“Make me to know your ways, O Lord; teach me your paths.” – Psalm 25:4
As I have shepherded Caribbean entrepreneurs and enterprises and traversed the corridors of power over the years, I have become convinced that most Caribbean governments do not have the right model of corporate governance to foster sustainable economic growth through successful enterprise development.
May the Caribbean tourism sector thrive as we carefully explore global markets; may Trinidad and Tobago be successful in finding and mining additional oil resources; and may Caribbean governments get the corporate governance model which is right for systematic enterprise development, one successful entrepreneur after another.
Caribbean entrepreneurs with excellent ideas and their accompanying innovative products and services, are clearly crying out for guidance as to how to increase their revenues on a sustainable basis and then convert those revenues into increased profitability and success.
My experience is that most start-up entrepreneurs think if they can get a loan all problems will be solved. Since the mantra from commercial banks is “we do not fund start-ups”, the majority of entrepreneurs then appeal to government for a solution. Governments tend to respond to this appeal from entrepreneurs with a loan instrument or sometimes a grant. Neither should be encouraged as a quick fix.
I have always been of the opinion that there is adequate liquidity in the private sector to profitably finance start-ups and that the solution lies in the collaboration of government (regulatory and service) and the private sector (investment).
My assessment is that entrepreneurs need, firstly, shepherding because it provides guidance as to how to fortify the entrepreneur’s mindset and how to strengthen the weaknesses in the corporate governance, marketing, production, productivity and financing systems of the business.
Secondly, I do not think that the loan instrument is the most appropriate option for start-up enterprises. Instead, national or regional equity funds are needed to effectively expedite their growth.
Whereas governments have paid lip service to entrepreneur needs, they have been reluctant to aggressively provide access to shepherding services as well as incentives to the private sector to subscribe to an equity fund for national enterprise development.
Governments have not got it right because of their own weak corporate governance systems as it relates to enterprise development.
In my opinion, the role of Government consists of “Regulatory and Service” functions and the role of the private sector is a “To Do Business” function. Enterprise development is a business exercise and hence a private sector function. Government may play a regulatory and service role in stimulating enterprise development but it must not execute because the government bureaucracy linked to its operating rules inhibits the efficiency of private sector operations.
Let us say that the Cabinet of a country gives a government line ministry the responsibility for mounting and investing in an enterprise development programme, as a regulatory and service function, to foster economic growth for the benefit of the people of the country.
My recommendation as to a new way forward for good corporate governance by the government line ministry is to hire an appropriate consultant to facilitate the implementation of the programme and not to attempt to do it itself.
Here are 12 suggested steps required for the efficient implementation of the programme:
(1) The consultant will select a group of four or five respected private sector leaders who are willing to serve on the National Enterprise Development Trust and seek approval of the names from the Ministry; (2) Register the Trust as a not-for-profit organisation; (3) Appoint the selected Trustees; (4) The consultant, in collaboration with the Trustees, should design a job description for the Programme Coordinator; (5) Commission a HR firm to advise on the market rate remuneration scale and search for a Programme Coordinator; (6) The coordinator will then work with the Trustees to develop a set of Operating Rules and Action Plan and lodge these with the Ministry.
(7) The Ministry will deposit seed capital funding on the bank account of the Trust to cover initial seed (operating and legal) expenses; (8) the Trustees will report to the Ministry once per quarter on their stewardship; (9) the Minister will launch a National Entrepreneurs’ Equity Fund; (10) The Trustees will establish the operating rules for the equity fund; (11) The government will give the private sector an incentive to invest in the fund in the form of a guarantee of the capital invested over the 10 year life, say, of the fund(s); and (12) the Director will set about seeking entrepreneurs to participate in the programme, hiring shepherds to life coach the entrepreneur and mentor the enterprise, and arranging for entrepreneurs to pitch to the Equity Fund in search of an investment offer.
The Chairman of the Trustees reports to the Minister and if the Minster is not happy with the reports from the Trustees, then the Chairman is accountable. Similarly, the Programme Coordinator reports to the Chairman and if the Chairman is not happy with the performance of the Programme Coordinator then the appropriate corrective action will be taken.
The challenge for the Programme Coordinator is to build the Trust into an effective mix of resources which services the needs of the entrepreneurs who in turn through their successful enterprises contribute to economic growth, one entrepreneur after another.
The above model allows the Ministry to do what it does best and allows the private sector Trust to develop without any interference from the Ministry. Such a governance system augurs well for successful enterprise development and sustained economic growth.
Let all governments be better prepared and ready to meet the needs of entrepreneurs.
Dr. Basil Springer GCM is Change-Engine Consultant, Caribbean Business Enterprise Trust Inc. – CBET. Columns are archived at: www.cbetmodel.org and www.nothingbeatsbusiness.com.