Can SMEs be up for the challenges ahead?

Oman is a lovely little oasis of ‘sense and sensibility’ within the region, so maybe we should evaluate the current emphasis on small and medium enterprises (SMEs) throughout the Sultanate. First, let me be clear that I am uncertain about the role of SMEs in an economy that is still developing and has a significant amount of its gross domestic product spent on public sector salaries, infrastructure and social responsibility. I see SMEs as a means of further developing employment and innovation within a buoyant economy, where there is enough balance of payments surplus to encourage ‘big ticket’ overseas investment. There are three great things about SMEs in growing or buoyant economies. First, in developed economies they provide in-country value to overseas-based entities and add value to multinationals. Even more impressive secondly, traditionally, is that SMEs drive upskilling of the workforce, with the more intimate workplace driving enthusiasm and innovation through its more ‘hands-on’ approach. Thirdly, they are a proven boost to national employment figures, as an unrivalled employment driver. Not confirmed yet, though with very strong anecdotal evidence, is the impression that the gender gap is virtually becoming extinct in SMEs as women take a leading role in determining their own destinies. Birch Water entrepreneur Anna Skopets tweeted recently that “SMEs are closing the gender pay gap at twice the rate of all businesses nationally”. So that’s a significant positive move. The World Bank has undertaken significant research regarding SMEs to gauge their effectiveness in stimulating economies. However currently, while seeking to be positive, they have found that 85 per cent of SMEs in developing countries never take the ultimate step of ‘formalising’ their regimes, with start-up costs not a significant barrier to formalisation, but rather taxation, acting as an ongoing deterrent. The pending imposition of vat is certain to create hesitancy, as even in proven business environments, there are always those who would seek to evade, or profit from tax breaks and processes, out of proportion to their right. Discipline in managing taxation obligations is an absolute necessity. Access to finance is a similarly restrictive element in setting up an SME, and who can forget what the great comedian Bob Hope said about banks. “A bank is a place that will lend you money, as soon as you can prove you don’t need it.” Other weaknesses in SMEs are the inability of many entrepreneurs to ever see themselves as workers, yet the reality is that in starting up, the boss must be as much of a worker, rolling their sleeves up, getting their hands dirty, as the next man (person). Indra Nooyi is worth listening to as she says, “Just because you are a CEO, don’t think you have landed. You must continuously increase your learning, the way you think, and the way you approach your organisation.” Remember too, that in a capitalist society, man profits from his fellow, and at his fellow man’s expense. So, profit is not only hard to find, and hard to get, but in business you must seduce your customers with some finesse, and with the knowledge that repeat business is easier to get than cold calling for new business, so “leave something for the other guy.” Being tough is not always the answer. Initially, the skills, knowledge and strategic knowledge and understanding will be limited, but as everyone embraces the philosophies and opportunities SMEs represent, there is much greater potential for meaningful enhancement, and income in these areas. As I said at the outset, I’m not certain the Omani economy is strong enough to sustain SMEs, but if they are resilient enough, have vision rather than dreams, and are prepared to work at it, they may succeed despite my pessimism. Ray Petersen petersen_ray@hotmail.com