Kumasi — The private sector in Ghana still operates in a constraining environment despite successive governments touting it as the engine of national economic growth and development as well as a key to poverty reduction.
Removing the constraints require that government fashions policies and enact regulations that would ensure that the constraints to doing business and increasing revenues are removed.
This is because government has the power to amend its rules and regulations to get the private sector, especially small and medium scale enterprises (SMEs) to perform better in order to satisfy consumer needs. Government also has the power to create requisite political environment, which is also essential for ensuring an enabling environment for SMEs to survive.
Enabling environment refers to the environment in which businesses operate and cover a wide range of factors which impact on the cost of doing business.
These arguments were advanced at a two-day workshop for members of the Journalist for Business Advocacy (JBA) on challenges of the private sector and business advocacy. It was organised by the Business Sector Advocacy Challenge Fund (BUSAC Fund) with support from MTN Ghana in Kumasi last week.
The JBA is an association of journalists from around the country recognised by the Ghana Journalists Association (GJA) who have devoted their time to SMEs and, to a large extent, private sector businesses in Ghana.
Options for retooling
Making a presentation, Kofi Asante Frimpong of BUSAC Fund explained that the expectation of the private sector of the economy in Ghana was good rules and regulations to govern operations; support from the public sector to satisfy needs and requirements of clients; and good competitive stance of businesses.
He added that there was the need for business advocacy in Ghana because there was limited or no effective dialogue between the public sector and the private business sector; the private sector in Ghana was generally not well regarded by the general public and the public sector had limited understanding of the needs of the private sector.
Mr Frimpong highlighted some of the problems businesses go through and these included lack of adequate/appropriate production facilities; lack of adequate promotional facilities; unsupportive laws and regulations; and rules/laws giving government what it requires whilst the needs and requirements of the private sector were not fully taken account of.
However, he offered some solutions to the problems. These included frequent training for SME operators, assisting in educating the operators and engaging them in business advocacy events.
He explained business advocacy as calling the "attention of government to the effects of a regulation or bye-law on a particular business and propose what has to be done to the regulation to get the private sector to perform better."
Mustapha Suleiman, General Secretary of JBA, while speaking specifically on SMEs, highlighted some of the problems facing the sector. These included insufficient capital for investment and very limited access to credit.
He explained that the scarcity of investment capital to SMEs was often due to their insufficient financial management, their poor savings culture and their inability to control their expenditure effectively.
He again hinted that the possibility for SME operators to access credit was affected by their lack of collateral and inability to keep proper records.
"SMEs are not fully aware of banking procedures and have also a biased attitude towards risk taking", he added.
On the other hand, financial institutions do not have credit products suitable and flexible enough, such as micro loans to respond to needs of SMEs as well as bank officials have negative attitudes towards SMEs.
The other challenge was high cost of capital, Mustapha stated, explaining that credit needed by SMEs consists usually of small-size loans and so financial institutions usually perceive that there are high risks involved in lending to SMEs; therefore, they apply high interest rates to SME loans.
Poor finishing and packaging
Mustapha added that the products of SMEs were frequently of low quality in terms of finishing and packaging due to limited technical and technological capabilities of SME operators. This is because of high cost of technical consultancy services, unwillingness to seek technical assistance and lack of networking and experience sharing among SMEs.
Regarding all these challenges, he said the role of national and local government could not be underestimated. He suggested that Government, both at national and local level, through relevant Ministries, Departments and Agencies (MDAs) should set a priority towards the determination of national policies related to SME development and promotion. In developing such policies government should adopt participatory approach by consulting and involving representatives of SME associations during all stages from the identification and formulation of programmes to their implementation both at national and district levels.
The other solution he gave was that "government should carry out a comprehensive review of taxes, rates and fees affecting SMEs in order to harmonise, simplify and reduce the number of taxes, avoid over-taxation and make it easier for them to comply; through the revenue authorities, improve the way of assessing the SMEs tax liabilities; and self assessment submissions by SMEs should be accepted by tax officials."