Mounting challenges in the global and local environment could further cripple an already weak and struggling small business sector creating the ‘perfect storm for failure’ says president of the Micro, Small and Medium-Sized Enterprises (MSMEs) Alliance Donovan Wignall.

Speaking to the Jamaica Observer on Monday, Wignall said that current shocks including continued supply chain disruptions, high inflation, spiralling energy cost, foreign exchange volatility, rising interest rates and more recently the war in Europe have all compounded issues faced by members of the sector and their operations presenting a sink or swim situation for many, even as they try to rebound from fallouts sustained since the novel coronavirus pandemic.

“For the most vulnerable businesses which are often small and unable to handle the additional economic shocks, these are most at risk and could end up going under first. There are those other businesses that are more resilient and able to increase prices or change their business models that could help them to survive the economic storm. However, for right now what we are seeing given the numerous challenges is a perfect storm for failure, which calls for businesses to be strong, agile and having robust operations that can adjust to pressures over the next couple of months,” he said in an interview with the Business Observer.

“The cost of doing business has long been a challenge which has been exacerbated, for example, by current movements in interest rates over the last few months. This has impacted operators wanting to borrow to grow their businesses, including buying capital equipment, getting more space or boosting inventory as they witness considerable climbs in costs. This has been making the business environment more challenging on the back of everything that was already happening in the economic space, he further said, noting that if interest rates continue to trend upward, the growth of small businesses will be significantly affected.

Over the last few months the Bank of Jamaica (BOJ) in responding to the challenges, largely driven by global activities, moved interest rates from a historically low 0.5 per cent to five per cent as at the end of May. As a result of this, several financial institutions have since moved to increase rates on existing loans. Just this week, the National Commercial Bank (NCB) said it would be adjusting its interest rate on loans for personal and SME customers by an average 1.14 per cent come July 19. Other banks have previously announced similar decisions as they too seek to respond to market developments.

Labelling the current measures applied to mitigate against the challenges locally as incongruent, the MSMEs head called for better measures which he believes could foster better economic outcomes. “We can’t control what happens internationally, but we certainly can control those issues happening locally. If issues are dealt with sensibly and we find alternatives to cut cost, I think we may be able to weather the storm, otherwise as far as the question of outlook is concerned — it’s going to be very challenging, it has already been, so I hope that good sense will prevail where as a country we try to make decisions that will foster the growth and development of the MSME sector,” Wignall stated.

Expressing similar sentiments president of the Small Business Association of Jamaica (SBAJ) Michael Leckie said that with approximately 40 per cent of small businesses having had to cease operations since the pandemic, it is of paramount importance that every step be taken to keep the sector responsible for some 75 per cent of employment going.

He said that while he was still cautiously optimistic in his outlook for the sector, effects from current tensions have not eluded its members, forcing a number of them in the face of adversity to rethink their business models or even get more creative as they fight to remain operational. To this end, he stressed the need for more small businesses to double down in agriculture, noting that there is a lot of demand in this area amid increased food security concerns worldwide.

“It is really a big struggle for small businesses in 2022 as majority continues to struggle and find it very hard since logistics and transportation are so bad and the cost of food have gone up considerably. The focus is agriculture and that is where small businesses have to look now as they continue to pivot from the existing challenges. This is an industry that can be twinned with small businesses to effect growth,” Leckie said.