The future of Ghana’s increased intra-African trade under the Africa Continental Free Trade Area (AFCFTA) trade lies with Micro, Small and Medium Enterprises (MSMEs), a new study by CUTS Ghana has found.
“With MSMEs accounting for a substantial amount of economic activity in the country, the AfCFTA provides an opportunity for them to export to other African countries, thus boosting intra-African trade. MSMEs form the bedrock of economic activity in Ghana and contribute immensely to reducing unemployment rates and the general growth of the economy,” the CUTS Ghana new study said.
The study conducted by CUTS Ghana titled “Assessment of Ghanaian Private Sector Readiness for AfCFTA Implementation” assessed the readiness of Ghanaian MSMEs, particularly pharmaceutical and herbal, tourism and hospitality, food and beverage, agri-business and garment, leather and textiles industries.
It said MSMEs contributed significantly to job creation, income generation and poverty reduction in developing economies and Ghana is no exception.
“Data from the World Bank suggests that MSMEs account for more than 70 per cent of industrial activities in Ghana and have been identified as catalysts for the economic growth of countries. 1 In Ghana, MSMEs contribute to about 70 percent of Gross Domestic Product (GDP). Contributions to GDP are typically in corporate taxes, export duties and import taxes from their activities,” the research revealed.
Additionally, the CUTS Ghana said MSMEs played an important role in human resource development and skills acquisition for businesses and are noted as being cradles of innovation and entrepreneurship.
“Across countries at all levels of development, MSMEs have an important role to play in achieving the Sustainable Development Goals (SDGs) by promoting inclusive and sustainable economic growth, providing employment and decent work for all, promoting sustainable industrialisation and fostering innovation, and reducing income inequalities,” the study said.
According to the study, despite being important and contributing significantly to the socio-economic growth and development of the nation, MSMEs were confronted with challenges that affect their production and export potential, thereby hindering their ability to participate fully in global trade.
“Key among these is limited access to finance. MSMEs are often unable to access financing from formal financial institutions due to inadequate operational and financial track records. Additionally, Ghanaian MSMEs are confronted with challenges including power reliability, the difficulty of trading across borders, access to ICT, ICT use, and difficulty starting a business. With the challenges mentioned above, the financial constraints affect their capacity to produce and export to other markets,” the CUTS Ghana said.
CUTS Ghana said the AfCFTA undoubtedly presented an opportunity for MSMEs to deepen their economic footprint and the single market would bring together more than 1.2 billion people, including a growing middle class and a combined GDP of more than US$3.4 trillion.
“The AfCFTA presents an incredible opportunity for Ghanaian MSMEs to scale up activities and expand into African markets. It opens them up to a market of 1.2 billion people across the continent and provides endless possibilities for the socio-economic growth of the population,” the study said. In view of this, CUTS Ghana stressed that that government must address the challenges that MSMEs were confronted with so as to create an enabling environment favourable for them.
BY KINGSLEY ASARE