Self-employment is not the answer

Jan 30, 2019 Features / Columnists, Peeping Tom

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African-Guyanese are being given a basket to fetch water. The government’s call for African-Guyanese to establish their own business and become economically independent ignores the challenges, which face persons seeking to become their own bosses.
On the campaign trail, the APNU+AFC Coalition had promised to create jobs for young people. But when it got in, it changed its tune and began to say that its job is to facilitate job creation and not find jobs for people.
The government has since been urging the unemployed to become self-employed. But this is like leaving the dying to the encircling carrion crows.
What type of jobs will the young people create? Where are the increases in demand for goods and services, which will generate this demand for new businesses? And how will the young people be able to satisfy any such demand without the know-how and the capital?
The economy is growing, but very slowly. It is not growing at the rate of 8-10%, which the Coalition, when in opposition, said was needed to reduce poverty.
Increased growth is likely to come when oil production increases, but there will be no corresponding increase in direct employment in the oil and gas sector. Government therefore is the one, which has to use the revenues to create jobs for the unemployed.
The government says that it wants to put the oil revenues into infrastructure, which as is well known, is now capital-intensive. Infrastructure projects no longer open the floodgates to massive employment. Each day, you can count on your hands, the number of workers who are being employed on the expansion of the East Coast Public Road.
Self-employment is not the answer either. You cannot ask a young person just out of school to go and establish a business. Doing what? There is no demand to generate large-scale employment through self-employment.
The young people do not have the experience to venture into business. They are being set-up for failure by asking them to try to start their own businesses.
Long ago, when you left school and your parents wanted you to learn a skill; they sent you to work as an apprentice in some workshop or factory. There you learnt under the tutelage of experts. Eventually, you became an expert yourself.
When you left school, your parents first arranged for you to get a skill. They did not ask you to set up your own business, because they knew you would not be able to do this unless you had working experience, which would have allowed you to acquire a skill, and understand how to manage a business.
The experience served you well. Not only did you learn a skill, but you also derived an income from which you saved and, at the same time, learnt how a business is managed by watching your boss.
The government is however telling African-Guyanese to abandon that old-fashioned and proven path to business success in traditional economies. It is urging them to establish their own businesses.
Self-employment is not cheap. You need money for rentals, equipment, to purchase materials, pay salaries and cover electricity and water. Where is a young person just out of school and without any savings going to find the money to start-up a business?
One of the biggest problems facing the self-employed is access to capital. The requirements, including capital, managerial experience and equity, which are demanded by the commercial banking sector and small business institutions, disqualify the majority of the unemployed youth.
The first question the credit institutions ask is about your equity and collateral. Young people with no work experience and no savings or fixed assets are immediately placed at a disadvantage.
The government’s answer to this problem is to direct the unemployed to a $250M small business fund which it has established. This along with all the other public and private small business credit facilities; however, are woefully inadequate.
The unemployment and underemployment rate require far more money than which is available for persons to start their own businesses. The government estimates that there are around 50,000 unemployed and underemployed persons.
Hinterland unemployment is among the highest in the country. The cost of living in the hinterland is far higher than on the coastland. Therefore, the cost of establishing a business in hinterland areas is far higher than in the urban areas and in rural communities.
Yet, the government, trying to outdo the PPPC’s cash-grant programme to hinterland residents, is providing business grants of $50,000 each. How far is $50,000 going to go to start up a business in the interior where prices are much higher than elsewhere?
The way to create wealth is the old-fashioned way. Provide the private sector with support, such as cheap electricity and tax concessions for expansion and reinvestment. Then allow for school-leavers to go and work as apprentices in these private sector businesses so that they can learn a skill, learn how a business is run, and save some money. Only then should they venture out on their own.

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