This piece was delivered by Mike Nyinaku, CEO of The BEIGE Capital at the ACCA Eastern Africa Convention held in Kampala, Uganda on the 26th of November, 2014. On the night, an appreciation was given Mike for his contribution to the ACCA in Ghana & Africa at large.

 

Ladies and gentlemen, invited guests  and fellow ACCA members. I bring you greetings from Ghana and I’d like also to express my thanks to you for having me on this platform. My task is simple, tell story and then talk about SMEs. The second part is the easier option as it’s been done many times before by better renowned speakers than myself. And come to think of it, Africa & African Countries for that matter are BIG SMEs in the committee of nations….. really if we want to know the role SMEs are playing in our economies, shouldn’t we just look around us?

Africa and African Countries are big SMEs in the committee of nations. If we really want to know the role SMEs are playing in our economies, we should look around us. To provide a practical evidence of the role of SMEs in our

daily lives, I thought of sharing this story. One of my staff in the Bank owns a bakery. A staff of my staff (who owns the bakery) runs a small laundry business. One of the washmen of that staff’s staff, also provides private laundry services outside the laundry where he works. The wife of this washman, also operates a table-top grocery shop in front of their home. And the niece of this wife, is a janitor at one of my establishments – a Logistics Company. This Janitor besides her work routine, sells airtime for Vodafone. Incidentally, staff of the logistics company, on a daily basis, buy airtime from her. It’s quite a long and possibly complex chain of relationships but what I’m trying to establish is that this chain of economic activity has only become possible because I employed one staff at the Bank. And this source, through their earnings, has bankrolled a chain of economic activities directly and indirectly.

“Most SMEs originate from the country of operation; therefore their wealth

-if any – stays in that country. This is a fact.” If we can appreciate the value that my staff has played in this chain of economic activity, then we cannot over- emphasize the role that the millions of small businesses scattered over Africa are playing in the economy of our continent.

In Ghana, it’s reported that 90% of the companies formally registered are SMEs. This statistic is similar around Africa. Again, another statistic in Ghana is that, over 80% of the economically active population is employed in

the private sector. By simple extension you can safely deduce that about 80% of my country’s economically active are employed with SMEs. Now, that is interesting because it means these small companies are really, and in truth, the driving force behind the GDPs of African countries. Before assessing the extent of impact SMEs would have on the economies, one fact really inspires a lot in me; that is, Most SMEs originate from the country of operation; therefore their wealth -if any – stays in that country. This is a fact.

So you would agree that SMEs, without a doubt, make an impact on our local economies. But the question we don’t often ask is; what is the value and level of influence of that impact?

I may be employing 3,000 people, but if my turn over is 2% of MTN’s turn over, I cannot influence decision making in Ghana and the same would go for any SME in any country. So my selfish thinking is that, the talk about SMEs

being significant to economic growth would only mean something to me if I see opportunities for SMEs to grow into multinational companies and for that matter “Monster” Corporations. Remaining as SMEs would only give us

sustenance but monster corporations would guarantee us step increases in growth. “I’m a firm believer in the concept “small is cute” but hey, in today’s world “cute is no longer secure enough”.big is the way to go.”

 

And here is the part that I believe, as professionals, we have to play in this. More than 63,000 of ACCA’s 170,000 global membership work in or for small businesses around the world. To these businesses, that provide us with

employment, we deliver professional services in the area of business management, financial planning and reporting. Beyond this responsibility, however lies (particularly for us in Africa) a patriotic responsibility of seeing to it that the businesses we work for, GROW.

Coca Cola, Tata and Ali Baba were once SMEs and the people who engineered those remarkable corporate transformation included professionals like me and you. WE MUST BE AN ALL ROUND RESOURCE TO THE BUSINESS. If we aim to be RELEVANT in the LIVES of the businesses that employ us, then the first step to attaining this is to check ourselves: How knowledgeable we are; How well-informed we are and how creative and open-minded we are, to understand the rigors of business, in order that we are adaptable to situations and also assist our businesses navigate the challenges of everyday. Earlier this year at a graduation ceremony for newly qualified ACCA affiliates, I spoke about the essence of being a complete finance professional.

WE ALSO MUST ACCEPT THAT ENTREPRENEURSHIP IS NOT PROCEDURAL. The reality is that, not all Professional Accountants can be entrepreneurs. Entrepreneurship is not a science, but an ART. Much as we work with conventions and principles, entrepreneurs are inspired by ideas,

possibilities and their guts. I consider myself a perfect example of this following my transition into entrepreneurship after having trained and experienced the regimental life of an auditor with Deloitte & Touche. Back then, my whole sphere of thought bordered on principles, procedures and processes. Today, I’m inspired by my thoughts and ideas and hardly limited to what is believed to be convention. “Coca Cola, Tata and Ali Baba were once SMEs and the people who engineered those remarkable corporate transformation were professionals like me and you.”

The Entrepreneurs and business owners we work with, want to get there by whatever means and as henchmen to them, it is our responsibility to assist and creatively guide them to achieve their aspirations to the best extent

practicable. This should be done in a way that would not compromise professional judgment and standards, and at the same time, not stifle creativity and out of the box thinking It should be our aim to grow our businesses to higher heights. I’m a firm believer in the concept “small is cute” but hey, in today’s world “cute is no longer secure enough”, big is the way to go.

Africa has seen a continuous rise in the quantum of Foreign Direct investments into the continent. But do you also know that most of these investors complain that that they have difficulty in finding local partners with capacity suitable enough to partner them? Yes it is so, because we are small and seem happy in our comfort zone. Thus, foreign investors come in, do their own thing and repatriate their returns.

And you think small is good? No. Small is good only for starters; but big is better for the long term. When a business is big you have a reasonable assurance that with prudent management it can last for generations and the country and continents would benefit for generations. It has happened elsewhere in the stories of Dangote, GLO, UBA, Ecobank and many others. As Finance Professionals, we must push ourselves to learn how these corporations transformed their fortunes and in similar fashion do same for our local businesses.

WE SHOULD INFLUENCE EVENTS THAT IMPACT THE SUCCESS OF SMEs. And there are a lot of things we can influence. An example is Taxation. Excessive tax burdens and complicated compliance procedures can stifle the SME sector and prevent it from generating employment and wealth or, in more extreme cases, discourage participation in the formal economy. It is crucial for governments to work towards creating simple and transparent tax systems that encourage compliance in a way that allows small firms to contribute toward tax revenues.

Tax policy should always aim for simplicity because that makes it easier for small firms to pay taxes. If tax administrators are able to recognize the variety within the SME sector when devising tax policy, they can successfully enable small businesses become tax compliant with little strain-and who is best placed to tell them. ME AND YOU.

Another area where policy impacts significantly on SMEs is Business regulation. As with tax compliance, business regulation generally has a disproportionate impact on smaller enterprises compared with larger ones, and ACCA periodically calls on governments and policy-makers to ‘think small first’ just so to ensure that regulations are simple for small businesses to understand and do not impose onerous burden on their survival. I’m sure this is not too much to ask, since SMEs account for half of the world’s private sector output and employ two thirds of the global private sector work-force. Research has shown that countries with burdensome regulation have larger informal sectors, higher unemployment rates and slower economic growth, so it might be sensible to explore ways of removing any unnecessary barriers to business success.

A third area where I believe we can influence policy is internationalization of businesses. Most of these huge multinationals corporations did not just happen. They were created. Yes. Toyota, Hyundai, Samsung, GE, were created. They began as SMEs and then were propped by their home Governments with the intention of enabling them compete at international levels. That was an intentional move and one done with a long term view in mind.

I can confirm that ACCA, as a champion of SMEs and international business activity, is keen to encouraging debate on how the barriers facing SMEs in international trade can be overcome. At present, SMEs with ambition to internationalize face numerous barriers including – cultural differences, difficulties gaining market information, challenges in identifying international business partners, problems accessing finance, overseas and local “red tapes” and many more. Again, these challenges present opportunities for us, as professionals to show our SMEs what we’ve got.

Lately, I’ve been drawn to this movie which I’ve seen a couple of times over. It’s titled “The men who built America” and tries to give an account of how America was transformed from early 18th century. The focus of the movie is on the role played by some key entrepreneurs, whose activities formed the bedrock upon which the country’s economy generally revolved.

The story of JP Morgan, General Electric, Dangote & GLO reveal one thing and I hope I’m able to infect you with that. Small may be cute for now but big is better if you have tomorrow in mind.

 

My thanks to you.

 

Author: Mike Nyinaku || Chief Executive Officer, Beige Group

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