ROLE OF GOVERNMENT IN THE DEVELOPMENT OF SMALL SCALE INDUSTRIES
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ROLE OF GOVERNMENT IN THE DEVELOPMENT OF SMALL SCALE INDUSTRIES
Chapter one
INTRODUCTION
Background to the Study
Small-scale industries are recognised as the driving force behind socioeconomic transformation in any economy. Internationally, the small-scale industry accounts for more than 80% of job opportunities, facilitating primary production and value addition.
Furthermore, it boosts capacity utilisation and capital per head. It is the most reliable method of delivering required goods and services in rural or semi-urban areas
resolving the issue of rural-urban migration and income distribution, developing entrepreneurial skills, and boosting economic development in the community (Kondaiah, 2010).
Small and large businesses emerge through the process of meeting a societal need, conducting business, or engaging in entrepreneurship.
“According to Desai (2010), entrepreneurship or entrepreneurism is the life-blood of any economy and the solution to unemployment and poverty” .
As a result, it has been correctly stated that small-scale firms played a significant role in the industrialised world’s economic development. Historically, the majority of today’s large corporations and multinationals were founded by entrepreneurs with little capital.
In this regard, it is worth noting that international conglomerates such as Ford and Guinness, as well as Nigerian multinationals controlled by the Dantatas, Dangotes, Innoson, and Ekene Dili Chukwu, are classic instances of mega firms that began as small-scale businesses.
Without ignoring large businesses, an empirical finding has shown that a vibrant small-scale industry sector plays an enabling role in creating employment, providing economic sustainability and innovation, and serving as a vital link between large industries and individual consumers.
It is also recognised that countries with a higher share of small scale industry see faster growth than those with a lower ratio, with the beginnings of larger enterprises traceable back to small-scale industries.
“According to Llyas (2010), a large percentage of the population depends on this sector directly or indirectly for one thing or the other in meeting their needs” .
Though they all have the same economic motivation, small businesses differ from their bigger counterparts in terms of operational instability, access to finance and other resources, and capacity for innovation and growth.
“According to Etuk and Mbat (2010), small scale businesses have a higher propensity to employ more labour-intensive production processes than large businesses” .
They provide major contributions to the creation of productive job opportunities, income generation, and poverty reduction in society.
According to the Small and Medium Enterprise Development Agency of Nigeria (SMEDAN) (2012), small enterprises account for around 90% and 99.8% of all businesses in developing countries and the European Union, respectively.
They also account for 47%, 77%, and 62% of total employment in the United States, the European Union, and Japan, respectively, while this sector contributes 58%, 53%, and 51% of total value to the economies of the European Union, Japan, and South Korea, respectively.
Other research found that in high-income countries such as the United Kingdom and the United States, small companies account for more than 55% of GDP and 65% of total employment.
In low-income nations such as Burkina Faso, the sector accounts for approximately 60% of GDP and 70% of total employment, whereas in middle-income countries such as India and Mexico, it provides 70% of GDP and 95% of total employment.
In general, the small-scale sector plays an important part in the shift from traditional to modern economies by embracing innovation and giving opportunities for secondary production or processing, which boosts revenue generation and socioeconomic growth.
“According to Jayachandiran (2009), small scale businesses help to absorb productive resources at all levels and add to the formation of flexible economic systems where they interlink with large firms which attracts foreign capital and investment” .
As a result, small-scale business is a distinct component of any economy that demands attention from all stakeholders, including the government. Though its definition and characteristics vary by country, there is universal agreement on the type of business that qualifies as small scale.
Small businesses are ordinary businesses that were founded to offer a source of income for the owner or to meet a community need. They have limited assets, few personnel, and little capital, and are primarily informal, with a high mortality rate. Examples include tiny traders and furniture craftsmen.
Small enterprises are known to hold the key to a country’s future development and play an important role in the economy, particularly in terms of industrial expansion, youth empowerment, and innovation.
Despite the critical role that small firms play in economic development, they continue to face obstacles such as limited market linkage, inconsistent government policies, numerous taxation, outdated technology, insufficient skills and human capacity, and a poor flow of information. All of these factors contribute to their limited growth, failure to improve, and eventual premature death.
Small-scale firms produce and market a wide range of products and services, including food, beverages, drinks, sachet water, cosmetics, spare parts, and many others.
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