IN this final feature on small and micro enterprises, we will look at some of the incentives and assistance available to our SMEs under various programs specifically designed for them.
As we have observed earlier, in light of their significant contribution to the economic development, governments and development partners are now placing greater emphasis towards providing more impetus for the growth of SMEs.
I find it pertinent to highlight that in an unprecedented move stemming from its strong desire to create new incentives for SMEs, the UK Government has recently introduced a policy whereby 25 per cent of Government’s spending through contract opportunities either directly or in supply chains is reserved for SMEs.
At the home front our Government has also made significant strides in terms of implementing a number of measures and initiatives aimed at boosting the development of our SMEs, some of the most notable ones of which are encapsulated below.
National Centre for Small and Micro Enterprises Development (NCSMED)
NCSMED is a statutory organisation which was established in 2002 to support the creation and development of SMEs in Fiji.
Under its business support programs, it offers the following types of assistance to small businesses:
1) Entrepreneurship training is targeted at new business start-ups.
The training is conducted in the vernacular throughout the country including remote rural and maritime areas.
This is complemented by short workshops on business improvement techniques.
2) A business incubation center (BIC) has been set up in Ra and Suva which have been designed specifically to help start-up firms. The facility provides seed capital, office space, phone and internet to businesses operating from the BIC. It also provides training, and mentoring to these businesses.
3) Northern development program is a grant equity assistance program where grants up to 60 per cent of the total project cost are granted to selected ventures on the basis of their viability. The balance has to be sourced from a lending institution by way of a loan.
4) Linking SMEs to other potential opportunities that offshoot from bigger businesses like tourism, mining and other industries with a view to enhancing their diversification and growth. A number of niches have been identified where auxiliary services can be provided by SMEs in the whole supply chain.
Fiji Development Bank (FDB)
The bank provides loans up to a maximum of $500,000 to SMEs engaged in a range of sectors including mining, agricultural products, manufacturing, transport, tourism, wholesale, retail businesses, restaurants and repair shops among others.
Like other lending institution its interest rates commensurate with the type of business activity.
The micro finance grant is also disbursed through FDB.
Fiji Revenue and Customs Authority (FRCA)
The following exemptions and assistance are available to SMEs under its incentives package.
1) Exemption from tax for sole trader whose net annual income does not exceed $16,000.
2) Relief from income tax for SMEs engaged in agricultural, fishing and tourism industries if their annual income is below $500,000.
3) SMEs with an annual gross income of $100,000 or less are not required to be registered for VAT.
4) Forty per cent export income deduction are allowed on net profit derived from export of goods and services.
Way forward
Looking ahead it is my solemn belief that the key challenges that confront us is twofold. Firstly, how do we continue to assist and encourage the existing SMEs to survive by ensuring that they are not unduly and disproportionally affected by market failures and fixed costs.
And secondly but more importantly how can we support these high growth SMEs and ensure that these firms are able to successfully transition from one state of development to another e.g. from micro to small, small to medium, medium to large, or national to international.
While the Government must be commended for its efforts in facilitating an enabling environment for SMEs, we cannot afford to become complacent.
We must vigorously pursue innovative ways for our SMEs to remain competitive.
The postulation that one size does not fit all calls for the review of the relevant policy framework with a view to providing for different approaches and special provisions (adaptive) to address the peculiar needs of each of the sectors.
Keeping that in mind I would like to propose the following recommendations for consideration by the policy makers.
Recommendations
i. Undertake a survey to compile data on SME population in Fiji;
ii. Demarcation of the benchmarks for each segment (that is, micro, small and medium);
iii. Introduction of a short course on basic management skills and techniques as a component of the skills development programs offered by our newly established technical colleges;
iv. Development and publication of a guide on good business practice in both the vernaculars;
v. Inception of a call centre for women entrepreneurs to guide them on business planning, financial management, working capital management, input or raw material purchase, legal counselling, and market linkages will help them get help and information on critical issues that they face at different stages of the business cycle;
vi. It cannot be denied that stringent collateral and documentation requirements act as barriers. A simplified collateral regime will greatly encourage small entrepreneurs to secure finance to start up their venture.
To this end a Government-backed credit guarantee scheme will enable cash-strapped start-ups to borrow from FDB in the absence of collateral.
Similar facility should be made available for the enhancement of the successful businesses;
vii. Increase the tax-free threshold from $16,000 to $25,000 for sole trader run SMEs;
viii. Some relief should be granted on the fees and charges applicable to SMEs to lessen their burden; and
ix. Formulation of appropriate policies in the five-year and 20-year development plans for the protection and promotion of SMEs.
* Selwa Nandan is a former adviser for trade facilitation with Oceania Customs Organisation and a consultant on Customs and trade matters. For feedback, email: selwa.nandan@gmail.com.
