Start-Ups and SMEs are important part of economies, globally, continentally and nationally. Globally, 95% of businesses are Micro Small Medium Enterprises (MSMEs). About 60% of all private sector jobs are from small businesses. “The Private Sector drives job growth, accounting for 87% of total employment in 2016” (International Trade Centre (ITC)/UN,. 2018). 4/5 of new formal jobs in emerging markets are from MSMEs, as major job providers, catalysts for growth, and promoters of innovation, creativity and decent work for all. Start-Ups also account for up to 50% of all new jobs.
Young entrepreneurs are more active in high-growth sectors, are more likely to hire other young employees and pay higher wages than ‘older’ firms. But globally over 66 million Youth are unemployed, and 145 million young workers live in poverty. A mismatch in skills means that many young people cannot secure jobs. Entrepreneurship therefore becomes imperative for providing self-employment to the entrepreneurs and other youth. However, Start-Ups and SMEs are neglected and not assisted to realize their potentials for alleviating poverty, creating jobs, livelihoods, incomes and decent work for many.
SMEs also make up 70-90% of African Economies; contributes 70% of its GDP; supply about 80% of its Jobs; cater for the lower end of majority of its population and holds the potential for poverty reduction and development of African economies, and achievement of Sustainable Development Goals (SDG).But this sector is woefully neglected and undeveloped. Development of SMEs in Africa holds the key to a Continent at the verge of its historic and unprecedented development.
Start-Ups in Ghana
Among the Youth of Ghana are some of the top ICT brains in the world but which are wasting because of neglect due to lack of Institutional Framework to deliberately identify the potentials of our human capital and develop them into National assets which have significant contribution to the Economy. But this is what has propelled progress in developed and emerging Countries.
No wonder that “It is obvious that it is the youth who will drive the discovery of new technologies, innovation and growth in the future”(p. 163 NPP 2016 Manifesto). Whilst there is the dearth of Job Solutions in Ghana however, several youth have hatched innovative ideas , invented technologies, products and services which are badly needed to meet growing needs in Smart Technologies and ICT, food security and agriculture, health, water systems, renewable energy, waste recycling, waste to energy, adaptation to climate, affordable housing and rural enterprises, but these do not go beyond the stage of discovery into enterprises which are productive, profitable and sustainable, meeting the numerous needs that are in the community.
Challenges of Ghanaian Start-Ups
Several innovations and inventions therefore do not end up being enterprises, leading to killing off creativity, ideas shelved, or prototype products shelved, discarded or stolen by more wealthier and powerful people and organizations. Over the years, several innovations have been created by youth, are show cased in exhibitions, some awarded, but are not assisted to become start-ups, developed nor incubated to take off as invention enterprises. Many inventors and makers are thus not inspired, motivated, educated nor incubated to develop their products and potentials.
There are no systematic innovation and invention inspiration, education and development ecosystem. Start-Ups face a stiffer challenge of finance. In view of the fact that the businesses are new, owned usually by youth, and laden with risks, they find it difficult to attract financing from existing financial mechanisms. The lack of a Venture capital and angel investing mechanisms therefore is a pity for start-Ups since government has failed to address this in a comprehensive manner; the existing government interventions to Start-Ups financing is piecemeal and inadequate, uncoordinated and scattered in various bureaucracies unknown to those who need it, and fraught with wastage, ineffectiveness and leaving the sector further financially weakened.
Dealing with some Challenges of Ghanaian Start-Ups
There is therefore the need to have systematic innovation and invention development through a model such as Start-Up SME Centres(SSC) within a Network of Community-based Youth Enterprise Incubation centers which connect together at Community, district, regional and National Levels, which can also provide motivation and inspiration to Inventors, Innovators, Young Entrepreneurs and start-ups who can also advocate and engage with both the public sector, private sector, academia, media, Civil Society and Advocacy Platforms and other stakeholders in developing a better Inventions and innovations ecosystem to encourage creativity which results in viable enterprises that impact numerous social, economic and environmental needs facing Ghanaian people and communities.
Several Community based Youth entrepreneurship Incubation centres have been set up cost effectively using the Start-Up SME Centres (SSC) Model, which have been franchised to several community facilities in the private sector which are underutilized such as facilities of Business, communication and community centers, CSOs/NGOs, Churches and Mosques. A franchise is given to private owners of such facilities, who are trained to run and manage the facilities as Youth Enterprise Incubation Centers under this.
It is time to take the bull by the horn and develop the necessary means to create opportunities for our teeming youth who are potentially entrepreneurs but are seeking for non-existing jobs merely because there are no means and direction for them to realize their aspirations and goals of utilizing their great potentials.
SMEs in Ghana
70 % of Ghana’s economy is the informal sector (GSS, 2017). This is the sector in which SMEs are found. SMEs in Ghana have been noted to provide about 85% of manufacturing employment of Ghana. They are also believed to contribute about 70% to Ghana’s GDP. They represent about 80% of the private sector and account for about 92% of businesses in Ghana (Abor & Quartey2010; Abor & Biekpe ,2006). In view of the fact that SMEs make up a big proportion of the firms in Ghana, they play an important role in the growth of the economy.
The Woes of SMEs in Ghana
SMEs are woefully neglected and undeveloped in spite of their real and potential contribution to alleviating poverty, creating jobs, livelihoods, incomes and decent work for many. The several government interventions for developing the sector did not yield the required results because they were shrouded in government and civil service bureaucracies, in view of their insistence to run and manage such programmes, in spite of the fact that civil service training does not include the running of business. In view of that they run these SME focused programmes like civil service with all the red tapes, bureaucracies, and delays, which are unfriendly to business culture. In view of this, SMEs do not patronize these services, if in fact they even know about them, and the huge monies repeatedly invested by Development Partners go down the drain apart from the vehicles that programme Managers get to use and the expensive capacity building trips they make.
A bigger Private Sector Dilemma of Government
Government finds it difficult to take its hands off Private sector apart from the need to create the enabling environment, policy, regulatory and legal framework for businesses to thrive as government touts that business is engine of growth. Government does not have business in the actual running of business and therefore whether it is capacity building for start-ups, SMEs and the wider private sector or financing, the actual day to day arrangements to these services should be left in the hands of private sector businesses, unlike as it is now.
Notwithstanding the recognition of the important roles SMEs play in Ghana, their development is therefore largely constrained by a number of factors, such as lack of access to appropriate technology; limited access to international markets, the existence of laws, regulations and rules that impede the development of the sector; weak institutional capacity, lack of management skills and training, and most importantly finance. (Abor& Quartey,2010). Start-Up SME Centres (SSC) has therefore been set up as Private sector Intervention to fill the Capacity and Capital gaps that face our SMEs and do not enable them fulfil their full potentials.
Dealing with the Start-Up and SME financing challenge
Government needs to find and secure financing for Start-Ups, SMEs and Private Sector if they will continue to make their meaningful contribution to the economy. In fact government needs to take euro-bonds, other sovereign financing instruments and guarantees to Finance Start-Ups and SMEs for the real and potential contribution they make to the economy. The argument that Start-Ups and SMEs and for that matter, private sector should find their own finance is neither here nor there as they are the biggest contributor to the economy. When it comes to certain areas where government controls the finances such as the cocoa sector it is ready to take euro-bond but not the other sectors which make more contribution to the economy, because government will not control the funds.
In view of the importance of these matters, Start-Up SME Centres (SSC) Ghana Ltd; Start-Up SME Foundation (SSF) and Institute of Certified Management Consultants (ICMC) Ghana (Business Development Service Providers Association of Ghana (BDS-PAG) have jointly declared the Month of June to be observed as Start-Up and SME Month and is urging the relevant arms of Government to support this move by Declaring the Month of June as Ghana’s Start-Up and SME Month. This call is made with the view to underscore the important role that Start-ups and SMEs play in the Ghanaian Economy, and the challenges they face which impede the further contribution they could have made to the economy beyond what they currently do. June is chosen because the UN chose a day in June to be the International Day of Small Business. June was further considered because the business partnership has chosen the same Month to Launch 50 Start-Up SME Centres (SSC) in all 16 regions of Ghana.
These Opportunities and challenges of Start-Ups and SMEs require that the Month of June is observed as a period of reflection, reminders, and actions in our bid to remove bottle necks and explore better ways of enabling start-ups and SMEs to address youth unemployment, rural and urban poverty, incomes and livelihoods for women, providing decent jobs for all and empowering wealth creation and allowing shared growth in such a manner as to achieve the overarching Purpose of the Sustainable Development Goals (SDG) of ‘Leaving no one behind’.
Nelson Godfried Agyemang is Founder of Start-Up SME Centres (SSC )Ghana Ltd; Start-Up SME Foundation (SSF) and Rector/CEO Institute of Certified Management Consultants (ICMC) Ghana (Business Development Service Providers Association of Ghana (BDS-PAG)