Accra, Ghana//-Ghana’s founding fathers led by Dr Kwame Nkrumah who fought for the liberation of the country from British rule on 6th March 1957 would have been the saddest men if they were alive today.
The reason is simple but very significant. 66 years of independence, Ghana is still struggling to achieve economic emancipation.
CHALLENGES FACED BY LOCAL ENTREPRENEURS
Its over 30 million citizens who are also struggling to feed themselves have acquired foreign taste and therefore consume anything foreign.
Indeed, the unbridled demand for foreign goods by Ghanaians is hitting hard on the local ones produced in the West African country.
Ghana consumes more foreign goods than what its hard-working entrepreneurs produce annually.
Every year Ghanaian entrepreneurs are celebrated at the Ghana Entrepreneurs’ Awards and other award schemes, but Ghanaians do not purchase much of the goods they produce locally.
“Apart from paying taxes, we also employed thousands of Ghanaians in our businesses. It is therefore unfair that our own people will shun our locally made products and go for the foreign ones,” Nana Kwesi Obeng, an entrepreneur laments.
Low patriotism
He recounts that in the past Ghanaians were patriotic which could be seen in all facets of their national life, as a result they used to purchase goods produced in the country as against the current dispensation.
This is one of the major challenges of the Ghanaian entrepreneurs who spend their resources to produce products to solve the need or problems and create job opportunities for the teeming youth, however these entrepreneurs are yet to be appreciated.
Heavy dependence on imports
“Ghana’s heavy dependence on imports places tremendous pressure on the cedi, creating an unfavourable balance of payments position.
On average, Ghana’s import bill exceeds $10 billion annually and is accounted for by a diverse range of items that include iron, steel, aluminum, sugar, rice, fish, poultry, palm oil, cement, fertilizers, pharmaceuticals, Toilet roll, toothpick, fruit juices, etc”, according to the country’s 2023 budget statement.
Imagine if this $10 billion is retained in Ghana annually. Imagine if it goes into the pockets of Ghanaian entrepreneurs who would, in turn expand their businesses thereby creating employment opportunities for the teeming unemployed youth in the country.
They would also spend those monies at markets, restaurants, beauty shops, pharmacies, shopping centres and other Ghanaian enterprises, among others. It would have transformed the country’s economy, economists say.
When Ghanaians produce goods that other Ghanaians use, they are then able to re‐invest that revenue back into the very communities that patronized them, development economist, Dr Nii Emma explains.
“The money flows in a current, and it fortifies the nation’s economy. That is the best use of a nation’s currency. Imagine all that we could achieve if in one year, we could spend as much in cedis on locally produced rice, sugar, wheat, tomato products, frozen fish, poultry, vegetable and cooking oils, as we spent in dollars on those very same imported items”.
Dependence on raw material exports
Economists explain that raw material exports are subject to price fluctuations on the international market. Countries that are dependent on raw material exports are therefore subject to wild cycles of “booms and busts.”
Inadequate capital
Prince William Attipoe, a public relations and customer service expert at NewMax Company Limited, marketing, PR and business advisory firm, notes that the greatest of all challenges facing entrepreneurs, especially the Ghanaian ones, is inadequate capital.
“Most of them go into business with inadequate capital hoping to secure more once the business begins to grow”.
Also, self-made businesspeople often struggle to obtain loans from banks, grants from agencies and investments from individuals or organisations. If they get these loans must be paid back and investors expect returns; even those providing grant-money need evidence of success to keep the money coming should it be necessary.
He adds: “The real issue is most entrepreneurs face capital challenges a few months after operation. It is therefore important that entrepreneurs do the necessary research to be informed before starting a business, to avoid capital challenges before the first year of operation.”
Structure of the economy
The basic structure of Ghana’s economy has not changed from colonial times. The country’s economy was designed by the colonial masters to be exporters of raw material and importers of finished goods.
This is what best serves their needs and purposes. After independence, Ghana’s first President Osagyefo Dr. Kwame Nkrumah of blessed memory sought to break this vicious cycle by establishing numerous state-owned industries to produce consumable products for the domestic market as an import substitution measure.
Unfortunately, the management of these enterprises became a challenge and soon turned into very huge expenses for the state.
A decision was made to divest these enterprises to the private sector. Unfortunately, in many cases, the domestic private sector was unable to leverage the financing needed to revamp these industries and bring them back into production.
The result, the former Minister of Finance Seth Terkper said, is that they are still largely dependent on the export of raw material, including gold, cocoa, timber, oil and mineral exports, and on the import of finished goods. That is still the basic structure of the Ghanaian economy.
Given this reality, Ghanaian entrepreneurs cannot do anything but look helplessly because the economy is structured in a way to benefit foreign countries, especially Ghana’s colonial masters.
Macro-economic imbalances
Entrepreneurs all over the world can grow their businesses when there is a stable, sound, and robust economy.
Such cannot be said of the Ghanaian entrepreneurs who have to weather the storm to overcome economic challenges.
It is important to note that since 2020, Ghana’s economy which is second largest in West Africa has experienced several pressures which continue to pose challenges to the attainment of the government’s economic targets.
The year 2022 particularly went down as one of the most difficult and eventful years in the economic history of Ghana, according to the country’s Minister of Finance, Ken Ofori-Atta.
“While we continue to deal with the devastating impact of the COVID-19 pandemic which led to significant reduction in the country’s revenues and increased government expenditures enormously, we also have had to contend with the double jeopardy of the Russian-Ukraine war. What has resulted in unprecedented global crises ravaging all currencies and historic living and inflation levels”.
In 2021, the government took significant revenue measures to tackle its fiscal difficulties, finance the transformative agenda of the government and sustain the post COVID-19 recovery.
However, what started as a political disagreement over revenue measures in Parliament, triggered a series of events that significantly undermined the credibility of the 2021 budget, consequently leading to serious economic challenges, as investor confidence hit a new low.
This manifested in credit rating downgrades which triggered the closure of Ghana’s access to the International Capital Market; tightening domestic financing conditions; and increasing cost of borrowing.
The combined effects of the developments contributed to the rapid depreciation of the cedi and compounded the high debt service levels.
The government’s inability to access the International Capital Markets meant that, for the first time in its administration, “we did not have the needed foreign currency to complement our forex earnings”.
We have had to make strenuous efforts to meet our import bill, which exceeds US$10.0 billion annually. Considering our low foreign earnings, it has been difficult to meet our import requirements including crude oil and petroleum products of about US$400m (GHc4.80 billion) a month”, Mr Ofori-Atta indicates.
At the same time, the Ministry of Finance still needs to find about US$1.0 billion annually to keep lights in homes and workplaces.
The demand for foreign exchange to support the country’s unbridled demand for imports undermines and weakens the value of the cedi.
This contributed to the depreciation of the cedi, which has lost about 53.8 percent of its value since the beginning of the year.
Compared to the average 7 percent average annual depreciation of the Cedi between 2017 and 2021, the current year’s depreciation, which is driving the high costs of goods and services for everyone, is clearly an aberration – a very expensive one.
“The increases in fuel prices (Diesel currently GHS20.5 and Petrol GHS 16.8) has led to increases in prices of most goods and services. Inflation which we managed to bring down from 15.4 percent at the end of 2016 to 7.9 percent at the end of 2019 and remained in single digits till the pandemic hit in March 2020 is now 40.4 percent.
It is not only the individuals and households who are adversely affected by the depreciation of the cedi. For us at the Ministry of Finance, the depreciation of the cedi seriously affects our ability to effectively manage our debt”.
Indeed, the country’s stock of debt has increased by GHc93 billion this year alone due to the depreciation of the cedi since the beginning of 2022. Even as the State struggles to raise sufficient revenues, high inflation rates continue to eat away the already meagre wages of the average Ghanaian, according to Mr Ofori-Atta.
“The lesson from this relapse in macro-economic stability makes us even more determined, as your government, to permanently restructure and transform this economy and build resilience”.
Infrastructure nightmare
Another factor most entrepreneurs or businesses consider before going to set up a business in a particular area is the availability of infrastructure such as good road networks, potable water, access to telecom services, and ports.
This explains why there are many companies in the southern part of Ghana than the northern part of the country. Because entrepreneurs want to cut down overhead and administrative costs, they tend to locate their businesses in areas where these above-mentioned facilities are present.
In addition, proximity to raw materials and nearness to market for semi-finished and finished products is one of the challenges confronting Ghanaian entrepreneurs in the country.
Delayed payments
After the entrepreneur tries to set up the business, he/she usually thinks the woes are over. However, not knowing that some of the company’s customers, especially the government , will not honour their payments on time in case they purchased goods on credit.
The entrepreneur may have finished the work as planned, but for no apparent reason or maybe some kind of procedural issues, payment is delayed — especially if the entrepreneur is dealing with a large customer.
Another challenge on the part of the entrepreneurs is how to pay their employees and vendors.
What can be done
Ghana currently has the capacity as a country to locally produce items that account for about 45 percent of the value of its annual imports. These include rice, fish, sugar, poultry, cement, pharmaceuticals, jute bags, computers, etc.
To this end, the government Mr Ofori-Atta assures would target these products for import substitution by supporting the private sector, through partnerships with existing and prospective businesses to expand, rehabilitate and establish manufacturing plants targeted at producing these selected items”.
African Continental Free Trade Area (AfCFTA)
The Ghanaian government which is seeking $3 billion from the International Monetary Fund (IMF) says it would pursue strategically, opportunities that ensure that the country’s entrepreneurs take full advantage of the African Continental Free Trade Agreement (AfCFTA) as part of efforts to pursue an export-led economic recovery.
Also, the Ministry of Trade and Industry is working with over 200 Ghanaian companies to facilitate their entry into the African market including about 70 One District, One Factory (1D1F) companies.
Additionally, the AfCFTA Guided Trade Initiative (GTI) has been launched to start commercially meaningful trade.
The products identified for the Initiative include batteries, tea, coffee, ceramic tiles, processed meat products, corn starch, sugar, and pasta, amongst others, in line with the AfCFTA focus on value chain development.
The Ghana Export Promotion Authority is expected to enhance its coordination role by facilitating support to key export-sector stakeholders.
Export Trade Houses (ETHs) will be established in selected markets to promote made-in-Ghana products brands, including the completion of the first ETH in Kenya.
Furthermore, opportunities will be created for local Ghanaian businessmen and investors to invest in export product transformation and value addition at the district level in partnership with the Ministry of Local Government and Rural Development, according to the 2023 budget statement.
Development Bank Ghana
The government through the Development Bank Ghana (DBG) has established a GH¢500 million special credit programme: the DBG Emergency Economic Programme (DEEP) to support businesses in the agribusiness value chain over the next five years.
The priority sectors are poultry, rice & cereals, pharmaceutical manufacturing, tourism, textiles & garments for investments to help build economic resilience.
To support SMEs with equity funding, DBG is also in the process of establishing a private equity fund with an initial capitalization of about GH¢400m (US$30m).
DBG has fully on-boarded four Participating Financial Institutions (PFIs) and will engage other financial institutions to expand its loan channels. A total of seven loans amounting to GH¢ 245,322,000.00 was disbursed to SME’s saving over 1,000 jobs.
DBG has partnered with a PFI to build a digital lending platform to shorten the processing time for lending to SMEs and increase its ability to reach a lot more businesses across the country.
Ms Davina Sheilla Mensah who is the Chief Executive Officer (CEO), Royal Vina Foods, a leading producer of locally made food products such as local brown rice, white rice, coconut oil, brown sugar, pure honey, among others is emphatic that the consumption of made in Ghana goods would help address the unemployment challenges in the country.
This she believes strongly would boost Ghana’s confidence in the trade of its products on the local and global market and in return would create employment, help increase the livelihood of people.
Bottom line
The consumption of local products would attract local and international traders and investors, help to balance international trade, help maintain a good exchange rate, contribute to GDP growth, reduce unemployment, provision of healthy and nutritious food and give hope to Ghanaians.
By Masahudu Ankiilu Kunateh, African Eye Report
