Of small-scale enterprises and their roles in developing nations

Small-scale enterprises (SSEs) are businesses with limited size and resources, typically defined in Nigeria by the number of employees (less than forty) or annual revenue (turnover of less than N25 million per annum), according to Finance Act 2019. They often provide significant employment opportunities by forming at least 70 percent of the businesses in developing nations, especially in local communities and reduce abject poverty among citizens. SSEs usually require lower capital investment compared to medium to large businesses and do not usually require huge equipment or technology to start. They are mostly into trading, light manufacturing, food distribution, packaging, restaurant, consultancy (services) and transportation. Developing nations depend heavily on small-scale enterprises to provide jobs for their people and invaluable income to the economy.

Entrepreneurial activities are essential to the achievement of many of the Sustainable Development Goals (SDGs), including SDG 1: “End poverty in all its forms everywhere”; SDG 8: “Promote inclusive and sustainable economic growth, employment and decent work for all”; and SDG 10: “Reduce inequality within and among countries”. The United Nations’ SDG 8 sets out a global consensus that business enterprises should aim for sustained, inclusive, and sustainable economic growth and also ensure decent jobs and standard living environments for all. Governments cannot provide jobs for all its citizens, but governments can provide level playing ground for people to establish work. Small scale or small businesses play a crucial role and contribute to the expansion of the economy and one of the features of a strong economy typically is that it has a strong small-scale business sector mostly into light manufacturing, trading and services. In Nigeria, Small to Medium Enterprises (SMEs) account for 96 percent of businesses and 84 percent of employment, according to the National Bureau of Statistics (NBS).

SSEs play a crucial role in job creation. Sixty-six percent of all the formal jobs in developing nations are in this category. They are usually a haven for human survival in an economy. According to the NBS/Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) Micro, Small and Medium Enterprises (MSME) 2021 survey report, MSMEs contributed 46.32 percent to Gross Domestic Product (GDP) of Nigeria, accounted for 6.21 percent of exports and have the greatest potential of growing their businesses. Majority of the small business owners lack business management skills and less than 50 percent of the MSMEs do not have banking relationships or do not operate their accounts regularly, so cannot access bank loans.

They also have post average annual revenue of N2.3 million. Accessibility to finance, government support for small-scale enterprises development, friendly corporate laws, local conditions and culture are critical to the overall success of small-scale enterprises.
Small-scale entrepreneurs are still struggling to survive in Nigeria. They are highly unorganised, especially those in the informal sector! They include the traders in the markets, malls and on the streets, the tradesmen, artisans, farmers and small-scale manufacturers of goods and products. Infrastructure like security, roads, transportation, warehouses, electricity, markets and storage play a crucial role in the successful operation of micro, small and medium enterprises. Section 14(2) (b) of the 1999 constitution of the Federal Republic of Nigeria declares that the “security and welfare of the people shall be the primary purpose of government.”

In this declaration, the “security and welfare” of the people are conjunctively presented as the sole purpose of government. With the large population of Nigeria (about 230 million), the best way for governments to ensure ‘security and welfare’ of the people and be constitutional is to ensure that as many people as can work have work to do. As the saying goes, an idle hand is the devil’s workshop.

Section 16(1) of the 1999 constitution of Nigeria provides in paragraph (a) that: The State shall within the context of the ideals and objectives for which provisions are made in this constitution harness the resources of the nation and promote national prosperity and an efficient, a dynamic and self–reliant economy and (b) control the national economy in such manner as to secure the maximum welfare, freedom and happiness of every citizen on the basis of social justice and equality of status and opportunity; (c) without prejudice to its right to operate or participate in areas of the economy, other than the major sectors of the economy, manage and operate the major sectors of the economy; (d) without prejudice to the right of any person to participate in areas of the economy within the major sector of the economy, protect the right of every citizen to engage in any economic activities outside the major sectors of the economy.

Section 16(2) of the constitution provides that: “The State shall direct its policy towards ensuring: (a) the promotion of a planned and balanced economic development; (b) that the material resources of the nation are harnessed and distributed as best as possible to serve the common good; (c) that the economic system is not operated in such a manner as to permit the concentration of wealth or the means of production and exchange in the hands of few individuals or of a group. Small-scale enterprises are the surest way that governments can ensure that citizens’ welfare and security are secured. Everyone who is not on government payroll should have means to trade with government intervention in ensuring that there are shops and stalls in the public markets, and that interested citizens can have access to the shops.

In a planned society, all the ground floors of public buildings in city centres or high streets or central business areas are dedicated for small-shop owners as a responsibility of the government to ensure that everybody can trade. Without this provision, illegal conversion of residential to commercial use will result. This conversion called “succession” happened along Adetokunbo Ademola Crescent and Aminu Kano Crescent, Wuse II, and Gana Street, Maitama, Abuja. It also happened in Lagos Island, where all residential streets are now commercial without government intervention!

In the United Kingdom, car-boot sales, Sunday markets and street trading are encouraged to assist the small business operators to survive. Some small businesses like services and baking are also allowed to be operated from homes. In the United States of America, car-boot sales, selling inside vans parked beside the roads and near industrial areas, markets and schools, are encouraged to boost micro and small scale businesses. States’ Inland Revenue Services in developing nations like Nigeria should have development programmes for micro, small, and medium-scale (MSME) entrepreneurs and governments to develop micro-finance banks as MSME finance hubs as MSMEs are the backbone and lifeline of thriving economies. Governments must also reintroduce issuance of small public contracts like supply of stationeries, cleaning and regular fumigation of public buildings to SSEs.

OLUFEMI

Olufemi Adedamola Oyedele, MPhil. in Construction Management, managing director/CEO, Fame Oyster & Co. Nigeria, is an expert in real estate investment, a registered estate surveyor and valuer, and an experienced construction project manager. He can be reached on +2348137564200 (text only) or femoyede@gmail.com