Small and Medium Enterprises in Ghana - Case Study Example

Structure of Small Medium Enterprises in Ghana [Author’s name] [Name of the Institution] [Subject and code] [Date of fulfilment] abstract This is a report regarding the status of Small and Medium enterprises in Ghana. The report presents the challenges that these SMEs are facing and has made necessary recommendation to resolve the same. Table of content Abstract 2 Table of content 3 Executive summary 4 Acknowledgement 5 The Report 6 1. Introduction 7 2. Background 7 3. Basic Characteristics of SME’s in Ghana 8 4. SME Manufacturing Sector 8 5. Constraints & Challenges for SMEs (G&T) 9 6. Recommendations for Developments 11 7. Conclusion 12 References 13 Bibliography 15 executive summary This is a report dealing with the present status of SMEs in Ghana. The basic idea is to show challenges faced by these SMEs and the relevant recommendations possible. There is the background description that state that the SMEs of Ghana are actually contributing a lot to Ghana economy. However it is not enough. In order to bring in more proficiency processional recommendations are made in the report. acknowledgement The Report Structure of Small Medium Enterprises in Ghana 1. Introduction This is a report regarding the infrastructural conditions and business environment of Ghana, a Sub-Saharan African country. The purpose of this report is to bring out conditions and the persuasion of SMEs in Ghana. The report also makes a speculation over the some recommendations that can bring SMEs of Ghana into better shape. The report is specifically concentrating on the Garment and Textile manufacturing industry in Ghana. 2. Background The Small medium enterprises or the SME’s in Ghana face innumerable challenges and pre-requisite problems. There are large amount of constraints added to these problems. Though the basic role of these SMEs is very vital in generating employment and development of various levels in Ghana, yet there are regular hurdles set on its ways. The status of Garment and Textile manufacturing industry in Ghana has been recognized as the resource to reduce poverty, promoting adequate growth, and above all generating innumerable job options for its citizens. The participation of Ghana government policy and its framework for a sustainable growth, added by GPRSII forward the specific targets of meeting private sector of SMEs as core engine for all round growth. The policy framework also concentrates over the adequate wage structure and the regeneration of opportunities related to self employment. This is also the plan for creating opportunities for having entrants into labour market with special emphasis over micro as well as small scale enterprises. The programs are also structured to create opportunities for women. 3. Basic Characteristics of SME’s in Ghana SMEs in Ghana make up as the largest employment generator and are having the indispensable bedrock of all kinds of local as well as private sectors. However this is a sector that is also having the lowest levels of education added by limitations of training for self employed purposes. According to International Institute for Environment and Development, when the firms are classified by sizes, the assessments of SME firms get ranged with employee size that is less than a 100. As declared by Ghana Statistical Service the firms that are functioning with less than 10 employees are recognised as a small scale enterprise. With more than 10 employees it will be firms with medium to large enterprises (Kufuor, 2008). The typical characteristic of these SMEs of Ghana can be seen through the matter of ownership. In most of the cases these are generated within the family or relatives and there is hardly any scope for separation between the ownership and the control of authority. 4. SME Manufacturing Sector There are very large manufacturing firms in Ghana. The contribution of SME’s in Ghana is about 85 percent of the total manufacturing employment. This is total account for almost a range of 92 percent of total garment and textile businesses of the country as a whole. The participation of foreign investors for more intensive capital intensive is always encouraged, but the ultimate hold remains in the hands of the local business men. These SMEs are also having excessive export of garments and textiles and meet most of the order demands. They are well supported by higher labour productivity with quality products and refined materials (Buatsi, 2002). 5. Constraints & Challenges for SMEs (G&T) In spite of providing a great support to the economy of Ghana, there are innumerable constraints & challenges faced by the SMEs of Garment and Textiles industry of Ghana. In case of finance management the Garment and Textiles industry gets viewed under expensive and high risk entitles. These are structured by the key players of the industry. This is the reason that many of the commercial banks avoid lending to the ordinary owners of SMEs. Lack of professional managerial competencies is the biggest hurdle that this particular industry is facing. Due to this lack the SMEs are unable to get the basic developmental strategies under global influence. There is lack of strategic planning or any scope for change management in this sector and thus has been much laid back in international market scenario (Smallbone and Wyer, 1995). The results are so rigid that these SMEs of Ghana are also unable to have any kind of excessive access to the international markets. The SMEs from Garments and Textile industry in Ghana are lack of upgrade technology and the persuasion of latest equipments. As a result the productivity is more inclined towards the efficiency levels of the workers. Though the cost of labour is comparatively less, yet due to lack of technological assistance the growth of the industry remains static. The SMEs of Ghana tend to have very marginalised or limited access to market credit. With low level of technological support they cannot get adequate amount of productions and the facility for credit gets limited or blocked in most cases (HFC Bank, 2004). This eventually creates situations that are having lack of institutional framework. In the absence of institutionalised framework, the SME industry cannot overcome various disadvantages of being smaller in size and organisational unit. Ina nutshell the Garment and textile manufacturing companies in Ghana are though basically SME in structure, yet are losing large amounts of orders due to the following reasons; Lack of production flexibility No representative for professional marketing presentation Inefficient and inadequate production techniques Problems with financial credit facilities were always predominant to the SMEs of Ghana. Since there is the context of providing information that is actually asymmetry on both sides the credit options gets limited. On the other hand, it can be well resolved with the help of demonstrating the SME owners with the creditworthiness and all kinds of project viability. However, since the SMEs of Ghana are at very poor accounting practices, it will be hard for them to get out of it. By means of restricting credits they can somehow plan for new persuasions. Added to all these hurdles there are extensive problems related to gender discrimination. This is the problem due to which the participation of women is limited. They are even not allowed to have any access to any property, land or financial support (Tagoe, et al 2005). This creates more stress over the social developmental structure of SMEs in Ghana. The SMEs of Ghana are always under tremendous pressure of foreign competition. They are limited in many ways and are unable to cope up with the degree of competition forwarded by the imported clothing lines from abroad. The lack in technological upgrade formulation added by discriminations for women establishes poor working environment for SMEs. As a result the whole participation of SMEs in garment and textile industry has been considered to be under poor ethical structure. 6. Recommendations for Developments There are various levels of opportunities as well as challenges faced by the SMEs of Ghana. To meet the challenges and to sustain with the opportunities are under great pressure and should be considered a of high priority. The recommendations for overall development can e noted as follows; There is the need for right HR management along with the capacity to deal with all kinds of adversities and risks (Ulrich, 1995). Adoption of proper institutional frameworks is a compulsion. This is the means that can add effective utilization of all the collective and extensive capacities of these SMEs. Absolute financial and social promotion of small businesses as well entrepreneurship to meet the demands of the customers There is the need for absolute maintenance of credit records. This will help in making the lender feel safe with their investment and that will open some aspects of financial support in the future. Professional and strategic planning to tap into international markets. This needs to be supported by adoption of strategic change management structure and participation of ICT (Armstrong, 2006). Compulsory need for improving technical as well as highly developed vocational training for every individual who is a part of SME. Readily available of all kinds of information and effective disseminations about every development of the markets can help in meeting competition on global basis (Pine and Gilmore, 1999). Preferences should be given to women to be a part of the developmental structure. With proper training women can perform in much better way and that needs to be well utilised. 7. Conclusion Eventually it can be well concluded that even though the SMEs of Ghana, especially the garments and textile industry is contributing a lot to the economy of Ghana, yet there is the need for tremendous changes. These changes are very necessary in respect to meet the international competitive market and to meet the global challenges. Added to the global competitiveness the SMEs of Ghana also need to develop the working environment. It is very necessary to have broader outlooks and let women participate in the process of development. Adoption of technology and IT can further enhance its hold over the international market and thus is a compulsion for sustainability. It is important to make the SMEs of Ghana feel the importance and the profitability that international market can bring to them (Probst, et al 1999). The SMEs must generate native management staff or should hire managerial experts from outside for the application of change management within the organisation. Exposure to the global market structure and the understanding of International trading formulations are the basic things that the SMEs of Ghana should get. References Armstrong, Michael (2006). A Handbook of Human Resource Management Practice (10th ed.). London: Kogan Page. Pine, J. and Gilmore, J. (1999) The Experience Economy, Harvard Business School Press, Boston, 1999. Probst, Gilbert, Raub, S. and Romhardt K. Managing Knowledge, Wiley, London, 1999 Ulrich, Dave (1996). Human Resource Champions. The next agenda for adding value and delivering results. Boston, Mass.: Harvard Business School Press. Journal sources Buatsi, Seth N. (2002) Financing non-traditional exporters in Ghana. The Journal of Business and Industrial Marketing, Vol. 17 No. 6,. Smallbone, D. and Wyer, P., (1995) "Export Activity in SMEs", CEEDR, Working Paper Series, No 9 Tagoe, Noel Ernest Nyarko, Ebenezer Anuwa-Amarh. (2005) Financial Challenges Facing Urban SMEs under Financial Sector Liberalization in Ghana. Journal of Small Business Management, Vol. 43, 2005 Electronic sources HFC Bank. 2004. World Investment News - Pre-report Ghana. World Investment News. http://www.winne.com/ssa/ghana/reports/2007/cp/hfc/index.php [retrieved on 2nd of Nov. 2009] International Institute for Environment and Development. “Small and Medium-Sized Enterprises (SMEs) and Corporate Social Responsibility: A Discussion Paper”. June 2005. http://www.iied.org/SM/CR/documents/CSRandSMEs.pdf [retrieved on 2nd of Nov. 2009] Kufuor, Dr. AfuaA. (2008) Employment Generation and Small Medium Enterprise (SME) Development:the Garment and Textile Manufacturing Industry in Ghana. GIMPA Business School, Ghana. http://www.gim2008.ca/conference_proceedings/Kufuor.%20Employment%20Generation%20and%20Small%20Medium%20Enterprise%20Development%20in%20the%20Garment%20and%20Textile%20Manufacturing%20Industry%20in%20Ghana.pdf [retrieved on 2nd of Nov. 2009] Bibliography Andersen, O., (1997) "Internationalization and Market Entry Mode: A Review of Theories and Conceptual Frameworks", Management International Review Economist Intelligence Unit. “Country Finance Report, Nigeria”. July 2008. Jarillo, J. Carlos Strategic Networks: Creating borderless organizations, Butterworth-Heinemann, Oxford, 1993 Legge, Karen (2004). Human Resource Management: Rhetorics and Realities (Anniversary ed.). Basingstoke: Palgrave Macmillan Read More