Government needs to extend to local businesses the big-hearted incentives it pampers foreign investors with in order to nurture small- and medium-scale enterprises in Ghana, Mr. Martyn Mensah, Group Chief Executive Office of UT Holdings, has said.
“Why do we incentivise Foreign Direct Investment (FDI)? I have nothing against FDI, but we must pay the same, if not more, attention to local direct investment,” he said at the opening of the African SME Summit in Accra, under the theme “Small Companies, Big Impact.”
“There are many local companies here that need the same kind of support. If you look at Tropical Cables and Conductors Limited, the company has been built from nothing to an international exporter of cables. Interplast has also been built from nothing but has become the biggest supplier of plastic pipes in West Africa. But ask yourself, how many tax breaks have they had?”
Government has been enticing foreign investors with huge tax holidays, tax rebates and exemptions, and capital allowances. Free zones companies, operating under the Free Zones Act, also enjoy additional incentives such as reduced cost for leasing lands within the Free Zones enclave. However, local businesses and investors are not accorded the same support.
Last year, US$3.9billion worth of FDI projects were registered with the Ghana Investment Promotion Centre (GIPC), and US$88million of initial capital transferred within the year.
Government is also targetting between US$3-5billion in annual foreign direct investments (FDI) between now and 2018 to improve the macro-economy and boost growth.
According to the Registrar General’s Department, 57 percent of all incorporated entities in the country are private limited liability companies; 26 percent sole proprietorships; 9 percent partnerships; and 7 percent family-owned.
SMEs make up 92 percent of all businesses in the country. The sector employs 60 percent of the nation’s labour force and contributes up to 70 percent of Ghana’s Gross Domestic Product (GDP).
“We are so fixated with FDI that we don’t even see it when we are giving them the money to invest here whereas across the road, there is a local who should be supported to grow. The world of changing our mindset starts now,” Mr. Mensah observed.
Development, he said, is a function of the SME and not a function of government or politics and that the success of an SME is a function of the entrepreneur.
“Therefore, development is a function of the entrepreneur. In countries where entrepreneurship is respected and given the space to thrive, development takes place. If you think about the situation in Ghana, the reverse holds true. We are unable to develop at the pace we should because we haven’t nurtured our entrepreneurs.”
He encouraged entrepreneurs to build synergies and not always try to do it all alone.
“Some partnerships and family business make up a small percentage of the types of SMEs. This may be part of why we are not having the impact that we should. We don’t have trust and without trust we cannot form partnerships and without partnerships, we cannot spread the load.”
While SMEs yearn for government support, they equally blame the banking sector for being risk averse and comfortable with investing in government instruments.
The banks, on the other hand, have often cited poor record keeping, lack of collateral, and poor training of entrepreneurs for their lack of interest in funding the SME sector.
“SMEs are very self-reliant in starting and growing their businesses. The financial sector is not doing enough to support SMEs,” Mr. Mensah said.
The African SME Summit served as an avenue for SMEs to showcase their products, services and initiatives. It also provided networking and mentoring opportunities for SME leaders, and created a platform for SMEs to learn from major industry players.
The summit is expected to help nurture sustainable and profitable SMEs for the future, create a business-to-business environment for companies to make deals and forge peer-to-peer mentorships.
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