My Thoughts on Technology and Jamaica: Why 10000 firms registered in 2015 at Companies Office of Jamaica heralds Recession in 2016

Friday, December 25, 2015

Why 10000 firms registered in 2015 at Companies Office of Jamaica heralds Recession in 2016

“Things have been better. Private sector credit has been improving and we have seen a sort of stabilisation in the exchange rate in the last year of just four per cent devaluation. We have seen lower interest rates, lower inflation and what we have also seen from the PSOJ is more people coming out of universities and starting business, so there is a more vibrant SME sector"

Chief Executive Officer of the PSOJ (Private Sector Organisation of Jamaica), Dennis Chung commenting on the increase in businesses and company registration at the Companies Office of Jamaica in 2015

I was always told by my parents that there are only three ways to make money in the world; Beg, borrow or steal and time is money. Looks like a lot of Jamaicans are tired of the boss stealing their time, leaving them begging for more, so they've and have decided to borrow time to become their own boss!

More MSME (Micro Small and Medium Enterprises are taking the plunge as reported in the article “Enterprise registrations expand by 20%”, published Wednesday, December 23, 2015 by
Karena Bennett, the Jamaica Observer.

According to data provided by the Companies Office of Jamaica in 2015 collected up to Friday December 18th 2015:

1.      10,733 enterprises have registered companies and businesses
2.      8,777 enterprises had registered companies and businesses in 2014
3.      9,317 enterprises had registered companies and businesses in 2009
4.      5,320 enterprises had registered companies and businesses in 2002

The latest figure means we're back to the year 2009, which was the year of the Global Recession due to the collapse of the banking sector in the US of A because of sub-prime lending as noted in the article “A Global Breakdown Of The Recession In 2009”, published 1/15/2009 by Nouriel Roubini, Forbes.

The JCC (Jamaica Chamber of Commerce’s) Conference Board in its Business and Consumer Confidence Indices suggest 65% of companies in Jamaica were confident that the economy was recovering. As such, they say 2015 as a good year to expand their productive capacity as 2016 and beyond is looking kinda bright.

This rosy picture painted by the JCC's Business and Consumer Confidence Indices might not be entirely true and may really be a case of them wearing rose tinted glasses.

So many of these entrepreneurs are doing so not because they have a zeal to start a business. They are starting businesses because many of them are out of work and unable to get work. 

Like the entrepreneurs of Bowens Road, St Andrew as detailed in my blog article entitled “How Entrepreneurs Dianne Facey, Lillian Henry and Al Barrett are people on the Move” they realize that the only way out of their financial predicament is to create their own  businesses.

Jamaica’s entrepreneurial zeal - Global Warming, Remittances downturn herald Global Recession in 2016

These Companies Office of Jamaica stats in 2015 make more sense if broken down in terms of businesses and companies:

1.      8,565 businesses registered
2.      2,168 companies registered

Over a ten year period spanning from 2005 to 2015, the Companies Office of Jamaica stats look a little more interesting:

1.      64,830 individuals registered business
2.      19,809 individuals registered companies
3.      7,648 businesses closed
4.      1,170 companies were closed or removed

Most of these businesses were most likely MSME's and based on these decade long figures, are less stable than larger companies, who probably downgraded instead of completely shutting down. The fact that the bulk of new firm being formed are MSME indicates that they're responding to the current job climate.

Not only are many of these entrepreneurs facing increasing job losses but reduced salary prospects as the Jamaican economy fails to grow at a rate fast enough for companies to increase hiring or salaries as noted in the article “Jamaica’s economic growth remains 'anaemic' — World Bank”, published Wednesday, December 09, 2015, The Jamaica Observer

To quote Chief Executive Officer of the PSOJ, Dennis Chung: “I’m not surprised; a lot more people have started their own businesses. If you look at the activities of the JBDC and the Development Bank of Jamaica in terms of SME angel investor network you are going to find a lot more persons registering businesses. Remember also that because there was such high unemployment, then the alternative to that is to go and start doing something. The fact is that the Government is more stringent in terms of tax compliance and is out there more in terms of enforcing the need for registration”.

Startup difficulties worthwhile in the long run – Global Recession due to Remittances and Global Warming

Starting a business is equally hard, as albeit the JBDC (Jamaica Business Development Corporation) may have a Mobile Business Clinic Initiative, thanks to a JA$25 million grant from the National Commercial Bank and Fidelity Motors, many businesses fail to secure funding.

This is mainly due to a lack of business plans, which is responsible for 20% of applicants failing to get a business loan as noted in my blog article entitled “20% of Jamaican MSME's Fail to get Bank Loans - Why MSME's need Business Plans, Marketing Plans and Market Research”. 

This might be a good move as Jamaica is facing yet another Global recession this time cause by the falling price of Oil. This translates to lower remittances from the US of A and Saudi Arabia due to lower earnings and employment caused by US$50 Oil as predicted in my blog article entitled “World Bank's Global Remittance Slowdown - Why Jamaica's Remittance will slow in 2016 as Saudi Arabia Runs out of US Dollars”. 

This is further compounded by climate change, which is affecting Agriculture as well as other business depend on water in Jamaica as noted in my blog article entitled “How the Drought of 2015 means higher prices for Jamaican Christmas 2015 and Easter 2016”. 

2016 is truly the year of the Monkey, as it'll make mischief with the economy, remittances to Developing World countries as well as increase natural disasters such as drought and hurricanes

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