Small businesses; those that employ between 1 to 50 persons are very important to an economy. In terms of capitalization, what is referred to as a small business depends on the size of the economy in question.
For example, an established economy like Japan will have small businesses with capitalization that businesses in Africa can only but dream of. Sometimes referred to as cottage industries, these businesses are very important in every country, especially in a developing country like ours.
They are the engines that power economies, create jobs, fuel growth and, ultimately, transform communities. A good example is Italy, where for a long time cottage industries that are mostly family-run have contributed about 20% of the Italian GDP.
It is therefore, vital that governments, investors and educators find ways to harness this energy. This is especially a good way to solve the unemployment crisis that most sub-Saharan countries face. Look at it this way, in Rwanda, with majority population below 30 years, there is an increasing number of graduates from schools, colleges and universities. While this is a good thing, it poses the threat of unemployment crisis. This same scenario is replicated in the region. Governments are grappling with this problem, but it is an opportunity and a good one too.
With regard to small business, we need a serious paradigm shift. We need to rethink the way we do things here. The scenario normally plays out thus; X works in paid employment till retirement. Upon retirement, they start a small business (normally a farm) in their ‘sunset’ years. No wonder our countries face food insecurity all the time!
Enterprises are high energy, high risk and involving ventures that surely (with due respect to retirees) might be quite a handful for a 60 plus old. What’s more, the mindset of an entrepreneur is quite different from that of someone who comes through paid employment.
As the Chinua Achebe says, ‘one cannot teach a man to be left-handed in old age’. I must add that this is generally speaking and there are exceptions to this rule, but they are just that; exceptions.
A more intelligent way, is to pursue the same through entrepreneurship and business incubation programs right from early stages of our youth education with a lot of exposure to current business practices. The Swahili saying ‘samaki mkunje kama angali mbichi’ (literally; if you want to bend a fish, do so while it is freshly caught) is apt here. I root for these programs because they can, if properly implemented, turn the ‘problem’ of overpopulation into a solution. Look at it this way; if a potential job seeker turns into a job creator you have solved at least one unemployment problem. But they will most likely employ someone else, so you will have two or more unemployment problems gone. If they borrow from a bank, the multiplier effect of credit creation is phenomenal.
They will use products from various sectors in the economy and thus raise consumption. And of course they will be taxed both directly and indirectly. You simply cannot go wrong investing in this; creating small businesses is big business!
I must play the devil’s advocate though, various business incubation programs have been put in place and this is good. I regret to say, however, that they are not set up in a sustainable manner and their implementation is still ad hoc. Perspective must be put into this by moving from lip service into action. We must be willing to make mistakes and learn from them to improve. Young and new entrepreneurs must be encouraged and counseled adequately to avoid failure.
Sam Kebongo is an skills and business advisory services consultant. He teaches entrepreneurship at Rwanda Tourism University College.