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Business News of Friday, 27 July 2012

Source: Capacity Development Centre

Empowering SMEs in Ghana for Global Competitiveness

Globally, the contribution of Small and Medium Enterprises (SMEs) to the growth of national economies is significant. In the developed economies such as Germany and the United Kingdom small businesses are recognized as the main engines for growth and development. Indeed, studies conducted in recent years in developed markets, including the Freedman studies done in the United Kingdom, confirm that small businesses account for the highest number of registered companies and make significant contributions to economic growth and prosperity.

In Ghana, readily available data on SMEs is scarce but statistics from the Registrar General’s Department suggests that 92 per cent of companies registered are micro, small and medium enterprises. SMEs in Ghana have also been noted to provide about 85 per cent of manufacturing employment, contribute about 70 per cent to Ghana’s GDP, and therefore have catalytic impacts on economic growth, income and employment.

In looking at comparators in some emerging economies, studies indicate that SMEs in India, amounting to almost 30 million operators, have been the fountain head of several innovations in manufacturing and the service sectors, and serve as the major link in the supply chain to corporate entities and public sector units or enterprises. In India, SMEs contribute about 20 per cent to GDP, 45 per cent of industrial output, 40 per cent of exports, employ 60 million people, create 1.3 million jobs every year and produce more than 8,000 quality products for the Indian and international markets.

SMEs are important players for National Development

SMEs are therefore important players to national development, whether one considers the situation of a developed economy or a developing economy.

Aside being important sources of employment and income in many developing countries, SMEs with their flexible nature have a better adaptability to changing market conditions, making them better suited to withstand cyclical downturns. The dispersion of SMEs across the nation also promotes better distribution of income, and generates additional value in raw materials and products, even as they bring about efficiencies in domestic markets.

Small businesses however thrive because larger public companies create opportunities through forward and backward linkages, and governments serve as effective institutional support for creating market access and providing a conducive environment.

In Ghana SMEs are now exposed to greater opportunities than ever for expansion and diversification across the sectors. While developed global markets may be shrinking on account of the financial and economic crises prevailing, Ghana’s market size is growing and opportunities within Africa are also beginning to look attractive for SMEs in manufacturing, food processing, pharmaceutical, IT and agro and service sector, among others, transportation difficulties discounted.

Some Challenges to the SME sector Despite their commendable contribution to the national economy, SMEs in Ghana have not always obtained the required support from concerned Ministries, Departments and Agencies as well as the Banks, Financial Institutions and other bigger corporate entities. This lack of support is a handicap to developing competitiveness locally and globally.

Indeed, SMEs face a number of problems such as the absence of adequate and timely banking finance, limited capital and knowledge, non-availability of suitable technology, low production capacity, ineffective marketing strategies, lack of capacity to identify new markets, constraints on modernisation & expansions, non availability of highly skilled labour at affordable cost, bureaucratic delays and the complex maze of rules in following up with various government agencies to resolve problems.

To address such challenges, successive governments in Ghana have tended to look at cosmetic minor changes and relied on inadequate donor supported funds to address the concerns of SMEs. Despite these support systems, and the now institutionalized funding through non-bank financial institutions and traditional banks, capacity gaps continue to exist.

Capacity Development for SMEs Indeed, despite the strenuous efforts most SMEs put into developing their business and economic growth many SMEs are not aware about various developments and changes in international and domestic trade, incentives and schemes of Government, market development, banking and finance, laws, direct and indirect taxes, H.R. Management, TQM, Six Sigma, quality assurance, productivity, logistics and supply chain management and other related areas.

The result is that SMEs in Ghana have lacked competitiveness and both the banks that finance their operations and the government which supports programmes with tax payer resources have not derived the required benefits.

It is therefore refreshing that Capacity Development Centre, Ghana, a cutting-edge knowledge-based and transmission entity, has shown commitment towards the SME sector through the organization of training programs and international level promotional activities, research, survey and interactive meetings for the enhancement of knowledge of SMEs in Ghana.

Assistance & Support Services According to Mr. Yaw Dankwa of Capacity Development Centre, Ghana, the challenges facing SME operators is at the centre of their activities as their entity had has since its inception sought to reinforce the actions of SMEs in areas such as SME Business Management skills, export & trade promotion, technology upgrades, joint ventures and technology transfers, contract manufacturing tie-ups, international collaborations and alliance, marketing, branding and promotion, connectivity with potential business partners, surveys and research, mergers and acquisitions and the setting up of new enterprises in Ghana and abroad.

Mr. Dankwa further stated that Capacity Development Centre Ghana had been working in collaboration with overseas SMEs by, among other assignments, identifying for overseas SMEs, business partners, associates, buyers and importers in Ghana, business and investment opportunities in Ghana, technology transfer, joint ventures, collaborations and Investments opportunities in Ghana, assisting in identifying contract manufacturers in Ghana and undertaking market development, survey and research on various products and services.

The efforts of Capacity Development Centre Ghana may only be a modest effort, but it is one much needed addition to resolving the challenges of SME operators in Ghana, in the quest to make them competitive both locally and globally.

Capacity Development Centre, Ghana may be contacted at: 8 Kofi Annan Avenue, North Legon or on by