By K. C. Soares, Contributor
SINCE THE presentation of the budget, many small businessmen and businesswomen have been complaining about the effects of the new taxes imposed. They fear that they may have to close their businesses.
The rapid decline of the Jamaican dollar has compounded matters, leaving many with the view that this is the worst time to start a new business.
I think otherwise as it is my firm opinion that this is the best time to start a new business. Many persons will be surprised at this statement but please allow me to explain.
In the present economic climate, the average person thinks that it is unwise to start a new business or even expand an existing one. In light of this point of view there is an expected reduction in the demand for funds from the financial institutions.
EASIER TO GET A LOAN
The existence of financial institutions weighs heavily on the fact that they have to make loans in order to survive. In these circumstances, it is much easier to get a loan. If one is dealing with a commercial bank, then the advantages are much greater as one may be able to negotiate a much lower interest rate than the prevailing rates. A reduction in interest rates is never usually negotiable with those institutions dealing exclusively with the small business sector. These institutions include the Micro Investment Agency (MIDA), the Self Start Fund (SSF), and the National Development Foundation of Jamaica (NDFJ).
When there is a great demand for loans, the commercial banks tend to shy away from accessing development funds from the Development Bank of Jamaica. With a reduction in demand for funds they are more likely to accede to one's request for such funds as this is seen as one way to get much needed loans on the books. This state of affairs equate somewhat to the situation when there were 11 commercial banks and 32 merchant banks operating here in Jamaica. During those times, loans were easy to get as some banks literally begged people to take loans.
The declining dollar also offers great opportunity to enter the business world. Many businessmen and businesswomen are of the opinion that as the dollar devalues it becomes harder to succeed in business. I do not share that opinion. As a matter of fact, I think it is a great time to go into business. The key here is the type of business chosen. Isn't it better to have $68 for every dollar earned rather than $1 for every $68 earned? Of course it is, and this is why the business chosen will have to be one that earns foreign currency.
GLOBAL MARKET
To be a net earner of foreign exchange it is best to use local materials in producing a product that is in demand and one which can compete in global market places. There are only two sectors that one may at this time target for such production. These are the agriculture sector and the tourism sector.
Unfortunately, however, there is not much activity in terms of investments in these two sectors. Tourism is affected by both the economic recession in the United States of America and the concerns of international travel with regard to terrorism and disease. Agriculture then is the area for investments at this time. We should, at this time, be concentrating on crops that we can produce economically - especially if they are indigenous. In this regard we should be placing more emphasis on crops that produce essential oils (pimento, ginger, turmeric, rosemary, lemon grass, cinnamon etc.).
At the moment, we are moving in the wrong direction as over the past five years there has been a significant increase in the funding of small businesses in the services sector. This sector includes the buying and selling of items (higglering) purchased mainly from abroad with the United States of America being the main area of trading. My suspicions are that the higgler trade makes up, for us, the majority of the services sector. This type of business is not the type that will do well when the dollar declines. We need to rethink our position and channel our energies to export-oriented businesses.
K. C. Soares is a former banker and is now a business consultant with Soledad Financial Services Limited. E-mail: soledad@netcomm-jm.com.
