business development conference_paul frimpong presentation

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


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


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



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.



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.



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


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.


BUSINESS ENVIRONMENT


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



Policy makers need

to know how Ghana

and comparator economies rank on the

ease of STARTING A BUSINESS.


How Ghana ranks on

doing business TOPICS




How Ghana and

comparator economies rank on the

EASE OF DOING

BUSINESS.



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


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.


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

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.


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


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


Human CapitalEducation system: Basic

TertiaryTraining:

Including MentorshipStimulation of entrepreneurship:

Technology centres



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.


STRATEGIC POLICY RECOMMENDATIONS

Cont’d


THANK YOU

business development conference_paul frimpong presentation

Documents

business smes

british council

ghana paul frimpong

business report

business environment

accra paul frimpong

congo mozambique paul

economic performance