Falling on deaf ears, pt. 3
“Someone is sitting in the shade today because someone planted a tree a long time ago.” — Warren Buffett
In this series, we have addressed topics that are critical to our national development that we have failed to seriously address to foster long-term sustainability and mitigate unforeseen external shocks to our economic and social existence. All of the topics in this four-part series highlight important national issues that have fallen on deaf ears.
In part one, we addressed lessons that we should have learned from our over-reliance upon and the homogeneous nature of our primary industry: tourism.
Last week, in part two, we detailed how the threat to our environment is no longer a theoretical hypothesis, but a very sober reality and pervasive threat which, if we continue to ignore and fail to seriously address, would not end well for us and, more importantly, our children.
This week, we will consider this — what price would we pay if we continue to ignore the warnings regarding economic empowerment to which we have paid incessant lip service, but which have also fallen on deaf ears?
A culture of entrepreneurship
For many decades, primarily prompted by the political directorate, we have collectively created a false sense of security by placing excessive emphasis on job creation.
Like well-choreographed minuets, ministerial midgets parade at hastily orchestrated news conferences, extolling the virtues of the impressive number of jobs that will be created by foreign investors.
Our leaders justify the obscene concessions, usually tax holidays, which will be extended to our “foreign saviors” for their fantastic and frequently fanciful proposals by enumerating the jobs they will create. Remember Oban?
While job creation and employment are essential elements of upward mobility and wealth enhancement, they are just one single track on which we should focus our national development efforts. Jobs are relevant, but equally important is business ownership, another term for economic empowerment.
If Bahamians are going to seriously participate in a more significant share of the national economic pie, a more determined, deliberate focus must be placed on encouraging a culture of entrepreneurship from the early days of our education system to foster a deep appreciation for the role that this activity can play as our young people plan for the future.
It is essential to shift the paradigm by placing a higher priority on business ownership or entrepreneurship than we have historically done.
Revisiting and expanding the Bahamianization policy
In the early days of the Pindling administration, tremendous emphasis was placed on the importance of Bahamianization — a policy that accentuated the need for businesses to hire Bahamians in jobs where they were qualified to perform instead of rehiring foreigners who previously held those positions.
The Bahamianization policy required businesses to provide the Department of Immigration with manpower projections or detailed plans of action to ensure that those businesses train Bahamians to assume positions that were then held by foreigners within reasonably specified periods.
The immigration department closely monitored the progress of those businesses and how well their projections were realized. Companies understood that if their manpower projections were not achieved within reasonable time frames, work permits would not be renewed for their foreign employees.
The policy worked and successfully contributed to the advancement of Bahamians in the accounting, architectural, engineering, legal, banking, education, medical and other professions.
Today, the Pindling-instituted Bahamianization policy has become obscured by “excuses” of globalization, resulting in Bahamians being frequently displaced by foreigners, even where the former is qualified to hold such positions.
The time has come for the government to revisit and even expand the Bahamianization policy relative to ownership of our economy. While we fully appreciate the importance of foreign direct investment as a tool for economic development, there is an equally pressing and urgent imperative to apply that policy to entrepreneurial activity.
As is done in other developed countries, the government should become more proactive in encouraging foreign investors to include greater participation of Bahamians in their investments in The Bahamas. This can be accomplished in several ways:
Firstly, prospective foreign investors should be encouraged to offer shares in their enterprises to the public by way of public share offerings in our local capital markets.
Secondly, if prospective foreign investors decline the public share offering option, the government should encourage potential foreign investors to set aside a percentage of their intended investment for qualified Bahamian partners who have the expertise, interest and financial capacity to participate.
Prospective foreign investors should be advised that their investment proposals would be more favorably considered if they allow qualified Bahamians to participate in their domestic investment.
Thirdly, in the case of businesses that are presently here, the government can encourage such companies to offer Bahamians a way to participate in a private offering of their shares.
Fourthly, the government should resist the temptation of granting obscene tax concessions and tax holidays for such investments.
Investors who believe that The Bahamas is a favorable environment in which to invest will do so anyway, without receiving excessive tax concessions and holidays.
They already realize that they will not be overburdened with income taxes as they are in their home country, and will likely eventually expatriate their tax-free earnings.
We should never lose sight of the fact that every tax dollar that we exempt for foreign investors is a dollar of taxes that will ultimately be exacted from our citizens to compensate for the lost revenue.
Fifthly, wherever and whenever the government grants excessive concessions and especially our Crown land to foreign investors, those businesses should be required to place a reasonable percentage of their investment into a Sovereign Wealth Fund for the benefit of our citizens – the actual former owners of that land.
As those businesses mature and establish themselves, their shares in the Sovereign Wealth Fund could form the basis of an initial public offering to Bahamians, thereby enabling them to invest in those companies directly.
Foreign investors who recognize the wisdom of this progressive approach to an inward investment policy would embrace these policies if they are reasonably and adequately presented to them.
In the case of Bahamian entrepreneurs, the importance of business planning cannot be overstated.
Too many would-be entrepreneurs start a business without the benefit of a business plan, which is a vital tool that significantly increases the enterprise’s chances of success.
The absence of such a considered business plan represents a built-in blueprint for that enterprise’s failure.
The role of mentorships and directorships
Bahamian businessmen must recognize the importance of mentorship as a critical success factor in their enterprises.
Many entrepreneurs with excellent business ideas often fail because they do not investigate or obtain assistance from mentors who could help them to avoid some of the problematic pitfalls that many startups experience.
In this regard, some Bahamians believe that the only essential ingredients for business success are a well-considered business plan and adequate capital. Too often, they neglect to appoint a board of directors to guide the business through the countless challenges that most startups invariably face.
An astute board can enhance the success rate if adequate consideration is given to such vital variables as market share, human resources, marketing, budgeting, financial accounting and reporting and cost controls – just some of the concerns that are often overlooked in starting and running a business.
Wisely-chosen mentors and board members can also assist the entrepreneur in establishing best business and corporate governance practices that will enhance the enterprise’s chances of success.
Overcoming bureaucratic red tape
Many entrepreneurs complain about the excessive amount of bureaucratic red tape they encounter in starting a business.
It is vitally important to successfully reduce or minimize the level of frustration encountered in this area.
Many feasible enterprises are stillborn because this impediment cannot be adequately overcome. The appropriate business advisor, mentor or consultant can be beneficial in successfully navigating the treacherous waters of government bureaucracy and red tape.
The University of The Bahamas can play the vital role of a business incubator, which will aid startup companies that seek their help by creating a “one-stop-shop” for entrepreneurial support.
Although most incubators offer their clients office space and shared administrative services, the heart of a real business incubation program rests in the support services it provides to startup companies.
Business incubation is a means of meeting a variety of economic and socio-economic policy needs, including new business creation, corporate structuring, development of an inherent entrepreneurial culture, technology implementation for increased operational efficiency, commercialization, economic diversification and business expansion.
The amount of time a company spends in an incubation program can vary widely depending on several factors, including the type and complexity of the business and the entrepreneur’s level of business expertise.
Business incubation is a powerful tool for economic empowerment that cannot be understated and should be embraced by embryonic enterprises.
Access to capital
Unquestionably the greatest and a timeless challenge that entrepreneurs encounter is accessing capital to take their business ideas to fruition.
The benefits of economic empowerment, primarily through entrepreneurship, would be felt throughout our society.
Besides the distinct financial advantages, widespread Bahamian entrepreneurship would uplift our fellow countrymen and fill them with pride of accomplishment in their endeavors, as well as those of others.
Furthermore, successful entrepreneurial enterprises would minimize external shock to our domestic economy. Economic empowerment also enhances economic democratization.
Economic empowerment would inspire not only this generation of entrepreneurs but also those who will come after to strike out in ways not yet imagined. It would make The Bahamas a shining example of what can happen when a nation is motivated by hard work, innovation and creativity.
Next week, in our final instalment in this series, we will examine whether our urgent appeal for food security is also falling on deaf ears.
• Philip C. Galanis is the managing partner of HLB Galanis and Co., Chartered Accountants, Forensic & Litigation Support Services. He served 15 years in Parliament. Please send your comments to firstname.lastname@example.org.