Small business restructure to 'cease political interference'

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The proposed Small and Medium-Sized Business Development Agency (SMEDA), which will have a $25 million initial capitalisation, is structured as a “one stop-shop” and designed “to minimise political interference”.

Merrit Storr, attorney and partner at the Chancellors Chambers law firm, and who played a key role in developing SMEDA’s framework and supporting legislation, told Tribune Business that the proposed Agency would serve as the “umbrella” body co-ordinating all the Government’s small business support services.

Confirming Tribune Business’s revelations about adjusted roles for numerous government agencies, such as the Bahamas Development Bank (BDB) and Bahamas Agricultural and Industrial Corporation (BAIC), Mr Storr said the proposed structure would ultimately make the Government-sponsored venture capital fund “accountable” to SMEDA.

The responsibility for grant programmes, such as the Jump Start and Self-Starters initiatives, will also be transferred from the Ministry of Finance to SMEDA, Mr Storr confirmed.

Disclosing that the Government was looking to push ahead swiftly with SMEDA’s creation, and the passage of enabling legislation, the attorney told Tribune Business that consultation on the proposed restructuring was set to close in April.

He added that by placing all business support services ‘under one roof’, SMEDA was designed to generate efficiencies and reduce costs, plus eliminate bureaucracy and red tape for Bahamian entrepreneurs and investors.

“The intention is to better co-ordinate the Government’s support services for small and medium-sized businesses, and organise as much of the resources as the Government has available to it under one umbrella,” Mr Storr told Tribune Business.

The consultation document he has drafted notes that there are no fewer than eight government ministries and agencies involved in providing small business support services, with their efforts uncoordinated and often overlapping.

Apart from BAIC, BDB and the venture capital fund, the paper noted that the Ministry of Youth, Sports and Culture was responsible for various grants, while the Prime Minister’s Office took care of the Hotels Encouragement Act.

The Ministry of Finance was responsible for grants, duty exemptions and the administration of the Tariff and Excise Acts; the Ministry of Financial Services for the Industries Encouragement Act; and the Ministry of Agriculture and Marine Resources for farming and fishing support.

The consultation document said: “Good intentions have led to a number of overlapping government agencies and programmes, which has resulted in an uncoordinated approach with respect to providing the needed support for the growth and development of SMEs.

“Further, in some cases, resources are either not allocated efficiently or some of the said agencies are under capitalised (eg, the Bahamas Development Bank).”

Mr Storr confirmed that the venture capital fund would continue to operate as it did now, with its own Board.

While it was currently financed through the Ministry of Finance, he explained that once its current funding tranche was in place, all future monies would come through SMEDA.

BAIC’s business advisory services, meanwhile, will be absorbed into SMEDA, leaving the former responsible for managing its industrial parks and providing specific advice on agriculture projects.

And Mr Storr clarified that BDB’s position would be to “try to work down through their existing book of business long-term”.

While acknowledging that BDB could be “phased out” in the long-term, Mr Storr said its bad debts made this impossible short-term, with the immediate focus being to “contain losses”.

Agreeing the restructuring was designed to move the focus from financing entrepreneurs/small businesses to providing them with the necessary technical support, plus guarantees in some cases, Mr Storr added: “The thinking is that direct lending to entrepreneurs may not necessarily be the best way to go, although it will not be eliminated as a possibility.

“In terms of what the new organisation can do, the Government is of the view that it may be able to lend more support to entrepreneurs if it can encourage and incentivise the private sector to lend.”

Mr Storr told Tribune Business that the legislation tried to “minimise the involvement” of the responsible Minister as much as possible, setting out criteria for SMEDA’s Board to be populated by professionals experienced in the small business arena.

“It tries to give this entity as much independence as possible,” he added. “The criteria is to minimise political interference.

While the proposed legislation allows the Minister to appoint four SMEDA Board members, who will be outnumbered by the five he does not appoint, on the nine-member body, Mr Storr said this was still being debated.

He acknowledged that it was “a cumbersome process” for lenders to currently call on small business guarantees, which were currently handled through the Ministry of Finance.

SMEDA will now take on this role, if the Board so decides, ensuring lenders will no longer have to call on the Consolidated Fund.

Explaining that this will not be SMEDA’s primary role, Mr Storr said its birth would “hopefully create some efficiencies. If everything is funnelled through one entity, we will be able to eliminate some duplication. That will be helpful as well.

“It’s supposed to be a one-stop shop, and will eliminate some red tape, some frustration, that domestic investors may have, as they may have to go to multiple government agencies to get done what it is they want to get done.”

The Government’s consultation document describes SMEDA as “an attempt to think outside the box and to embrace the possibility of radical change”.

SMEDA’s initial $25 million capitalisation will cover its first five years of existence. It will be exempt from real property taxes, and other tax and licensing requirements, and divided into three operating divisions: Financial Services; SME Resource Centre; and Specials Programmes. It has to produce a strategic plan every four years.

The consultation document adds: “SMEDA was designed to minimise any need for government subvention above what has been agreed by the Minister in the beginning of its funding cycle.

“In this regard, it would have a limited ability to leverage its balance sheet to offer loans and guarantees for certain private sector loans that fulfill specific criteria.”

Comments

242 says...

this is good news.

Posted 3 March 2013, 7:01 p.m. Suggest removal

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