Expectations of start-ups in 2016
Individuals, corporate bodies and government often have clear-cut expectations at the turn of each year.
Each tries to outline objectives, revenue or income targets, problems of the previous year and possible solutions to them.
Mistakes are often analysed and corrections taken. Plans are usually in the pipeline to cut wastes and make impactful or good investments.
Nigeria’s start-ups and small business owners are not exempted from such lofty plans and expectations. The difference here is that like all corporate bodies, many of their expectations are meant to be fulfilled by the government.
One key expectation of start-ups, the micro, small and medium businesses (MSMEs) in 2016 is regular supply of power across the country.
Estimates show that 30 to 40 percent expenditures of players in this category of business go to alternative power sources. Start-ups and MSMEs spend much on diesel and fuel with which to run their generators. The medium enterprises with financial muscles to install gas plants pay for gas in dollars, in an era where foreign exchange has become as scarce as gold.
The Manufacturers Association of Nigeria (MAN) is already thinking of resuscitating an Independent Power Project (IPP) which it abandoned long ago, owing to power inconsistency, which has hit a new low.
The micro, small- and medium-sized hoteliers who spoke with Start-Up Digest complained that many of them could go out of business this year if power does not improve.
“We did not make any profit last year,” said a hotel manager in Lagos who preferred anonymity because he was not authorised to speak to the press.
“We depend wholly on diesel. We have no business with public power supply because they would not supply any electricity but would bring fat bills. So we decided at some point to cut off from them,” the hotel manager said.
Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry (LCCI), lamented that most start-ups struggle to take care of power costs, stressing that the business environment is becoming more unfriendly for them.
Beside power inconsistency, start-ups and MSMEs expect harmonisation of taxes to ensure that more people are brought into the tax net. Tax-paying start-ups are worried that many state governments overtax few of them but leave the majority of businesses in the informal sector.
Other start-up owners express worry that they may be in for a shock in 2016, given the revenue drive of the three tiers of government, due to crash in the crude oil market.
“This is a year of taxes with different nomenclatures,” Ike Ibeabuchi, managing director, MD Services Limited, told Start-Up Digest.
“The economy is tough, but those who have no businesses do not know. We expect President Buhari, the Minister of France and commissioners of finance in various states to harmonise taxes. If this is not done, many start-ups will pack up,” Ibeabuchi said.
A recent report by The Economist entitled, ‘Enabling a More Productive Nigeria: Powering SMEs’ shows that an average company in Lagos expends 956 hours per year in paying their taxes—compared with the Sub-Saharan African average of 310 hours, and the OECD average of 175 hours.
As part of the expectations of start-ups and SMEs, The Economist says, “The government urgently needs
to broaden its tax base, which means deriving more revenue from SMEs. But the time involved in tax administration is one reason why so many SMEs remain unregistered. A simpler system with fewer processes, and limited opportunities for tax officials to exercise discretion on fees, could bring more SMEs into the tax net.”
Apart from taxes, corruption is also one clog in the wheel of start-ups and small businesses.
In The Economist’s report, Jason Njoku, founder of iRoko Partners, one of the largest online distributors of African movies and music, said he attempted to bring IT equipment into Lagos International Airport from London, when a customs official sought to impose a $4,000 spot customs fee. There was no online resource
through which Njoku could establish the actual duty and customs charges owed, and the official made an exchange-rate calculation on a mobile phone.
“Such events are a serious burden for a company that is now one of Nigeria’s SME success stories, in the heart of its most exciting sector: the creative industry,” says the report.
The general impression of start-ups is that the searchlight of the Economic and Financial Crimes Commission (EFCC) should beam on the activities of regulatory institutions and the corporate entities.
More so, start-ups and small business clamour for scale- up of infrastructure. Railways should be well developed, while road rehabilitation must be taken much more seriously in 2016, they say.
Light rail infrastructure and ports are key to economic diversification and Nigeria’s commercial ecosystem and need to be developed, they add.
“We expect that something is done about this in 2016. Think about small-scale farmers that need to move their goods to other markets within the country. Think about the logistics cost of moving goods you produce from Lagos to Bauchi. We need good roads and light rail system and we believe Buhari will look in this direction,” said Chidi Obasi, managing director, Chiben Enterprises in Onitsha, Anambra State.
Access to finance is also one big area start-ups and small businesses expect the government to look into in 2016. Many funds in commercial banks are short term and attract between 15 and 35 percent interest rates.
Already, Buhari has pledged to fund more start-ups and MSMEs this year and many business owners are expectant.
“We employ more; contribute more to the economy, and are transforming the economic ecosystem. We are hopeful for more funding. If we are properly funded, we will help reduce the financial stress of the government and even export to bring in foreign exchange,” said Tony Wesler, a technology entrepreneur in Lagos.
ODINAKA ANUDU