`20% of government’s procurement should go to SMEs`
Small and Medium Scale Enterprises (SMEs) and start-up businesses play significant roles in the economic development of countries. According to the United Nations Industrial Development Organisation (UNIDO), SMEs form the backbone of economic growth in most industrialised economies, and account for 50 to 60 percent of employment generation. They also contribute significantly to wealth creation and poverty alleviation.
It, however, appears to be a little different in Nigeria. Until recently, the country’s SME sub-sector has been faced with lots of challenges that include a stringent business registration process, inefficient electric power supply that constrains companies to run on expensive alternative sources of energy, inaccessibility to bank credits and loans, multiple taxation, importation of goods that can be produced locally and lack of managerial capacity among other factors.
Niyi Yusuf, managing partner at Verraki, recently called on the Federal Government to intervene in SME growth by creating access to markets for indigenous businesses over subsidies.
Speaking during a live interview on the Global Business Report segment on Arise TV, Yusuf, who spoke on the topic, ‘Technology and Innovation in Sub-Saharan Africa,’ stressed that limited market access was one of the fundamental barriers to Nigeria’s attempts to boost small and medium enterprises, and called for a new policy that directs government procurement to SMEs.
Benchmarking other countries, Yusuf explained that 16 percent of South Africa’s Federal Government procurement goes to SMEs while the United States of America spends 22.5 percent of all Federal procurement on SMEs via the Small Business Administration and urged for a deliberate policy where 20 percent of the Federal Government’s procurement should go to indigenous SMEs. According to him, this will create access to markets for indigenous businesses and foster expansion.
Speaking on the impediments to technology and innovation in Nigeria, Yusuf proposed steps to enable governments to foster innovation in-country.
He said a major bottleneck to innovation and innovative practices in Nigeria was the lack of a structured process to foster innovation. Annotating this comment, he explained that innovation is an intentional process, not an accidental occurrence and most Nigerian companies and institutions prefer quick solutions and do not dedicate enough time and resources to support innovation.
He also identified a cultural fear of failure but stressed that one of the biggest constraints to innovation in Nigeria was the lack of investment in STEM education – Science, Technology, Engineering, and Mathematics.
“Technology innovation will be driven by technology and STEM education plays a major role in achieving this. With STEM education at the basic levels, we can begin to lay the foundation for pervasive innovation. In South Korea, kids learn software programming in kindergarten; while for most Nigerian kids, kindergarten is where they learn “A for apple” and “B for ball”. If South Korean kids, from kindergarten, already start programming, you can imagine what they will be doing at eighteen.
“We need to invest in STEM education and Research & Development. We should create linkages with the private sector to enable commercialization of research outcomes, and then the government should provide access to markets. When we do all these things, we will remove some of those barriers to innovation,” he said.
Yusuf charged the Nigerian government to improve ease of doing business, provide access to the market, support SMEs through federal procurement like other developed countries such as the United States and massively support Research & Development through grants, comparable with South Korea that spends 4.39 percent of its GDP on R&D.