A study, by Dr. S. Matadeen in 2004, revealed some interesting facts about small firms in Mauritius. Before 1984, creation of SMEs was very slow, with only 6% created then. By the late 80s and early 90s, this had accelerated, with 29% set up between 85 and 89, 23% in the next five years and 30% during the period 95 to 99. However, there was a slow down in the last five years with only 12% of SMEs created. Furthermore, the sector of operation throws some light of where our entrepreneurs see themselves. 26% invested in wood products and furniture while another 22% set up business in food, beverages and tobacco. 18% of them operated in the textile industry.

However, Matadeen’s study reveals a worrying aspect of our economy in the sense that there are virtually no IT companies. Since the country is bound to phase out the sugar industry, coupled with the textile industry’s inability to fight off Chinese competition, Information and Communications Technology (ICT) has come to represent the only viable future for the country. But our present lack of skilled labour to sustain increased activity on this front is worrying. The Indian economy’s continuous growth, and indeed Ireland’s success story are both centred on ICT. What they both had in common was a highly educated population waiting, ready to embrace the changes in technology. ICT also represents an area where investments can initially be at a low level. The example of Google, set up by two college students, but the now biggest media company in the world, should be an inspiration. While the search engine’s success cannot be replicated easily, and no one is expected to do so, there are plenty of avenues to be exploited in the sector.

<B>Future for Africa</B>

But back to SMEs and we can see their importance to Africa’s economy. They represent nearly 90% of private business on the continent, and contribute to roughly 50% of GDP and employment according to the African Development Bank. Many have developed from micro enterprises (with less than 5 workers, though a company with such a workforce would be classed SME in Europe) to SMEs. Without doubt, small firms are the future for Africa but they need to be supported. And the advantage inherent in promoting small firms is that they represent real indigenous investment and growth. While corporations are usually attracted to low corporate tax countries, their contribution to the economy is minimal, because of the phenomenon of capital flight, when profits are repatriated and not invested in the host country. With local firms driving the economy, profits are ploughed back into the country, raising the standard of living.

Our challenge in Mauritius, is how much the government of the day understands the importance of SMEs and gives them appropriate support. Heavy investment will be needed in education as well as in support mechanisms for small firms to prosper. We tend to think that large corporations are good, because logically a big company employs more people and generates more capital. But we are moving towards a world where everything is becoming specialised. Even multinationals are made of small units of production these days, each with their own budget and managerial teams. SMEs represent the future of the country.

At the moment, we are at the crossroads and we will need men and women of ideas and conviction to make sure we choose the right direction. Fewer populist decisions and more tough ones are needed if we are to succeed.

<B>Diren VALAYDEN</B> <I>Outlook Correspondent in Dublin</I>