Why SMEs are the bedrock of the Liberian transformation agenda
Slowly but surely, Liberia is rising. Since 2003, the country has enjoyed peace, two democratic elections, and the economic recovery has been progressing steadily in the past decade. For a country traumatized by years of conflict and instability, these are important achievements. With the Ebola crisis behind us, we are now looking to the future.
In 2013, we launched a five-year development strategy called the Agenda for Transformation (AfT). The aim of AfT is to lay the foundation for Liberia to become a middle income country by 2030, while ensuring the gains from growth are distributed in an equal and inclusive manner. This was backed up in 2014 when we launched Liberia’s national export strategy and a national trade policy, which were both developed in partnership with ITC.
SME development is critical to achieving the goal of the transformation agenda. Nearly 80% of all formal Liberian firms employ fewer than 20 people, with only a further 13% employing between 20 and 100 people. We should also keep in mind that Liberia is comprised of mostly young people: 60% of the population is under the age of 25 and 70% of people in employment are found in the informal sector. As such, it is safe to say that SMEs dominate Liberian employment.
The challenge for Liberia, and in particular for us in government, is how to structure programmes to best support the development of SMEs. Currently, the economy is dominated by extractive industries, which are highly dependent on volatile commodity prices. These are capital-intensive operations that do not create the kinds of jobs that will transform the economy and encourage a creative environment for inclusive growth. For example, Liberia’s tourism sector has a huge potential to deliver jobs and growth for the young, and SMEs in other sectors would be well positioned to exploit downstream linkages and supply services to the tourism sector.
To facilitate this transformation, we must address the challenges that exist within firms, the business environment and the national environment.
In Liberia, the average SME has three major challenges: access to training, access to markets, and access to finance. And through our SME policy we are trying to address those issues – one by one – with a view to strengthen the capacity of service providers to develop training programmes that will meet the specific needs of SMEs.
For example, how do you train a woman who has been managing her operations from her purse to manage a business from her bank account, and enable her to understand clearly what belongs to her and what belongs to the business? To meet such challenges we are working with a range of providers to meet different demands; from basic marketing skills, to financial management, and book-keeping practices.
To further back up the AfT, the annual National SME Conference and Trade Fair has been set up to promote innovation among SMEs. Through the conference, we identify SME champions and let those champions tell their stories to inspire others. And the SMEs with the most innovative solutions are presented with awards.
We are aware that linkages and the business environment are critical to our growth agenda. We are in the process of creating linkages for SMEs in the agro-processing industry through our Food and Agriculture Policy and Strategy programme. To back up this effort, we are also facilitating the creation of a packaging company, as we’ve identified packaging as the missing link to increase the export of Liberian products.
At the national level, we are actively seeking to improve the business climate by making it more predictable and transparent. Recently, President Ellen Sirleaf Johnson signed into law the Small Business Empowerment Act (SBEA), which obliges the government to award 25% of public procurement to SMEs. The government procurement system is specifically designed to encourage SMEs to register, to become regular tax payers, and therefore come into the formal sector. The SBEA is also designed to boost competition, innovation, and access to finance so that SMEs become an integral part of the transformation that we aspire to see in our country.
The AfT is ambitious, but ambition on its own is not enough. Serious long-term commitment and leadership are needed for the reform process to succeed. In Liberia, such leadership is provided by our President. Since she was first elected, she has ensured that the government is engaged with the private sector, including meeting in person private sector representatives about the challenges they face. This focus on creating a public-private dialogue has been crucial for the government in identifying how it can help mitigate challenges faced by the private sector, and keep the AfT on track.
Liberia is also in the process of acceding to the WTO. The domestic reform process is forcing us to upgrade our laws and has led to the development of new laws in areas where we previously had no legislation. This process is literally forcing us to rethink what we mean when we say we want Liberia to be an ‘investment-friendly destination’. In trying to answer these questions, we are putting in place programmes to ensure that the country becomes an attractive and competitive destination – for Liberians and foreign investors.
We strongly believe in our potential and the potential of our youth to be major drivers of our transformation story, as they are arriving every day on the job market with the audacity of hope to live fulfilled lives in self dignity.
This article is a part of ITC's SME Competitiveness Outlook 2015.