Ghana goes to the polls come December 7th, the two main political parties in the lead to win, the ruling National Democratic Congress (NDC) and the main opposition party, New Patriotic Party (NPP) are revising their last minute political strategies to annex the highest position of the land. The central theme trending in the build up to the polls is job creation for the teeming unemployed masses in the country.
Four out of every five jobs created globally come from small medium scale enterprises and about 55 percent of Gross Domestic Product of higher income countries comes from SMEs according to a recent World Bank Report. In Ghana, about 92 percent of all registered businesses according to data available at the Registrar General’s Department (RGD) are SMEs; these SMEs in turn contribute 70 percent of Ghana’s Gross Domestic Product (GDP). Also about 85 percent of workforce in the manufacturing sector in Ghana isemployed by SMEs in that sector, data at the Ghana Statistical Service indicates.
Job creation has been a key message in elections here in Ghana and the major parties are promising what they believe are the major policy shifts for the next government to navigate in solving this macroeconomic challenge. How both governments have fared in this regard is a subject for discussion later. What is of prime importance to the author of this piece is trying to see through the policy initiatives being pushed by both parties to ensure small and medium enterprises in the country are supported to see growth in the sector and also bring about the needed employment.
A recent World Bank report estimated that about 48 percent of Ghanaian youth are without employment. What policies hold true to stemming the unemployment challenge in Ghana? Do these policy initiatives by these politicos hold the keys to making any substantial impact? Are they willing to follow through their own manifestos to the latter should they win the elections? These are the pertinent questions we seek answers.
Unemployment is high in urban centers; The Ghana Living Standards Survey for the year 2012/2013 however states that the unemployment rate in the country “is marginally higher for females (2.0%) than males (1.6%) and higher in urban areas (3.5%) than in rural areas (0.8%).” The survey estimates that 250,000 young men and women enter the Ghanaian labour market every year with only 2% absorbed in the formal sector whilst the 98% seek employment in the informal sector or remain unemployed. With the appropriate policy initiatives in place to support SMEs, the unemployment debacle can be tackled head-on. It has been the case in developed economies that when small and medium enterprises are given the needed support they employ a chunk of the teeming youth who are unemployed. The case can be made from the example of the Asian Tigers.
The Ghana Union of Traders (GUTA) is a union of traders doing business in most of the business districts in Ghana, from Accra central market to Kumasi Kejetia market and has members in small enterprises to medium scale enterprises. The Union has been battling with the Trades and Industry Ministry to enforce the regulation of domestic retailwhich prohibits foreigners from engaging in retail trade of a certain capital threshold. The association is lobbying political parties to make this part of their campaign promises and to implement when given the nod in December 7th.
• What Manifestos have for us on Youth Entrepreneurship
NDC
We will continue to support young people under the Youth Enterprise Support (YES) Fund to establish and grow their own businesses. To this end GHC100 million will be allocated to YES over the next four years;
Create an enabling climate for digital entrepreneurship.
NPP
Launch a comprehensive National Plan for Entrepreneurship and Innovation that will invest in supporting young businesses and start-ups, and b.
Merge the National Board for Small Scale Industries (NBSSI) and Rural Enterprises Project (REP) to consolidate public resources in the provision of entrepreneurship training and business development services.
GTB Comments: These are laudable on the face of it but over the years what have the results and achievements on the ground really been? The political will to walk the talk on their promises will see it materialize for the benefit of the teeming youth who are looking for opportunities. It will also curtail the soaring unemployment rate.
Creating enabling environment for digital entrepreneurship is laudable but should be aligned to the needs and trends of the global digital ecosystem. Government’s Youth in ICT Program in recent time doesn’t give any credence to the success of this promise. Focus should be to support the existing players in the digital ecosystems here in Ghana. The ICT infrastructure should be in place. With mobile telephony penetration improving, data cost should be affordable and reliable. Fintech is becoming the order of the day and most compatriots in the African scene are making giant leaps- from Nairobi in Kenya to Lagos Nigeria. Tax incentives could be provided for companies who are willing to assist startups in the tech scene with funding support.
One key thing lacking among startups is adequate training so NPP’s promise of entrepreneurship training and business development services is laudable. NDC’s GHC100 million to support TES program a good step in the right direction since capital is a main source of worry for many a Ghanaian entrepreneur. But with experiences in recent past with GYEEDA, SADA, funds must be judiciously allocated to intended enterprises which need them.
• What Manifestos have for us on Cost of Doing Business
Cost of doing business remains a major concern for SMEs in Ghana. From high tax rates to unreliable power supply to lack of support services for effective business delivery and high interest rates among others, entrepreneurs are looking forward to some comprehensive assurances and subsequent commitment to implement some favorable policies to ease the pressures on cost of doing business in Ghana.
The New Patriotic Party is promising a cut in tax rates. The party promises to broaden the tax base and also increase tax compliance. Also the party says it will reduce corporate tax from 25 percent to 20 percent, remove import duties on raw materials and machinery for production within the context of ECOWAS Common External Tariff Protocol. On special import levies, the party seeks to abolish them. 17.5 percent VAT on imported medicines not produced in Ghana will be abolished, same for financial services and domestic airline tickets. 5 percent VAT on real estate sales will be abolished. It also seeks to reduce the VAT rate from 17.5 percent to 3 percent flat rate on micro and small enterprises.
GTB Comment: broadening the tax base and increasing compliance have been the suggestion by many economic analysts to give some respite the overburdened taxpayers. But the political will and commitment to follow through is what we wait to see since it has been one promise after another by various political parties to take this bold step but have failed to deliver in that regard when given the nod.
Reduction of VAT from 17.5 percent to 3 percent will be welcoming news to small and micro enterprises who are reeling under the current 17.5 percent. It will reduce the cost of doing business and will serve as an incentive for businesses to operate in Ghana.In addition, Ghana may well go on to be an attractive destination for doing business in the sub-region if corporate tax sees the reduction from 25 percent to 20 percent since it will be competing favorable with the rates in other countries in Africa. The economic recession being witnessed in Nigeria has made our domestic aviation industry very attractive and the plan to abolish the 17.5 percent on domestic air tickets will further attract more business wanting to relocate to Ghana to do business in the aviation industry.
Author: Paa Swanzy-Essuman || p.swanzy@ghanatalksbusiness.com
