SMEs And The Budget

In Trinidad and Tobago  Small and Medium Enterprises have mushroomed over the last decade numbering some 18,000 by the end of 2010, employing about 200,000 persons and contributing nearly 28% to GDP.

However, SMEs face several constraints, the most persistent of which have been non-availability of loan finance, low levels of technology and research and development, and inadequate physical infrastructure.  Despite the high liquidity in T&T’s commercial banking system and the availability of a small-business window at certain banks, the CSO found that only about 11% of SME start-up funding comes from the banking fraternity with 70% coming from personal savings.

The Minister of Finance announced plans in his 2011/2012 Budget Statement, for the establishment of an SME Market on the T&T Stock Exchange with the creation of a “third tier…to provide Small and Medium Enterprises with access to the capital market.”

The Minister has proposed that “for the first 5 years, SMEs whose capital is greater than $5 million but less than $50 million and listed on the SME Market for trading purposes, would be allowed a 10 percent corporation tax rate”.  However, “the SMEs would be required to raise capital on the stock exchange through an initial public offering with a minimum of 25 shareholders holding at least 30 percent of the company’s share capital” up to a maximum of TT$50 million.  A similar approach has proven to be quite successful in Jamaica and the expectations are that similar results can be achieved here in Trinidad and Tobago.

Ernst and Young, in its review of the 2011/2012 Budget noted that there were two significant gaps in the Minister’s presentation on the SME Market. Firstly, there was no indication as to whether a company would be obligated to conduct operations in T&T in order to qualify for this listing or if operating in CARICOM would be sufficient.  Secondly, it can be implied that such listing would be subject to the approval of the T&T Stock Exchange, thus companies would have to comply with all requirements of the SEC and the Companies Act.  These requirements may prove to be onerous to SMEs and discourage listing.  The Chamber expects that these matters would be clarified during the budget debate.

The Chamber is hopeful that prospective shareholders will indeed come forward and support the SME sector so that issues of unemployment, poverty, economic diversification and crime can be addressed frontally.   The Chamber is also heartened to learn from the Minister of Labour and Small and Micro Enterprise Development that the Government, in its thrust to develop the SME sector, will use women and youth entrepreneurs, who are among the most vulnerable groups in society, as the main drivers.  The entire process will be executed by four agencies, namely, the Ministry of Labour and Small and Micro Enterprise Development, the Business Development Company, the National Entrepreneurship Development Company, and the Tobago House of Assembly. The relevant legislative framework is expected to be in place by June 2012.

With approximately half of our membership comprised of SMEs, the Chamber has made SME development a priority and as the process of developing plans for its SME Business conference, SMEs will be given important tools to assist them in further development, and a greater understanding of the fiscal incentives the Government has put in place to further develop the SME sector.   Stay tuned for more information.