Mrs Elsie Addo Awadzi, the Second Deputy Governor of the Bank of Ghana, has urged Micro, Small and Medium Enterprises (MSMEs) in Ghana to reposition to lead the post-COVID economic recovery.
Strong and Viable MSME sector
She said the current pandemic provided a lot of opportunities for MSMEs in Ghana to reengineer themselves and to participate more fully in the national, regional, and global economy.
“It is time for the enterprises to rethink their business models, be more innovative to embrace technology to help improve quality and efficiency,” she said at a virtual forum to mark the UN Day of MSMEs.
The enterprises must also adapt their management practices and diversify the range of products and services for the local market, as well as expand into the ECOWAS sub-region and beyond.
“It is also important for MSMEs to prioritise compliance with laws, standards, and ethical business principles to help build strong foundations for robust growth and lasting impact,” she said.
Mrs Awadzi said the country needed a strong and viable MSMEs sector, which must continue to soldier on, leveraging the opportunities available and creating new ones for themselves and future generations of entrepreneurs.
MSMEs have played and continue to play a critical role in Ghana’s socio-economic development by producing critical goods and services, creating jobs, and helping to reduce poverty and promote economic growth.
Majority of Ghanaian Businesses are MSMEs
It is estimated that MSMEs in Ghana represent about 85 per cent of the country’s private sector and contribute about 70 per cent of the annual Gross Domestic Product (GDP).
In terms of employment, MSMEs account for an estimated 85 per cent of manufacturing jobs in the country.
Mrs Awadzi said the sector had also provided women and the youth opportunities to harness their economic potentials and it is estimated by the World Bank that about a third of all MSMEs in Africa were owned by women.
Those contributions notwithstanding, MSMEs had always faced severe constraints that stifle their growth, she said.
For example it is estimated that the MSME financing gap in Ghana is approximately 13 per cent of GDP, according to a World Bank 2019 Report on Improving Access to MSME Financing in Ghana.
There is recognition around the world that the economic impact of COVID-19 has been disproportionately felt by the sector.
First, on the supply side, they have faced many challenges including disruptions in their production cycles due to employees and suppliers infected by the virus; a shortage in raw materials and other inputs due to global supply chain disruptions; and increased costs of production due to a shortage of inputs, and spending on new health and safety protocols.
On the demand side, MSMEs have experienced revenue losses and severe liquidity stress arising from weak consumer demand due to closure of businesses in the hospitality, tourism, aviation, education and food industries, among other things.
With little or no savings they have had difficulty paying their workers and suppliers, paying rent and utility bills, and servicing their loans with financial institutions. This is, in many ways, an existential threat for the sector.
MSMEs are not the only ones impacted. Major businesses, and multinationals in some cases have all been hardly hit. Corporate insolvencies around the world have increased exponentially due to the pandemic, and national economies are reeling from the loss of tax revenues and increased government expenditures on health and safety among other measures to help contain the effects of the pandemic.
In Ghana, the impact of the pandemic on businesses, government revenues and expenditures and on inflation, have compounded the problems of the MSME sector, leading the Government to provide some GH¢600 million through the NBSSI to cushion them against the COvid-19 effects.
Through partnerships with banks and other financial institutions, this amount could potentially increase to GH¢1 billion to provide even more support to this sector.
Other interventions by government, including the absorption of electricity and water bills of consumers, have also helped to support the sector.
The Bank of Ghana has also taken a number of measures to help alleviate the economic pain from the pandemic.
By reducing its monetary policy rate from 16 per cent to 14.5 per cent in March 2020 and providing regulatory reliefs to release capital and liquidity to banks and specialised deposit-taking institutions (SDIs), the Bank of Ghana has provided a major boost to these financial institutions to provide economic relief to their customers, particularly those in the MSME sector.
Mrs Awadzi said while those policy and regulatory interventions had been the initial responses to help contain the impact of the pandemic, the real work lay ahead.
“As challenging as the current situation is, we must not lose hope. No one knows how long the pandemic will last, but surely a day will come when we can put it behind us,” she said.
The forum was held on the theme: “MSME Manufacturing Capabilities, Responding to COVID-19 and Opportunities Beyond.”