Local Entrepreneur is used to refer to a resident of a country who sets up a business in the country. Is it justifiable to say that having local entrepreneurs is not vitally important in our quest to create jobs for the unemployed masses because Foreign Direct Investments could do the job? I think not and here are my reasons. First, when the need to create jobs is as dire as it is in Ghana, any means of successfully creating jobs must be considered vitally important.
Secondly, local companies are needed to diversify the portfolio of employers so that when, for any reason, foreign companies are no longer able or willing to employ, the effect on the economy would be minimized.
Thirdly, the country stands to benefit more from the local entrepreneur than the foreign one. Finally, even within the context of attracting foreign investments, local entrepreneurs are very important because they serve to attract foreign capital that would otherwise not have come into the country.
Local Entrepreneurs Create Jobs
That local entrepreneurs create jobs is not a matter for dispute. Mr Dominic Oduro-Antwi is a Ghanaian entrepreneur. Beginning with virtually no capital, a few years ago, he has built an admirable business that, today, employs about ten people. His company – Design House Projects – which deals in Publishing, Market Research, Architecture and Interior Design is an example of how local entrepreneurs create jobs in the country.
When looked at in light of the fact that some Multi-National Companies have been in the country for just about the same time but employ many more, one might be tempted to gloss over the contributions of such industrious local entrepreneurs in reducing unemployment. That would however be a gross mistake. In a country with so many unemployed youth, any effort to create jobs, no matter how relatively small it seems, is highly important. Job creation in a country like Ghana depends greatly on local entrepreneurs. A World Bank press release in 2006 indicated that 70 percent of the Ghanaian labour force was employed by Micro, Small and Medium Enterprises. (allafrica.com).
Local Entrepreneurs Diversify ‘Employership’
There is an advantage in having an economy that consists mainly of a multiplicity of Micro, Small and Medium Enterprises as opposed to one that is dominated by a few large Multi-National Companies (MNCs). In the event that these large companies fail or withdraw from the country, the aggregate effect on the economy would be greatly lowered if the economy is dominated by many small local companies. MNCs can and do fail. They also can and do withdraw from countries when they stand to gain greater profits from moving their operations to another country. This happened in Singapore in 1986 and again in 1998 when the collapse of the economies of Singapore’s neighbours offered MNCs cheaper labour in those countries. (Yew, 622) I doubt that Mr Dominic Odoru-Antwi would relocate Design House Projects in the Gambia because labour there is suddenly cheaper. An economy that rests mainly on the shoulders of many local MSMEs, and hence local entrepreneurs, should be our aspiration.
Local Entrepreneurs are of More Benefit to Us
Local companies and foreign companies are both of immense benefit to us since they create jobs for our unemployed. Local entrepreneurs, however, are of additional benefit. It is generally accepted, I think, that allowing foreign companies to repatriate profits is an important incentive for foreign companies to invest in a country. If this is true, then it is safe to say that a significant amount of the earnings of foreign companies are repatriated. Local companies cannot repatriate profits. Thus, profits from local companies are more likely to stay in the country than those generate d by foreign companies. These profits would likely be re-invested in the business or some other local business or spent on goods and services. No matter which of these ways it ends up being spent, our economy benefits. The same cannot be said of repatriated profits.
Local Entrepreneurs Enhance Foreign Direct Investments
Capital, globally, seeks to minimize risk and maximize returns. Starting a new company is a highly risky venture. Thus, a lot of times, capital is more willing to invest in an already successful venture than one that is to be started from scratch. For some capitalists, being able to show from a hypothetical Profit and Loss Statement (as in a business plan) that a venture would be successful is enough. Some other, perhaps most, capitalists prefer demonstrating profitability from real Profit and Loss Statements. To attract such capital, someone must first bear the risk of starting the venture and making it successful. That someone is the local entrepreneur and this is how local entrepreneurs enhance foreign investments. They start and build successful companies that attract global capital to grow further. Sometimes, the foreign investors merge and, at other times, they acquire.
Local entrepreneurs are vitally important in creating jobs and, thereby, in our economic development. Therefore, no efforts should be spared in encouraging entrepreneurship in Ghana and in Africa.
- Yew, Lee K. From Third World to First: The Singapore Story: 1965-2000. US: HarperCollins, 2000.