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Rustagi: FG, Banks Should Give More Assistance to SMEs

18 Jun 2013

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Rustagi: FG, Banks Should Give More Assistance to SMEs

There are over 17 million small and medium enterprises (SMEs) in Nigeria, providing jobs for over 32 million Nigerians. But this critical sector is yet to get the needed attention from the federal government. Founder/General Manager of VConnect Global Services Nigeria Limited, owners of VConnect.com, the largest local search engine and information service provider in Nigeria, Mr. Deepankar Rustagi, told Eromosele Abiodunwhat should be done to grow the sector, the role of the federal government and the banks. He also revealed how his company recently provided online presence for over 700,000 SMEs.

As a stakeholder in the industry, can you give an overview of performance of the small and medium enterprises (SMEs) in Nigeria in the last few years?

Small businesses here are very passionate but they require a lot of support to actually grow. A lot of efforts are spent by the banks, government and other infrastructure providers to groom the large scale businesses. Banks mainly focus their attention on big businesses, even the government, how many their policies are targeted at small and medium businesses? I know the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) is there, is this enough? That is not to say they are not doing a good work. Some of the banks also provide some assistant but are these enough? SMEs really need our support. In your newspaper, eight months back, it was published that small and medium scale businesses across Africa contribute more than 50 per cent to their Gross Domestic Products (GDP), but unfortunately that is not the scenario in Nigeria. We still are way behind and that has to change. We have to grow in terms of the contribution of small scale businesses to the nation’s GDP. Small and medium scale businesses have a very important role to play in any economy especially in the area of employment. Again this is lacking in Nigeria. The government and the banks need to direct their policies to SME.

In view of what you have said, what advice do you have for the federal government as to how we can grow the sector?

There are various places where with help of government we would be able to extend our reach to people. When you work alone you can reach a limited set of people but when you work together with government and the banks and companies who understand the importance of small and medium businesses, then we can make headway. This is what the economy actually needs to move forward. So what we say to government or other institutions who want to contribute to small and medium scale businesses is we have objectives, lets discuss the objectives, lets align the goals and we can work together to achieve that. The role governments around the world normally play is to provide infrastructure, government cannot go to any individual SME and give them funds.

What government does is identify the business that can contribute a significant amount of employment and economic growth. Look at hand craft in Nigeria, there are people who specialises in making calabash, leather works, artefacts and what have you. That sector is so underdeveloped, these people have great talent and I have not seen any individual or government supporting that sector. Why is this? Do you know how much export we can get out of that sector?

In terms of employment everybody in the rural area will be employed because they don’t require extra training to do crafts. They do not have to learn French, Japanese, Chinese or even English to do it. All what they need is the right environment and the development of their supply and distribution channel. In India, the cottage industry contributes a large sum to its GDP. In Kenya, wildlife does the same. Why can’t we do it here? We have the skill, the manpower and natural ability to do it. Nigerian arts are well appreciated abroad. Any time I have visitors from abroad the first gift I give them is a local art. Why not export it, why can’t the government train people on how to make business out of this critical sector. Hand craft is just an example, their other sectors like that we have not explored at all.

Specifically, what are the challenges facing SMEs in Nigeria. What is your company doing to assist in this regard?

Last year, SMEDAN come up with a survey on the challenges that small and medium scale businesses face. One of their major challenges according to SMEDAN’s findings was working capital. I think the banks are working towards changing that. Other government institutions like the Central Bank of Nigeria (CBN) have actually provided funds to take care of them. Some of them face challenges like manpower, workforce and getting skilled people and raw materials.

Also, for start-ups to manage on their own is tough. You manage your stock, warehouse etc. alone. In other parts of the world there are software you can install on your computer to help you manage your warehouse, invoices and your inventories. We don’t have those here. But now we are helping small business get these tools on their smart phones. They don’t need to have a computer to have them. Before now, if an SME want to do marketing they had to print fliers and you cannot track the performance of a flier. It is a very expensive form of marketing. Some have argued that fliers are more economical but that is not true.

There are different ways of spending little money so as to get value and return. We have trained them to know that by spending little amount of money they can grow their business on month-on-month basis. That is why we conduct a lot of business forums and we invite the CEO’s of businesses, we partner with them, we provide them with internet and laptops and show them how to utilize the platforms we have created.

Our team members help some of them who are not very conversant with computers and internet. Some have started using smart phones but are not very used to using internet. We give them all the resources so we can actually take them online. Also, we help them measure their return on investment. Marketing is a very important concept. A trader in Alaba International Market may be passionate about what he does but because he is in Alaba international and does not have any control in Surulere, Victoria Island,  Ikoyi and Ikeja where a lot of consumption happens, he loses business. How can a person in Alaba have control over all those other areas?  Online presence actually helps him.

Recently, someone from one of the big companies ordered 300 or 500 leather bags from Kano through our site. It does not matter where you are, online presence is all you need. What I’m saying is a small handy craft person in Kano would not have believed someone from Lagos is going to order 500 or 300 pieces, so we actually give them an avenue to grow their business.

The Nigerian Stock Exchange (NSE) now has a window where SMEs can raise long-term capital to enhance their business and returns to investors. What advice do you have for SMEs who will want to take advantage of this opportunity?

It is a good development. But one thing is to raise money and the other is to put it in the right place. Money does not come cheap. Whoever is investing in you, wherever you are raising money from, there are going to be some responsibilities and liabilities to investors. You must have a strong plan, know where you are going, engage advisers and employ the right tools to enhance returns. As an entrepreneur you have only taken a path where you fill you can control your destiny and you have the appetite for risk taking. Therefore, pick the right objectives and invest strong.

Recently your company moved 700,000 SMEs online how were you able to do this and what impact would this have on SMEs?

When we started our business, we had close to 6,000 to7,000 small businesses or individual driven enterprises online in the Nigerian space. We looked at several initiatives as to how we can change the sector. Our plan was to make websites for thousands of businesses, in that process, we were able to take 700,000 businesses online. We went from area to area and state to state and have combed three states completely starting from Lagos and now going to other states.

Success attracts envy and competition, how do you hope to assert yourself way ahead from your competition?

Building a database is actually a very tedious task and we have the best in the country. So we are already ahead of the competition and we intend to stay up. However, the rate at which we are still gathering data shows that we will soon reach the 1 million mark i.e. 1 million SMEs registered online. As a result we will be the largest local search engine in Nigeria and Africa with more than a million businesses listed on board.

Is access to information on your site based on subscription?

It is a free listing model. Anyone and every business can come and list their services. That it is why it is the most massive portals online in the Nigerian space. That is why we have such high traffic and so many businesses. But if and SME want some paid services they will have to pay. What I mean by that is if you are in Surulere and you have a restaurant, there is no point in sending your message to everyone in Lagos. There are 18 million people in Lagos, you would spend all your money and still not reach everyone, so instead find 300,000 people who are in your own area and promote your business to them. These are tactical tools which help a small business to grow. We give them targeted SMS platform where they can send messages at a particular time.

What measures are being taken to prevent fraudsters from accessing your database?

We do a physical verification of data that is why we have a large team. We have the telephone process were we call SMEs to find out all their details and if we feel there is a need we do a physical verification to see if your business exists. We verify them to an extent that nobody gets into trouble.

Why is your organisation focused on SMEs wouldn’t you want to include multinationals? They too require visibility and growth.

Multinationals have the money to build their own website site and hire people to maintain the sites even if they have to spend N300,000 every month to maintain their cooperate image. But the man who owns a bakery cannot afford that amount. Here there is no cost for them to come online. Multinationals are actually listed here. For example, some oil companies have listed all their filling stations so that their customers can locate the nearest petrol station in their locality.

Our objective is to sell the small and medium scale businesses. It is easy to get money from the large cooperate and difficult to get money from the small and medium scale businesses, but we believe that is the sector that will grow the economy. When talking about economic development multinationals are just about 500 or less. But for SMEs, we are talking about 20,000,000 businesses that can be covered.

Are Nigerian businesses taking advantage of the internet for growth? How do we compare with other countries?

The way online scenario is growing in Nigeria, we are matching up with any other country in growth rate. We are not yet there, but we are growing. Lagos as a city is growing at a rapid pace and I can tell you Lagos is at par with most of the developed economies. As well, we also have other states that are coming up and the rate of growth is much better. So I feel the growth rate is very good, that is why we see over the last two years a lot of internationals investment have come into Nigeria. I know we are the biggest internet force in Africa.

Your effort is quite commendable, but in how many states have you taken this initiative?

We were only in Lagos a few months ago, now we are in seven states in Nigeria. Initially, people found it difficult to give all their details but slowly and steadily with more awareness, things are changing. People now log onto our website to give their business details that is why we have this growth rate. The first eight months we gathered only 200,000 businesses but in the last six months we have actually grown rapidly that is because people are starting to know us with a little bit of marketing and referral. So now it is not that difficult.

What can SMEs gain from Vconnect.com that they cannot get from other search engines like Google?

Very good question again! Google is a data aggregator; Google gives you any website that is on the internet. But someone has to take the initiative to bring the content on the Nigerian space on the internet. Google does not give small business website or the visibility that they require to grow their business. But Google is our big brother, they help us get publicity but when you search for information on Google they take you back to us. To answer your question properly, we are content based and Google is more of a facilitator.

What is your target for SMEs in Nigeria say for the next five years?

In the next five years, 500, 000 small businesses that were small scale would have grown to large scale businesses substantially. What I mean by that is they would have multiple stores to service their clients, they will have the reach in various parts of the country and that will help them to become big entities. I am happy to see large companies grow but I am happier to see small businesses become large corporations.

Registration in your portal is free for SMEs how then do you make money to run your company?

We actually have three income streams. One, we offer tools for SMEs which are monetised. We have a product called FLASH, it is a community tool that helps SMEs retain their customers. It is about survival. For instance, if an SME has 500 customers who regularly buy goods from him, he should know all of them. FLASH helps them in that regard. We give every business a unique number, that number is displayed on their shops, if a customer flashes, you they get registered on your data base. It’s that simple. We also have income from advertising. Banks and other institutions take advantage of the huge traffic we have on our site to advertise their services. Also, we get money from subscriptions. SMEs for visibility purpose pay a token to be placed in a position on the site where they can be easily accessed. We also help them to reach a larger community of customers with our various mobile Apps and this has worked greatly for them.

Everybody knows what it takes to do business in Nigeria given infrastructural problems, can you tell us how much you have invested so far in this project?

Our investment in this project is in two from. One, we have invested heavily on our data base. You know what it takes to gather data and we are not just in Lagos but all over the country. We have also invested in man power. When we started this business it was just the vision that we had, not the knowhow. So we had to train almost everybody to get better result. In all we have invested over $2 million to get to where we are today.

Companies like yours do not like going public. Do you see yourself reversing that trend by getting listed on the NSE soon?

Yes! I am 101 per cent sure of that. I give you an example, a similar company in India went public recently with a $1 billion initial public offer (IPO). I will like to do such thing here. But there is time for everything. The company I am referring to started 20 year ago, they did not go public in their first two years. Ours will not take 20 years but we will go public when we have delivered so much value and take millions of SMEs to the next level.

One last advice for SMEs

For SMEs they should know that everything in business is about customer service and relationships. It is important you know your customers if you are doing well or not. That is why we provide tools for SMEs to know their customers and grow their business. If you don’t know your customers and you think you are up their one day a competitor will come and reduce your market price to take you out of business. So for sustenance and long term growth of your business, you must know your customers!

Can you tell us what you do at VConnect Global Services Nigeria Limited?

VConnect Global Services is a local search engine with the brand name VConnect.com. We provide information of product services and business to millions of people every month. The objective is SMEs and other businesses that can’t have online presence at an economical rate we bring them online and give them the opportunity to trade globally and find customers globally. We provide them with tools that can actually promote them on a global platform.

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