SME strategy cannot save this country — Think again

How else is one going to say this so that the mass hypnosis that we almost collectively suffer will clear, so that our brains may function well? The idea that the continuous encouragement of micro, small, and medium scale enterprises (MSMEs) is a sure bet approach to economic development is false, foolish, unscientific, fraudulent, wasteful, mediocre, lazy, and deleterious of our effort at achieving economic development.

Why? It hasn’t worked for as long as we have been implementing it. It has not worked anywhere and could never work. At best, it lulls us to sleep, miniaturizes our dreams, keeps us permanently at a point where we could never compete with larger, well-established ones, keeps us hooked only on importation economics, helps to retain our woeful unemployment indices, and ends up frustrating our youths out of their minds. Check the odds… out of 1,000 youths who become half-baked, import-dependent entrepreneurs, only one or two will be able to build to sustainable levels in five, 10 years. Most will crash out or live on the fringes of poverty all their lives. Funny though, that most of those pushing these ideas – government people and politicians – are not entrepreneurs themselves and if they are, they started with monies they got from being government officials or politicians (to create a façade and make ill-gotten wealth less recognizable). Otherwise, we should have asked a person like Rauf Aregbesola, who as a minister told graduating students of Osun state not to bother looking for work, how he made his money. I think it is a callous strategy.

The strategy of relying on SMEs to lift and transform Sub-Saharan African economies is a very much failed one already. Our SMEs cannot do better than sell imported goods. Almost all of them have neither the patience, perseverance, time, resources, finance, personnel, structure, and indeed inspiration, to be innovative in a way that can inch black Africa closer to relative self-sufficiency, or even help in solving our existential problem. We have been had. And anyone who continues to push that strategy should understand that we are merely markets for foreign importers from China and Western nations by promoting MSMEs. The transformative ability of research and development such as we require can only be undertaken with substantial reserve capital, a good, diverse, well-motivated complementarity of personnel, and mega ability to earn.

I also think we have too many of our people running MSMEs. At last count according to SMEDAN, we had 41 million of them. That is not to count the probably 40 or 50 million Nigerians who sell small things in the thousands of local markets around the country, at street corners, in traffic, and the booths of their cars, including online, etc. It gives them some sense of having something to do but such businesses are not scalable, cannot help them in times of health emergencies, and cannot even take care of hygiene factors (food, shelter, clothing) for most of them. They find it tough just sending their children to school or treating malaria.

Then we say all they need is financing. And the government has been spending a lot of resources on ‘financial inclusion’. We start with getting them to own accounts (which is okay), then we promote the financialisation of the economy through the establishment of snazzy banks. We did not see a major groundbreaking turnaround in the fortunes of the country, and a coalescing of our SMEs into a formidable force for employment generation, or even competition with other countries, until the traditional banking format gave way to technology when our banks replaced almost all their staff with robots (ATMs and Apps).

Today, we live in the Fintech era, by which this category of businesses can only get that lending from smart organizations backed by technology. The traditional banks have never had time for that segment of businesses and were not built to service them by the way. Today, some of them own the Fintech companies and use that means to lend to small companies at very exorbitant rates. The experience of our SMEs with the Fintechs has been hilarious. Many of them borrow using apps with no intention to repay willy-nilly. The Fintech companies go crazy and start harassing their families. In one instance the Fintech company published the obituary of their debtors.

In our financialised economy where only banks and bank-like entities thrive, we are trying to conflate a fundamental problem of governance failure, inability to properly identify the issues and document our people’s existential problem, and solve what is multidimensional poverty (poverty that extends to access to health, education, water, environment, etc), with mere financial inclusion. The results will be even more disastrous as we go along. What I suspect we need, are ideas around economic inclusion.

How do we include our vast majority of financially excluded people in the economy properly, by ensuring they are actually productive beyond shifting foreign goods as middlemen for a spread? I also think that even though the face of the industry is fast-changing around the world, we should do the difficult task of building companies to be bigger, stronger, and able to employ more people. Even if we are able to do this for five years it will be worth it. Even western nations are careful to push all their workers on the streets in favor of robots. They understand the meaning of mass unemployment and would never dare it.

Government cannot hope to escape its core objective of pursuing and achieving full employment (yes, that is a valid expectation of governments in economics). How people will get engaged gainfully is one problem that should take most of the time of governments if they were serious. This task cannot be farmed out to the people through the idea of entrepreneurship or MSMEs. No successful country has done that in the past. And none will be able to achieve that in the future.

If at all, we should encourage a situation where a majority of our youths work for organisations for a spell, understanding how companies are built, the concept of corporate governance, risk management, internal control, and also building their own ability to go the long haul. We should also remember that entrepreneurship is not for everybody. Some do it much better than others. As things stand, we are just on a wrong track in this country; and it is beyond sad.