Small businesses post $96 billion sales decline -

[Lazie]

Small businesses post $96 billion sales decline - Firms borrowing more as commerce worsens

Avia Collinder, Business Writer

Using general consumption tax (GCT) returns as a measure of business buoyancy for micro and small enterprises (MSEs), these entities registered major sales declines in 2009, as evidenced by a $96.4 billion fall-off in business over 2008, the Government's latest issue of the Economic and Social Survey of Jamaica (ESSJ) compiled by the country's economic planning and monitoring authorities, has shown.

Sales for MSEs in 2009 were measured at $99.1 billion, with them contributing 9.3 per cent of the total sales of all the firms that filed consumption-tax returns, a near 50 per cent deterioration in business for that sector compared to its $195.5 billion in sales last year, when they paid 16.4 per cent of all GCT filed.

Small entities are considered to have between 10 and 50 employees while those with one to 10 employees are regarded as micro firms. Micro and small businesses accounted for 90.9 per cent of all firms that made GCT returns last year, the survey said.

Reason for big sales drop

The big drop in sales for the MSE sector last year was driven predominantly by the worsening of business for small firms, which saw a 46.2 per cent decline in sales to $81.8 billion, underscoring the real likelihood that much of the year's job losses emanated from these companies. This category of firms accounted for 82.5 per cent of the MSE sector's overall business. The sales deterioration was due to the general downturn in the economy and the decline in business confidence, the ESSJ has said.

For 2009, 13,781 micro and small firms filed GCT returns, down from 14,968 in 2008. Of this number, just about 41.6 per cent, or 5,739, were involved in the wholesale and retail trade, roughly the same proportion of MSEs that filed last year, suggesting no real shift away from that business activity that continues to represent the most GCT filings. A total of 6,170 wholesalers and retailers paid up their consumption tax last year.

GCT returns by micro firms within the wholesale and retail trade industry were down 5.3 per cent, with only 3, 911 filing, less than the three-year average of 4,039 filing micro retailers and wholesalers between 2006 and 2008, according to the ESSJ.

Meanwhile, amid declining sales, the micro and small businesses are borrowing more. The Government's data indicate that loans disbursed to these enterprises from the wholesale lending agencies and non-traditional government credit sources totalled $1.652 billion, compared with $753.1 million in 2008, a more than 100 per cent improvement in credit availability.

Loans disbursed were for expansion of existing businesses involved in agriculture, manufacture, services, and the wholesale and retail trade, according to the Planning Institute of Jamaica publication.

A total of 12 loans were disbursed to businesses engaged in financial services, compared with eight during the previous year. These loans were for refinancing.

Approximately $132 million was disbursed to entities in the service industry. The money was used to fund businesses, including bars, clothing stores, and transportation and restaurant services. Persons in agriculture received $12.3 million in loans for projects that involved chicken and pig rearing, fishing, and crop farming. The remaining $7.4 million was disbursed to interests in manufacture, including furniture production, baking, tailoring, dress making, concrete products, and block-making.

Of the total loans granted, the ESSJ noted that female-headed enterprises accessed $98.6 million, or 65.9 per cent of the credit.

Persons between the ages of 18 and 35 received 33.3 per cent of loans disbursed, while applicants over the age of 36 received the remaining 67.0 per cent.

- avia.collinder@gleanerjm.com

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[Lazie]

Study points to low level of small business training

It is being suggested that the Government either significantly increase the funding
it provides to the state-owned micro- and small-business training and promotions agency, Jamaica Business Development Centre (JBDC), or farm out to private-sector entities to provide, at market rates, the services that the agency now offers.

University of the West Indies (UWI) researcher, Dr David Tennant, made the recommendation last week, as he pointed to research which showed a very low coverage of the micro, small and medium (MSMS) sector by the agency.

"In the context where (it is) estimated that the JBDC, in 2008, achieved coverage of less than five per cent of the MSME sector, we must question whether the broader development objective is being met," he said, as he presented research data at a forum at the university's Mona campus on Thursday.

The UWI academic challenged the Government to fund the activities of the JBDC in a meaningful way if the entity was to be regarded as an important part of meeting the nation's developmental objective.

Important growth

But Valerie Veira, chief executive officer at JBDC, is pointing to what she said was important growth in the agency's coverage since it was established in 2001.

"I think that what would be more interesting, rather than an average, is to see the growth of that coverage over the period," she said.

"I don't think that (the mean) translates the reality that the coverage is growing."

Fault has also been found with the research findings by Dr Beverly Morgan of the Competitiveness Company who disagreed with the study that training coverage was an issue affecting the sector.

"You need to establish that the extent of the coverage is in fact an important variable, and based on the work that I have looked at on MSME training, MSME doesn't want general training," she said.

"There are other issues. Coverage is not a priority issue," she said.

In defending the research and pointing to a way forward, Dr Tennant said while he was not advocating any specific action to be taken by the Government, it appeared more prudent for the State to consider an alternative that would not be a strain on the national budget.

"In the current context of fiscal stringency, we have suggested an alternative approach that should be considered by the Government that puts less strain on the budget over the medium to long term," he said. Dr Tennant also pointed to data indicating a 70 per cent lack of awareness of business-development services among operators in the sector.

- dionne.rose@gleanerjm.com
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