The entrepreneur– looking beyond business capital

Over the years, the media, government officials and economic experts have at different forums articulated the lack of capital as one of the causes of underdevelopment in developing countries. Capital is believed to be the most important contributing factor to the development of Small and Medium Scale Enterprises (SMEs) and ultimately economic growth. Today, firms typically compete in a global economy that is complex, uncertain and unpredictable. The global economy as it is today rewards effective performers whereas poor performers are forced to restructure significantly to enhance their strategic competitiveness. Most firms are just coming out of the 2008 economic depression, while goals of achieving competitiveness is challenging not only for large firms but also for small ones. Most SMEs with very impressive business ideas and resources are strategizing to leverage on opportunities within their operating environment to actualize their dreams. Having the capacity and ability to recognize opportunities, launch new products, identify new sources of supply, and mobilize huge resources amongst others may not necessarily be sufficient to conferthe title of a “successful entrepreneur” on an individual.

The Entrepreneur

According to Schumpeter, “an entrepreneur is willing and able to convert a new idea or invention into a successful innovation” In his wisdom, he sees the entrepreneur as an innovator, a generator of new ideas and processes. Both Frank Knight and Peter Drucker equally see an entrepreneur “as someone who is willing to put his or her career and financial security on line and is prepared to take some amount of risks in the name of idea, spending time, and capital on an uncertain venture”. By implication, the entrepreneur must have initiative, skill, and motivation to establish a business no matter how small it may be. These qualities notwithstanding, there are three important factors posing challenges to entrepreneurship in any economy namely: risk, cost and uncertainties.

The entrepreneur plays a significant role in the economic development of any nation. I respectfully salute the courage of the entrepreneur, especially a new entrant who is encumbered to develop a business idea, raise capital and assemble a business team in addition to finding the right business location, employees, and customers. The entrepreneur must get everything right despite seen or unforeseen challenges in his operating environment.

Capital Shortage Misconception

Several years ago, Adam Smith in his book “Wealth of Nations” mentioned labour, land and capital as factors of production. Over time however, economic experts have observed that some nations with excess land, labour and capital have not attained the desired economic growth. Most times when there is a discussion on entrepreneurship, sentiments are often expressed about the inadequacy of business capital. The thesis of Robert Kiyosaki that “the world is filled with brilliant ideas and excellent products but the world lacks seasoned entrepreneurs” may be relevant in this article. This is because “seasoned entrepreneurs” are those that possess the knowledge to make, create and innovate as well as sustain their businesses irrespective of the status of national or global economy. Importantly, the entrepreneur will need to apply appropriate technology amongst other contributing factors to increase the output of his business. Several decades ago, the contribution of technology to economic growth was analyzed qualitatively by Professor Robert Merton Solow of the Massachusetts Institute of Technology. Solow an economist conducted a study for more than 40 years to measure the contribution of technical change to economic growth and found that the output of man doubled during the period. He attributed only about four-fifths of the growth in US output per worker to technical progress. That is, about 20 percent only of the growth was due to more capital, while the remaining 80 percent was attributable to advances in technology. 

In Nigeria, most unemployed youths want to be entrepreneurs but they have difficulties in developing business ideas, raising capital for startup, assembling a business team and finding good employees. Others include finding good customers and dealing with competition. The 220 billion Naira set aside by the Federal Government of Nigeria to enable SMEs realize their potential and promote economic growth is worthwhile and commendable. It will to an extent encourage the growth of SMEs, support production, reduce poverty and unemployment but may not engender economic growth. This is because provision of capital is not an end in itself, it is merely a means. Those benefitting from this largesse cannot be left alone if they are expected to do well. If we want SMEs to improve their contributions to GDP and export earnings, policies of government must drive various strategies at national and state levels. The nation must continue to play the leading entrepreneurial role to enable SMEs provide goods and services that are competitive when compared with other emerging countries. Any society that is desirous of achieving economic development should have the capacity to create, renew and increase wealth on a continuous basis. Education of our youths and indeed all Nigerians must be given the attention it deserves. According to Fitzgerald Schumacher in his book ‘Small is Beautiful’,” only nations whose people are disciplined, organized and educated will be developed”.

Educating the Entrepreneur 

It has been said severally that Nigeria has a large reservoir of human resources. With technology rapidly changing, and the entire world becoming knowledge based, education has become a key factor in measuring a nation’s human development, while the level of educational attainment of a country gives an implicit indication of her economic development. In preparing entrepreneurs for competitiveness in a global economy, policy makers in Nigeria must not neglect the importance of education. This is because education is a critical factor required to improve the quality of human resources and for developing new skills, management expertise and general experience. The current decline in academic performance of our youths is unacceptable and disturbing because it is from these lot that future entrepreneurs will emerge. The quality of human resources will determine to a great extent the success of entrepreneurship. If SMEs are to drive the economy of our country to a higher level, then working hard without the use of suitable machinery and equipment including the application of appropriate knowledge, will result in no work. 

If Nigeria is to tap the entrepreneurial talent of its people, government must find ways of continuously measuring the effectiveness and performance of SMEs and thereafter enact relevant reforms that will increase support for new businesses in the formal sector. Nigeria has to minimize barriers and provide educational support that will accelerate entrepreneurial growth. Private and not-for-profit organizations have to work closely with the Government to promote the development of education for entrepreneurs at state and federal levels. The Federal Government will however ensure that regulatory responsibilities and standards are maintained as well as sustained. If the nation’s educational system does not produce human resources that are pro-industry in this century, it is doubtful if the potential of SMEs to create jobs, reduce poverty and promote economic development would be actualized. With the right education coupled with the use of appropriate technology SMEs will thrive. Business capital cannot do it all, we need to look beyond it for economic growth.

M.A. Johnson