Introduction
Despite the current health crisis caused by the pandemic, we are undeniably witnessing the soaring of small business in our country. Historically, global entrepreneurship has been surging gradually in various parts of the world since the end of the cold war in 19991. In the past two decades, Somalia experienced one of its highest paces of entrepreneurship. Many diasporas and the locals created numerous businesses in various parts of the country, but Mogadishu became the hub of entrepreneurship in the country. The diaspora and local investors have invested large amounts of money and created many jobs. As a result of this large investment, lots of fresh businesspersons showcased their business interests. No matter how large or small the small businesses in the country are, they can be seen everywhere. These businesses encompass a fresh variety of businesses which did not exist or have never been seen in the context of Somalis. Many unemployed youths benefited from the jobs created by these sorts of entrepreneurship.
The surge of entrepreneurship spiked again in the early years of the last decade when the security situation of the country got better. The hope and confidence of the entrepreneurs have risen up. The large size of the entrepreneurs’ investment bombarded new business industries and filled gaps. It can now be seen frequently in Mogadishu. Besides, myriad fresh and brilliant business ideas are underway and many more are yet to come. Since entrepreneurship is growing extensively, the government’s involvement in the business is inevitable. Businesses create a lot of jobs, enhance the level of economy of the country and participate in the efforts of reducing youth unemployment and also pay taxes to the different levels of government. But, the entrepreneurs’ need for the support of the government is also indispensable. Hence, this essay examines the role of government in promoting entrepreneurship.
The Role of Government in Promoting Entrepreneurship
Governments around the globe have introduced numerous schemes to boost businesses and encourage entrepreneurship. The roles and the means which governments can play to support their small business owners are too many depending on the capabilities, resources, and experiences of public sector leaders. Somalia has been a war-torn country but is getting back its feet again and getting stable gradually.
Somali’s governance system is federal which is still in its early nascent stage. Ideally, the federal system of governance should have harmonized policies, rules, and tax regulations among the different tiers of government. But in reality, in Somalia’s current model of federalism, there is no such harmonization of policies. Various levels of governments formulate their own tax rules and regulations which in most cases conflict with the national ones. As a result, entrepreneurs and small business owners face countless challenges from various tax systems when operating different states within the country while each levying on its tax without considering charges they paid to other states. However, by harmonizing the tax regimes, the different tiers of government can provide strong incentives to the entrepreneurs through the following schemes to inspire entrepreneurship and growing business for the betterment of the country.
First, sound trade policies. Government is the sole institution that has the power to make and implement policies that regulate the behavior and actions of the people. Therefore, federal and federal member state parliaments can formulate and implement sound trade policies to promote and protect entrepreneurship and overall small business growth. For example, devising economic liberalization and free trade policies can increase small businesses. In addition, the government can formulate policy engaging free trade zones. These policies will definitely support entrepreneurs and other investors to fearlessly invest their capital in the country and expand their profit margins.
Second, tax incentives. It is one of the main schemes used worldwide to inspire businesses. The main concern of small business creators is tax. The panic and anxiety of entrepreneurs at first are unimaginable. Such panic can only be relieved by the government’s tax policies like tax exemptions, and deductions that intend to stimulate entrepreneurs and enhance the growth of small businesses. Lower tax rates give investors the courage to go on and think of long-term business growth. Moreover, reviewing and altering existing tax policies to suit the growth of small businesses is significant.
Third, Training Programs. Offering the necessary skills and knowledge to the entrepreneurs is another scheme the government plays to ensure the viability of businesses. For example, a six month or one-year-long training program can be given to fresh graduates to help them start their own business. In Somalia, many women entrepreneurs were not schooled, so such kind of training is also appropriate to them. Such training of small business workers helps understand the context of their niche and opens their horizons. Governments provide free schooling for worker training programs with the collaboration of community colleges, non-governmental organizations, and universities. After getting relevant knowledge small business owners can start to expand their business.
Fourth, Public Infrastructure Improvement. Businesses can’t work effectively without proper funding of infrastructure. For instance, in Mogadishu, the prices of vegetables and fruits skyrocket whenever the rainy season starts because of poor roads. The enhancement of infrastructure is the only solution. Governments help improve the infrastructure needed for businesses to thrive. The infrastructure enhancement encompasses building and maintaining roads, bridges, rail lines, airports, seaports, and telecommunications systems. Businesses get and transport materials smoothly from the factories to the markets when the infrastructure functions well.
Fifth, establishing a strong and impartial legal system. Think about a business environment where there are few wealthy companies and no well-functioning government. Unquestionably, these companies would have tried to do anything they please. An enormous number of today’s youth fear that their business ideas might be stolen, while others claim their business ideas have already been stolen by stronger and wealthier business owners. The government is the sole protector of those business ideas since it has the monopoly of power to formulate and implement laws. So, devising such a fair legal system is the role the government can play to buffer valuable business ideas.
Finally, launching a small business hub. Ultimately, the government should open a center that serves only entrepreneurs. The center provides the services business owners need such as licensing, grants, loans, microfinance, etc. Such a center and the sort of service it provides encourages and enhances the morale of the business owners and would attract others.
Conclusion
The establishment of small businesses is a necessary ingredient for the well-functioning of the economy of every country. There have been numerous stages of entrepreneurship in the country and the globe. Somalia has recently experienced one of it’s highest rates of entrepreneurship. As a result, many people benefited from the employment created by the widespread small businesses in the country. However, as these businesses surge, the involvement of the government becomes significant. Government plays a major role in the help of entrepreneurship. Government supports businesspersons in many ways such as devising trade policy, lowering or reducing taxes, supplying appropriate training opportunities, improving public infrastructure, creating an impartial legal environment, and creating an entrepreneurship hub to support businesspersons.
Ahmed Mohamed Hassan is the head of Political Science Department at SIMAD University
