In many societies, small and medium enterprises (SMEs) are the engine of growth. They drive their countries development as they create employment and contribute to the gross domestic product (GDP). But in Nigeria, SMEs face the challenges of funding, capacity building, competition and regulation. All these, says National Vice-President of the National Association of Small Scale Industries (NASSI) and Managing Director/Chief Executive Officer of Spectra Industries Limited Mr Duro Kuteyi, in this interview with OKWY IROEGBU-CHIKEZIE, inhibit SMEs’ growth.
What are the challenges of small and local manufacturers?
Small and Medium Scale Enterprises (SMEs) are faced with myriad of challenges which are affecting their growth. The most pronounced, however, is access to funds and effective infrastructure to operate, especially electricity. Small scale operators do not have the muscle to compete with the multinationals in terms of marketing because of what it takes in real terms to market a product. In addition, the volume one needs to produce to engage in profitable marketing to break even is also not there for the local manufacturers. SMEs by nature are supposed to be the bedrock of the nation’s economy but the operating environment has been very harsh for them to thrive. Currently, most of them can scarcely fund their operations and you know when you are talking about mass production, you need a lot of capital, especially in the food and drinks sector.
What are the sector’s other problems?
It would have been a different story if the sector was getting sufficient encouragement from the government with an enabling environment to operate. We also need the government to do something, especially in capacity building. As it stands now how many local manufacturers can afford to attract and retain the right kind of staff that will take charge of sensitive and high tech positions in their companies. We also need the capacity to distribute produced goods around the country to reach the consumers but this also is a major challenge as it is almost impossible for the small scale manufacturers to achieve. All these are the challenges that are making the SMEs not to be up and doing. In other countries such as Malaysia, Thailand, China and India SMEs are responsible for more than 70 per cent of export and this is why these countries are growing in leaps and bound.
What can the government do to stimulate SMEs?
There is a lot the government can do to grow the sector. When we look at the alternative way of funding, we came to the conclusion that effective use of SME industrial clusters will go a long way. When you talk of clusters, you talk of providing common facility and the common facility could be the machinery or the source of power with a central generator provided to serve the small and medium size industries in the cluster. Coming to specifics, for instance, on what is needed by the manufacturers, government can provide central equipment and machines that can be shared commonly in the production process. If this kind of environment is provided what the operators will do is to organise themselves in such a way that they will bring in their raw materials for processing with no hassle or encumbrance in paying for equipment purchase or maintenance fee. They will only come in with their raw materials and after processing will take their finished products away.
We strongly canvass the need to have more clusters. From experience we have seen that it can be a success story. The pilot project in which the government experimented with bakeries in Lagos turned out well. Some people will wonder how consumers in Lagos are able to purchase the popular Agege bread not only in Agege but also in far places in the city such as Obalende, Apapa and others, with the same composition and taste. In the aforementioned places, what the bakers do is to bring their flour, use the bakery facility and leave with their finished products to sell to their customers or in the open market. In every local government in Lagos, there are bread bakers in clusters.
So, the same way we can now use clusters to produce for export. We can use the clusters to provide employment for millions of Nigerians and that’s what we are doing in NASSI. This is a classical example of the success of a business cluster which we are advocating should be replicated in other sectors. We are working assiduously to strengthen the clusters in the bakery industry and then invite the Bank of Industry (BOI) to finance them. Thankfully, the BoI has agreed to do this and, in the next few weeks, results will start coming out.
Do we need multiple regulatory agencies, such as the Standards Organisation of Nigeria (SON), National Agency for Food and Drug Administration Control (NAFDAC) and others?
We really do not mind regulatory agencies doing their jobs but when you have different agencies regulating and asking the same questions when they visit our factories with different cost requirements, we do have a problem with that. For instance, we acknowledge that SON and NAFDAC have a job to do, especially in ensuring adherence to stipulated standards and quality for the good of the consuming public and the manufacturers. The quality of the product can only be improved with their presence but the cost implication is what bothers us. For instance, in particular cases, NAFDAC comes and certifies your product with the issuance of a certificate that will last for five years and within those years NAFDAC will only come on routine inspection without any cost implication until it is time to renew your certification. But in the case of SON, it comes yearly to say that we should pay certain amount of money for certification and registration. Our position is that what we pay is too much and there is no need for SMEs to be subjected to such payments. We call for it to be discontinued; it amounts to double taxation of a kind.
What are the effects of faking and sub-standardisation?
We had issues with faking and adulteration many years ago but not any more due to the sophistication in our packaging. Currently, the chances of faking or adulterating our product are nil.
What do you make of the local content policy?
All our input materials are local; our raw materials are available in Nigeria besides, our workers are all locals.
How are you confronting the problem of product storage which is common among small scale industrialists.
We don’t have problem with storage. We have a strategic business plan which is implemented to the later.
How do you see franchising and buy-outs?
I do not know if there have been buy-outs and franchising in the sector, but l want to look at it in terms of the strategic decisions of the owners of the various businesses concerned. Some of them make business decisions to concentrate on their core competence while others buy new businesses because they have the fund and will eventually turn it around because of some strong points such as experience, working capital, quality of staff and add it to their existing businesses. For instance in this area many South African and Asian companies have excelled and are playing high stakes in our local economy. One thing these foreign companies have going for them is that they have the support of their home countries in terms financial muscle and the needed machinery to operate wherever their interest is. Our local companies don’t get such from our government that is why we are calling for more support from our government in terms of low interest loan and competitive infrastructure.
