"Ghana\u2019s macroeconomic environment hostile to SME\u2019s competitiveness under AfCFTA"

" \n Ghana\u2019s macroeconomic environment hostile to SME\u2019s competitiveness under AfCFTA \n \n\n \n Ghana\u2019s macroeconomic environment has been identified to be the single most limiting factor to the competitiveness of small and medium-sized enterprises (SMEs) under the African Continental Free Trade Area (AfCFTA). \n \n\n \n Per the study and subsequently a report published by CUTS Ghana and German development agency GIZ, on behalf of the Federal Ministry for Economic Cooperation and Development [BMZ], asserts that, while Ghanaian SMEs are putting in their best foot to remain competitive and relevant, the immediate business environment of these SMEs are hostile and appear to limit their chances of survival. \n \n\n \n Factors identified to be hostile towards the competitiveness of SMEs under the continental trade agreement include: unreliable electricity supply, high rate of exchange depreciation and inflation. \n \n\n \n \u201cThere are also general difficulties in dealing with government bodies and agencies in relation to documentation, registration, licensing and regulatory issues. This is beside the poor ICT infrastructure network. There is also lack of accessibility to credit facilities in Ghana due to high interest rate from financial institutions,\" added the report. \n \n\n \n In view of this, the report titled \u201cImproving Framework Conditions to Unlock the Potential of AfCFTA for SMEs in Ghana,\u201d states that, \u201cthere are many barriers that need to be surmounted to make the business environment more eco-friendly to the operations of these SMEs.\u201d \n \n\n \n The report indicates that at the firm level, a large number of the sampled Ghanaian SMEs have no domestic quality certification for export and no internationally-recognised quality certification. This simply means that most of them are unable to compete in the African or international market. \n \n\n \n Most of the SMEs also have excess capacities and lack a functioning management structure. This notwithstanding, most of these firms have not made sufficient investments in the production, finishing and packaging of their products to meet international standards. \n \n\n \n There is also a general low capacity at the immediate business environment level to compete, connect and change. This is evidenced in the general difficulties in accessing trade information and trade-related infrastructure such as good roads and ICT for the purpose of work. \n \n\n \n There are also delays in clearing goods from customs besides poor dealings with governmental bodies and policymakers on documentation, registration, licensing and regulatory issues. \n \n\n \n A risk assessment profile of Ghanaian SMEs by the study given the hostile macroeconomic environment shows there is a high level of risk among Ghanaian SMEs with the risks being economic, financial, operational and market risks. \u00a0 \n \n\n \n For SMEs to improve upon their competitiveness for trading under the AfCFTA, the report made the following recommendations: \n \n\n \n The SMEs should put in their best effort towards acquiring quality certification especially with regards to those in manufacturing. It is also a must to acquire an internationally recognised quality certification in preparation for exporting to the African market. \n \n\n \n All SMEs should endeavour to open and use a bank account for their business operation. This account should be separate from their personal bank account and this makes their business serene. \n \n\n \n Ghanaian SMEs need to operate at full capacity even if this requires an extra hand. This will boost their output levels. In addition, some of the SMEs can leverage the vast experience of their top managers to expand their current operating capacities and make space for exportation. \n \n\n \n There is a need for SMEs to put in place a functioning management structure. This may motivate the employees, reduce employee turnover and make them have a sense of belonging. \n \n\n \n There is also the need for massive investment in the production, finishing and packaging of products to meet quality and international standards. \n \n\n \n Some of the SMEs need to leverage recent advancements in technology to boost their productivities. Basic investment in smart mobile phones and internet services is required to access and use social media platforms to enhance their productivity. \n \n\n \n The deployment of modern marketing tools should also be aggressively exploited to market the products and services of SMEs and also to be able to reach a larger African market. Modern marketing tools such as social media marketing, Email marketing and internet advertisements should be exploited. Some of these tools are more convenient with the necessary training and more cost-effective. \n \n\n \n SMEs should follow prudent but basic financial management practices. They should endeavour to prepare annual audited financial accounts. This makes them easy candidates in accessing credit facilities from financial institutions and private investors. \n \n\n \n Formal training workshops should be organised for staff at least once in a year. This will refresh the staff and sharpen them for enhanced productivity. This is also to ensure that the staffs are abreast with changing trends and new ways of doing things. \n \n\n \n Read: Tax coordination can lead to a fairer, greener global economy \n \n\n \n Recommendations made by the report to government to aid SMEs become competitive under AfCFTA include: \n \n\n \n Industry players and government should invest in trade infrastructure that gives easy access to trade information such as the catalogue of government policies and potential export markets among others. \n \n\n \n The bureaucracy at the various points of entry such as the ports and airports should be reduced or removed. Thus, conscious efforts should be made to make it easy to send goods abroad and clear same from customs. This requires more investments in ICT infrastructure. \n \n\n \n The time required in dealing with governmental bodies on documentation, registration, licensing and regulatory issues should be streamlined. \n \n\n \n There is a need for SMEs, policymakers and governments to enforce more collaboration between the industry players or businesses and universities on research and development. \n \n\n \n The Ghanaian government and financial institutions need to put in measures to make credit facilities more easily accessible to SMEs to expand their businesses. \n \n\n \n Relatedly, the cost of credit or lending interest rate should be drastically reduced. This will make it competitive to counterparts in Africa since these rates are considered very high in Ghana. \n \n\n \n It is also very necessary for the government and the relevant stakeholders to ensure that electricity supply is readily available, reliable and affordable. The high price and unreliability of electricity supply are one of the reasons why SMEs keep increasing their prices. \n \n\n \n There is a need for government to stabilize the exchange rate and inflation. This will make Ghanaian SME export products competitively priced. \n \n\n \n Government and the National Communications Authority (NCA) should enhance the general ICT infrastructure in the country. Also, internet services should be competitively priced and made more reliable. \n \n\n \n There is the need to establish AfCFTA coordinating offices (at the MMDA level) across the country. These coordinating offices should have units solely designed to meet the needs of SMEs. \n \n\n \n There is the need to extend the education and sensitisation of AfCFTA to women, particularly \u201cmarket women\u201d in the informal sector. \n \n\n \n \n \n\n \n In terms of capacity, AfCFTA is expected to establish a single continental market for trade in African goods and services with a combined GDP of over $3 trillion and a market size of 1.2 billion people. \n \n\n \n This includes some 54 countries in Africa. The United Nations Commission for Africa estimates that the free trade area agreement will boost intra-African trade by 52 per cent by 2022. \n \n\n \n \n \n\n \n \n "

"Ghana\u2019s macroeconomic environment hostile to SME\u2019s competitiveness under AfCFTA"

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