Driving economic growth through SMEs in Ghana

On July 16, 2024, the government of Ghana launched the Small and Medium Enterprises (SMEs) Growth and Opportunity Programme, aiming to enhance partnerships, mobilize diverse financial resources, and create a conducive platform for the growth of SMEs in the country.

SMEs form the backbone of Ghana’s economy, constituting about 90% of businesses and contributing approximately 70% to the country’s GDP. According to the SME Support Services Strategy by the National Board for Small Scale Industries (NBSSI), about 1.7 million out of an estimated 2.1 million businesses in Ghana can be classified as SMEs. With their dynamic blend of local talent, innovation, and entrepreneurial spirit, these enterprises have the potential to drive significant economic growth and development.

The importance of SMEs extends beyond Ghana. The United Nations Industrial Development Organization (UNIDO) indicates that SMEs account for more than 90% of all registered businesses in Africa. In South Africa, for instance, SMEs contribute roughly 34% to the country’s GDP, offer substantial employment opportunities, and provide fertile ground for skills development and capacity building.

In Ghana, SMEs are at the core of economic policy for development. However, for them to operate optimally, they need to be rooted in a conducive environment. An analysis of the business circumstances surrounding SMEs in Ghana suggests numerous obstacles to their development. These include low levels of entrepreneurship and managerial skills, limited technological capacity, and poor international competitiveness in labor productivity and capitalization. SMEs also face challenges in market accessibility, lack vertical linkages and developed clusters, struggle with limited access to financing, and operate in a rigid labor market with low levels of technical skills.

These impediments prevent SMEs from attaining agility, flexibility, networking capacities, and economies of scale, all of which would contribute to enhancing their competitiveness. Additionally, Ghana faces two key economic obstacles: a poor and shrinking manufacturing base and chronic deficits in its current account. Sustained growth will depend on the country’s success in reversing these drawbacks through the vitalization of entrepreneurship and the industrial base.

Despite these challenges, SMEs play a crucial role in Ghana’s economic landscape. They are a major source of employment, accounting for over 70% of total employment in the private sector. By providing job opportunities to a large portion of the population, they help reduce unemployment and improve living standards. SMEs also contribute significantly to economic diversification. While Ghana has historically depended on sectors like cocoa and gold, SMEs contribute to a broad range of industries, including agriculture, manufacturing, technology, and services. This diversification reduces economic vulnerability and fosters sustainable growth.

Moreover, the entrepreneurial spirit in SMEs drives innovation. Many small and medium-sized businesses in Ghana are pioneers in introducing new products, services, and technologies. Their agility allows them to adapt quickly to market changes and address local needs effectively.

Recognizing these benefits, the government of Ghana has invested GH?8.2 billion to push the SME Growth and Opportunity Programme initiative for a better economy. This commitment is expected to create jobs for a large number of youth, thus curbing the unemployment rate in the country. It will also contribute significantly to foreign exchange creation and the growth of the country’s GDP.

At the launch of the SME GO Programme, five Ghanaian SMEs received GH?1 million in financial support as beneficiaries from the pilot phase. These companies include AA Food and Beverages Limited, Tevonwa Limited, Tilaa Limited, Abubakar Mahama Limited, and Payne and Hopkins. This support is aimed at helping them expand their operations and become more viable in the market.

For this initiative to succeed, the right balance of competent teams, motivated and well-trained workers, and a possibility mindset is crucial. SMEs should aim to compete with international brands that import their products into the country. A proper mechanism should be instituted to ensure a good return on public funds invested in these enterprises.

While the government’s gesture is commendable, it is important to keep a watchful eye on the beneficiaries and hold them accountable for the support given. The government should monitor these SMEs, conduct regular visits, and hold series of meetings with them to track their progress and address any challenges they may face.

To solidify this initiative and ensure its long-term success, it is incumbent upon future governments to continue pushing this program forward without politicizing it. The SME Growth and Opportunity Programme has the potential to be a game-changer for Ghana’s economy, driving growth, creating jobs, and fostering innovation across various sectors.

As Ghana moves forward with this ambitious program, the focus should remain on creating an enabling environment for SMEs to thrive. This includes addressing the identified challenges, providing continuous support and training, and fostering partnerships between SMEs and larger corporations. By nurturing its SME sector, Ghana can unlock new avenues for economic growth and position itself as a hub for entrepreneurship and innovation in Africa.

By Emmanuel Boakye Ansah

The writer is a Public Relations Officer at the Ministry of Finance

Email: [email protected]

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