Akufo-Addo’s next term: SMEs push for growth-supporting reforms

  • Favourable tax system
  • Expansion of NEIP, others
  • Access to market through AfCFTA

Startups and small businesses in the country want President Nana Addo Dankwa Akufo-Addo’s next term in office to focus on making the business environment more friendly – by reforming the tax system, expanding the existing entrepreneurial programmes and supporting them to take advantage of the continental free trade deal.

Currently, the tax system in the country doesn’t discriminate between small and large businesses, as both sizes of business are subject to the same company income tax rate of 25 percent, Value Added Tax, and Customs and Excise Tax obligations.

A recent research by the Private Enterprise Federation has revealed that Micro, Small and Medium Enterprises (MSMEs) in the country contribute a paltry 4 percent to domestic tax revenue despite making up about 92 percent of registered businesses, often due to complexities in the tax administration system.

This, the CEO of Giddins – a local shoe manufacturer, Gideon Dendzo, says must be reviewed to introduce a policy that will require different tax obligations for SMEs and startups in the president’s next term.

“I think government should come out with policies which will give us tax waivers or reduce the tax burden on small businesses. It is not fair for small business and large ones to be taxed at the same rate. If there is a policy wherein young entrepreneurs or startup businesses have their tax obligation slashed by half, or even waived, it will encourage many youths to create jobs. Government can even do it by coming out with a policy that will waive tax for entrepreneurs which employ the vulnerable in society,” he said in an interview with the B&FT.

Another area these small businesses want government support is in assisting them to penetrate other markets through the African Continental Free Trade Area (AfCFTA) agreement. For someone like Yvonne Odame, CEO of Y&M Regeneration Ltd. – a climate smart agriculture business, access to market is as important as access to finance; hence, a deliberate policy to help SMEs penetrate other markets is needed, as such businesses do not have the capacity to do that alone like large businesses do.

“Already, government has introduced some programmes such as the NEIP; Planting for Food and Jobs; One District, One Factory, among others; but I think what’s left is adding value to the chain to push the market aspect. Sometimes you produce and run at a loss because of access to market constraints. So, government should assist entrepreneurs to take advantage of the African Continental Free Trade Area to spread our market by tapping into other countries,” she said in an interview with the B&FT.

Mr. Dendzo, quoted earlier, further states that the National Entrepreneurship and Innovation Programme (NEIP) that was introduced in 2017 should be expanded in scope and content so as to serve start-ups and SMEs better.

“I think the NEIP is a very brilliant initiative, and it should be expanded and strengthened. Aside from the financial support given by the programme, it also gives technical and managerial support to entrepreneurs. There are some skill-sets that entrepreneurs need, and so if the NEIP is expanded to give such training and skills to entrepreneurs it will be very useful. Not every entrepreneur can afford to pay for legal advice, so if the NEIP is expanded to add certain services entrepreneurs can access, either at subsidised cost or free of charge, it would be very helpful,” he said.

What the manifesto says

In his second bid to convince the electorate to retain him in power till 2024, the president and New Patriotic Party (NPP) promised in the party’s manifesto to make the business environment friendly by introducing initiatives to address some constraints hampering the private sector’s growth.

The president said in his next term he will introduce regulatory flexibility for MSMEs to improve compliance post-COVID-19: by introducing a specific tax regime for MSMEs with specialised, flexible provisions; offering online tax filing and payment for MSMEs; reducing the time required for VAT refunds for all companies; and introducing a risk-based system to make tax audits more efficient.

Other constraints highlighted in the manifesto include the cost of power; access to and cost of finance, and the business environment itself. With regard to cost of power, the NPP government says it will review and restructure the energy-mix to generate cheaper sources for industries, including gas and renewable energy; and complete the re-negotiation of the existing power purchase agreements to reduce the take-or-pay commitments and excess capacity charges that translate into higher power tariffs.

With access to, and cost of finance constraints, the NPP government says it will reduce the risk of lending by leveraging technology to reduce information problems between lenders and borrowers; restructure and redirect existing funding arrangements; overhaul and restructure already existing funding programmes like the Venture Capital Trust Fund, among others; use preferential tax regimes and first options on government of Ghana-funded projects to direct projects to private sector businesses; and complete the establishment of a new Development Bank for long-term capital mobilisation.

To address constraints in the business environment, the president says in his next term he will introduce a risk-based licencing and inspection system, and remove the licence requirements for all companies that do not pose any health or public safety risk; introduce a single business identifier for interactions with all government agencies to reduce compliance cost and time for the private sector; and set up a one-stop shop that gathers together all agencies involved in the building permitting process for improved service delivery.

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