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Ideas & Debate

EDITORIAL: Build on SME optimism

It is significant that Small and Medium Enterprises (SMEs) are expressing optimism, not just in their industries, but also in the economy and they have signalled a willingness to create more new jobs in the New Year.

This is an indication that these enterprises are looking forward to better economic fortunes and expect the economy to pick up. It is also instructive that the Executive recently issued an order compelling all government agencies and departments to pay the debts they owe suppliers.

For the last five or so years, the government has been slow in paying companies that have been doing business with it, thus reducing their cash flows and exposing them to distress.

As such, the willingness to start paying up should unlock cash for SMEs, meaning that they can now start meeting their own obligations besides creating new jobs.

The only danger would be if this new system that the government has adopted is not sustained. Just one misstep will be enough to dampen the optimism of the investing class.

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The decision by the government to remove caps on interest rates should also increase cash in the economy by allowing SMEs, which had hitherto been denied credit, to borrow for expansion. As such, it will be important to ensure that banks price their loans fairly to ensure that they do not make loans so expensive as to be unattractive to SMEs.

Predictability, especially of payment cycles, is important in the world of business. Now that the government has expressed willingness to pay its debts, other organisations in similar circumstances should also put their houses in order so that money can start circulating once again.

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