Shed no tears for the 'Think Small' crusade

The Small Business Act (SBA) was piloted by the PN government in 2011 and among others things it provided for the College of Regulators to be convened at least three times each year.  The SBA had a late start under the government headed by Joseph Muscat.  So much so, that he triumphantly announced the holding of the first meeting of the College of Regulators six years later in April 2017.

This speaks volumes for the esteem that is lacking for small and medium sized enterprises in Malta.  We remember the euphoria of setting up a mega Private Public Partnership with Vitals Health Care to revamp three derelict hospitals. The icing on the cake was the vote catching gamble to reduce electricity bills by 25% followed by the mega investment of a LNG plant run by private investors in a consortium styled Electrogas - the latter contractually supplying electricity on a fixed term.

This high regard for mega business dwarfs the significance of SME’s which contribute substantially to the domestic economy.  What is the need to clip the wings of a gold-plated regulation?  Regrettably, we have myriad regulating bodies - sometimes overlapping in their respective agendas.  The uniqueness of the College for Regulators (see Small Business Act Chapter 512 Article 13) is that it aims to simplify the regulatory burdens on SMEs by increasing cooperation between the Regulating Entities.  Readers may ask why do meetings of The College of Regulators not being regularly convened as stipulated at law.

The answer is that the spirit is willing but the body is weak.  Perhaps the SME’s Czar will face the challenge to inculcate a Think Small concept as was originally mandated by the EU directives.  It is good to know that the promulgation of the monolithic Small Business Act was piloted with much fanfare in July 2011.  Historically it formed part of the ubiquitous Small Business Act for Europe (SBA) endorsed by the European Council in December 2008.

It now sits silently in a library of dead letter legislation which is gathering dust on some nondescript shelf in a majestic building called the Main Guard facing the palace in Valletta.  Observers lament that the “Think Small First” principle is not a reality yet and the tool box for SME’s is spartan.  Theoretically this law on paper is the guardian for SME’s on legislation both new and revised as it targets small enterprises (employing less than 250), i.e. in Malta the overwhelming majority of enterprises.

It is a pity that ten years down the line and really and truly the ‘think small first’ concept has never quite taken off the ground (a Dodo).  Some argue this needs a cultural change in local politics and therefore is difficult to achieve - so just be contrite and take a long breath.  Just grin and bear the agony that SMEs in Malta have for a long time been seen by the State - as the Cinderella of the business community.

Unfortunately, much too often SMEs are deemed to be a necessary evil and given second preference as prime opportunities are usually the domain of  mega businesses - contemplate how government agencies prefer the latter when issuing tenders even though the EU encourages us to be more supportive to start-ups and when merited to concede a second chance to relatively untested SME’s bidders.  It goes without saying that this handicap discourages the small business sector in its quest to become more entrepreneurial and join the digital revolution.

Rules written for a small business can be easily scaled up to cover bigger enterprises, while doing the contrary is terribly complicated.  Ideally, this motto should be used consistently and with more determination throughout the whole regulatory and implementing process.

Applying this principle will dramatically ease administrative burdens.  It is pertinent to mention that the Chamber for SME’s (ex-GRTU) has been active to support the Think First policy and since 2010 was arguing with the authorities to resist the temptation to tinker with the SBA directives by the use of “Gold plating” the rules.

Simply put this is the practice of exceeding the terms of EU legislation and adding undue and unnecessary clauses, which in turn fans more red tape.  In particular, government departments are encouraged to respect the proportionality principle when it comes to judge SMEs in areas of compliance and administrative requirements (including AML/CFT rules).  This principle means that legislative or political provisions should scale down on the demands posted on SMEs, since as can be expected the impact on their activities is disproportionality high.  But this is Utopian.

In fact the six year hiatus in setting up an active College of Regulators did not help the SBA’s cause.  Unless regulators meet frequently in an effort to shift through thousands of acts that generate unnecessary bureaucracy - then the molehill turns into the proverbial mountain and no Colossus will be strong enough to dismantle it. Nostalgically, we recall how the introduction to the SBA act in 2011 solemnly asserts that “It further sets up the Enterprise Consultative Council and the College of Regulators, which aim to provide a forum for consultation and social dialogue, advise Government on challenges faced by the business enterprise, address grievances which emanate from the business enterprise and come up with remedial action”.

Reality has shown us a different picture.  Undoubtedly our political mindset tainted with a Colonial past and an ingrained prejudice against ‘small is beautiful’ tempts politicians to support anything that is larger than small which in their own misguided perception leads to the hubris when big numbers are at play (eg the kid glove treatment to high rise developers).

All the closures and health restrictions by small businesses due to Covid 19 has further dampened the resolve of family run units.  Empty words of support by the State - paying pennies for a rent subsidy or a reduced furlough wage - this means SME can survive until their limited savings dry up.  Ideally, the College of Regulators do meet regularly to mitigate the hardship that Covid 19 measures have introduced due to a drop in spending power by customers, curfews and/or closures of premises.

NSO informs us about a severe drop in GDP faced last year - so it is doubly important for Castille to conduct regulatory and independent surveys about their deliverables to SMEs and start-ups.

Last, though not least, the SBA mandates that any public sector entity rendering services to the public shall carry out a customer satisfaction survey every two years, with the aim to establish the impact it is having on the community.

One augurs the Commissioner for Simplification, takes a sprint in the awe-inspiring task to resuscitate the SBA provisions.  It is the least one expects in the post Covid road map.