You are here: HomeWallOpinionsArticles2017 02 15Article 510162

Opinions of Wednesday, 15 February 2017

Columnist: Adobor, Henry

Implementing the “One District, One Factory” idea

Henry Adobor, PhD

The idea of citing one factory in each district as proposed by the government is intriguing. It is easy to dismiss it outright as a political gimmick but we should welcome it. As a nation, we have gotten into the habit of dreaming small; and delivering even smaller for our people. It is about time we think big again and this idea certainly falls into that category.

Properly and carefully implemented, this program can help promote rural economic development. However, I hasten to add that good intentions alone would not be enough. As the Scottish poet Robert Burns reminds us, “The best-laid plans of mice and men often go awry.” It is true that sometimes the best plans and intentions may go unrealized.

I present below some of my thinking on this idea, not in any particular order, in skeletal form only, for lack of space. I may not be saying anything radical and new, still a reminder would not hurt.

I am not sure why a “factory” and what yardstick is going to be applied to define a factory. Factories can range from large ones to very rudimentary ones. I would broaden the definition of what constitutes a factory here. Maybe the word factory should not be used at all since it may give the wrong impression. For example, a cooperative made of commercial bee keepers who start clarifying the raw honey and bottling it on the farm is as much a legitimate operation as a factory as canning tomatoes on a large scale.

Beneficiaries. The government should not be in the business of building or owning any businesses. They do a terrible job as it is managing their own affairs for the most part. Their job here should be to create the conditions for private citizens to create businesses in the districts. I believe this is one condition they should not compromise on. I hope this is what the government has in mind. Provide the hooks so private citizens can do the fishing.

Think about the idea again. Now is the time to question the assumptions behind this idea. I do not presume that those who came up with the idea have no models in mind. That said, it is absolutely necessary to examine the assumptions again and do so openly and frankly so others can question these and for its sponsors to explain their thinking behind it and what they propose to do. Much is likely to be gained during that process. After all, this frame breaking idea is, at some level, a giant leap of faith; an aspiration that must now be translated into something more concrete and operationalized for implementation. That means we now have to think carefully about what has to be done, how it will be done, when it will be done and who will be responsible for doing what. We cannot assume that things will just fall into place and the idea would work. I would urge the President’s Economic Team or whoever is in charge of this to question their initial assumptions. Ask: how will this work? Do we have a plan to roll this out? Have we carefully thought this through? What can we do wrong? Are we prepared to learn? These and similar questions need to be carefully answered before any steps towards execution taken.

Distribute your blueprint for implementation if you already have one. If not, produce one and let it be open for discussion. Based on feedback, modify your plans if need be. Do not be driven by political expediency to rush to execute this strategy. If it takes two years to refine the model, so be it. This should not be about the next election. Rather, it should be about economic transformation. Transformation is a radical thing. It takes time, challenges the status quo, and should be questioned. Take a constructive view of all criticism because they may be helpful.

Funding should not go to startups/new businesses only. A startup is a business designed to create a new product or service. But there is a lot of uncertainty surrounding any startup and success is by no means assured. Therefore, if there is already a viable, operating business in the district that may benefit from the funding to scale up, it would make economic sense to help that business instead of funding a new one. The government should not worry too much about taking credit for building something new. New is not always better. Worse yet, in the case of new businesses, new may be riskier.

Use a Lean Approach. The Lean Approach is a moniker for sensible management. This approach encourages one to proceed incrementally, focus on the value they will deliver to customers while conserving resources in the process. Go steady, see what works, drop what does not work. That way, you reduce the chances of failure and conserve resources. I encourage the government to act similarly. I think the government should pick a maximum of five districts as pilots and see how things go. If feasible, proceed. If not, learn from it and make modifications and adjustments. Trying this out in a few places and taking note of lessons learned would prove indispensable in the long term. The lessons you learn in the pilot should make you question some of your initial assumptions and improve on execution.

It is important that any funds be clearly understood for what they should be, loans not grants. A grant is free money. A loan, on the other hand, is something that needs to be repaid, often with interest. My suggestion would be to levy some nominal interest on the loan. Loans must have some assurance for repayment and the assets of the company should serve as a guarantee until the loan is paid off. That, of course, means there should be equity, some money invested by owners and the government money used as a loan to supplement the equity investment. My suggestion is for payments of the funds be in tranches tied to milestones agreed upon beforehand. This will ensure that an operation that is failing may not receive all the funds allocated to it.

Selected projects should be thoroughly vetted by independent third parties. These projects should be economically feasible. I read something about one of the ministers saying the number of employees any recipient of the fund is going to employ would be a key criterion. If you tie this to just employment, it would be a false start. Businesses hire the number of people they need, not what they are pressured to hire. It would be a grave error to think of this as some employment avenue. I agree employment is necessary but please do not place too much weight on that in the beginning. Feasibility defined in terms of probability of success, soundness of idea, and the qualification of sponsors to deliver on plans should be the main drivers. Remember that it is a growing business that hires more people, a failing one lays off some hires, and a failed one lays off all its employees.

Transparency and accountability. These two words may be some of the most abused words in our vocabulary. We tend to pay lip service to them but do the opposite. Governments should remember that all money is actually the people’s money and we have a moral responsibility to at least safeguard how we disburse the people’s money. The government should clearly lay out, publicly, how such funds are going to be disbursed, and ultimately, disclose every single outfit in every district that got the funding. The criteria used to select the beneficiaries should be made public. My suggestion is that the final decision to release funds should be made by none other than the Minister of Finance himself. That way, we know who to hold responsible at the end of the day. Please do not just throw this money at the districts, least it generates a feeding frenzy.

Plan not to fail, but failure should be an option. Most startups and lots of businesses fail. In this particular case where political goodwill is going to be tied to the success of the investments, there is always the danger to escalate commitment to a project even if the sensible thing would be to allow something to fail. Simply put, we should avoid throwing good money at something that is failing because there is political goodwill to be had from it. Sometimes allowing the venture to fail would make more economic sense.

Provide institutional support, not just money. Each region must put together a Center for Small Business Management, or at the very least, each region must have a Chamber of Commerce. Each district, in turn, must have a district level Small Business Management Center where basic management, accounting, and financial management skills can be taught. National Service Personnel in each district can be used to teach these basic skills. Successful businesses in each region must be paired with new/existing businesses benefiting from this fund so they can mentor and advise them. There is often a lot of untapped goodwill business owners have, their willingness to share knowledge often goes unused. Instead of just asking businesses for donations, seek their mentorship because that would be more beneficial in the long term. One goal should be to generate a multiplier effect, each successfully funded project should bear other satellite projects and they should serve as a learning laboratory for other smaller projects in the district.
Use successful businesses as benchmarks. There are some rather well-run private businesses in almost every region. I have little doubt that the owners would be more than happy to share their knowledge with others. I know there are some business breakfast meetings at least in the cities. That and similar forms of get-together should be encouraged at the regional and district levels.
My advice to districts. Whenever possible, be a partner and invest in viable projects in your districts. If you do, leave the management of the business to the experts. The goal is for the districts to aim for a marginal level of self-sufficiency in funding their activities.

Learn from others and our own past. The Taiwanese, working with a comparable level of infrastructure their colonizers, much like what the British left us, have been able to turn a small Island with a population of about 28 million into a global economic powerhouse. People always remind us about how at independence we had about the same GDP as South Korea. Today, we have not even reached the stage of agro-based industrialization, let alone move on to manufacturing and high technology as both countries have done. We can learn from others, but more importantly from our own mistakes as we move forward as a nation.

And Finally. We have reason to be skeptical about manifesto-driven ideas or any idea that comes from the government for that matter. The past performance of most government funded or initiated projects gives us little comfort. Well-intentioned projects have fallen by the wayside; viable projects badly executed and millions wasted in the process while our rural health posts lack basic supplies. But that is no reason to dismiss bold ideas out of hand. The key is to hold the government’s feet to the fire and offer counsel if and when we can. We can do much to increase the chances that this bold and novel idea is properly and successfully implemented. I certainly wish the government lots of luck.

Henry Adobor, PhD (hadobor@gmail.com)