Creative employment of private sector capabilities for economic development

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Gbenga Daniel1111

(Keynote Address by Otunba Engr Gbenga Daniel, FNSE., FNAEng., FIoD., at the Institute of Directors, Nigeria)

PROTOCOLS.

My discourse, today, with this honourable gathering is driven as much by personal experience as well as empirical studies. It is a matter of common knowledge that I have been privileged to lead some of Nigeria’s successful private enterprises, in addition to having served as the Governor of Ogun State for a total of eight years! In other words, I have gathered experience from both the private sector and the public sector, and my qualification for discussing the imperative of economic development through the deployment of private sector capabilities and competence cannot be easily discountenanced.

You must have heard it said at one time or the other that “Government has no business with business”. This may be true to some extent, but it is not totally correct. There is a particular level of synergy required between government and the organized private sector to ensure positive economic development. The government’s duty is to provide the enabling environment for private businesses so that they will prosper and catalyze the operating environment for a profitable and sustainable economic growth and development!

I make bold to declare that there can be no business without government, and there can be no government without business. Government requires businesses, not only as sources of revenue, but also as tools for executing state policies and plans. Businesses require government, not solely for control and monitoring, but also for advancement of strategic corporate intents and objectives. It is for these reasons that the government pays attention to happenings at the stock exchange and also the rural markets, while businesses closely monitor governmental budgets, as well as fiscal and monetary policies. Bottom line is that the decisions of government affect businesses as much as the well-being, or otherwise, of businesses affect government.

Economic development for government is indicated by the ease of funding the provision of social and physical infrastructure, increasing gross domestic product and gross national income, positive balance of trade, low deficit budgeting, increasing revenue profile, reduced unemployment, minimal social vices, enhanced security and political stability. The organized private sector will consider economic development from the perspective of enhanced balance sheet, lower finance cost, minimal production cost, maximum output, availability of physical infrastructure (without having to invest directly in its provision), increasing demand as a result of enlargement of purchasing power, lower cost of funds, ease of access to development financing, lower taxes, increasing stock of manpower and human capital resources, vibrant market, etc.

A critical evaluation of these indices from both sides of the divide will clearly show that the private sector experience is a function of the initiatives on the government side. It is for this reason that we can safely state that the two institutions cannot be exclusive of each other, but they are mutually dependent on one another. Having said this much, I will like to delve into the core issue of the imperative for deploying the potentials and capabilities of the private sector for national economic development.

A basic index for measuring economic growth and development is the GDP (Gross Domestic Product). This is the sum total of the value of all goods and services produced within an economy. A growing GDP is indicative of economic development. A declining GDP is indicative of the reverse. By and large, it is the private sector that drives the growth or decline of the GDP. It may be argued that there are public corporations that contribute their quota in terms of output of goods and services. That cannot be dismissed. However, we all agree that no public corporation can run effectively and efficiently as a private business.

Most private businesses are committed to excellent service and product delivery at an optimal cost and the highest possible return on investment. The same cannot be said of many public corporations. Beyond the issue of bureaucracy, most public corporations have an element of social service built into them. These social services bear cost which impact negatively on the balance sheet of the corporation. In some instances, there will be bloated and oversized workforce, unwieldy expenditure profiles and such leakages that translate into inefficiency of cost in relation to output. This is the reason for several public corporations relying on subventions from government despite being actively engaged in revenue-generating activities!

At the other end of the economic divide is the private business that is concerned about the return on assets employed, return on investment, minimal cost of production of goods and services, minimal cost of sales, minimal downtimes, efficient production processes, compliance with corporate governance, health, safety, security and environment (HSSE) of the production or service process, enhanced value chain, positive balance sheet, sustainable profits, shareholder equity and increasing dividends. These drivers of private business translate to efficiencies in production and service delivery. By extension, this translates to higher remunerations and increasing standard of living for private sector operators with its attendant multiplier effect on the economy. With increasing efficiency, the quality of goods and services produced by the private sector businesses are improved. Production capacities are enlarged and the “cycle of prosperity” is enlarged.

My submission, here today, is that until governmental policies and plans are focussed on ensuring that private businesses are empowered to succeed, the much-needed economic development will remain a mirage! Having managed private businesses before volunteering for public service, and having returned to active private sector operation, I confidently assert that the panacea to our dwindling national development is encapsulated in the empowerment of our private sector to perform better. Casting our minds back a few paragraphs, I had mentioned that it is the business of government to provide the enabling environment for private businesses to operate efficiently and productively. In the absence of government’s engagement, the dream for economic development will remain unrealizable.

WHAT MUST GOVERNMENT DO TO REALIZE THE FULL POTENTIAL THAT IS INTRINSICALLY INHERENT IN PRIVATE SECTOR BUSINESSES? The era in which private businesses are also run as local government businesses need to come to an end! By this, I mean that private businesses should no longer be the purveyors and providers of basic social and physical infrastructure like access roads, potable water, staff school, electric power and private security. It is rumoured in certain sectors of the economy (especially manufacturing) that the cost of providing power is often as much as 35% of production cost. Let us imagine what will happen if manufacturers do not have to provide their own power generators.

More importantly is the fact that businesses will be able to deploy the resources freed from no longer having to provide electricity into more productive ventures. There will be less stress on finances, reduced environmental pollution and a definite expansion of production capacity. That is just one out of so many diversionary influences from the core competence of the private business. It must be emphasized that government should assume the onus for ensuring that businesses operate in an environment that brings out the best in the private sector. The attendant benefits to government cannot be wished away.

The backbone of every business organization is the availability of affordable and sufficient funding as and when required. It is the business of government to ensure that the financial system is structured to encourage entrepreneurship, research and development and creative corporate finance and investment. We run a peculiar economy in which the financial system does not adequately support the private sector, yet it wants to derive maximum benefit from the organized private sector. I am amazed that several businesses are still surviving in our double-digit interest regime and financial squeeze. Our operating environment can be described as the proverbial “squeezing water out of the rock”! It is the business of government to protect businesses so that businesses can prosper and be beneficial to the government. I am not sure that we require rocket scientists to work out the formula for re-denomination and re-decimalization of our currency, as well as imposing a single-digit interest regime in our financial system.

Let me conclude this presentation by stating categorically that I believe that the key to the development of our economy is in the construction industry! This is one industry which capacity for immense contribution to our economic emancipation and growth is grossly under-estimated and understated. An understanding of the construction value chain will help to make my point clearer.

This is one industry that employs and engages various competencies across a broad spectrum of professionalism and abilities. From the human resources – consultants, engineers, technologists, technicians, artisans, support staff (administrative, finance, logistics, etc.), to the natural resources engaged in the construction process – quarries, water, granite, cement, sand, etc., it is difficult to see any other industry engaging such a multi-facetted combination of resources in its value chain.

If we must kick-start our economy through private sector engagement, it is high time we start re examining the cost of our projects and its execution. I have always marvelled at the cost of some of our projects especially bridges et al. Probably because as an Engineer, I am aware that the construction of these bridges and lads is no more than aggregates consisting of cement, steel reinforcements, stone granites sand and water. Not gold and diamonds.
Permit me to share this trending interview script from a Jewish Leader about Blacks. It is very instructive and a most appropriate evaluation of our situation as a people:
INTERVIEWER: Why are Blacks so behind economically?
JEWISH LEADER: The only aspect Blacks understand is Comsumption. Blacks don’t understand the importance of building wealth. The fundamental rule is to keep your money within your racial group. We build Jewish business, hire Jewish, buy Jewish, and spend Jewish. There is nothing wrong about that, but it is basic rule blacks cannot understand and follow. “He kills his fellow blacks daily instead of wanting to see his fellow blacks do well. For example, 93% of blacks killed in America are by fellow blacks.
Their Leaders steal from their people and send this money to their colonial masters from hom they now borrow the money from.
Every successful black man wants to spend his money in the country of his colonial masters. They go on holiday abroad, buy hoses abroad, school abroad,  etc instead of spending this money in their own country for the benefit of their own people.
Statistics show that, Jewish monies changes hand 18 times before leaving the Jewish community while for blacks, its a maximum of once or even zero. That’s why blacks are at the bottom of every ladder of the society.
It will shock you to note that, Nigerians are the biggest buyer of Louis Vuitton, Hermes, most expensive shoes, dresses, and houses.
Whereas we have the resources to industrialise Africa and build enduring institutions.

There is a need for a paradigm shift in allocation of resources to finance projects. Let us consider investing 50% of our resources in the construction industry, 30% in agriculture and 20% in the oil, gas and the solid mineral industry. I predict that we will experience the kind of boom that is beyond our collective imagination. Imagine what will happen if we decide to fill the housing deficit of 14 million houses using indigenous labour! To deliver 1 million houses per annum will translate to the direct employment of about 8 million people and about 24 million people indirectly. Apply the potential earning capacity of these ones, and the disposable income at their behest being injected into our economy, you will be able to appreciate my thinking that the construction industry is where we should focus on if we truly desire a creative employment of private sector capabilities for our economic development.
Why do we keep talking about unemployment when the potential, the need and the capacity and the solution are staring us all in the face.

I thank you for this opportunity to share my brief ideas, and I appreciate your patience in listening to me. Please, accept my sincere regards.

Otunba Engr. ‘Gbenga Daniel, FNSE., FNAEng. FIoD.
Chairman, Kresta Laurel Ltd
Ogun State Governor 2003-2011

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