged here and there is not ‘small’. When it is done in twenty places, it adds up to a whopping 20%. One of the most ridiculous, wrong, and unfair charges I have come across is that of ‘minimum tax’. I honestly just don’t get it. It is either a business should be taxed because it has earned some taxable income, or it will not because it has not!
Now while it is critical for governments to collect revenues for various legitimate purposes, the private sector should not be made to bear the consequences of wrong policies, avoidable wastes by governments and lack of proper planning over the past several decades. Besides that, it is the responsibility of governments to provide not only direction but show executionary capacity. As a senior employee in a private company, we built and commissioned a 120mW plant within two years despite all sorts of constraints and environmental challenges. We could so easily have built a 1,200mW if that was our need, it would have just been a scale issue. Why should lack of sufficient electricity still be a major constraint to businesses in our country?
We need our government officials and agencies to see beyond any one factor and appreciate how each supports and/or hurts other factors of entrepreneurship development. We need them to understand the concessions that governments need to make at various points in time even as they get more stringent on others. It is about knowing and doing first what comes first. A way for government agencies and officials to fathom this is to go beyond the ‘simple’ revenue generation models to appreciating the big developmental picture and how it can evolve over time. It is this big picture understanding by bureaucrats in Singapore, United Arab Emirates and China, that made it possible for them to build modern economies in one generation.
The Entrepreneurial Ecosystem: Being able to see the big picture is about understanding how enterprises and the entrepreneurial ecosystem works and how it evolves over time. One of the good depictions of the entrepreneurial ecosystem was initiated first by Prof. Daniel Isenberg as shown below:
Quite honestly, I find ‘culture’ and ‘Mentors, Advisors and Support Systems’ as particularly crucial elements that we need to understand further. Some people argue that ‘people + culture = everything’. But more scientifically, in a study of 81 countries over a period of five years, it was found that three of Hofstede’s cultural dimensions (Individualism, Long Term Orientation, and Indulgence vs. Restraint) support entrepreneurship success rate; the impact of one dimension (Masculinity) is rendering while the other dimensions (Power Distance, Uncertainty Avoidance) seem to have no significant effect. We need our government administrators to understand the soft drivers of what people do and what they don’t.
Next week, we will take up the need to coordinate the activities of various MDAs, improve on collation of individual and business data, encourage the documentation of legacy assets owned by individuals, families, groups, and businesses, etc.
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