By Omoruyi Edoigiawerie, Esq
When we think of start-ups and a progressive start-up ecosystem, we often only call up the role that entrepreneurs play. But governments in start-up economies have also progressively played a critical role in developing the start-up culture by creating better policies, reducing the tax burden, and having the adequate infrastructure in place to suit the needs and realities that stare start-ups in the face.
Governments establish regulations and policies that guide businesses. While the regulations are often mandatory and help the government in its oversight role, others are policies that influence businesses directly and indirectly. Government policy more often than not, has a significant impact on start-ups, either positively or negatively.
Policies can shape the regulatory environment, provide funding opportunities, and create market and industry conditions that either enable or hinder the growth of start-ups. Therefore, it is essential for start-ups to keep an eye on policy changes and to engage with policymakers to ensure that their voices are heard.
One of the most significant ways in which government policy can impact start-ups is through regulations. Although regulations are intended to protect consumers and ensure fair competition, they can also pose a significant challenge for start-ups, particularly those in highly regulated industries.
It is often argued that regulation is used to protect and benefit consumers, businesses, and the environment and to support economic growth. The regulation also helps government achieve its policy objectives. For example, start-ups in the Financial Technology (FINTECH) space must navigate a complex web of regulations governing everything from regulatory approvals to audits and clearance procedures. This adds significant costs and delays to their growth process, which can be a major barrier to entry for new start-ups. It is however a “necessary evil” that cannot be removed in its entirety but rather mitigated and modified to be the best fit for start-ups.
Ideally regulation is often a tool for incentivising industry best practice through compliance. Oftentimes government puts in place policies that benefit players in the industry being regulated. One such incentive is funding support; the Nigerian Start-up Act, for instance, provides for various support initiatives including funding that start-ups can leverage for growth and development.
Another very key example is Tax policy; this is another area where government policy can impact start-ups. Tax incentives for start-ups, such as tax credits for research and development, pioneer status, and waivers can provide a significant boost to early-stage companies.
In addition to the above specific policy areas, broader economic policies can also impact start-ups. For example, policies that stimulate economic growth can create a more favourable environment for start-ups. Policies that encourage entrepreneurship, such as incubators and accelerators, can help start-ups get off the ground. On the other hand, policies that restrict trade or make it more difficult for start-ups to access international markets can create significant challenges.
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Policy as a Catalyst for growth
It is instructive to point out that government can implement a policy that changes the social behavior in the business environment. For example, the provision of Start-up Labelling under the Nigerian Start-up Act and the incentives that flow from being labelled are a product of government policies that will help start-ups grow and gain adequate leverage not just locally but regionally. It is therefore essential to pay adequate attention to the processes and the persons who spearheaded the establishment of these policies. Therefore, businesses and entrepreneurs must have a proper understanding of the regulatory landscape.
The Politics of Policy and Regulation
Government policy will always depend on the political culture of the moment. Policy crafted in a politically stable country will be different from that formed in an unstable country. A stable political system can make business-friendly decisions that promote local businesses and attract foreign investors.
Unstable systems present challenges that jeopardize the ability of the government to maintain law and order. This harms the business environment. Bringing this context home, as pivotal and beneficial as Laws like the finance Act, the Start-up Act, and most recently the Business Facilitation Act are, they can only work meaningfully under the right political climate and with the right political culture in place.
This is why it is impressive to see many entrepreneurs exercise their votes at the just concluded Presidential and National Assembly polls. The outcome however is even more important than the participation, as it will not only entrench a firm belief in the system, thereby creating a healthy synergy of private sector players working closely with the public sector (through the ballot) to ensure adequate representation and in turn the enactment of laws and policies that will fuel the growth and development of the Start-up Ecosystem.
In conclusion, government regulation and policy can have a significant impact on the growth and success of start-ups. Regulations, funding programs, tax policies, and broader economic policies can either enable or hinder the development of start-ups, depending on how they are implemented. While regulations are intended to protect consumers and ensure fair competition, they can also pose significant challenges for start-ups, particularly those in highly regulated industries. Broader economic policies can either create a favorable environment for start-ups or make it more challenging for them to succeed.
It is, therefore, essential for start-ups to keep an eye on policy changes and their implementation as well as engage with policymakers to ensure their voices are heard. By advocating for policies that support innovation and entrepreneurship, start-ups can help shape the regulatory landscape to better support their growth and success. Ultimately, enabling policies that support entrepreneurship and innovation is critical to ensuring that start-ups continue to play a vital role in driving economic growth and addressing critical challenges that fuel nation-building.
Omoruyi Edoigiawerie is the Founder and Lead Partner at Edoigiawerie & Company LP, a full-service law firm offering bespoke legal services with a focus on start-ups, established businesses, and upscale private clients in Nigeria. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. His firm can be reached by email at hello@uyilaw.com
