Ghana’s ability to take advantage of the Africa Continental Free Trade Area (AfCFTA) has been dealt a major blow, after a baseline study found that only 5 percent of the country’s Micro, Small and Medium Enterprises (MSMEs) export their products.
This was after surveying 84,592 MSMEs in 245 out 261 districts in Ghana’s 16 administrative regions with most of the surveyed firms from the Ashanti (23,123, equivalent of 27.3 percent and Greater Accra (18,856, representing 22.3 percent) respectively.
The survey found that only 4,177 MSMEs from the 84,592 – representing a paltry 5 percent of the enterprises – export their products and/or services.
According to the survey- which was sanctioned by the Ghana Enterprises Agency (GEA) under the GEA-Mastercard Foundation’s Young Africa Works Project and conducted by Palladium Group Ghana Limited – of the significant proportion of the MSMEs in all the 16 regions, 86 percent are operating in the informal sector; with the Western North Region recording the least.
The study further found that a significant majority (87 percent) of the enterprises are micro-sized. Again, the majority of micro- (33 percent), small (35 percent) and medium-sized (24 percent) enterprises operate within the handicraft sector; while majority of large firms are in the agro-processing, textiles and garments sectors.
The baseline study of the Ghanaian MSME landscape indicates that Ghana’s MSME sector shows very minimal growth-spurts – as firms start at a particular size and remain so throughout their lifetime, indicating that not much changes over time, Professor Ebo Turkson, an economist at the University of Ghana, explained this when he presented the findings.
“These findings generally suggest that although Ghana has a very vibrant MSME sector, a large majority are micro-sized – not innovative, highly informal, constrained by access to credit and do not grow in higher size thresholds. If policy can enhance the productivity of MSMEs through innovative activities, it will encourage their participation in the export markets and partly address the issue of access to credit,” he stated.
Chief Executive Officer (CEO) of the GEA, Kosi Yankey-Ayeh, welcomed the survey’s findings, saying in an interview with the Business and Financial Times (B&FT) that the baseline study has given the agency a better picture of the country’s MSME sector; and that will lead to the creation of bespoke interventions which ensure rapid scale-up with a focus on heightening exportation into other markets.
“It shows potential, it shows opportunity; and this is a great time for us to enhance more people to export…build their capacity to export and take advantage of the continental free trade area,” she stated.
She continued that the findings will also drive massive formalisation of the MSME sector to make the enterprises attractive for investors as well as ease access to bank loans. “So, as much as possible, formalisation is needed if we are going to address the challenges of accessing finance. It’s key, and it leads to the building of stronger relationships,” she added.
For Mrs. Yankey-Ayeh, data from the study will inform the GEA’s policy direction in partnership with the Ministry of Trade and Industries, and als0 determine the type of programmes which need to be implemented.
“We are going to take all of that to design a value-added intervention for the MSME sector to take a centre-stage in Ghana’s economic development.”
The Chief Director of the Trade and Industry Ministry described the study as a game-changer, noting it will create an environment that supports the growth of MSMEs, ensure access to financing, and implementation of targetted programmes aimed at streamlining the sector into the digital economy.