Since President Nana Addo Dankwa Akufo-Addo took over the governance of this country, he has pushed strongly and forcefully the idea to move Ghana and the whole of Africa beyond aid and dependence. The idea is a call on African countries to free their peoples from a mindset of dependence, aid, charity and handouts and leverage Africa’s vast resources to resolve the continent’s problems.
The government itself acknowledges that the ability to mobilise and maximize domestic revenue is an integral part of realizing a Ghana and an Africa that is truly independent and beyond aid. But how do we mobilize domestic resources to support and provide a firm foundation for a self-sufficient country? I will in this article share thoughts of an important sector of the Ghanaian economy that is integral to the ‘Ghana Beyond Aid agenda’ – the SME sector.
The importance of the SME sector is well recognized worldwide due to its significant contribution to gratifying various socio-economic objectives, such as higher growth of employment, output, promotion of exports and fostering entrepreneurship. Recent empirical studies show that SME’s contribute to over 55% of GDP and over 65% of total employment in high-income countries. SME’s and informal enterprises, account for over 60% of GDP and over 70% of total employment in low-income countries, while they contribute over 95% of total employment and about 70% of GDP in middle-income countries (OECD, 2016).
SMEs have proven to be effective antipoverty strategies for many countries and they have served as building blocks for enhancing innovation, competitiveness, entrepreneurship and the fostering of a system that form the basis of sustainable growth. These statistics give credibility to the fact that SMEs are a major driving force of economic growth.
The statistics give weight to the assertion that development in Africa cannot happen without SMEs; growth cannot happen without them; socio-economic paradigm shifts cannot happen without them; and poverty cannot be reduced without them. This is their development enterprise role in an economy and their development sustenance must not be trifled with by policy makers. For the Government of Ghana to realize the ‘Ghana Beyond Aid’ agenda and make it demonstrable within the timeframe it has set for itself, the government has to prioritize the development of SMEs through the molding and framing of deliberate policies to develop the sector.
The development of the SME sector requires a crosscutting strategy that will have a domino effect on many areas (e.g. ability of governments to implement sound macroeconomic policies, capability of stakeholders to develop conducive microeconomic business environments, inter alia, through simplified legal and regulatory frameworks, good governance, abundant and accessible finance, suitable infrastructure, supportive education, sufficiently healthy and flexibly skilled labour as well as capable public and private institutions, and the ability of SMEs to implement competitive operating practices and business strategies).
Flowing from this, I strongly hold the opinion that SME development strategy must be integrated in the broader national development strategy and/or poverty reduction and growth strategy of Ghana and African countries. Government must also facilitate dialogue and partnerships between the stakeholders (public sector, private sector and civil society) for broad-based buy-in and community ownership of these strategies. This makes the strategies more implementable while at the same time, making them politically credible, and sustainable.
I encourage the government to make a high-level political commitment to change the way the SME sector is integrated into broader development agenda. I am confident that the SME sector holds to key to lifting countries out of poverty and developing and growing a middle class. If a country can pursue its development agenda independent of foreign aid, then there has to be deliberate measures aimed at creating an enabling environment for businesses, especially the medium and small ones to thrive. The ‘Ghana Beyond Aid’ agenda is achievable. But only when we develop SMEs to the stage where they flourish and contribute meaningfully to the country’s development.
By: Pearl Nkrumah
The writer is the Head, Enterprise Banking, Stanbic Bank Ghana.