One of the more important disclosures to come out of the post-budget presentations in the National Assembly last week was the one made by Minister of Business Dominic Gaskin regarding what we hope is a definitive confirmation that the 20 per cent allocation of state contracts to small businesses will take effect in January 2019. The insertion of the caveat has to do with what we are told are the various ‘loose ends’ that have to be tied up, not least the one that has to do with the harmonization of the provisions spelt out in the Small Business Act of 2004 with national procurement legislation. In other words an important prerequisite to going ahead with the full implementation of what is in the Small Business Act is that it must also be enshrined in the Procurement Act, the legal framework that guides the behaviour of procurement entities.
Arrival of the 20% allocation to small businesses legislation to the point where it is today took very long and if ever there was a case of the grass growing whilst the horse was starving, this, surely, was one of those open and shut cases. The biggest impact which the full implementation of this provision in the Act is concerned with will be to afford more modest businesses, previously not considered worthy of state contracts to access those. That, of course, will have a significant knock on effect insofar as employment levels are concerned, the truth being that once the provision is implemented honestly and transparently, over time, thousands of additional jobs could be created for Guyanese.
As the Minister pointed out in his presentation in the National Assembly it may well be possible to clearly identify a clutch of contract areas of a particular size that would amount to the 20% allocation envisaged in the Act. Then there is, of course, the question of capacity, the point here being that some of the contract areas that might be accessible may simply be outside the capability of many of the smaller businesses.
One possible way around this is to create conditions that allow bona fide small businesses unhindered access to what one might call the ‘low-hanging fruit,’ that is to say those areas in which those small businesses may have proven competence.
But it is its integrity as a system upon which the 20% provision has been known to stand or fall. We know from numerous previous reports of the Auditor General that tender procedures at state agencies are not necessarily always above board and that there have been cases, many of them, in which room has been created for glaring instances of the crudest nepotism. The reality as far as the 20% allocation provision is concerned is that it could, in theory, fall victim to a complete ‘takeover’ by functionaries possessed of the authority to do so. What we must guard against is the carving up of the entire process into a regime that becomes sufficiently burdened down with nepotism and backhanders such as to cause it to degenerate into a national scandal.
Here, the point should be made that the system will almost certainly work best if it is attended by a rigorous and vigilant mechanism that ensures that the whole process is not simply captured by men and women who cast long shadows and by well-connected networks of friends and families who, purely on account of their ‘connections’,’ are able to have generous allocations of state funds simply placed at their disposal.
The reality is that if properly administered, the 20% allocation to small businesses policy can serve an invaluable poverty-alleviation purpose whilst at the same time helping small firms to grow by exposing them to larger contracts. Here, service areas like catering, courier services, landscaping and gardening, some types of repairs and maintenance, and some types of construction come to mind. These are areas in which local small businesses have proven themselves to be competent even though many of those will have to be taught how to ‘live with’ the provisions of state contracts.
What the 20% provision for small businesses is also likely to do is to create greater access to commercial bank lending since the contract in itself will serve as an assurance of repayment. This, in circumstances where, these days, small businesses bellyache constantly about the difficulties they have in accessing bank loans.
All of that said – and while no one wants to see the implementation of half-baked provisions which, in the longer term will do more harm than good, the million dollar question (as many small businesses are chomping at their bit to tender for what could be their most important job ever) has to do with whether all of the systems are as yet in place for a January 1 start. Truth be told, that does not appear to be the case though we would be more than happy to be proved wrong.