International Trade I Investment Promotions I Economic Diplomacy with Richmond Kwame FRIMPONG: Industrial clustering

Special Economic Zones (SEZs)
Richmond Kwame Frimpong
  • An economic ‘Upper-Hand’ for SMEs

To achieve poverty reduction and reduce income inequalities in Ghana, there is need to promote the distribution of industries away from urban areas. Clustering in Ghana mainly concerns the manufacturing sector, and manifests as the visible physical concentration of businesses in relatively close defined geographical areas within the major cities of Accra-Tema, Kumasi, and Takoradi.

Ghana’s industrial clusters were built either by the government or developed  as private sector  firms  so there is potential in creating them. For instance, there have been a spontaneous set up of machinery and furniture clusters in a number of cities in the southern part of the country. The Ghana Free Zones Board (GFZB) has established industrial zones as export processing zones (EPZs) in addition to the clusters. They comprise the Ashanti Technology Park and the EPZs at Tema, Sekondi and Shama. Convergence of the primary entities for export/investment promotion facilitates business processing into a ‘one-stop-shop’.

Factors of production include labour, capital (buildings and machines) and natural resources (land, trees and mineral deposits). To generate high-quality output and take on significant business partnerships, access to the appropriate production factors in terms of both quantity and quality is necessary. Employers are driven to seek assistance from other businesses that have equivalent equipment, and the necessary skill, knowledge and expertise because SMEs are constrained by their size and resource availability. In this sense, the industrial cluster represents a legitimate location where expertise is frequently concentrated, allowing for the acceleration of labour resources.

Heavy and light industries both require significant capital investments to operate. Only a few solitary firm owners can buy industrial equipment; the remainder rent it from distant suppliers. In dire circumstances, business owners create groups to purchase large industrial machines with cash and credit. As an alternative, businesses that are unable to contribute to the equipment’s purchase may pay a fee to use the machinery and equipment in their manufacturing processes. The cost of transporting all heavy wood products to different sites for processing is decreased with this form. Since all activities take place in one area, producers who lack the necessary skills to create must employ other heavy equipment operators who are qualified to complete the task.

The employer can supervise the work to ensure excellent quality while these people are being compensated for their services. Direct contact and communication with other competing companies are essential to the daily operations of micro-firms. Micro-firms are exposed to various levels of interactions and knowledge about new commercial activities, market opportunities, financial opportunities, and technology in a cluster. Among the cluster’s businesses, fresh knowledge generated by participants is frequently disseminated. Employers can modify their business processes and systems in micro-firms to investigate and seize any chances since they are adaptive and flexible. As a result of first mover advantage, proactive enterprises in dense clusters build strategies to take advantage of transformative knowledge as it becomes available.

To realise economies of scale, networks of businesses work together to use complementary skills, tap into untapped markets, integrate activities and pool resources and information. It is interesting to note that when micro-firms are situated in an industrial cluster, they are able to construct the cluster’s infrastructure, including roads, sheds, lighting, and even provide social and welfare services for members. In carrying out their business activities, participants develop substantial collective bargaining power. Members of a cluster can influence policy-makers and government organisations to implement flexible regulatory frameworks, such as tax breaks and support services. These incentives are necessary to provide the cluster’s members with a stronger competitive edge over other companies. Strong network and association between members and support organisations are necessary for a cluster to extract these services for a competitive advantage.

SMEs are characterised by a paucity of resources and long-standing environmental restrictions. Innovating new products, markets, marketing tools, organisational procedures, and product designs, among others, require knowledge and expertise. In essence, clusters encourage innovation since businesses will share information and expertise. Ghana is growing its industrial exports and high-value manufacturing, and if the barriers can be removed, government initiatives could result in rapid growth. If the necessary transportation infrastructure is put in place, efforts to decentralise and create industrial clusters near the sources of raw materials may also be effective.

A company’s competitive edge is increased by having rapid and easy access to professional services and skilled labour among other substantial infrastructure and facilities. The central location of the Dawa Industrial Zone (DIZ) is a great example of Ghana’s largest industrial park that encourages clustering. The DIZ is Ghana’s ultra-modern location for all types of industries – be they light or heavy. It provides an adequate and reliable road network, high-speed Internet, constant power supply, clean water, civil and engineering services, etc., that facilitate all industrial activities carried about by companies within the enclave. The provision of these amenities and more also aids in the efficient and effective operation of businesses, affording them the needed competitive advantage to grow and develop.

The writer is a financial advisory and international trade professional



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