For me, it was not surprising the soft-spoken Minister of Finance, Ken Ofori-Atta, had indicated the “Government’s Payroll is full.” The state-centred employment system should be complemented by the private sector. Unfortunately, the slow pace at which the private sector grows and expands is unencouraging and problematic.
Meanwhile, Ghana’s private sector is dominated by Small and Medium-sized Enterprises (SMEs) by a little over 90% of the market share. SMEs employ 60% of the labour force and add 70% to Gross Domestic Product (GDP). Notwithstanding the contribution to employment and GDP, SMEs are saddled with the critical challenge of funding, among others.
By definition, SMEs are a heterogeneous group, ranging from the single artisan producing implements, to owners of coffee shops, and internet cafés in small towns. Statistical definition, however, considers the number of employees in classifying an enterprise as an SME.
Generally, SMEs are enterprises with 200-250 employees, with Japan and the US having 300 and 500 employees respectively as exceptions. Supporting and strengthening SMEs in Ghana to employ even the global standard number of employees can be a game-changer in the country’s employment trajectories, especially as complementary job opportunities are required from the private sector to ease the pressure on the formal sector employment system.
This article, therefore, seeks to unearth and chart pathways for growing and nurturing SMEs to provide employment and livelihoods to the people, increase productivity for enhanced GDP and support economic growth and development.
Sustainable government finance is critical for the growth of SMEs in Ghana and requires a cross-cutting strategy which touches on the government’s ability to fund sound business environments development, sufficiently healthy and flexibly skilled labour, plus capable and working public and private institutions.
A purported financial public policy regime should be adopted to provide seed capital for start-ups and struggling-to-survive SMEs to compete in the hostile business environment, with unbridled funds flowing internally and internationally to subsidiaries from mother companies under the guise of financial globalisation.
Integration of SMEs’ development through trade and investment,in the broader national development strategy and/or poverty reduction and growth policies of Ghana is a significant pathway for success.
These growth policies, among others, involve “Planting for Food and Jobs” and the industrialisation agenda of “One District One Factory”. The incorporation of SMEs into local, national, and global markets is vital for growth and expansion since large and ready markets availability will influence enhanced production of goods and services and capacity through technology innovation application.
The African Continental Free Trade Area (AfCFTA), which promises a single market of more than 1.3 billion people, is an example of policy harmonisation that catapults the continent into a more global market square, that is, the African Growth and Opportunity Act (AGOA).
The AGOA is the US’ economic policy and commercial engagement with Africa and provides eligible sub-Saharan African countries with duty-free access to the US’ market for over 1,800 products and 5,000 goods eligible for duty-free access under the Generalised-System of Preferences programme.
Business-oriented institutional and physical infrastructure development aids the growth and development of SMEs. The institutionalisation of appropriate infrastructure provides simplified legal and regulatory frameworks, good governance, abundant and accessible, and implementable macro-economic policies as levers for the growth and expansion of SMEs in Ghana.
Indeed, low budget deficits, inflation, a stable and transparent currency regime, and a competitive exchange rate secure the minimum stability businesses needed to make sound business decisions.
The establishment of industrial parks and business incubators are also essential to providing appropriate development services to SMEs in simple technological application and innovation as well as launching cluster initiatives to enhance their global competitiveness while boosting enterprises’ profits, capacities for employment, and higher productivity.
Capacity building is crucial for the survival of SMEs in Ghana because these business units are usually owner-managed, and most owners have little managerial expertise, including knowledge and skills to direct firms’ success.
Though some forms of skills, through the informal and/or formal way, might have been developed. However, the right work attitude and ethics, maintenance, the law, customer service as well as civil life are most often lacking. Enhanced manpower skillsare essential for the salability of brands and commodities for large market share.
The enforcement of contracts and the establishment of property rights are key to the growth, development, and success of SMEs. As important innovators, SMEs need to protect their intellectual capital through formal legal rights such as, patents or copyright, or contractual agreements.
Making these legal rights accessible, cheaper, and less time-consuming will inure to the benefit of SMEs and protect them from the vulnerability of pirates, which has the potential to retrogress the development of promising enterprises.
Channels of redress, when infringements are observed, should be provided and made affordable through the formal institutional support system.
The writer is Head of Monitoring and Evaluation Department,
Ministry of Tourism, Arts and Culture
By Dr Alphonse Kumaza