Key success factors for SMEs in 2019

 As we come to the close of 2018, a year that is very eventful for all the bad reasons, and uneventful in matters that matter to the masses, there is need for operators in the sector that have the most positive impact on the masses to brace up, rethink its strategies and retool its operational modalities

So much has been said and also done, concerning the development of the SME sector, not just in Nigeria but in several other parts of the world. At the African continental level, for instance, the Africa Union Commission (AUC), in its search for the evolution of “competitive, diversified and sustainable economies in Africa underpinned by dynamic, entrepreneurial and industrial sectors that generate employment, reduce poverty and foster social inclusion”, has established the Enterprise Africa Network (EAN). The Network is a flagship initiative of the AUC, which aims at implementing the Business Development pillar of its Africa Master Plan for 2017-2021. The initiative would provide services relating to the developmental needs of African SMEs, including international partnerships with the private sectors of other economic groupings, including the European private sector. It will also offer advisory services for international growth as well as support for business innovation.

The Enterprise Africa Network therefore becomes a strategic institutional resource, to facilitate the realization of the objectives of the AUC by confronting the key obstacles hindering SME development and growth. It will address the issue of the participation of SMEs in the formal economy of their respective countries, as well as in regional and global trading spaces. Prominent among these limiting factors are little or no access to markets and market intelligence/information, corruption, inefficient bureaucracy, stifling regulatory barriers, and a business-operating regimes that are overtly hostile.

On the domestic front, several initiatives in the areas of funding and capacity development have been implemented. The Central Bank, the Bankers Committee and other stakeholders have established several on-lending facilities for the benefit of SMEs. It is now a common feeling that the availability of funds as a challenge of SMEs has been largely addressed, even though accessing such funds is still a bit of a problem for operators, and drawdown is still insignificant. A lot of thinking is going on around this challenge. It is this problem that prompted the Central Bank to contemplate the establishment of a nation-wide national microfinance bank – an idea not supported by this column for the obvious reason that we had traded that route before through the Peoples Bank, and the legendary incompetence of government in the running of businesses.

As we come to the close of 2018, a year that is very eventful for all the bad reasons, and uneventful in matters that matter to the masses, there is need for operators in the sector that have the most positive impact on the masses to brace up, rethink its strategies and retool its operational modalities. This will enable them to maximally profit from the opportunities that may arise in 2019 – an election year like no other in Nigeria. In this regard we shall attempt here to highlight some of the attributes and strategies that must be manifest in the affairs of those SMEs that will click Champaign glasses this time next year. Before we present those critical success factors, let us take a cursory look at some aspects of the environment within which our SMEs operated in the closing year. The Nigerian economy is growing at less than 2 per cent per annum as against its population, currently estimated at 198 million people and growing at a rate of 2.6 per cent – a growth deficit. Ghana’s population of about 29 million people is growing at the rate of 2.2 per cent while its economy grew at the rate of 8.5 per cent in 2017 – the fastest in five years. We may need to recall that Ghana was the first country in Sub-Saharan Africa to achieve the Millennium Development Goal 1 – which is the target of reducing extreme poverty by half. We never did. Of recent, Ghana has become a middle income country. Although Nigeria is not among the 37 Heavily Indebted Poor Countries, debt service is gulping about a quarter of its 2019 budget (N2.14 trillion).

The oil market is still soft, with many traditional buyers of Nigeria’s crude, including India, either slowing, looking elsewhere or seeking alternative energy sources. Output is projected to reach 2.3 million barrels a day. We are currently producing below 2million barrels a day and nobody has told us the source of the miracle of this jump. In short. There is no certainty of rapid production increase. This could negatively impact revenue, cut jobs and put more pressure on the beleaguered households.

2019 will bear the brunt of the general elections activities, which has already negatively impacted the economy. SMEs must therefore guard their loins and brace up for all sorts of negative externalities, including possible delays in the formation of cabinets, depending on who wins the presidential election. All considered, growth may be minimal and there is no need to restate that SMEs have little or no prospects when an economy is stagnant. The dividends of the failed strategy of neglecting the Warri and Port Harcourt ports and concentrating almost all import trade in Lagos have come to roost. Almost all businesses in the hitherto highbrow Apapa GRA have shut down. Nobody of any economic substance lives in Apapa now, except hapless landlords without an alternative. The economy of Lagos is bleeding but strangely the state is not complaining. Its economists appear too distracted by their huge IGR to think about the disaster in Apapa. Nigerians need to know why we locked down the ports in the South-South?

Even more important, SMEs must understand and embrace the reality of the time – the world has gone digital. Services are being migrated to the digital space. There is no hiding place for those that hang on to the dying analogue age. On this matter, there will be no standing on the fence. One is either in or out. Furthermore, exploration, discovery and deep utilization of digital platforms and the social media and marketing strategies will be imperatives. In this regard, investment in capacity development is needful. Many free offerings have been made in this area but operators must realize that there is actually no free lunch. A small training budget even if it is for the key man alone, is unavoidable. Continuous effort to create bankable projects, the lack of which is a major cause of the financial starvation of SMEs, and of course, general self-improvement of SMEs’ internal processes is important. The time has come for SMEs to differentiate themselves and embrace creative thinking and innovation.

SMEs are not famous for their customer-centricity. The need for repeat business has never been a priority. The time has now come for SMEs to hold on to the customers they have been able to garner. The only way to do this is first to know who the customers are; listen to them and try to hear what they are saying. This guides the development and deployment of products and services. Owing to the fact that we have never been interested in whether the customer repeats or disappears, we are unable to innovate. Need identification precedes innovation. SMEs that close in on their customers, listen to them and constantly interact through various digital channels will be better able to offer goods and services that meet customers’ needs.

The state of unemployment, which hit 23 per cent in the third quarter of 2018 is not likely to abate. It is probable that more entrepreneurs, willing and unwilling, from the ranks of those structured out of the formal sector by a stagnant economy, will throng the SME space; competition will heighten and market shares will shrink. In essence, SMEs should expect little or no special favours from government beyond the hard-to-access financial packages still trending. There is also no need to wait and hope that government will do what they say. The only hope that makes sense is the hope in God. Otherwise, hope is the absence of strategy with an indeterminate outcome.