Ghana’s recent political transition reflects a populace eager for solutions to the economic challenges that have stifled growth and prosperity. High inflation, currency depreciation, unemployment, and fiscal deficits have created a sense of urgency for the new government to prioritize policies that stimulate economic recovery and foster inclusive growth. Among the potential avenues for impactful intervention, addressing the bottlenecks faced by small and medium-sized enterprises (SMEs) presents a “low-hanging fruit” with the potential to deliver quick wins and long-term benefits.
The Economic Context
The change in government following the December 2024 polls, is rooted in public dissatisfaction with the previous administration’s inability to navigate mounting economic pressures. SMEs, which constitute over 90% of businesses in Ghana and contribute significantly to GDP and employment, have been particularly hard hit. Factors such as high transportation costs, limited access to markets, weak local currency, high rents, limited credit access, and capacity gaps constrain their growth and profitability.
The new administration has a unique opportunity to address these issues as part of its broader economic recovery agenda, thereby winning public goodwill while setting the stage for sustainable development.
Key Bottlenecks Facing SMEs
High transportation cost remain one of the most significant challenges for SMEs, particularly for those in the agricultural value chain. High costs of moving goods from production hubs, such as Techiman in the Bono East Region, to major markets like Kumasi and Accra erode profitability and inflate consumer prices. Compounding this issue is inadequate infrastructure and limited options for affordable cargo transport.
Market access is another pressing issue, especially for agricultural produce, where perishable goods often go to waste due to insufficient storage and limited demand. Weak trade ties with regional neighbors and security concerns along critical routes, such as the Ghana-Burkina Faso border, further stifle cross-border commerce.
High cost of credit also constrains SME growth, as businesses struggle to access affordable financing for operations and expansion. The prevailing interest rates are prohibitive, leaving many SMEs dependent on informal sources of credit, which often come with unfavorable terms.
Additionally, high cost of business rent is a major concern. Business rent laws heavily burden SMEs, with many required to pay rent years in advance. This drains limited cash flows and leaves businesses struggling to sustain operations. Finally, capacity gaps among SME operators hinder their ability to scale, innovate, and compete effectively.
Solutions for Immediate Impact (First 365 Days)
To address the pressing challenges faced by SMEs in Ghana, a set of immediate interventions is essential to stabilize their operations and stimulate growth. The goal is to ensure that these interventions provide immediate benefits to the population, particularly low-income earners.
Addressing transportation costs should be a top priority. The government can partner with transport companies to offer discounted cargo fares from major food production centers to urban markets. Implementing this solution will require strong coordination with the private sector and careful monitoring to ensure the benefits are passed on to consumers. The immediate benefit is reduced prices for consumers and improved margins for businesses, fostering economic stability.
Boosting trade with neighboring West African countries is another urgent intervention. Improving security along key trade routes, particularly the Ghana-Burkina Faso border, will facilitate the transport of goods such as tomatoes and onions. These measures will require investments in border infrastructure and collaboration with security agencies, but the benefits include increased trade volumes and strengthened regional ties while domestic agricultural production improves.
To address the burden of business rents, the government must enforce existing rent laws to transition SMEs from paying multi-year advance rents to shorter-term agreements, such as monthly or bi-annual payments. The challenge lies in enforcing compliance among landlords, but the payoff is a healthier business environment where SMEs can allocate resources more effectively.
Stimulating demand for local goods, particularly agricultural produce, is essential. The government can increase procurement for programs such as the Free Senior High School (SHS) initiative and school feeding programs. This requires effective coordination between ministries and budget reallocations, but the benefits include reduced food waste, enhanced local production, and stronger rural economies.
Increasing access to affordable credit is another critical step. Partnering with financial institutions to create subsidized loan schemes for SMEs can alleviate financial pressures. While such initiatives may strain public finances initially, the long-term benefits of increased productivity and job creation outweigh the costs.
Capacity building is critical for equipping SMEs with the skills needed to thrive. Partnering with private sector organizations to deliver training and mentorship programs can yield immediate results. These programs, though cost-intensive, will enhance SME competitiveness and innovation, driving economic growth in the long run.
Solutions for Medium-Term Impact (2-5 Years)
Facilitating exports of key local goods, particularly agricultural produce, should be a priority for the Ministry of Trade and Industry. It is great news that H.E the President has created Agribusiness unit within the Ministry of Trade, Agribusiness and Industry. It is my view that this unit will perform better under the Ministry of Food and Agriculture. Nonetheless, its emergence is quite visionary! The Ghana Export Promotion Authority (GEPA) can play a pivotal role by providing export subsidies, establishing trade hubs, and directly connecting SMEs with international buyers. While this requires significant investment and policy adjustments, the long-term benefits include increased foreign exchange earnings and diversified revenue streams for SMEs.
Acting as a bulk buyer for perishable goods is another medium-term solution. The government can stabilize prices and reduce post-harvest losses by purchasing and redistributing goods for domestic and export markets. This initiative necessitates the establishment of storage facilities and efficient distribution networks, but it will significantly improve agricultural productivity and farmer incomes. The government can partner with private players to make this a reality.
Addressing infrastructure deficits through strategic investments in transportation networks and the creation of SME clusters can enhance operational efficiency. These clusters would provide SMEs with shared access to utilities, reducing costs and fostering collaboration. While the financial outlay is substantial, the impact on productivity and competitiveness would be transformative.
Encouraging innovation and technology adoption by subsidizing digital tools and fostering R&D partnerships can modernize SME operations. This requires incentives for private sector involvement but promises substantial gains in efficiency and market reach.
Finally, overhauling the regulatory framework to create a cohesive SME policy can reduce uncertainty and streamline operations. Establishing a unified regulatory body for SMEs would require political will and stakeholder consultations but would simplify compliance and foster a more supportive business environment.
Conclusion
For Ghana’s new government, tackling SME bottlenecks is both an economic imperative and a strategic opportunity to rebuild public trust. Immediate interventions to reduce transportation costs, improve market access, enforce rent laws, enhance access to credit, and provide capacity building can deliver visible results within the first year. Medium-term strategies, including export promotion, infrastructure development, and regulatory reforms, will ensure the sustainability of these gains. By addressing these challenges holistically, the government can unlock the potential of SMEs to drive economic growth, create jobs, and foster shared prosperity, setting Ghana on a path to long-term success.
The clock is ticking! For the people want change, sooner, than later.
Kwaku Ofori is a Chartered Accountant and an expert in SME Financing and Support Systems. He can be reached at [email protected]
