The key to creating more jobs; driving technological transformation of MSMEs
Ghana’s economy is dominated by Micro, Small and Medium Enterprises (MSMEs), that struggle to grow, according to the latest Country Economic Memorandum report of the World Bank, for Ghana. The report notes that in 2015, 98 percent of the country’s businesses were micro or small and 90 percent were informal.
“Digital technologies could offer a source of productivity growth and accelerate firm upgrading and spur innovation and entrepreneurship, driving growth of higher quality jobs”, saysPierre Laporte, World Bank Director for Ghana, Liberia, and Sierra Leone. “MSMEs also provide important job opportunities for women and young people, meaning that addressing their challenges is a major way to improve inclusion.”
The report notes that as part of the Covid-19 Alleviation and Revitalization of Enterprise Support (CARES) program, the Government of Ghana already plans to expedite digital initiatives, such as the National ID, digital address systems and land records, to digitize fiscal revenue collection as a first step toward a cashless society and improve online education delivery.
The report notes that though Ghana performs well on the availability of digital infrastructure – with high coverage and relatively low costs for mobile internet, fixed broadband is the main barrier to digital technology adoption.
For digital transformation to drive firm upgrading and job creation, the report recommends that Ghana focuses on reforms in three areas:
- Increase speed of mobile internet, continue to reduce the cost of handsets and data plans, and rapidly reduce the costs of fixed broadband and expand use.
- Improve the quality of foundational skills and develop a labor force with advanced digital skills through tertiary education.
- Focus on accelerating the adoption of Industry 3.0 technologies such as internet access, mobile phones, computers, and smartphones, particularly in smaller firms and manufacturing. This will help lay the foundation for the adoption of more advanced “Industry 4.0” technologies of big data analytics, artificial intelligence and software for automation and online payment systems.
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The report highlights four main pillars for an accelerated economic transformation for better jobs:
- To create jobs, Ghana will need to drive sectoral transformation through the movement of workers into higher productivity firms and sectors and spatial transformation through trade, urbanization, and connectivity. This will require expanding lower-skilled jobs in ‘global innovator’ services, particularly ICT and business services and boosting competitiveness in manufacturing by fully implementing the African Continental Free Trade Area and moving to higher value-added labor-intensive tradable services through Foreign Direct Investment, attracting and cultivating large firms and developing the tourism sector after the pandemic.
- To deliver productivity growth and boost innovation and entrepreneurship, Ghana will need to drive technological transformation through the adoption of digital and complementary technologies in domestic firms.
- To support more inclusive private sector development, Ghana will need to leverage the financial sector to facilitate firm expansion, technology adoption and innovation by increasing the availability of long-term finance, accelerating the implementation of the new wholesale development bank, develop the capital market, mitigate financial institutions’ credit risk and lessen collateral requirements. It will also need to digitize retail and merchant payments and establish digital financing platforms and marketplace solutions.
- To enable long-term inclusive growth, Ghana will need to leverage the macro-fiscal environment to provide stability, manage natural resources and generate the revenues to fund reforms for economic transformation. This requires ensuring fiscal stability, improving debt management and transparency in the extractive sector, striking the right balance between efficiency and equity in the tax mix, while increasing revenues and improving the framework for environmental taxation to minimize the impact of climate change on households.
“Ghana faces an acute job challenge and responding to this challenge will require creating more and better job opportunities for lower- and mid-skilled workers” says Katherine Stapleton, World Bank Economist, and co-author of the report.
“The country’s population is projected to rise to 45 million by 2040 (according to the 2021 UN Population Forecasts), with 58 percent of the population under 30 years old. This implies that around 10 million Ghanaians will enter the labor force between now and 2040, addressing the job challenge is therefore critical.”
