The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian small businesses have virtually zero confidence in the existing Government and private sector institutional support structure that is meant to assist them, creating “a possible credibility issue” for efforts to reform this initiative.

A report on the needs of Bahamian Small and Medium-Sized Enterprises (SMEs), produced for the Government and Inter-American Development Bank (IDB), found that more than 90 per cent of entrepreneurs surveyed found the existing support structure “ineffective”.

The report, which has been obtained by Tribune Business, found that just 6 per cent of the 556 SMEs surveyed confirmed that they were members of the Bahamas Chamber of Commerce and Employers Confederation (BCCEC).

“Conversely, 97 per cent reported never having sought any assistance either,” the report, written by EPS Consultants, said. “Only 5 per cent and 6 per cent, respectively, reported having received funding from either the Government Guarantee Programme or the Bahamas Development Bank.

“Strikingly, almost five in 10 respondents (48 per cent) confirmed that the funding received from the Government programmes was inadequate, or insufficient for business requirements.”

The report, entitled ‘The Bahamas small and medium-sized enterprises needs assessment survey and analysis report, added that 94 per cent of respondents - 432 out of 459 businesses - said they were not members of trade associations or co-operatives. And 99 per cent said they had never sought assistance from either of these bodies.

“All of the above appear to speak to a decided indifference (apathy) towards the current support structure, or ignorance regarding any support or assistance the system may offer SMEs. This poses a possible credibility issue,” the EPS report, completed on January 31, 2014, warned.

The findings paint a damning picture of just how ineffective the existing government institutions, and support programmes, which are meant to support Bahamian small businesses and entrepreneurs, really are - or are perceived to be.

It also indicates that many small Bahamian businesses and entrepreneurs often feel they have no choice but to ‘go it alone’, with the absence of an easily accessible, and quality, support structure likely contributing to the high rate of SME failures.

The EPS Consultants report found that almost 79 per cent of the entrepreneurs it interviewed operated businesses with less than five persons, with the majority of the remainder having between five to 19 staff.

“On the question of employee compensation, the overwhelming majority of businesses (80 per cent) indicated a salary/wages compensation arrangement,” the report revealed, “as opposed to a commission arrangement (8 per cent) or a combination of salaries and commissions (10 per cent).

“This is indicative of a possible root cause for business failures or the onset of cash flow difficulties, as the majority of respondents indicate lack of funding as an ongoing business concern.

“An SME operating with cyclical revenue streams, while paying fixed regular salaries, will have cash flow (timing) challenges.”

The EPS Consultants’ report found that 73 per cent of Bahamian SMEs interviewed relied on their owner’s own funding sources to get started, with 55 per cent saying they needed access to financing to grow their business.

“Seven out of 10 SMEs, or 68.8 per cent, indicated a willingness to ‘accept financial assistance if linked to technical support’,” the document added.

“This is perhaps a clear indication that while financing is considered important, SMEs recognise technical assistance and specified training as critical components to growth.”

The report is designed to pave the way for legislative and institutional reform efforts to overhaul the Bahamas’ small business and entrepreneurial support network, with the creation of a ‘one stop shop’ Small and Medium-Sized Business Development Agency (SMEDA) the centrepiece of existing proposals.

EPS Consultants’ work found that six out of 10 SMEs “confirmed that they do not invest in staff training and development”, with 58 per cent admitting “that their businesses cannot afford to provide the level of training required to sustain themselves”.

When asked to detail the training assistance they required, the report noted that 66.2 per cent showed interest in customer care help, with 37.2 per cent seeking technical aid and 22.7 per cent administrative/finance help.

While the fact some 79 per cent of SMES supported SMEDA’s creation will encourage the Government in its reform efforts, just 44 per cent could recommend how the agency should be structured or what it should provide.

Among the greatest challenges said to be facing SMEs were, not surprisingly, access to financing from commercial banks; poor business plans; the absence of proper accounting systems; and lack of local customer support.

“In addition, SMEs cited availability of reliable and trained staff, unfair competition (price undercutting by illegal immigrants and unlicensed businesses(, high marketing costs, poor infrastructure, excessive regulations, lack of reliable inter-island shipping transportation and threat of Value-Added Tax (VAT),” the report said.

“Regarding the advocacy for a level playing field in doing business, concerns were expressed about the ability of foreign companies and individuals (informal sector) to operate unchecked in the Bahamas, and the need for industry regularisation.”