Business

Hard times for entrepreneurs

50% fall in Start-ups

BY NEKIESHA REID Business reporter

Friday, October 19, 2012    

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JAMAICANS who dream of starting their own businesses are facing much tougher times, warn the authors of a new study.

“The entrepreneur climate is declining,” said Dr Girjanauth Boodraj, a senior lecturer at the University of Technology (UTech) and lead researcher on the Jamaican part of the Global Entrepreneurship Monitor (GEM).

The number of businesses started in Jamaica has dropped by more than 50 per cent since 2009, according to GEM's latest annual report.

And although the figure ticked up slightly last year, it is unlikely to rise much, if at all, in 2012.

The tragedy is that Jamaica is one of the most entrepreneurial countries in the world, with 79 per cent of persons believing they have the skills to be their own bosses.

GEM - a study conducted by a consortium of universities — analyses the level of entrepreneurship in countries ranging from Algeria to the United States, using Total earlystage Entrepreneurial Activity (TEA) as its primary indicator.

TEA is the percentage of persons between 18 and 64 years old who are in the process of setting up businesses as well as those that have been paying wages for up to three and a half years.

At the start of the global recession, Jamaica's TEA was 16 per cent, but rose to 23 per cent in 2009.

However, by 2010, TEA fell to just over 10 per cent.

One possible explanation, said Boodraj, is that persons who lost their jobs when the recession hit set out on their own in 2009, but that many of them had “discontinued” their businesses a year later.

“People tend to start in retail,” he said, noting that these businesses are less likely to survive and that their owners would much rather have secure jobs.

Vanetta Skeete, a senior lecturer at the UTech and coauthor of the report, said that “a lot of the start-ups in Jamaica are necessity-driven” rather than opportunity-driven.

“Our economic circumstances push people into starting businesses and the research will show that most people prefer to get a job since that's more secure,” she said.

Those who start businesses out of necessity tend to go into retail trades and agriculture, because they often require a minimum amount of capital.

“While 80 per cent of Jamaicans believe they have the capabilities to start a business, the figures show that only 19 per cent intend to become entrepreneurs,” Boodraj said.

This is because the majority of the population is risk-averse, Skeete said, although the percentage fell last year from 33 per cent to 29 per cent, less than in more developed countries.

Fear of failure is a major hindrance to increased entrepreneurial activity, which both Boodraj and Skeete said could be overcome with increased education.

“One of the case studies that we use in the classroom is that of Audrey Marks,” Skeete said.

Marks created Paymaster, the first multi-transaction payment system in the Caribbean, after years of struggle.

Faced with a lack of investment and scepticism on all fronts, she sold her two houses and vehicle in order to raise the money to fund the business.

Paymaster now has over 200 locations in Jamaica, the US and the UK.

Lessons such as Marks's story would do much to address the fear of failure.

Teaching entrepreneurship in schools beginning at the primary level is the easiest and cheapest way to do this, Boodraj and Skeete said.

The development of a curriculum for Entrepreneurship that was just completed for the Caribbean Advanced Proficiency Examination (CAPE) level was welcome, they said.

But the best way to encourage entrepreneurship would be to get the economy ticking over again, Boodraj said. “Give people jobs, make the economy better and entrepreneurship will follow.”

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