Enabling organised retails and small-scale enterprises

R ECENTLY, a mall developer, Chief Tokunbo Omisore, drew attention to some of the obstacles to business development at the country’s grass roots. Speaking during a media parley, Omisore lamented that structured retail development was not receiving the deserved support from government and financial institutions despite having the potential to mitigate Nigeria’s youth unemployment crisis.  He lamented that a country of Nigeria’s status could scoff at demands by investors and developers for an enabling environment for their businesses to thrive. He wondered why developers who borrowed forex from banks prior to the devaluation of the country’s currency were given no consideration after using such funds to provide platforms for employment via small and medium scale enterprises (SMEs).  The failure to encourage developers to provide more neighbourhood malls at an affordable cost even while key retail brands in the country provide direct employment to thousands of Nigerians, he said, would not augur well for the country. According to him, “Our vision to grow a structured retail business expected to support our unchecked population increase has been handicapped by this act of neglect. The US economy flourishes and benefits from structured retail growth.”

With Nigeria’s scary poverty and unemployment figures, it is indeed not difficult to see that the private sector is not getting the required backup from the government. This is in spite of the official rhetoric. Speaking while inaugurating the Sura Shopping Complex’s 1.5megawatts Independent Power Plant (IPP) in Lagos last year, Vice President Yemi Osinbajo acknowledged that SMEs hold the future of the Nigerian economy and urged for more private sector partnerships to achieve the Federal Government’s targets in economic development. “This partnership between the Federal Government, private and social sector partners and most importantly with you, business women and men and your market associations, has enabled us to launch the Energising Economies Initiative (EEI) here in Sura Shopping Complex in record time. The reason we go to markets is because we believe that small businesses hold the future. The small and medium-sized businesses are the future of the Nigerian economy and we must support SMEs,”he said. But even though  SMES account for over 95 per cent of businesses, between 60 and 70 per cent of employment and 55 per cent of Nigeria’s GDP, the problems of multiple taxation, regulation by different government agencies and restricted access to the Federal Government Special Intervention Fund for MSMEs have yet to be addressed in realistic terms.

As is fairly well known, in 90 per cent of the developed world with notable outlets like Walmart and Asda in the United States, United Kingdom, the European Union and Asia, retail is the major employer of young, unemployed people. But this situation is only possible because those countries boast of mall infrastructure. Malls create value and facilitate growth by providing a venue for people to trade in. Even in Nigeria, with communities embracing modern markets, malls are fast replacing the open market, allowing organised retailers like Shoprite to enter into communities and create an avenue for manufacturers to sell goods.  Crucially, Nigerian malls are driven by nondiscretionary consumer spending, that is, spending that takes place as a necessity even in a depression. By providing avenues for manufacturers to sell goods in the communities where they are located, malls allow SMEs to grow steadily. As a matter of fact, organised retailers patronise local farmers who can stock vegetables and other perishable farm produce. This helps local farmers to grow their businesses since relying on distant suppliers will likely reduce quality and cause spoilage. Crucially, once an SME in the agriculture sector has an organised retailer as an off taker, the performance of the business can easily be recorded, assessed, monitored and verified, making it easier for the owners of such SMEs to obtain bank loans.

Again, organised retailers are the number one source of employment for unskilled and semi-skilled labourers like stock takers and cashiers, providing young people with an avenue to garner work experience. In this regard, we urge the government and the relevant agencies not to see malls as mere buildings but as infrastructure that supports industry, retail, trade and agriculture. One reason a country like Kenya for instance has a higher density of shopping malls than Nigeria is the availability of long-term financing, a facility lacking in Nigeria.  Given the average cost of construction and the cost of servicing loans, long-term financing holds the key to profitability for those involved. But with most money deposit banks in the country shying away from long-term financing because they don’t have long-term deposits, the government has a bounden duty to encourage investors willing to invest over a long period, with a steady rate of return that is protected from inflation. These are perfect candidates to invest in assets like malls through a real estate investment trust (REIT).