ENTREPRENEURIAL CHALLENGES IN THE ESTABLISHMENT OF SMALL- SCALE INDUSTRIES IN ENUGU URBAN

ABSTRACT

The study was done to ascertain the entrepreneurial challenges in the establishment of small – scale industries in Enugu Urban. The aim was to determine the extent to which commercial banks and other financial institutions have out loans to small-scale entrepreneurs. Information was collected through (a) Questionnaires (b) Library reviews (c)Personal Observation. A total of four hundred questionnaires were distributed and two hundred and fifty collected back from five companies in the urban comprising: Herbertex Paint, Paradise Paint, Marshal Paint, Global Paint, Eme-Bus Nig Limited. Through the information gathered from the questionnaires.  It  was  found  that:  small  scale  entrepreneurs  find  it difficult to raise loan from banks again, most small scale business owners enter into business without adequate knowledge of management and without proper feasibility studies about the proposed business. It was also gathered that the cost of producing some of the goods have risen to very high proportion due to government policies  have not been favorable to small  scale  entrepreneurs  especially  in  the  areas  of  importation  of required basic  raw materials  and taxation. The research also reveled that NERFUND was not helping to  solve financial problems of SMES as some of these business owners were not even aware of such fund. Although, government have recognized the important of small scale industries, full attention have not yet been devoted to solving these problems. A number of measures were perceived as capable of solving the challenges posed and some recommendations based on the findings of the study were made and they include. It was suggested that banks and other financial institutions should adjust their lending habit to accommodate the competence of small-scale industries particularly in the demand for high interest rate and collateral securities, starting a business only after thorough feasibility studies have been carried out about the business, making provision for training of staff; creating an agency that will assist the small-scale industries in financial management and other matters, management consultants and those knowledgeable in account, general business should be employed. Finally, the entrepreneurs should make sure that advertisement is carried out. The government should equally  provide   infrastructure  to   enable   the   entrepreneurs  have  a conducive environment to operate on. The researcher hopes that the implementation of the above will help ease the challenges of small-scale industries in Enugu urban and Nigerian in general.

CHAPTER ONE INTRODUCTION

1.1     BACKGROUND OF THE STUDY

Nigeria, like all other developing countries is engaged in the process of diversification of the economy. This is a movement away from capital intensive,  large-scale  industrial  projects to  small-scale  industries  with immense   potentials   for   developing   domestic   linkages   for   rapid, sustainable industrial development.

Nigeria as a country chooses the mixed economy option, that is, an economy where both the government and individuals are free to own and operate factories and industries.

The Federal Government has been encouraging the private sector and participating directly  in industrial ventures  where necessary,  and  also encourages the  use  of local  raw-materials.  Thus,  Inyang  and  Ukpong (1992) states that “Apart from their potential  for ensuring a self-reliant

industrialization in terms of ability to rely largely on local raw-materials, small scale enterprise are also in a better position to boost employee, guarantee a  more  even  distribution  of  industrial development in    the country including the rural areas and facilitate growth of non-oil exports. Steinhoff and Burger (1993:3) posited that approximately 98 percent of all business firms in the United Stated are small-scale. This means that there were about 19 million “small” firms providing products, services and information within the United State in 2009. While the importance of small-scale   enterprises   to   a   nation’s   development   has   been   well recognized, the entrepreneurs of these enterprises are equally faced with some challenges which have constrained their ability to play the pivotal role expected of them.

Entrepreneurship started when people produced more than they needed, as  such,  they  had  to  exchange  these  surpluses.  For  instance,  if  a blacksmith produced more hoes than he needed, he can exchange the surplus with what he had not but needed or he would look for someone who needed his products to exchange with. By this way, producers came to realize that they can concentrate in their areas of production to produce more and then exchange with what they needed. Hence the exchange of this product led to the emergence of entrepreneurship. Nigerians in olden days were engaged in entrepreneurship and the early entrepreneurship is

characterized  with  production  of  manufacturing  in  which  case  the producer most often started with small capital, most of it from his own savings. Early entrepreneurship started with trade by barter even before the advent of any form of money. While modern entrepreneurship in Nigeria started with the coming of the colonial masters, who brought in their wears and made Nigerians their middle men. In this way the modern entrepreneurships was conceived. Most of the modern entrepreneurs were engaged in retail trade or sole proprietorship.

1.2     STATEMENT OF PROBLEM

To be a paid employee in this modern age is very difficult. This is as a result of irregular payment of salaries associated with it. Consequently, one cannot depend completely on his/her salary.

Oshagbemie   (1993:2)   states   that   “This   has   motivated   both   the government  and   individuals  to  focus  their  interest  on  small-scale industrial development at least to solve the problem of unemployment for owner and create some employment opportunities for others. This enthusiasm  not  withstanding,  only  very  few  individuals  in  the  final analysis succeed in establishing their own small-sale industries”. This shows that the dynamic roles of small-scale industries in our national entrepreneurs are not being realized, all to the disadvantage of the whole economy. It has been observed that small scale industries were unable to

achieve  there  Pivotal  goals  due  to  some  challenges  which  shall  be discussed in the subsequent chapter.

1.3     OBJECTIVES OF THE STUDY

This study intends to investigate the entrepreneurial challenges of small- scale industries in Enugu urban specifically:

(1)     To identify the core challenges individuals faced in establishing and operating small-scale industries.

(2)    To  identify  the  roles  of  small-scale  industries  in  the  general economy of this country.

(3)    To find out the prospects of small-scale industries in Nigeria as a whole.

(4)    To find out causes of these inhibiting factors.

(5)    Finally, to find out remedial actions and giving possible solutions.

1.4     RESEARCH QUESTIONS

(1)     What are the challenges facing the establishment and operation of small-scale industries?

(2)     What are the roles small scale industries in enhancing growth of

Nigerian economy in general?

(3)     What are the prospects of small-scale industries in Nigeria as a whole?

(4)     What are the causes of inhibiting factors?

(5)     What are the possible solutions to such challenges?

1.5     SIGNIFICANCE OF THE STUDY

Small-scale industries provide employment for a good number of people. Therefore as the world economy is moving towards a brighter future in the area of industrialization, there is need to continue to promote the small-scale industries.

In  respect  of  this,  the  role  of  small-scale  industries  is  becoming stimulating. This work will help in finding solutions in some of the challenges militating against the performance of small scale industries in Nigeria.  The  information  as  will  be  seen  in  this  research  work  will establish facts why some small-scale industries fail. It will also serve as a motivating force for our people who would like to establish and manage their own enterprises.

1.6     SCOPE

The scope of the study refers to all aspects of the study which the researchers  purposely  eliminated  off  the  study  due  to  some pertinent reasons. It shows the extent of coverage in the study or research boundaries.

In this study this scope of study covers the firms having employment strength of more than one hundred and twenty employees and operating

in Enugu urban on the entrepreneurial challenges of small-scale focusing on paint industries.

A sample of three firms with the same line of product will be studied and the firms under study will be limited to processing that is, business enterprise that undertake the physical transformation of materials from one form into another and offering same for sale to satisfy customers.

1.7     LIMITATIONS OF THE STUDY

This study, though interesting and successful, however, encountered a number of factors as a constraints especially in our country Nigeria where bureaucracy   and   bottled   neck   act  as   limitations  to   free   flow  of information. Some of the constraints encountered by the researcher which tend to limit her study are as follows:

Time: This was a major limitation to the study because it was limited in quantity. Time management is a sole responsibility of the researcher so as to avoid its lack.

The researcher had to find the companies under study, attend her lectures and also has assignments and term papers to work on her courses and pressure of work in her office.

Finance: Indeed such research demand much fund for a successful accomplishment. Due to the location of these firms under research, a large sum of money was spent in transportation and research materials by the researcher.

Respondents: The researcher encountered a great deal of problem most of those given questionnaire were very reluctant to supply answers to the questions.

Some of the staffs were afraid that the information given by them may get out and cause them harm and some were reluctant to entertain interview for fear of unknown due to high level of secrecy.

Therefore, out of one hundred and sixty (160) questionnaires given, only (154) was returned. This, to a reasonable extent, hindered the process of achieving enough information needed for the study as most staff complained that they were prone to query on any unpleasant response they were likely to give.

Sample Limitation: The fact that all the small-scale industries in Enugu urban could not be studied, and information obtained from the few firms cannot stand the test of 100% accuracy to the population are obvious limitation.

1.8     HISTORICAL BACKGROUND OF THE COMPANIES USED

Herbertex Paint Nigeria Limited was incorporated in Nigeria in the year 1983 as a Limited Liability Company. The company with its office/factory at Emene Enugu, commenced business in the year 1985 in the area of manufacturing and production of paints and Allied products. The company produces decorative house paint such as emulsion paint, gloss paint, Tex-coat and car paints. Its initial capital was ten million naira (N10, 000,000.00) which was raised by the shareholders owner and relatives.

Initially, the company has about 50 non-management staff and ten management staff who were all graduates but presently they have less than 30 management and non-management staff. According to the Human Resource Manager Mr. Duru, the reduction in the staff is attributed to the Poor Economic condition in Nigeria.

The company encountered the problem of infrastructural facilities such as Lack of Power outage, poor road network linking to the factory for transportation of their products, Lack of water/borehole which is their major raw-material, insufficient fund, competition from large industries, High cost of raw-materials, High rate in both Import duties, High government Levy, Economic problem i.e. Low patronage etc.

MARSHAL PAINT/CHEMICAL INDUSTRIES LIMITED

Marshal Paint/chemical industries limited was incorporated in the year

1994 with its Head office at No. 9 Marshal paint Avenue, Off-Ihiala

Street New-Haven Enugu.

He  employed  3  workers  at  the  initial  time,  a  cashier  and  2  factory workers. The firm started business with five hundred thousand naira (N500, 000.00).  Presently it  has branches in  Lagos,  Abuja  and  Port- Harcourt and currently has up to 48 staff. This company produces Emulsion paint, Oil paint, Sandless and Tex-coat. This firm raised his initial capital through personal savings and relatives. This company encounter some difficulties such as stiffed competition, lack of Fund, Expertise  in  the  Firm,  mobility,  High  tax  rate  from  government, Economic price Fluctuation, Raw-materials which only 10% is locally sourced.

PARADISE PAINT LIMITED

Paradise paint limited came to existence in 1998 and was registered with Corporate Affairs Commission (CAC). The owner started it as a family business  with  its  office  located  at  No.  1  Pond  Close  Abakpa  Nike Housing  Estate.  He  raised  his  initial  capital  alone.  The  company employed four persons, the production manager, secretary, technician and driver. Presently the company has about 45 staff working in the company.

The   company   employs   both   graduates   and   school   leavers.   The entrepreneur also faced with some challenges such as lack of capital to pay their staff, Banks do not support them by refusing them loan. The Nigerian  government policy  on importation of  foreign  product which made it difficult to get adequate raw-materials.

GLOBAL PAINT LIMITED

Global Paint LTD is also an indigenous company incorporated on the 8th of March 1994.  Its operational head office at Transekulu Enugu,  and braches  at  Emene  and  Abakpa-Nike  all  in  Enugu.  The  entrepreneur started with about 8 factory workers, but currently they have about 35 factory workers excluding the core administrative staffs. Its initial capital

of N 250,000 was raised through the family members. This company produces Emulsion paint, Oil paint, Sandless and Tex-coat. This firm raised his initial capital through personal savings and relatives. This company encounter some difficulties such as stiffed competition, lack of Fund, Expertise in the Firm, mobility, High tax rate from government, Economic price Fluctuation, Raw-materials which only 10% is locally sourced.

EME-BUS NIGERIA LIMITED

Eme – Bus Nig LTD was incorporated  in June 3rd 1987 with head office at 33 Badagry Express way Ojo Lagos and its branches at No. 91 Ogui

Road Enugu and 154 Utako Road Abuja .The company initial capital N

5,000,000.00. This company deals on Electrical materials with the aim of manufacturing and assembling electrical material goods, primarily, the company  import  a  wide  range  of  electrical  and  assemble  them  into finished goods for both rural and urban electrification, it ranges of goods includes: cables such as Amoured and non Amoured cables, XLPE, PVC, Aluminum conductors, for street light and fittings pot, Disc insulators, Lightening Arrestor, D-Fuse and other over head materials. The entrepreneur ecounter some challenges such as insufficient capatia for the business, economic problems such as low patronage, lack infrastructural, High rate in both Import duties,

1.9     DEFINTION OF TERMS

Entrepreneur: This refers to one, who organizes, operates and especially assesses the risk of business venture, he is also an innovator, one that introduces new technologies into the work place or market, increases efficiency, productivity and services.

Small Scale Industry: Industrial policy in Nigeria of 1989 defined small scale industry as those with investment between N100, 000 – 200,000 exclusive of land but with working capital requirement while Wikimedia

2010 define small scale as that which is privately owned and operated, with a labour size of 1-50 employee.

Industry:  This  is  could  be  termed  a  collection  of  firms,  but  in  this context, it means any establishment engaged in production, repairs or serves to satisfy human wants and make room for profit.

Training: This refers to the acquisition of knowledge, skills, and competence as a result of the teaching of vocational or practical skills and knowledge which has specific goals of improving one’s capability, capacity and performance.

Initial Capital: This is the money that is used to start a business such as personal funds, Banks loan, grants, and credits from suppliers.

Shareholder’s Equity: It is shareholders fund/ capital at the start of a business. Owners bringing some fund into business to fiancé asset and this create liability on the business.

Security: It simply means a thing of value that can be used to make sure that one will pay back borrowed money

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