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“I would never have had a business in this country were it not for Lawrence Duprey and his […] CLICO Investment Bank.
“As I sought investment funding to finance radio stations i95.5 FM and later, Red 96.7 FM, and still later, W107.1 FM the Word, despite very sound business plans, all the banks refused to lend us a single dollar to begin a company, which once it opened its doors, paid its way and paid its shareholders dividends one year later.”
Louis Lee Sing, Express 30 August 2024.
This experience of Mr Lee Sing is worthy of our further consideration. It reflects a discussion that we do not have in our community. We do not comprehensively discuss what it takes to grow entrepreneurial enterprises.
What should be our national policies regarding entrepreneurial activity, and what is the government’s role?
We make assumptions about what constitutes entrepreneurship. We do not link any commitment in fund allocation so that the population can understand what is being done on their behalf. Yet, this conversation is vital to the growth of our economy.
What is entrepreneurship? Entrepreneurship is the creation of new enterprises; it incorporates the phrases business creation, new businesses, and nascent entrepreneurs. This term does not include the sole trader.
When public funds are engaged, there ought to be a clear definition of the policy’s purpose. Are we attempting to trigger new firms or to improve the performance of existing firms? That is a political decision.
New firms can create jobs and stimulate productivity. However, the global evidence is that state subsidies for new businesses only deliver modest gains.
The experience of the National Entrepreneurship Development Company Limited (NEDCO) demonstrates the rocky road of attempting to initiate entrepreneurial energy.
In 2017, the Company’s Chairman told Parliament that it had not been well managed since it was established in 2002, evidenced by a 77 per cent non-performing loan ratio averaging $94 million and an accumulated deficit of almost $150 million.
We also need to address the focus of this effort. Do we wish to tackle entrepreneurship at a national big-picture decision level or the individual firm level?
Lee Sing’s ventures sought help at the individual firm level, albeit at a more substantial capital level than is available at NEDCO.
At a big-picture level, it could have been asked: “Do we need to add radio stations to the existing pool of radio stations?”
The issue of a competition policy will need to be resolved. Similarly, the applicable tax regime needs to be determined.
Inherent in these decisions is the difficulty in predicting which sectors or firms will survive. We need to recognise that closure rates of new firms are exceptionally high, so providing support to such enterprises may end with only a slight net improvement in economic growth.
An associated risk is that the entrepreneur, in the event of failure, may end up poorer than he started. On balance, the evidence is that a government focusing on the big-picture level has a better track record of delivering policy objectives cost-effectively (Storey 1994; Anyadike-Danes et al. 2014).
Lee Sing fingered what may be the most significant of the macro-level issues: financing.
“I am given […] to compare CLICO with the other banks, be it RBC Royal Bank, Scotiabank, Citibank, First Citizens, and Republic Bank,” he said, before landing on what may or may not be the cause.
“This reflection reminds me of the issues of race and class in the context of banking and the availability of business opportunities in Trinidad and Tobago.”
Two of the top banks, Republic and First Citizens, are locally owned and managed. Therefore, it is incumbent on us to consider this matter more deeply.
Here, we also meet a challenge: the government continuously seeks local financing. In this demand, the banks have low-risk, high-return lending opportunities.
The banks will provide their funds to the government before they lend to aspiring entrepreneurs. Yet, it should be a high priority for our government to ensure that a competitive market exists to finance new and small businesses. The government must decide the appropriate balance.
(Copyright Office of the Parliament 2022)
However, entrepreneurs should be able to tap different sources to fund their firms. These persons do not need only loans but equity capital at rates that reflect the risk to the finance houses. There will also be the need to provide trade credit and invoice discounting, among other services.
Our finance institutions need to create venture capital windows to nurture budding entrepreneurs. Sound data on the business environment is required. Technical assistance is also a critical necessity.
Financing assistance can be superior to the much-touted “Ease of doing business” indicator in growing the economy. Of course, we must include national security and criminality at the macro level.
Photo: Getty Images
The entrepreneur has to follow essential steps to be successful. While entrepreneurs have a desire to achieve, we must be careful to have them pay for their mistakes.
We have countless examples of untouchable persons because they belong to a particular ethnic group or club. Mediocrity is allowed because of who the incumbent is.
Race, family and political connection still play a significant role. This approach does not build a national high-achiever capacity. When we reward high achievers, we will encourage more.
Calling out business leaders who unscrupulously feed on the national treasury or rape consumers is wise. However, we should acknowledge those who do well. High-performing business elites are sensitive to the public’s needs.
We should not excuse business and political leaders who do not deliver on their promises or treat contracts as mere guidelines. Clarry Benn’s complaint is applicable: “Some said they never knew they had to repay the loans.”
The maximum loan was $500,000, and the minimum was $5,000. The sentiment was that there was no need to repay the loans.
But it is not only NEDCO’s clients. We were shocked at the recent revelations about unpaid taxes and rent. Why do some businessmen not pay taxes and other lowly taxpayers do so monthly?
Selwyn Cudjoe called the State’s lax collection “rather lenient”.
Let us be slow to put our entrepreneurs on statues. They can deflect our attention from their wrongdoing by assuming personas of upstanding citizens. However, in so doing, they rob us of developing true high achievers, which we desperately need.
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