Office rent chokes businesses

Rising cost of office space rental in major business districts in the capital, has significantly increased the cost of doing business for medium to large scale businesses, while small businesses are pushed to the brink.

A decent office space in the Kotoka International Airport area is offered for rent at an average of US$40 per square meter (m2 ), Spintex Road for an average of US$24/m2, Osu-US$20/m2, and US$20/m2 for office space in Tema area.

This means that, for minimum of 100 square meter (m2 ), businesses in the Airport area will have to pay US$ 4,000 as rent, US$ 2,400 in Spintex, and US$2,000 in Osu and Tema area. The situation is compounded by the number of years rent advance businesses are required to pay.

Most landlords quote their prices in dollars, though payable in cedis at the prevailing rate, due largely to the instability in the local currencies to ensure they don’t suffer any foreign exchange losses.

Though the high rental charged by owners of commercial properties is not captured by the Association of Ghana Industries (AGI) Business Barometer—which expresses the state of business confidence--cost of doing business has increased for large, small and medium scale enterprises with the steep increases in the cost of commercial space rental.

The worst affected are SMEs and start-ups who are struggling to stay in business amidst the high rent payment, high cost of utility, inadequate supply of electricity, and the increasing tax burden.

Registrar General’s Department data shows that 92 percent of companies registered in Ghana are micro, small and medium enterprises (SMEs). SMEs also provide about 85 percent of manufacturing employment and contribute about 70 percent to Ghana’s GDP.

Indeed, a key indicator of a growing economy is a vibrant Small and Medium Enterprises (SMEs) sector that contributes significantly to a country’s GDP.

A PwC survey found that the bulk of SMEs in the country are within the services sector, particularly hotels, restaurants, transport and storage, business and real estate.

This sector was the hardest hit in the two-year load-shedding regime the country was plunged into as a result of power generation challenges. Though the situation has improved significantly, the cost of power is so huge that small businesses who need constant electricity are folding up.

The AGI’s updated Business Barometer cites exchange rate volatility, poor access to credit and cost of credit, and the plethora of taxes heaped on businesses by government in its frantic effort to increase revenue.

High rental charges in the capital and other major commercial centres in other parts of the country, is inimical to the growth of businesses and the creation of jobs on the back of the economic challenges they have had to grapple with for the last three years.

The Rent Control Department, which is under the Ministry of Water Resources, Works and Housing, is not well-resourced to investigate and address this challenge facing businesses.

Indeed, to encourage graduates to venture into business, a conscious effort must be made to offer decent affordable business operating spaces to budding entrepreneurs, similar to the one created by some East African governments for start-ups and small businesses.