|
Andy Grove, former chairman and CEO of Intel
Corporation, once said that "there is at least one
point in the history of any enterprise when you have
to change dramatically to rise to the next level of
performance; miss that moment - and you start to
decline."
Would that hold true for the Small and Medium
Enterprises (SMEs) of our fair nation?
More than 73,000 SMEs were established in Ethiopia
by the year 2007/08; they have created employment
opportunities for 551,075 individuals, according to
the annual progress report from Ministry of Works
and Urban Development (MoWUD). This figure may sound
rather stunning, but a comparison with Chinese
performance might help strike a balance.
There are 42 million SMEs in China, which makes 99pc
of the total number of enterprises in the country,
according to China Briefing. The total value of
goods and services produced by Chinese SMEs account
for 60pc of the Gross Domestic Product (GDP) of the
third largest economy of the world next to the
United States and Japan.
Amongst the major reasons that Chinese SMEs have
developed such a large market capitalisation are due
to policy direction, favourable financial support,
strong inter-industrial linkage, clear regulatory
framework and a strong political commitment.
Our poor nation has also picked up the vibe, partly
by choice and partly due to pressure, to expand SMEs
in different sectors. Yet, aside from a few in the
construction sector, the hype could not achieve what
it intended.
Even the little achievement attained is now at the
brink of collapse unless a plan for sustaining and
pushing it forward is placed soon.
While planning, we ought to answer one critical
question: What went wrong with our SME development
strategy that makes its achievements so modest?
The answer transcends many fronts.
A range of factors, from the lack of political
commitment to the condemnatory popular attitude, is
challenging the survival of our SMEs.
The current SME movement in our nation was embraced
in the urban development policy of the incumbent,
which is one of the pillars of the Plan for
Accelerated and Sustained Development to End Poverty
(PASDEP). The main objectives of the strategy were
reducing urban unemployment, helping to realise the
progressive shift from agriculture to industrial
development and incubating domestic enterprise
development. The strategy was found very attractive
by the urban unemployed, especially the youth.
Provided that technical and vocational education and
training (TVET) was gaining momentum, SMEs were
conceived to be the way to transform technical
skills into businesses by many. Yet, the strategy
was short-sighted in terms of putting clear tactics
in place to link the SMEs with the biggest
industries and help them to climb up the ladder of
enterprise development. Besides, it was not
accompanied by long-term market analysis, either
domestically or internationally.
On the political front, SMEs have helped the
governing party to amass a large number of urban
supporters. Yet, the support base was so fragile
that business success was taken as a performance
measure of bureaucrats by enterprise folks.
Hence, even after the official announcement of the
strategy on 2005, a lot of quick fixes have been
made to it aiming at maintaining the "urban hype."
To the dismay of the Revolutionary Democrats,
though, the hype could not be maintained as the
fundamental problems of the system were not taken
care of.
At the same time, the urban hype has also lost the
charismatic leadership of Arkebe Oqubay. After him,
there was no one with the charisma, comprehension
and eloquence to pick up the cause and stir it.
Snared with the many implementation snags faced by
SMEs, the lack of strong political commitment has
lowered the tone of expectations.
On the technical side, the SME development strategy
has many holes, which could not be filled with the
quick fixes made at different occasions over the
years. The biggest of the holes is the failure to
create the link between SMEs and bigger industries.
In relation to this, failure to draw a clear
strategy for enterprise development and
transformation has also been widening added
significantly to the holes.
In countries like China, where the SME revolution
has altered the wave of economic development,
inter-industrial linkage is very strong, and
well-established. For every large industry producing
a good or service, say shoes, there are many SMEs in
the supply chain providing an outsole, foot bed,
heel or shoelaces. This applies to all industries
ranging from electronics manufacturers to garment
factories and fast-food chains.
The inter-industrial linkage strategy has made
Chinese SMEs strong players in China's export
market. China has also succeeded in supporting
start-up SMEs to climb up the ladder of business
development by availing cheap credit and subsidies.
With that, it has created a handful of prominent
domestic brands with millions of loyal customers in
its base. Not to say the least, the Chinese
government has also used its leverage to negotiate
with big multinationals to feed Chinese SMEs into
their supply chains.
We have a lot to learn from the Chinese experience
in creating inter-industrial linkage and assisting
SMEs to transform themselves into bigger business
ventures. We can broaden the beneficiary base by
replacing new start-ups in the place of the grownup
businesses.
Another important technical snag that our SMEs face
is the absence of market information. That has led
some of them to produce non-tradable and substandard
goods. Add to this lack of planning and management
capacity, which often causes them to overproduce
goods.
Just as what the ECX has made to synchronise our
agricultural market, we should be putting in place a
clear strategy to synchronise SMEs with domestic as
well as international markets. In furthering the
market synchronisation, the government could also
help SMEs get cheap credit by negotiating with both
private and public financial institutions.
Diversification of product types should also be
given attention by the government and the
enterprises alike. It is only then that the holes of
the SME development strategy could be filled,
thereby creating a smooth playing field for them.
Equally challenging to SME development is the
unfavourable attitude they face from the public. We,
as a society, have developed a habit of judging
things by their mere size. Small is perceived as
substandard. But the truth is far from such
presumptions.
Popular international brands like Nike and Adidas
work in partnership with many SMEs. The government
has to extend a helping hand to SMEs by inspecting
the quality of their products. Denouncing them is
not the way to teach them but supporting is.
SMEs have helped to reduce urban unemployment,
though employment statistics are rare and difficult
to find in our fair nation. Yet, our SME revolution
can hold water only if we open ways for them to
change, as Andy Grove was quoted saying above. For
that to happen, strong political commitment,
strategic leadership and popular support should must
be established. |
