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Entrepreneurship, diversification debate
Entrepreneurship, often defined as “the capacity and willingness to develop, organise and manage a business venture along with any of its risks in order to make a profit,” is a key instrument in the economic toolbox of any nation.
Entrepreneurs are thought of as national assets, since their efforts contribute significantly to the country’s gross domestic product (GDP) and employment.
Entrepreneur vs employee
The realities of an entrepreneur versus an employee are starkly different in nature.
As such, any drive to develop entrepreneurship can only be successful with the input of those who know the realities best but in the absence of a structured system through which experienced entrepreneurs can mentor younger ones, the discussion continues: How can we find a balance between risk and opportunity? Between funding and education? Mentoring and competition? There are no quick fix solutions; yet, economic growth and balance are dependent on the solution.
The T&T case
The World Bank describes T&T as “a high-income country, rich in natural resources, with well-developed, globally competitive oil and gas industries.”
The local energy sector, which contributes approximately 44 per cent of GDP, has been the major economic contributor for several decades, and has allowed T&T to maintain its positive economic growth from 1960, up until the recent sharp decline in global oil and gas prices. But this high dependency on the energy sector has led to underdevelopment of non-energy sectors, which tend to attract little investment, and are often reliant on government subsidies and transfers.
Economic diversification is essential for economic stability and long-term growth. For several years, decision-makers have been engaged in the diversification debate; however, there has been very little growth in the non-energy sector.
The World Bank suggests that T&T needs to be more open to direct foreign investments and focus on improving the business environment. Much of the discussion around diversification suggests that any diversification strategy that supports new and emerging sectors should be government-driven.
At the 2016 T&T Energy Conference, Prime Minister Dr Keith Rowley stressed the importance of diversification as one way of weathering the impact of the current economic downturn, caused by the precipitous drop in international commodity prices. But when will there be measurable results emanating from these discussions?
There is a symbiotic relationship between economic diversification and entrepreneurship development.
Fostering a culture of entrepreneurship is an essential tool in creating a balanced economy. So what are the key elements required to drive entrepreneurship? How do we produce individuals willing and able to take calculated risks that will generate profits and benefit both stakeholders and the nation? This is by no means an easy task.
The challenges of entrepreneurship
The high failure rate of small and medium enterprises suggests that entrepreneurs experience several major challenges, including inadequate funding, poor planning and management, lack of product differentiation, and not paying enough attention to the needs of their customers.
Insufficient funding is one of the most significant contributors to failure.
The inability to access start-up funding because of a lack of personal resources is all too common; yet, many start-ups that are successful at getting funding—statistics suggest more than 80 per cent—still fail, which creates high risk for financiers. Funding providers have generally avoided start-up businesses for this very reason.
To protect themselves, they set mandatory requirements that businesses must be in operation for a minimum of three years before they will even consider an application for funding. While certain government agencies do offer financial support for entrepreneurs, even these agencies have stipulated limitations regarding the types of businesses they are able to support.
The challenge is further complicated by the fact that financial backing is not the only kind of support entrepreneurs need. Giving money to an entrepreneur who lacks financial management expertise is likely to lead to poor results and possible failure.
In 2002, the National Entrepreneurship Development Company (Nedco) was established and mandated to promote entrepreneurship in T&T.
This was a strategic move but the company lacks the critical resources to produce meaningful, measurable results, on a scale that will positively impact the national community.
It would be far more useful to evaluate entrepreneurs’ needs and the realities of their business environment, in order to identify the critical gaps hindering their growth and development.
Promoting entrepreneurship demands clear policies that are able to overcome such challenges, and achieve successful, sustainable enterprises.
It should be noted that in addition to Nedco, a number of support programmes have been created to promote entrepreneurship.
The value of the entrepreneur
Diversification is critical to a sustainable economy. To effectively diversify, we need to have a bank of successful entrepreneurs investing in a variety of goods and services.
Promoting and supporting entrepreneurship requires the focus to work through the maze of challenges and conflicts that exists.
Are adequate resources being dedicated to the national diversification objective? Are policies designed to promote entrepreneurship across all levels of the education system? Are we doing enough to move past discussion, to planning and implementation? What can the private sector do to promote entrepreneurship?
Changes in the energy sector have demonstrated both the risk and impact of a poorly diversified economy.
Both diversification and entrepreneurship are processes that require proper lead-time in order to yield results; we must aggressively refocus on them if we are to achieve economic growth and stability, and this must be done sooner rather than later.
Can we objectively say that we have given adequate resources towards either?
• Nichole Joseph-Cupid is an entrepreneurship and business solutions provider based in T&T.
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