DOING BUSINESS IN GHANA: Supporting SMEs for Sustainable
Development
2ND Business Development Conference
November 14, 2014
British Council, Accra
Paul Frimpong, Ch.E.
Founder and Chairman - Young Professional Economists Network (YPEN)
MY AGENDA
PART I Doing Business in Ghana
PART IISupporting SMEs for Sustainable Development
Paul Frimpong, Ch.E. @ British Council, November 14, 2014
To help unveil the macroeconomic framework of Ghana’s economy for business (SMEs)
To understand the intricacies of the business environment in Ghana
The roles of SMEs for economic transformation
Strategies to support SMEs in Ghana
ULTIMATE OBJECTIVES
Paul Frimpong, Ch.E. @ British Council, November 14, 2014
PART I
INTRODUCTION
Doing Business sheds light on how easy or difficult it is for a local entrepreneur to open and run a small to medium-size business when complying with relevant regulations.
It measures and tracks changes in regulations affecting 11 areas in the life cycle of a business: starting a business, dealing with permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency and employing workers.
Source: World Bank Doing Business Report, 2014
DOING BUSINESS IN GHANA
Paul Frimpong, Ch.E. @ British Council, November 14, 2014
ECONOMIC PERFORMANCE IN SUB-SAHARAN AFRICA
The region’s economy is expected to continue growing rapidly, expanding by about 5 percent in 2014 and 5¾ percent in 2015.
The region’s economies continues to experience solid growth, driven bySustained infrastructure investment
Buoyant services sectors
Strong agricultural production.
Countries to watch in terms of growth momentum 2014/2015 (> 8%)
Chad
Côte d’Ivoire
Democratic Republic of the Congo
Mozambique
Paul Frimpong, Ch.E. @ British Council, November 14, 2014
ECONOMIC PERFORMANCE IN SUB-SAHARAN AFRICA
Rising Middle ClassThe world is getting richer and about 90% of the world's population lives in the emerging markets and the expectations are that we would have approximately
3 billion new people in the world's middle class by 2030.
Africa's middle class stands about 400 million people today and is estimated to balloon to 1.1 billion by 2060 , thus representing 42% of the continent's
population by that year Source: IMF, Regional Economic Outlook Report: Sub-Saharan Africa, Oct. 2014
A rise in disposable income: i.e. increase in demand for modern goods and services: telecommunications, food, insurance, security, luxury, banking services etc.
Paul Frimpong, Ch.E. @ British Council, November 14, 2014
ECONOMIC PERFORMANCE IN SUB-SAHARAN AFRICA
Demographics
A very young and dynamic population showing a positive demographic story
60-70% of Africans under the age of 25 and by 2050; Africa's population of
2bn will have overtaken that of India (1.6bn) and of China (1.4bn) (AfDB)
Untapped natural resources, arable land and ever buoyant consumer market
In terms of productivity, this continent is a great absorber of technology and
is able to combine labour and capital to help spare economic growth.
Paul Frimpong, Ch.E. @ British Council, November 14, 2014
Paul Frimpong, Ch.E. @ British Council, November 14, 2014
ECONOMIC PERFORMANCE IN SUB-SAHARAN AFRICA, CONT’D
Vulnerabilities
Despite having a high potential, so are the risks both economic and sociopolitical, of doing business in Africa?
Ebola outbreak (West Africa)
Guinea
Sierra Leone
Liberia
Fiscal vulnerabilities across economies
Public debts
expenditure patterns
High cost of borrowing etc.
External ShocksSlow growth in advance economies etc. Source: IMF, Regional Economic Outlook Report: Sub-Saharan Africa,
Oct. 2014
Paul Frimpong, Ch.E. @ British Council, November 14, 2014
ECONOMIC OVERVIEW: GHANA
Fairly Resilient Growth
Over the medium term to 2015, the economy is expected
to register robust growth of around 8% bolstered by:
Improved oil and gas production
Increased private-sector investment
Improved public infrastructure development
Sustained political stability etc. ( Source AfDB)
Vulnerabilities
Public debts
expenditure patterns
High cost of borrowing etc.
Over reliance on development partners
Source: World Bank Doing Business Report 2014
How EASY or DIFFICULT is it to do business in Ghana?
Investments opportunities (Agriculture sector, Technology etc)
Benefits from the ECOWAS sub-region
15 Member countries
Greater consumption power i.e. growth in Nigeria and Cote d’Ivoire
Security for investments i.e. Political stability etc.
Paul Frimpong, Ch.E. @ British Council, November 14, 2014
BUSINESS ENVIRONMENT
Paul Frimpong, Ch.E. @ British Council, November 14, 2014
Starting a Business
Procedures to legally start and operate a company
Pre-registration (for example, name verification or reservation, notarization)
Registration in the economy’s largest business city
Post-registration (for example, social security registration, company seal)
Time required to complete each procedureDoes not include time spent gathering information
Cost required to complete each procedure
Official costs only, no bribes
No professional fees unless services required by law
BUSINESS ENVIRONMENT cont’d
Paul Frimpong, Ch.E. @ British Council, November 14, 2014
DOING BUSINESS IN GHANA
Policy makers need
to know how Ghana
and comparator economies rank on the
ease of STARTING A BUSINESS.
Paul Frimpong, Ch.E. @ British Council, November 14, 2014
How Ghana ranks on
doing business TOPICS
DOING BUSINESS IN GHANA
Paul Frimpong, Ch.E. @ British Council, November 14, 2014
DOING BUSINESS IN GHANA
How Ghana and
comparator economies rank on the
EASE OF DOING
BUSINESS.
Paul Frimpong, Ch.E. @ British Council, November 14, 2014
DOING BUSINESS IN GHANA
How Ghana and
comparator economies rank on the
ease of getting ELECTRICITYGlobally,
Ghana stands at 85 in the
ranking of 189 economies on
the ease of getting
electricity
Paul Frimpong, Ch.E. @ British Council, November 14, 2014
SMEs IN GHANA
PART II
Definition
There is no universally agreed definition of Small and Medium Enterprises (SMEs). Some define them in terms of their total revenue, while others use the number of employees as an indicator
The European Union defines a medium-sized enterprise as one with a headcount of 250, a small firm as one with a headcount of less than 50 and a microenterprise as one with a maximum of 10 employees.
The National Board for Small Scale Industries (NBSSI) which is the regulatory body for SMEs in Ghana defines SMEs in terms of both fixed asset and number of employees.
It defines an SME as an enterprise with turnover greater than US$200,000 and not more than US$5 million equivalent.
Paul Frimpong, Ch.E. @ British Council, November 14, 2014
SUPPORTING SMEs IN GHANA
Economic EmpowermentThe key to poverty alleviation is economic growth that is inclusive
and reaches the majority of people
Local entrepreneurs and SMEs represent the backbone of global economic activity
Improving the performance and sustainability of SMEs can help achieve this type of economic growth
Paul Frimpong, Ch.E. @ British Council, November 14, 2014
SMEs are vital in achieving industrial and economic development objectives.
Development of this sector contributes to poverty alleviation, employment creation and generation of potential entrepreneurs.
It offers linkage development to large industries.
Supports the rural economy in providing income generating activities.
Enable marginalised groups such as the disabled, youth, and female-headed households to meet basic needs in the informal sector.
Paul Frimpong, Ch.E. @ British Council, November 14, 2014
SMEs & ECONOMIC TRANSFORMATION
Large CorporationsImportant source of local supply and service provision to larger corporations.
Extensive local knowledge of resources, supply patterns and purchasing trends.
By working closely with SMEs, large corporations can develop a new customer base that may not be accessible to the traditional distribution networks of these corporations.
Important source of innovation – SMEs tend to occupy specialized market “niches” and follow competitive strategies that set them apart from other companies Paul Frimpong, Ch.E. @ British Council, November 14,
2014
SMEs & ECONOMIC TRANSFORMATION Cont’d
Infrastructure
Physical infrastructure:
Transport
Telecommunication
Energy
Information
Sensible financial Institutions / financial products for RISK FINANCE
Accessing Finance Experienced across the board, with difficulties ranging from qualifying criteria to the
adequacy of business plan assessment and excessive pricing of loans
The challenges are aggravated when emerging SMEs without a track record are concerned
Paul Frimpong, Ch.E. @ British Council, November 14, 2014
SMEs CAN‘T GROW: WHY?
Accessing finance: challenges Does not have a bank account with the institution it approached
No or poor credit history
Applicant lacks security/collateral for the loan
Limited cash flow
Limited owners equity
Lack of technical and management skills
No financial records
Consultant prepared the business plan – lack of understanding
Lack of research on consumer base (market)
Poor planning skills thus struggle to forecast the growth and financial cash flow of the businessPaul Frimpong, Ch.E. @ British Council, November 14,
2014
SMEs CAN‘T GROW: WHY? Cont’d
Governance
Socio-political stability
Security
Corruption
Legal rights enforceable: rule of law property rights
bankruptcy proceedingsPaul Frimpong, Ch.E. @ British Council, November 14,
2014
SMEs CAN‘T GROW: WHY? Cont’d
Human CapitalEducation system: Basic
TertiaryTraining:
Including MentorshipStimulation of entrepreneurship:
Technology centres
Paul Frimpong, Ch.E. @ British Council, November 14, 2014
SMEs CAN‘T GROW: WHY? Cont’d
The setting up of appropriate institutional framework to monitor the policy implementation process.
Ensure that appropriate regulatory environment which does not stifle SME growth is in place .
Consolidate efforts for entrepreneurship development and training of SMEs.
Relevant policies should incorporate technological support as key component for SME development.
Market development should include provision of information and creation of market opportunities.
Access to finance is very crucial for the sector.Paul Frimpong, Ch.E. @ British Council, November 14, 2014
STRATEGIC POLICY RECOMMENDATIONS
Need for close collaboration amongst SME business promotion service providers for more impact.
Regional based promotion of entrepreneurs, to tap on differences in resource base and skills across regions.
Collaboration between industry, Academia and Government to train to the needs of the industry.
SME related policies should be harmonized, coordinated and be focused.
The need for strong private sector SME sectorial Associations to assist Government in policy reforms.
Paul Frimpong, Ch.E. @ British Council, November 14, 2014
STRATEGIC POLICY RECOMMENDATIONS
Cont’d
Paul Frimpong, Ch.E. @ British Council, November 14, 2014
THANK YOU