Entrepreneurial activity falls below 2017 levels
STAGING A comeback after five years, the 2021-2022 Global Entrepreneurship Monitor (GEM) Report, released in March 2023, shows significant changes in the entrepreneurial ecosystem in Jamaica.
The report indicates that Jamaica’s early-stage Total Entrepreneurial Activity (TEA) rate in the 2021-2022 Adult Population Survey was 6.5 per cent. Researchers note that this indicates a significant reduction from 9.9 per cent since the previous report was published in 2016-2017.
Specifically, in the nascent category, individuals who have attempted to commence business operations within the past year, the TEA rate was 2.2 per cent.
For the category of baby businesses, those starting and running a business and paying wages or salaries for three months or more, the TEA was 4.3 per cent.
The writers commented: “These rates may be attributed to the high number of cases of infected persons resulting from the COVID-19 pandemic, which restricted economic activity.”
GEM is produced by a consortium of national country teams, which carry out survey-based research on entrepreneurship and entrepreneurship ecosystems around the world. In the island, the GEM survey is done in association with the University of Technology, UTech, through its College of Business and Management.
In comparison to the 2017 report, the number of established businesses in Jamaica has decreased to 6.3 per cent.
St Ann accounts for the lowest TEA, 0.7 per cent, but also has the highest proportion of nascent entrepreneurs, 100 per cent. On the other hand, three parishes – Portland, St Thomas and St James – account for the highest proportion of baby business owner-managers, with 100 per cent each.
The GEM survey for Jamaica indicates that the majority of the entrepreneurs involved in TEA are self-employed,37.5 per cent, followed by those employed on a part-time basis, 35 per cent.
The nascent entrepreneurs are employed in business activity mainly on a full-time basis (18.4 per cent), while the majority of the baby business owner-managers are employed on a part-time basis (42.7 per cent).
Overall, the baby business owner-managers are more likely to be employed in entrepreneurial activities, while the majority of the nascent entrepreneurs are not working (21.0 per cent). The GEM 2021-2022 Global Report posits that there has been some decline in the TEA rates during the pandemic.
Of the nascent entrepreneurs and baby business owner-managers who responded, the majority, 18 per cent and 34 per cent, respectively, reported an annual household income below $20 million.
The majority of adults, 26.3 per cent, reported an annual household income below $20 million.
“This is a concern for Jamaica. Nandamuri and Gowthami (2013) find that there is a significant correlation between household income and an individual’s inclination to start a new venture,” the writers commented. “Ostensibly, high-income individuals would have better access to resources to take hold of entrepreneurial prospects. This also appears to be a global issue.
The survey reveals that 34.4 per cent of adults of the TEA completed secondary school. However, only 12.3 per cent of adults have completed tertiary education. The majority of baby business owner-managers, 32.5 per cent, received post-secondary education.
The writers stated: “This is a very positive indication, as attaining this level of education can equip an individual with the required knowledge and skill sets for conceptualising entrepreneurial ideas, starting the corresponding business, and managing it effectively.”
The report also noted that higher levels of education tend to result in higher levels of entrepreneurial activity.
The majority of the entrepreneurs in the combined TEA also live in the bordering parishes of St Andrew and St Catherine, with more nascent entrepreneurs living in St Catherine. In addition, the majority of nascent entrepreneurs and baby business owner-managers earn an annual household income below $20 million. The majority have likewise received post-secondary education.