Making Small Business a Big Deal at the G20

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By Sarah Montgomery & Tina Chang

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Small Businesses in Sierra Leone

To Mariamata Sbangara, struggling to sell groceries on the streets of Kenema, Sierra Leone, the world’s “premier economic forum” must seem a world away.

But there are good reasons for President Putin and his G20 colleagues to put small businesses such as Mairamata’s front and centre of the agenda for their St Petersburg summit this September.

At this Summit the G20 will revisit its agenda on supporting the economic development of low income countries, as the Seoul action plan expires. Improving the focus on small businesses within this work plan would do a lot to improve the development impact of the G20. For example, the G20 has paid a lot of attention to infrastructure – a key constraint to most small businesses in poor countries. In recent research that we have conducted in 12 developing countries, access to markets due to poor infrastructure provision is a major barrier. In Kenya one livestock business owner reported that getting customers could be a problem for him as ‘sometimes customers are unable to reach markets due to bad roads.”. In Mondul Kiri, Cambodia a rice farmer reported that “the road to our community is bad and so the rice collectors don’t want to come to buy from us.” The message from small enterprises was clear; you cannot be successful if you cannot get goods to market.

But whilst the G20 has focused a lot on tackling the financing gap for infrastructure and getting some mega projects off the ground, it has not paid enough attention to impact. As CAFOD knows (see our recent paper looking at PPPs), positive results of infrastructure projects for local communities and their small businesses are not automatic and need to be directly targeted and monitored by policy makers.

As governments get wise to the need to have growth that creates jobs and that benefits the majority rather than increasing inequality, small businesses should immediately rise to the top of their economic agenda. Small businesses across a range of developing countries account for up to 90% of jobs and nearly 50% of GDP; they are significant economic actors who make a considerable contribution to national economies. We know from other studies that by targeting sectors where the poor tend to be employed, the impact of growth on poverty reduction is significantly improved.

This is not surprising. In our research, earlier this year, we spent a lot of time talking to small business owners, the owners of small-scale farming enterprises, and the organisations that represent them. They told us clearly that they are in business to end cycles of poverty and for the development of their communities. When we asked small-business owners in Kenya, Myanmar and Columbia why they were in the business, the majority of them answered “to put my children through school… to provide food and medical care for my extended family… to provide jobs for my family and for the community”. Their dreams for the future were that their businesses would grow so that they could contribute more effectively to the economy, provide jobs for people in their community and have money on hand to improve their prospects long-term.  Supporting them in these ambitions should be the business of the G20’s development working group.

And it’s not just the G20’s development agenda that needs to adopt this “small business first” mantra. From our work with small businesses, we know that financial and economic stability, progressive tax regimes, anti-corruption, global exchange rates, how sovereign debt is managed – in fact the entirety of the G20’s core agenda all matters for the relative competitiveness of poor entrepreneurs.

So far, the G20’s small business agenda has been limited to improving their access to finance. At this St Petersburg Summit the challenge for the G20 is to ensure that the whole of its agenda can be made to work for the smallest drivers of the global economy. The G20 – and governments in general – will also need to get much better at listening to them. As a saffron grower in Afghanistan reported, “We have the time to speak to the government but government does not have time for us and they do not listen to us.”

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