Identification of Barrier for Development of the Sri Lankan Small- and Medium-scale Gem Mining Enterprises: A Case Study Based on Ratnapura District

Identification of Barrier for Development of the Sri Lankan Small- and Medium-scale Gem Mining Enterprises: A Case Study Based on Ratnapura District

  • Case
Abstract

Small- and medium-scale enterprises (SMEs) have been recognized as a critical segment and lifeline to push development and social improvement in Sri Lanka. The case begins with an examination of the essential trademarks of gem mining SMEs and the study discusses the primary issues which thwart improvements in this industry and will suggest necessary improvements and changes.

The study is composed of an investigation in Ratnapura locale with organized questionnaire surveys and meetings with stakeholders. The vicious cycle of the SME model may be utilized to study the prevailing barriers in the gem mining industry. Marketing, technology, data and administration and administrative issues are identified as the main problems. Gems prices are kept at a falsely low level for those purchasers who come for repeat buys. This is the major sticking point in the development of the lifestyle of the minors who are still extremely poor, while the gem buyers have prospered.

Case

Keywords: Gem mining, SMEs, vicious cycle, barriers to SME, gem prices

Introduction 1

The development of the Sri Lankan small- and medium-scale enterprises (SMEs) is paramount for the country’s economic growth and development, as stated by many researchers by looking at their contribution with many indicators (Dasanayaka, 2011a, 2011b, 2014). This research identifies the barriers in the development of gem mining SMEs along with identification of basic characteristics of this hidden informal industry. Identification of barriers, which hinder the development of this industry segment along with characteristics, will be beneficial to find effective solutions to overcome these barriers for the development of this sector. The policy recommendations proposed in this study will be beneficial for relevant authorities and apex bodies to take necessary measures in order to develop gem mining SMEs and uplift socio-economic conditions of the people who are engaged in this hidden informal business.

The improvement of SMEs will be fundamental to the country’s financial development instrument (Dasanayaka, 2011a, 2011b, 2014). This study examines the situation taking cognizance of obstructions for the improvement of gem mining industry. ID number about obstructions, which ruin the advancement of this industry fragment alongside business qualities, will get a chance to be useful to figure out compelling answers for beating distinguished obstructions to create this sector. The approach recommended in this study will be useful for all stakeholders in this business. Furthermore, results of the research should get vital measures to create gem mining SMEs and uplift socio-monetary states of the individuals who are captivated in this stowed-away casual business.

Methodology

The research methodology is basically focused on questionnaire survey, interviews with stakeholders and intensive literature survey. Conceptual model is developed based on the famous vicious cycle of SMEs (Dasanayaka, 2008; Dasanayaka et al., 2011). Interviews were conducted with senior officers at the National Gem and Jewellery Authority (NGJA), Ratnapura to gather more practical information on gem mining enterprises and understand the view of government institution on informal sector small-scale gem mining enterprises. Informal discussions with gem mine shareholders were very beneficial to understand real practical issues in gem mines. Since the empirical research carried out in this area is limited (Dasanayaka et al., 2016), it was decided to conduct the study through a survey of SMEs based on a structured questionnaire. Utilizing the knowledge and information gathered from the literature review, interviews and informal discussions with gem mine shareholders, conceptual framework, questionnaire and research methodology were developed. Questionnaires were distributed among 100 gem mine shareholders in different geographical clusters in Ratnapura (city of the gems) district. To collect data from all the geographical areas of Ratnapura, this district was divided into eight geographical clusters based on polling division distribution within the district. According to the data obtained from NGJA, number of small and medium gem mining licences given in different polling divisions are not the same, and it emphasizes that gem mining is not distributed evenly throughout the district. Hence, 100 samples were collected based on the percentage of gem mining licences given in each polling division in Ratnapura district. Total 100 samples were selected from Kalawana (13), Ratnapura (17), Nivitigala (15), Pelmadulla (19), Eheliyagoda (15), Balangoda (10), Rakwana (9) and Kolonna (2).

Conceptual Framework

A conceptual framework was developed based on the empirical model, which is called ‘vicious cycle of SME’ developed by Dasanayaka (2008, 2011a, 2011b, 2014). The framework as developed is depicted in Figure 1. In the conceptual framework model, nine factors have been identified as constraints which hinder the growth of gem mining SMEs. These nine factors were identified primarily based on ‘vicious cycle of SME’ model and data gathered from literature review, interview with senior officers of the NGJA (Ratnapura) and some gem miners and shareholders.

Figure 1. Conceptual Framework
Figure

Source: Dasanayaka et al. (2011).

Out of the nine issues identified in conceptual framework, six issues were already described in available vicious cycle of SME model. Those issues are as follows:

  • Finance-related problems.
  • Marketing-related problems.
  • Technology-related problems.
  • Managerial skills related problems.
  • Information-related problems.
  • Government administrative and regulatory-related problems.
  • Shareholder-related problems.
  • Weather-related problems.
  • Knowledge-related problems.
Operationalization of Variables

To quantitatively analyze the hypothesis in conceptual framework, operationalization table is developed. There are nine variables in the conceptual framework. These are further divided into 23 indicators and these 23 indicators are further subdivided into 35 measures. Table 1 represents the operational aspect of variables.

Table 1. Operational Aspect of Variables

Concept

Variable

Indicator

Measure

Reference

Vicious cycle of SMEs

Finance-related problems

Capital requirement

Risk of return

High cost of initiating gem mine Non-availability of loan scheme for gem mining

Uncertainty of return

Amarasinghe (1999)

Priyanath (1999)

Marketing-related problems

Marketing capabilities

Pricing uncertainty

Not having proper method for marketing

Not having proper place for marketing

Buyers organized and maintained prices at artificially low level

Dasanayaka et al. (2011)

Amarasinghe (1999)

Technology-related problems

Labour intensiveness

Technological training

Awareness on technology

Not having proper pricing criteria Depends on labour intensive techniques

Not having proper system to learn the technology

Not having proper guidance on new technologies available

Dasanayaka et al. (2011)

Dasanayaka et al. (2011)

Dasanayaka et al. (2011)

Management-related problems

Lack of planning

Human resource planning

Work environment

Not having proper time plan

Not having sales or cost estimation

Not having proper understanding of how many shareholders are needed

Highly dependent on temporary labourers

Lack of concern on safety and health

Improper working environment

Dasanayaka et al. (2011)

Dasanayaka et al. (2011)

Dasanayaka et al. (2011)

Information problems

Information accessing

difficulties

Non-availability of

information

Lack of awareness

Not having proper way to get information

Non-availability of information on gem deposits

Not having awareness of services provided by NGJA

Dasanayaka et al. (2011)

Dasanayaka et al. (2011)

Amarasinghe (1999)

Government administration problems

Complex procedures

Strict rules

Pricing and tax structure

Incapable of developing skills and knowledge

Complex procedure in getting licence for gem mine

Strict rules set by NGJA on gem mine

Relatively high amount of fees and deposits to get licence

Not conducting proper training and development programme on gem mining

Not having proper guiding mechanism for gem miners

Dasanayaka et al. (2011)

Dasanayaka et al. (2011)

Dasanayaka et al. (2011)

Dasanayaka et al. (2011)

Vicious cycle of SMEs

Shareholder problems

Weather and natural resource problems

Knowledge-related problems

Lack of skills

Shareholder availability Weather

Supporting natural resources

Gem-specific knowledge

Technology-related knowledge

Lack of people who have required skills for gem mining

Lack of people who have the ability to properly identify gem and its details

Lack of interest of new generation

Seasonal unemployment

River flood

Continuous rain

Difficult to access water source for gravel washing

Not having knowledge to identify a gem

Not having knowledge to estimate the real value of gem

Not having knowledge to use new technology

Not having knowledge to maintain/repair technical equipments used in gem mining

Dasanayaka et al. (2011)

Dasanayaka et al. (2011)

Lea Collet and Laura Curtze (2013) Priyanath (1999)

Amarasinghe (1999)

Amarasinghe (1999)

Source: Developed by authors.

Hypotheses

Hypotheses are formulated to test whether the pre-described issues in the conceptual framework is a real barrier in the development of gem mining SMEs. These hypotheses are developed based on the available vicious cycle of SME model, literature review, interview with senior officers in apex bodies and discussion with some gem miners and shareholders.

  • H1: Finance-related problems are significant barriers in the development of gem mining SMEs.
  • H2: Marketing-related problems are significant barriers in the development of gem mining SMEs.
  • H3: Technology-related problems are significant barriers in the development of gem mining SMEs.
  • H4: Managerial skills related problems are significant barriers in the development of gem mining SMEs.
  • H5: Information-related problems are significant barriers in the development of gem mining SMEs.
  • H6: Government administrative and regulatory aspects related problems are significant barriers in the development of gem mining SMEs.
  • H7: Shareholder-related problems are significant barriers in the development of gem mining SMEs.
  • H8: Weather and natural resource related problems are significant barriers in the development of gem mining SMEs.
  • H9: Knowledge-related problems are significant barriers in the development of gem mining SMEs.

These hypotheses were tested with quantitative data analysis.

Data Analysis

Research team personally visited gem mine shareholders and filled questionnaires, so that the initial target of 100 samples become realistic. As it is necessary to perform one-tailed tests to examine research hypothesis, Minitab statistical software, which supports one-tailed testing, is used for data analysis purposes.

Barriers for Development of Gem Mining SME

The questionnaire is prepared to quantitatively analyze whether the problems indicated in conceptual framework as barriers in the development of gem mining SMEs are actual barriers. In this questionnaire, a five-point Likert scale is adopted to quantify the response. The following numerical values are assigned to different responses:

  • 5: Most favourable answer to confirm variable as barrier.
  • 4: Favourable answer to confirm variable as barrier.
  • 3: Neutral.
  • 2: Favourable answer to confirm variable is not a barrier.
  • 1: Most favourable answer to confirm variable is not a barrier.

Measure of internal consistency was performed for establishing reliability. Cronbach’s alpha is the reliability coefficient that indicates how well the items in a set are positively correlated to one another. Cronbach’s alpha is computed in terms of average inter-correlations among the items measuring the concept. If Cronbach’s alpha value is closer to 1, it means that the internal consistency and reliability of the measurements is higher. This is not a hard and fast rule to set limiting value for reliability. Table 2 summarizes reliability test results.

From Table 2, it can be observed that Cronbach’s alpha values are little lower. Considering the facts that gem mining enterprises belong to informal sector and characteristics of gem mining SMEs according to the data analysis results of part A of questionnaire are complex, it is difficult to obtain consistent response from all the respondents. As people of different age groups, educational and financial backgrounds are involved in different levels in gem mining enterprise, it is acceptable to receive responses which are not biased towards one direction. This variation can also be considered as a special characteristic of gem mining SMEs.

Table 2. Reliability Test Results

Variable

Cronbach’s Alpha Value

Finance-related problems

0.5717

Marketing-related problems

0.6408

Technology-related problem

0.4125

Management-related problem

0.3347

Information-related problem

0.5178

Government administration problems

0.6655

Shareholder problem

0.3381

Weather and natural resource problem

0.3326

Knowledge-related problems

0.3725

Source: Developed by authors.

Hypotheses Testing

Nine hypotheses were tested via one-tailed single sample t-test using Minitab statistical software. Before performing single sample t-test, normality of each variable data set is tested. Test result is given in Table 3.

Table 3. Normality Test Result

Variable

Normality Test Result

Finance-related problems

Normal

Marketing-related problems

Normal

Technology-related problems

Normal

Management-related problems

Normal

Information problem

Normal

Government administration problems

Normal

Shareholder problems

Normal

Weather and natural resource problems

Normal

Knowledge-related problems

Normal

Source: Developed by authors.

As all the variable data sets are normal, single sample t-test can be performed for each variable data set.

Hypothesis is assumed as follows. According to the Likert scale and the numerical assignment, a value of 3 is assumed to be a neutral value. It means that if the value is greater than ‘3’ it is considered that variables act as a barrier in the development of gem mining SMEs. Similarly, if that value is less than ‘3’ it is considered that the variable is not a constraint on the development of gem mining SME.

As it is needed to test whether variable is a barrier for development of gem mining SMEs for whole population, variation of the variable mean value around fixed value 3 was analyzed with one-tailed single sample t-test.

Following hypotheses were tested via one-tailed single sample t-test:

  • H0 – μ = 3 (variable is not a barrier in the development of gem mining SMEs)
  • H1 – μ < 3 (variable is a barrier in the development of gem mining SMEs)

Confidence interval is selected as 95 per cent.

Table 4 represents results obtained from the single sample t-test.

Table 4. Results of Hypothesis Test

Variable

Mean

Standard Deviation

SE Mean

p-Value

Conclusion

Finance-related problems

4.00000

0.91073

0.05258

0.000

Accept H1

Marketing-related problems

4.12750

0.67259

0.03363

0.000

Accept H1

Technology-related problems

3.97667

0.61973

0.03578

0.000

Accept H1

Management-related problems

3.67833

0.79745

0.03256

0.000

Accept H1

Information problems

4.09667

0.85426

0.04932

0.000

Accept H1

Government administration problems

4.03400

0.81374

0.03639

0.000

Accept H1

Shareholder problems

3.69000

0.74853

0.03743

0.000

Accept H1

Weather and natural resource problems

3.89667

0.74913

0.04325

0.000

Accept H1

Knowledge-related problems

3.94250

0.78469

0.03923

0.000

Accept H1

Source: Developed by authors.

p-value for all the hypotheses is less than 0.05 (confidence interval is 95 per cent). It indicates that H0 can be rejected and H1 has to be accepted. The results of the hypothesis tests indicate that all nine hypotheses described earlier can be accepted. According to the results, it can be concluded that all the variables in conceptual framework are acting as barriers in the development of small and medium gem mining enterprises. Table 5 indicates all the barriers of development of small and medium gem mining SMEs according to their criticality.

Table 5. Barriers of Development of Gem Mining SME: Ranked According to Criticality

Problem

Mean

Rank

Marketing-related problems

4.12750

1

Information-related problems

4.09667

2

Government administration related problems

4.03400

3

Finance-related problems

4.00000

4

Technology-related problems

3.97667

5

Knowledge-related problems

3.94250

6

Weather and natural resource related problems

3.89667

7

Shareholder-related problems

3.69000

8

Management-related problems

3.67833

9

Source: Developed by authors.

To strengthen the assumption on weather and natural resource related problems is a barrier in the development of gem mining SMEs, Ratnapura district average rainfall data are analyzed. Table 6 represents Ratnapura district average rainfall data.

Table 6. Ratnapura District Average Rainfall Data

Months

January

February

March

April

May

June

July

August

September

October

November

December

Total rainfall in mm

111.1

137

212.2

338.9

475.9

412.2

292.8

304.1

421.4

436.8

371.4

235.3

Total rainfall in inches

4.4

5.4

8.4

13.4

H

16.2

12.0

16.6

17.2

14.6

9.3

Total number of rainy days

9

9

14

20

20

21

20

20

21

18

14

Chances of rain (%)

29.0

32.1

45.2

66.7

64.5

70.0

61.3

64.5

66.7

67.7

60.0

45.2

Source: Ratnapura Climate (December 2015).

By analyzing Table 6, it can be clearly observed that most of the days in the year are rainy days for Ratnapura district. In summary, 205 days out of 365 days (56 per cent of days) have chances of rain within a year. Observation from Table 6 and result for hypothesis number 8 (H8) indicate that there is a significant effect of weather for the development of small- and medium-scale gem mining SMEs.

In addition, subissues originated under major variables are also ranked according to their criticality in Table 7.

Table 7. Subissues Ranked According to Criticality

Measure

Minitab Name

Mean

Rank

Buyers organized and maintained price at artificially low level

Mkt_PU_1

4.58

1

Non-availability of information on gem deposits

Inf_AV_1

4.51

2

High cost of initiating gem mine

Fin_CR_1

4.47

3

Not having knowledge to identify gem

Knw_GK_1

4.38

4

Not conducting proper training and development program on gem mining

Gov_SK_1

4.32

5

Non-availability of loan scheme for gem mining

Fin_CR_2

4.26

6

River flood

Whe_WH_1

4.25

7

Not having proper way to get information

Inf_AC_1

4.19

8

Relatively high amount of fees and deposits to get licence

Gov_PT_1

4.13

9

Depending on labour intensive techniques

Tec_LI_1

4.11

10

Complex procedure in getting licence for gem mine

Gov_CP_1

4.09

11

Not having knowledge to estimate the real value of gem

Knw_GK_2

4.07

12

Not having proper guidance on new technologies available

Tec_AT_1

4.06

13

Improper working environment

Mng_WE_2

4.06

14

Not having proper place for marketing

Mkt_MC_2

4.04

15

Lack of concern on safety and health

Mng_WE_1

4.04

16

Not having proper method for marketing

Mkt_MC_1

4.03

17

Continuous rain

Whe_WH_2

4

18

Strict rules set by NGJA on gem mining

Gov_SR_1

3.91

19

Seasonal unemployment

Sha_SA_2

3.88

20

Not having proper pricing criteria

Mkt_PU_2

3.86

21

Lack of people who have required skills for gem mining

Sha_LS_1

3.85

22

Not having sales or cost estimation

Mng_LP_2

3.77

23

Not having proper system to learn the technology

Tec_TT_1

3.76

24

Lack of people who have ability to properly identify gem and its details

Sha_LS_2

3.75

25

Not having the knowledge to use new technology

Knw_TK_1

3.75

26

Not having proper guiding mechanism to gem miners

Gov_SK_2

3.72

27

Not having proper time plan

Mng_LP_1

3.65

28

Highly dependent on temporary labourers

Mng_HR_2

3.62

29

Not having awareness on services provided by NGJA

Inf_LA_1

3.59

30

Not having knowledge to maintain/repair technical equipment use in gem mine

Knw_TK_2

3.57

31

Difficult to access water source for gravel washing

Whe_NR_1

3.44

32

Lack of interest of new generation

Sha_SA_1

3.28

33

Uncertainty of return

Fin_RR_1

3.27

34

Not having proper understanding on how many shareholders needed

Mng_HR_1

2.93

35

Source: Developed by authors.

All the subvariables except ‘Not having proper understanding on how many shareholders needed’ can be considered as barriers in the development of small- and medium-scale gem mining enterprise, as the mean value of all of those subvariables is greater than 3.

Analysis is conducted to identify whether there is any variation in the responses for each variable and subvariable from gem mine shareholder groups, which have different socio-economic characteristics. Variations in the mean of responses, for nine variables in conceptual framework based on their different social characteristics, are analyzed against each of following characteristics:

  • age groups;
  • educational levels; and
  • work type.

Gender factor is ignored due to the fact that only 2 per cent of females are engaged in gem mining according to the research outcomes. It is believed that comparing means of two groups of which one group has only two samples and other group has 98 samples will not provide fair result.

Following hypotheses are tested in the analysis:

  • Test 1: Variation of responses based on work type.
  • H0– Responses of shareholders who engage in gem mining as their major income source and extra income source, for the variable does not have significant variation.
  • H1– Responses of shareholders who engage in gem mining as their major income source and extra income source, for the variable have significant variation.
  • Confidence interval is selected as 95 per cent and independent sample t-test is performed for each of the nine variables in conceptual framework.
  • Results of test 1 are summarized in Table 8.
  • Results of test 1 indicate that responses of shareholders who engage in gem mining as their major income source and extra income source, for the nine issues indicated in conceptual framework, do not have significant variation.
  • Test 2: Variation of responses based on age groups.
  • H0– Responses of gem mine shareholders in different age groups for the variable do not have significant variation.
  • H1– Responses of gem mine shareholders in different age groups for the variable have significant variation.
  • Confidence interval is selected as 95 per cent, and one-way analysis of variance (ANOVA) test is performed for each of the nine variables in the conceptual framework.

Results of test 2 are summarized in Table 9.

Table 8. Test Results for Variations of Response Based on Work Type

Mean

Variable

Extra

Main

ρ-value

Conclusion

Finance-related problems

3.962

4.061

0.370

Accept H0

Marketing-related problems

4.177

4.046

0.073

Accept H0

Technology-related problems

3.962

4.000

0.629

Accept H0

Management-related problems

3.683

3.671

0.862

Accept H0

Information problems

4.108

4.079

0.779

Accept H0

Government administration problems

4.016

4.063

0.531

Accept H0

Shareholder problems

3.718

3.645

0.362

Accept H0

Weather and natural resource problems

3.909

3.877

0.727

Accept H0

Knowledge-related problems

3.956

3.921

0.684

Accept H0

Source: Developed by authors.

Table 9. Test Result for Variations of Responses Based on Age Groups

Mean

Variable

< 30

30-39

Mean 40-49

50-59

< 60

p-value

Conclusion

Finance-related problems

4.0588

3.8025

4.0805

4.0526

4.1250

0.254

Accept H0

Marketing-related problems

4.1324

3.9907

4.2241

4.0658

4.3750

0.018

Accept H

Technology-related problems

4.0588

3.8148

3.9885

4.0702

4.0833

0.075

Accept H0

Management-related problems

3.7255

3.6481

3.6092

3.7456

3.7708

0.502

Accept H0

Information problems

4.0196

3.9753

4.1839

4.1579

4.2083

0.456

Accept H0

Government administration problems

4.0471

3.9778

4.0552

4.1263

3.9000

0.547

Accept H0

Shareholder problems

3.7500

3.5463

3.6724

3.8553

3.7188

0.083

Accept H0

Weather and natural resource problems

3.9020

3.8765

3.8851

3.9298

3.9167

0.995

Accept H0

Knowledge-related problems

3.9118

3.8333

4.0086

3.9605

4.0938

0.375

Accept H0

Source: Developed by authors.

Results of test 2 indicate that responses of gem mine shareholders of different age groups for the variable ‘marketing-related problems’ have a significant variation, while there is no significant variation in the responses of gem mine shareholders of different age groups for other eight variables in the conceptual framework.

Test 3: Variation of responses based on educational levels.

H0– Responses of gem mine shareholders in different educational levels for the variable do not have significant variation.

H1– Responses of gem mine shareholders in different educational levels for the variable have significant variation.

Confidence interval is selected as 95 per cent and one-way ANOVA test is performed for each of the nine variables in the conceptual framework.

Results of test 3 are summarized in Table 10.

Table 10. Test Result for Variations of Responses Based on Educational Level

Mean

Variable

<5

5–10

O/L passed

A/L passes

Graduated

p-value

Conclusion

Finance-related problems

3.9359

4.0583

3.8889

4.0667

4.3333

0.530

Accept H0

Marketing-related problems

4.1346

4.1250

4.0357

4.2250

4.4167

0.328

Accept H0

Technology-related problems

4.0256

3.9250

4.0476

3.9333

3.8889

0.652

Accept H0

Management-related problems

3.7115

3.6458

3.6984

3.6833

3.6667

0.945

Accept H0

Information problems

4.3462

4.1417

3.8730

3.9000

3.5556

0.002

Accept H1

Government administration problems

4.1385

4.0050

4.0095

4.0600

3.6000

0.146

Accept H0

Shareholder problems

3.7115

3.6500

3.7262

3.6500

3.9167

0.746

Accept H0

Weather and natural resource problems

3.8846

3.8917

3.9048

3.8667

4.1111

0.937

Accept H0

Knowledge-related problems

4.0096

3.9250

3.9405

3.7500

4.2500

0.279

Accept H0

Note: O/L represents Ordinary Level of General Certificate of Education and A/L stands for Advanced Level.

Source: Developed by authors.

Results of test 3 indicate that responses of gem mine shareholders of different educational levels for the variable ‘information-related problems’ have a significant variation, while there is no significant variation in the responses of gem mine shareholders of different age groups for other eight variables in conceptual framework.

To further analyze the variation in responses based on different gem mine shareholders’ characteristics, same hypotheses of test 1, test 2 and test 3 were tested for 35 subvariables. Before conducting hypothesis test, normality of data set of each subvariable was tested. From the normality test it was found that all subvariables were normally distributed. So, that variation of responses for each of the 35 subvariables against work type was tested with independent sample t-test, while one-way ANOVA test was performed to test variation of responses for each of the 35 subvariables against different age groups and educational levels.

Confidence interval is considered as 95 per cent. Summary of test results is provided in Table 11.

Table 11. Hypothesis Test Results for Subvariables

Subvariable

Work Type

Age

Education

High cost of initiating gem mining

Accept H0

Accept H0

Accept H0

Non-availability of loan scheme for gem mining

Accept H0

Accept H0

Accept H0

Uncertainty of return

Accept H0

Accept H0

Accept H0

Not having proper method for marketing

Accept H0

Accept H0

Accept H0

Not having proper place for marketing

Accept H0

Accept H0

Accept H0

Buyers organized and maintain price at artificially low level

Accept H1

Accept H1

Accept H0

Not having proper pricing criteria

Accept H0

Accept H1

Accept H0

Depending on labour intensive techniques

Accept H0

Accept H0

Accept H0

Not having proper system to learn the technology

Accept H0

Accept H0

Accept H0

Not having proper guidance on new technologies available

Accept H0

Accept H0

Accept H0

Not having proper time plan

Accept H0

Accept H0

Accept H0

Not having sales or cost estimation

Accept H0

Accept H0

Accept H0

Not having proper understanding on how many shareholders needed

Accept H0

Accept H0

Accept H0

Highly dependent on temporary labourers

Accept H0

Accept H0

Accept H0

Lack of concern on safety and health

Accept H0

Accept H0

Accept H0

Improper working environment

Accept H0

Accept H0

Accept H0

Not having proper way to get information

Accept H0

Accept H0

Accept H0

Non-availability of information on gem deposits

Accept H0

Accept H0

Accept H0

Not having awareness on services provided by NGJA

Accept H0

Accept H0

Accept H1

Complex procedure in getting licence for gem mining

Accept H0

Accept H0

Accept H0

Strict rules set by NGJA on gem mining

Accept H0

Accept H0

Accept H0

Relatively high amount of fees and deposits to get licence

Accept H0

Accept H0

Accept H0

Not conducting proper training and development programme on gem mining

Accept H0

Accept H0

Accept H0

Not having proper guiding mechanism to gem miners

Accept H0

Accept H0

Accept H0

Lack of people who have required skills for gem mining

Accept H0

Accept H0

Accept H0

Lack of people who have the ability to properly identify gem and its details

Accept H0

Accept H0

Accept H0

Lack of interest of new generation

Accept H0

Accept H0

Accept H0

Seasonal unemployment

Accept H0

Accept H0

Accept H0

River flood

Accept H0

Accept H0

Accept H0

Continuous rain

Accept H0

Accept H0

Accept H0

Difficult to access water source for gravel washing

Accept H0

Accept H0

Accept H0

Not having knowledge to identify gem

Accept H0

Accept H0

Accept H0

Not having knowledge to estimate the real value of gem

Accept H0

Accept H0

Accept H0

Not having knowledge to use new technology

Accept H0

Accept H0

Accept H0

Not having knowledge to maintain/repair technical equipment used in gem mining

Accept H0

Accept H0

Accept H0

Source: Developed by authors.

Through the analysis of subvariables, it can be observed that responses for majority of subvariables do not have any significant variation against each gem mine shareholders’ age groups, educational levels and method of engagement in work type. But the following subvariables have significant variation in the responses received against different groups of characteristics:

  • Work type (method of engagement in gem mining)
    • Buyers organized and maintained price at artificially low level.
  • Age
    • Buyers organized and maintained price at artificially low level; and
    • not having proper pricing criteria
  • Educational level
    • Not having awareness on services provided by NGJA.
Findings and Recommendations
Findings
Characteristics of the Gem Stone Mining Enterprise and Gem Miners

Specific characteristics of small and medium gem mining enterprises have been identified through interviews and surveys. Traditional pit mining with single pit per licence can be considered as small-scale gem mining, while traditional pit mining with multiple pits per licence is considered as medium-scale gem mining. Mostly, traditional pit mining is carried out on labour sharing basis, which implies that all the people involved in gem mining are considered as shareholders. All shareholders receive a share from the revenue that the gem miners earn by marketing gemstones discovered from the corresponding mine, and the percentage of share is decided on the contribution of each gem mine shareholders to the gem mine. It can be considered as a unique characteristic of small- and medium-scale gem mining enterprise.

Characteristics of gem mine shareholders, which are discovered through data analysis, can be summarized as follows:

  • Small- and medium-scale gem mining is male-dominated enterprises, and engagement of females in these enterprises is significantly lower.
  • Majority of small- and medium-scale gem mine shareholders are engaged in gem mining to earn extra income. They have different sources of income as their major income, and they do not completely depend on gem mining. But still considerable amount of people are engaged in gem mining as their major source of income.
  • People with wide variety of educational levels are engaged in small- and medium-scale gem mining enterprises. Considerable amount of people who have not even passed grade 5 are engaged in small- and medium-scale gem mining, while some of the graduates are also engaged in gem mining SMEs. Majority of gem mine shareholders do not have Ordinary Level (O/L) qualification, which indicates that education level of majority of people engaged in gem mining SMEs are lower than most of the other SMEs. It can be concluded that small- and medium-scale gem mining is mainly based on experiences and not on the educational qualifications.
  • Young people in 20s as well as people older than 60 years engage in gem mining SMEs, while majority of gem mine shareholders are between 30 and 50 years.
Barriers in the Development of Gem Mining SMEs

The most critical barrier which hinders the development of gem mining SMEs is marketing-related problem and least critical barrier which hinders the development of gem mining SME is management-related problem. Although, shareholders not practicing proper management during gem mining is a barrier in the development of gem mining SMEs, it is believed that other issues indicated in the conceptual framework have greater adverse impact on the development of gem mining SMEs.

Referring to the results of the analyzed data for subvariables, most critical subissues are described in the descending order of the criticality.

  • buyers organized and maintained price at artificially low level;
  • non-availability of information on gem deposits;
  • high cost of initiating gem mine;
  • not having knowledge to identify gem;
  • not conducting proper training and development programme on gem mining;
  • non-availability of loan scheme for gem mining;
  • rivers in flood;
  • not having proper way to obtain information;
  • relatively high amount of fees and deposits to obtain licence;
  • dependence on labour intensive techniques;
  • complex procedure in getting licence for gem mines;
  • not having knowledge to estimate the real value of gem stones;
  • not having proper guidance on new technologies available;
  • improper working environment;
  • not having proper place to market; and
  • lack of concern on safety and health.
Barriers in the development of gem mining SMEs

The most critical barrier which obstructs the development of gem mining SMEs is marketing cognate quandaries and least critical barrier which obstructs the development of gem mining SME is management of cognate quandaries. In marketing issues, the main quandary facing gem mining SMEs is the preservation of price level at artificially low caliber by the organized buyers. Buyers organized and maintained price at artificially low level and non-availability of information on gem deposits are the main subvariables which are proximate to the most favourable answer to confirm variables as a barrier (Likert Scale 5). Identified barriers are the problems related to the government administration, management-related, and knowledge-related.

Under the government administration problem issues like not conducting proper training and development programme on gem mining, relatively high fees and deposits to get licence, complex procedure in getting licence for gem mining, strict rules set by NGJA on gem mining and not having proper guiding mechanism to gem miners have favourable answers to confirm variable as a barrier.

Management-related issues like improper working environment, lack of concern for safety and health, not having sales or cost estimation, not having a proper time plan, highly dependent on temporary labourers have favourable answers to confirm variable as a barrier.

Also, knowledge-management issues like not having knowledge to identify gems, not having knowledge to estimate the real value of gems, not having the knowledge to use new technology, not having knowledge to maintain/repair technical equipments used in gem mining have favourable answers to confirm variable as a barrier.

Inclusion of two to three subvariables in other matters like marketing-related problems, information-related problems, finance-related problems and technology-related problems also have favourable answers to confirm variable as a barrier.

The subvariables indicating the neutral response denote the issues related to the shareholders and weather and natural resource issues.

Albeit gem mine shareholders not practicing opportune management during gem mining is a barrier in the development of gem mining SMEs. It is believed that other issues indicated in the conceptual framework have greater adverse impact on the development of gem mining SMEs.

After the gem mining is complete, the entire pit is closed with soil to prevent mosquitoes. This part is neglected, and this may be the severe reason for developing dengue epidemics in gem mining areas.

At the same time, ground level mining employees who entirely depend on their physical strength to work are poorly recognized. When they are suffering from illness or lose their strength due to ageing after tedious work, nobody is there to look after them. There is no financial assistance to them. Any financial or lending institutions do not recognize their job, and hence, they cannot enjoy the privileges that other sectors have.

Recommendations

Active and proactive involvement of government and other apex bodies is extremely important in providing sustainable solutions to the problems identified as barriers in the development of gem mining SMEs. In general, it is necessary to solve the most critical issue of organized and collective behaviour of buyers to maintain prices at artificially low level. Involvement of foreign gem buyers in Sri Lanka gem trade will increase the competition among gem buyers and break the monopoly and issue of ‘buyers organized and maintain price at artificially low level’. Thus, gem mine shareholders will be able to receive competitive price for gem stones, and it will motivate people to engage in gem mining to a greater extent in a formal manner.

There is a great issue on the lack of information flow from relevant authorities to gem mine shareholders. It is necessary to understand the characteristics of gem mine shareholders like educational level when conducting awareness programmes. The awareness programmes should be aligned with the characteristics of the gem miners, so that they have the ability to gather information more effectively.

It is necessary to encourage research and development works in informal sector gem mining with the initiation of the government.

According to the findings, gem miners accept the fact that they lack knowledge in various areas of gem mining. It is highly recommended to identify real needs of gem mine shareholders and arrange proper training with hands on session to improve their knowledge and skills. It is also proposed to identify the educational background of gem mine shareholders when developing training programmes to make the training more effective. Training programmes related to gem mining is already available in some universities and GJRTI, but those training programmes are not popular among gem mining communities.

Note

1. This case as developed by the authors is a revised and updated version of the case titled ‘Barriers for Development of the Sri Lankan Small- and Medium-scale Gem Mining Enterprises at Sri Lanka’s Ratnapura District: A Case Study’ as presented by the authors at the International Conference on Management Cases (ICMC, 2016) held on 1–2 December 2016 at the BIMTECH Campus, Greater Noida, India.

Disclaimer

This case is written for classroom discussion and is not intended to illustrate either effective or ineffective handling of an administrative situation, or to represent successful or unsuccessful managerial decision-making, or endorse the views of the management. The authors may have disguised/camouflaged some of the names, events, financial and other recognizable information to protect the identity of individuals and confidentiality behind decision-making. This study uses secondary data, and information (news reports, published papers, books, reports available on the company website) and the sources have been cited wherever such data and information have been used. The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the official policy or position of South Asian Journal of Business and Management Cases.

References
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Collet, L. , Curtze, L. , & Reed, K. (2013). Responsible sourcing of colored gemstones, Graduate Institute of Geneva, Applied Research Seminar Report. Retrieved 20 February 2017, from http://www.responsiblejewellery.com/files/Responsible-Sourcing-of-Colored-Gemstones_ARS-Final-Report_-Collet-Curtze-Reed.pdf
Dasanayaka, S.W.S.B. (2008). SMEs in globalised world: A brief note on basic profiles of Pakistan’s SMEs and possible research directions. Business Review Journal, 3(1), 6978.
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Dasanayaka, S.W.S.B. (2011b). Global challenges for SME in Sri Lanka and Pakistan in comparative perspectives. IBA Business Review, 6(1), 5261.
———. (2014). Small and medium scale enterprises development in rural areas through business incubators: A case of Sri Lanka. Asia-Pacific Tech Monitor, 13(4), 1525.
Priyanath, H.M.S. (1999). Socio-economic and environment impact of gem mining industry in Sri Lanka: A case study of Hunuwala village in Ratnapura district. Sabaragamuwa University Journal, 2(1), 101109.
Ratnapura Climate. (2015). Retrieved 5 May 2015, from http://www.world-climates.com/city-climate-ratnapura-sri-lanka-asia/

This case was prepared for inclusion in SAGE Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

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