PRIVATE SECTOR AND ECONOMIC GROWTH
BASIL SPRINGER COLUMN TO APPEAR IN THE BARBADOS ADVOCATE’S BUSINESS MONDAY ON 13 MARCH 2006
PRIVATE SECTOR AND ECONOMIC GROWTH
A generous man will himself be blessed, for he shares his food with the poor – Proverbs 22:9
The economic system that is practised in many small emerging nations is one where it is easy for the rich to get richer and the poor to get poorer. Money maketh money. This exacerbates the wealth divide – the gap between the rich and the poor.
However, Barbados is among the countries that differ from many other small emerging nations in that the wealth divide is graduated. At any point on the economic ladder one has the opportunity to reach to a higher rung of the ladder and enhance one’s economic prosperity.
The challenge is to create the right conditions for individuals to take advantage of these opportunities. The primary constraint to development is the timely access to money. Some may argue that money is not all and I would agree with them. One also needs the vision and its conversion to action by passionate entrepreneurs. Of course, there is the requirement for management expertise (planning, marketing, technical operations, human resource development, administration & accounting, information & communications technology – ICT, finance, legal & corporate services).
I contend, based on the experience of CBET over the last four and a half years, that there is no shortage of passionate entrepreneurs with good ideas who have a vision for the future. Also, only last week I had a call from an individual who is interested in applying his entrepreneurial talent to good ideas that we might have which are in search of a champion to take them forward. There are many such ideas.
Management expertise is available locally, regionally and internationally (the Diaspora or non-nationals), either by a virtual or actual contractual arrangement. The virtual arrangement is made possible by the increasing access to the power of ICT. The constraint is the money to procure such management expertise so as I said earlier it all boils down to the challenge of accessing money. Where do we find it?
The successful private sector accumulates profits that are then converted into investment securities, real estate, debt servicing, some business expansion, and of course dividends for the financial shareholders. These cumulative private sector assets are considerable when compared with the needs of emerging entrepreneurs.
The government collects taxes from the people of a country to provide a wide range of services and obtains loans to assist with development. How then can we mobilize some of the money from the public and private sectors to stimulate growth among entrepreneurs?
We must remember that it is accelerated growth that is required if we are going to reduce the wealth divide between emerging nations and OECD countries or, as is often mentioned, if we are to become a first world country. This means that the net growth rates from our foreign exchange earning sectors, in particular, have to occasionally touch double digit percentages as was the case in emerging nations around the world who have exhibited significant economic growth towards first world status.
CBET is in the process of approaching the private sector to see how some of their wealth can be used to stimulate growth. We begin with the question ‘would you like to see increased national economic growth?’ The answer is an overwhelming, ‘yes’. The next question is ‘are you willing to contribute to the stimulation of economic growth’? It is pointed out that this is in the interest of the private sector as well as the interest of the nation.
This dialogue usually reveals that financial institutions experience weak deal flow, i.e. the rate at which good projects are brought to them for financing. CBET is then introduced as an organisation that is ‘A Caribbean Catalyst Turning Concepts into Commercial Realities’. CBET recognizes that the triad of entrepreneur, management and money is necessary to stimulate economic growth and that a shepherding process is required to make the whole thing work.
CBET then gives the private sector audience three options as to how they can contribute to enterprise development using the money resources that are accessible to them. The first instrument is designed to appeal to their social responsibility. It is a grant contribution to the creation of deal flow through a methodology for creating new ideas or one for re-engineering existing but perhaps dormant business concepts. The second instrument is a relatively modest investment instrument with a healthy short-term return (because it is unsecured) to stimulate the process of business plan development. The third instrument is an equity investment instrument. The collateral for the second and third instruments is ‘management’ provided by CBET through its virtual cadre of ‘shepherds’ (consultants).
Our approach to public sector funding is to access grants and technical assistance from local, regional and international institutions that have a mandate to contribute to enterprise development.
It is early days yet but CBET’s experience in Barbados and beyond is that both the private and the public sectors are responding to the innovative approaches of the CBET shepherding model. As this activity expands, the future becomes brighter as new enterprise development systematically contributes to an emerging private sector arm. It is being recognized that generosity is rewarded by a continual blessing.
(Dr. Basil Springer GCM is Change-Engine Consultant, Caribbean Business Enterprise Trust Inc. – www.cbet-inc.org)