When it comes to the Guyanese economy, small is gorgeous. It has always been this way, because we are a small economy with a vibrant entrepreneurial class that is prepared to incubate small ideas, take all the risks, but reap all of the rewards. This is how it has always been, even during the years when the policy makers imprudently tried to make the public sector into the commanding heights of the economy.
Any policymaker who understands how this economy works, and has taken the time to read the January 2017 Statistical Abstract (Bank of Guyana), ought to be increasingly worried about the state of the small business sector. Do they have adequate access to new credit? Are they borrowing enough to fuel the required jobs’ growth? How many of them are increasingly having serious trouble repaying their debt? How many of them are closer to bankruptcy compared to 12 months ago?
As I examine these questions and the latest Statistical Abstract and downloaded primary information from some small businessmen, it is clear to me that the players in the industry are not feeling good about the investment climate. Even the official private sector body is now saying its members are losing confidence in the manner in which the economy is being managed. Any sensible politician with any modicum of common sense would have done something about the state of the small business sector by now. How can they not understand the adverse effect this situation is having on the pockets of people who are voters in the near future?
Small businesses employ more than half of the Guyanese workforce. With the induced meltdown being promoted in GuySuCo by Team Granger, small businesses are expected to play a growing role in the dwindling economy. I therefore welcome Minister Harmon’s commitment of G$50 million for small business development.
But the actual need is much bigger, and with the private banks “right fitting” their loan portfolio continuously, the small business will feel the squeeze the most. If one is to observe the non-performing (bad) loan portfolio of the banks, all of the indicators are showing that size of the bad loans’ portfolio increased over the last 12 months. The banks had little choice but to tighten up their lending criteria to protect their capital, but such a strategy has affected the small business sector the most.
As the table below shows, all the banks, save and except for Scotia, are expecting a deterioration in their non-performing loans to their total loans over 2016. The banks with the biggest unfavourable hit were GBTI and Demerara, two of the key trendsetters in the small business sector.
With this evidence, it is clear that access to new loans is drying up. Such a situation would be very bad for the 2017 economy. This is not surprising, but what has the Minister of Finance done about this “yorker”? He has basically just jammed his bat down and is hoping for the best, but that cannot be a strategy. Any skilful financial strategist would have made adjustments for this kind of ball, knowing fully well that in such conditions, the bowler would have bowled such a delivery because of the state of the 2016 economy.
Without new jobs we cannot stimulate greater private consumer spending. The 2017 Budget tags private consumption as a percentage of gross domestic expenditure at 56%, compared to 74% in 2013. More evidence that the nation is in a hot economic mess today. But what is really the biggest national tragedy is that no sensible strategy to turn around the economy is being crafted by the players in the Office of the Minister of Finance.
Again, I welcome the promise to boost small business procurement by the Granger Administration, but we are now heading into April and it has not even been implemented as yet. There is also no State Development Bank to help leverage the difficult-to-construct deals. But worst of all, the small business sector is faced with a tax regime that is extremely hostile to them.
In conclusion, such a situation in Main Street is bad for consumer spending, bad for recovery, and bad for the economy. There is an urgent need for a stimulus package to kick-start the economy, but that is a big idea, and big ideas seem to be a challenge for Winston Jordan.
