ROLE OF SMALL AND MEDIUM ENTERPRISES IN THE ECONOMIC DEVELOPMENT
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ROLE OF SMALL AND MEDIUM ENTERPRISES IN THE ECONOMIC DEVELOPMENT
ABSTRACT
This study looks at how small and medium-sized firms contribute to Ghana’s economic development. The study evaluates the procedures developed by the government and its agencies to support and promote small and medium-sized enterprises (SMEs) in Ghana. The study delves deeper into the sources of capital for SMEs, the challenges they face, and the participation of other stakeholders.
The goal of this study is to estimate the impact of SMEs on Ghana’s economy in terms of economic growth, as well as the importance of encouraging and sustaining such firms. The research was carried out in the Greater Accra region.
Interviews were conducted with entrepreneurs whose businesses are classed as SMEs, as well as other stakeholders. These interviews are the primary sources of data collection. Secondary sources of data included papers, journals, and other printed and electronic publications.
Tertiary statistics were gathered from the Ghana Statistics Service, Wikipedia, and dictionaries. The acquired data was analysed qualitatively and quantitatively utilising predictive analytic software statistical tools.
The empirical component of the study investigated and reviewed theories on the notion and characteristics of SMEs with similar restrictions associated with all SMEs.
The study’s findings revealed that SMEs in Ghana contribute significantly to total GDP and employ a considerable proportion of the active population; yet, they confront various hurdles, and the government is doing little to solve these issues. The report concludes with specific recommendations for sustaining, promoting, financing, and attracting aspiring entrepreneurs.
Introduction
Small and medium-sized firms (SMEs) are critical to the economic development of many countries, including Ghana, and the African continent as a whole. Before the Europeans came in Ghana, people engaged in simple kinds of business known as barter, in which they exchanged one commodity or service for another.
The indigenes were also involved in subsistence production of clay pots, gold mining, salt mining, fishing, and peasant farming, with the excess produce sold to their neighbours after fulfilling the needs of their own families.
The Portuguese were the first Europeans to come in Ghana, and in 1842 they established a trading town on Ghana’s coast to trade gold. Although gold trafficking was their primary focus, slave trading rapidly gained traction and became the most profitable enterprise at the time.
Ghana’s economy currently is divided into three sectors: agriculture, services, and industry. According to recent numbers issued by the Ghana Statistical Service in the first quarter of 2011, Ghana’s economy is transitioning from agriculture to industry and services. The industrial sector grew the most, accounting for 21.4% of GDP;
this increase was primarily due to the start of oil production in late 2010 and an increase in mining and quarrying businesses. The service sector expanded by 5.3%, while the agricultural sector contracted by 35.7%. Overall, real GDP estimates declined by 5.1 percent in the first quarter of 2011 compared to the preceding quarter of 2010. SMEs can be found in all three economic activity groups in Ghana. (Newsletter, QGDP, Ghana Statistical Service, June 2011).
Small and medium-sized enterprises are defined differently in each location. According to the European Economic Commission’s journal on SMEs, published on May 20, 2003, SME are enterprises that employ fewer than 250 people, have an annual turnover of no more than €50 million, balance sheet assets of no more than €43 million, and have at least 25% of their capital owned by a larger firm or a public body.
This SMEs definition is used on a voluntary basis by European Economic Commission member states. In contrast, the Ghana Statistical Service (GSS) classifies enterprises with fewer than ten employees as Small Scale Enterprises and those with more than ten employees as Medium and Large-Sized Enterprises (Kayanula and Quartey 2000, 8).
These firms are a diverse set of businesses that often operate in the primary, secondary, and tertiary sectors. They comprise a wide range of businesses such as agricultural input manufacturers, local handicraft and artefact makers, textile and garment manufacturers, chemical and pharmaceutical producers, and other service providers. Globally, SMEs account for more than 90% of a country’s GDP and 80% of employment (Frederick 2005, 1).
Abor and Quartey’s 2010 research on SME Development in Ghana and South Africa found that SMEs in Ghana account for around 85% of manufacturing jobs and contribute 70% of Ghana’s GDP.
Globally, the SME sector is one of the sectors that governments focus on. Ghana’s government has implemented prudent macroeconomic policies and significant structural reforms to boost Small and Medium-Sized Enterprises (SMEs).
Government-sponsored business support services include the Ghana Regional Appropriate Technology and Industrial Service (GRATIS), which provides skill training and basic working capital requirements for start-ups, and the National Board for Small Scale Industries (NBSSI), which operates in the Ministry of Trade and Industries’ ten regional capitals.
Within the backdrop of change and globalisation, SMEs have been recognised as the driving force behind economic growth and development by nurturing new ideas, creating jobs, investing, and exporting.
As previously said, the primary goal of this research is to examine the benefits that Accra, Ghana’s capital city, has obtained from the creation and support of SMEs, hence bringing to light contemporary entrepreneurial concerns affecting the Ghana economy.
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