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
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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