Small Business: The way to the future [Archives:2008/1165/Business & Economy]

June 19 2008

By: YemenTimes Staff
Small businesses play an integral part in the development of any capitalist economy, especially in the 21st century where economic growth is no longer driven by traditional manufacturing industries, but is driven by the innovative and creative enterprises that are able to adjust to the changing market dynamics and this globalizing world.

And Yemen is no exception, in fact, Yemen has the advantage of being somewhat a medieval economy with large number of subsectors still unexplored. The Yemeni economy is still dependent on agriculture as the prime source of employment and livelihood for 50 percent of the labor force and 70 percent of the population respectively, while another 22 percent is dependent on the government, which is, in turn, dependent on oil returns, leaving 8 percent of the population making a living from non-agricultural privet sector opportunities.

In Yemen, there is a total of 33,000 tiny businesses, employing an average of 2.2 persons each. 75 % of these tiny businesses are concentrated in eight subsectors of the economy, and most of these are service-oriented, with a capital ranging between US$ 500 _ 2000. Evidently, from looking at Yemen_s socio-economic realities, each one of the people employed within such a tiny business is supporting a family, which indicates that growth within this sector is bound to provide more employment opportunities and income for many families.

Helping Small Businesses Grow

In 1998, the law of supporting small business enterprises was enacted and put into effect. The law aimed at removing all obstacles hindering the growth of small businesses, including limiting any taxation or fees paid by these businesses, while creating government agencies such as the Social Fund for Development, aiming at providing access to credit and technical assistance. The Social Fund for Development mainly aims at helping the growth of small business and the creation of new ones.

The Government of Yemen is very well aware of the importance of small business for the economic growth of the country, with emphasis on this sector mentioned in every 5-year poverty reduction plan and economic development strategy. However, many small business owners complain that the government is the prime reason they are unable to expand and operate more profitably.

Voice of the Small Business

Mohammed Al-Shamiri, a barber, said that in spite of population growth and more life coming to the neighborhood he works in, he sees that people are having their hair cut less often, costs of rent, power, and other expenses are increasing, while, for the first time in six years, he is forced to pay taxes to the government of 25,000 Riyals per month as sales tax, in addition to another 10,000 for the municipality. _Its one month_s income_ he says, _now the government is a partner with me in my very small barber shop, I work hard and pay the bills and they come to take my money, this is a rip-off!

Abdulhamid Al-Marari, a carpenter, says that he provides employment opportunities for three persons in his shop, and he has to pay their salaries every month even if business is less, he says he can_t fire them because he knows that each one of them supports a family, and it is not right to fire any of them because he needs them if business picks up. He said: _Ramadhan is only two months away and I am very concerned because things slow down and I don_t have money to pay their salaries and their Ramadhan bounce, I am seriously considering shutting down shop because I will go bankrupt in three months time like this_ he added: _people are not buying wood furniture, they buy plastic and metal, even doors!_

Musen Al-Sabri, who owns a small cafeteria, states that there is a growing number of customers and that his catering business has been growing on as there are more customers every day, in spite of the increasing competition, he stated that although the majority of his customers barely have enough money to survive, the increasing number of customers make it feasible for his business to continue growing.

Basim Amen, owner of a photocopy station, said that surviving as a small business is very hard, mainly because it takes so much effort and pain on a good day to make a decent profit, while there are far many bad days per every good day, he said: _every day I open this shop with a prayer for a good day, some days it works, some days it doesn't, some days the photocopy machine breaks down so i'm out of business for a few days… all I can say is that this is all about fate… no matter what you do whatever is destined to be yours will be yours at the end of the day…_

Developing the Small Business

Concerned parties believe that there is very little being done in order to take by the hand of small business and help it prosper, activities such as facilitating small credit, management training, and technical assistance schemes are not available for small business owners, in turn business owners have to suffer the ups and downs of the market and the business cycle due to their inability to explore and harvest business opportunities. Parliament member Ahmed Al-Khawlani believes that the source of the growth problems small businesses face is due to the lack of credit, adding that the interest rate of 18 percent is simply too much and cannot be born by small businesses, which, in most cases, do not have any plan of being able to pay back that interest and the principle borrowed.

Similarly, NGO activist Abdulwahab Salim indicated that there is a need for an overall sectorial strategy that works towards providing technical assistance to small businesses and youth empowerment, towards creating sustainable employment opportunities across the board.

Several business consultants stated that the main problem in the limited growth of small businesses in Yemen is due to the mentality of the owners and managers of these businesses, they expect that business growth is the normal result of engaging in any business activity, not understanding the odds of profit and loss, and how to maximize the profits through making the right investment, marketing, and management decisions. Furthermore, the behavior of businesses is a copy cat approach where they fear the risk of engaging in a new or unique business activity, and end up providing a service or a product which already has a saturated market. The small business sector needs the guidance required to introduce new subsectors of the economy which are promising, have good growth potential, and thereafter train the new business owners on the right management strategies to result in stainability.