After being disappointed by Budget 2020 for its lack of direct support towards businesses, which have suffered tremendously from the effects of the COVID-19 pandemic, the collective private sector anticipated with hope that Budget 2021 would contain comparable fiscal measures like the billions granted to households and public sector employees last year. Regrettably, this was not the case. Finance Minister Ashni Singh made no such announcements of relief measures to assist businesses to recover from certainly the worst crisis ever experienced by our private sector.
The Minister, in his budget speech, maintained that “COVID-19 is far from over and much uncertainty remains.” And that is precisely what scares businesses. They see no immediate-term end to the pandemic. Accordingly, they appeared hopeful that government would have done more to cushion the protracted effects of the pandemic. Such support would have been important especially for the micro-, small- and medium-sized enterprises which are most vulnerable to such broad economic shocks as those triggered by the pandemic which could deliver potentially the biggest unfavourable impact in terms of employment and stability on the domestic front.
In a year where the non-hydrocarbon economy shrunk by around 7%, and where taxes generated 96% of all government income (with the lion’s share coming from the private sector), it would have been understandable if government had set aside direct measures amounting to around 1 to 2 per cent of GDP to the business sector. This is the sector that many government officials refer to as powering the “engine of growth,” which creates jobs, generates GDP, enhances productivity, earns government revenues, improves human capital and quality of life, and aids poverty reduction by narrowing the gap between the rich and poor.
A significant investment in our business sector at this time would, in both the short and long term, reap dividends for both government and the citizenry. This is a critical point especially as pre-pandemic concerns such as climate change and structural investments for innovation for businesses to strengthen their competitive capacities in regional and global trade remain priorities. The government could see added benefits by targeting stimulus and relief support that earns “double dividends” by ensuring that long-term policy objectives are not set aside. Such relief would generate further returns on investment as the stimulus would ensure that businesses do not cut into resources that are essential for research and development or jobs training and growth.
One allocation that is indicative of the budget’s inadequacies in terms of delivering on desirable objectives is the $250 million set aside for the Small Business Development Fund. Here, one must take note of the fact that when COVID-19 hit, small businesses were already engaged in seeking to cope with the challenges of accessing financing from the local capital markets along with diminished export capacity, high electricity costs, and lack of entrepreneurial and business management skills. Taking all of this into account, this allocation should have been at least four to eight times greater – $1 billion to $2 billion. This would be sufficient to fund incentives (through loans and grants) targeting unorganized and informal small scale businesses to become registered, provide government guarantees on loans and strengthen and expand the capacity of the Small Business Bureau to develop training curricula with the capacity to meet the demands and needs of trainers and businesses in all of the regions across Guyana.
While the provisions of the Small Business Act allow for small businesses to receive 20% of the government’s procurement of goods and services, the full implementation of this clause would only ensure that a select few small companies benefit, since qualification is based on the criteria of meeting formal requirements linked to eligibility. This reinforces the point made earlier regarding the need for more funding aimed at capacity building and moving small enterprises from the unorganized to the organized private sector so that they too can reap the rewards of government support measures.
This can only occur if there is both a substantial financial allocation and the requisite political will. This is an opportunity not only to address the current crisis but also to apply the lessons for other crises that may in the future generate their own economic shocks.
