SMEs not investor ready - Kojo Addae-Mensah

Majority of Small and Medium Enterprises (SMEs) lack knowledge on how to position themselves to attract the required investments, Kojo Addae-Mensah, Managing Director of Databank, has said.

“Some of the SMEs, only the minority, are investor ready but the majority are not. Most of the problems SMEs face is a lack of education and knowledge of how they can expand and grow their businesses,” he said in an interview with the B&FT at an SME conference organised by GCB Bank, in Accra.

He explained that SMEs, in view of their crucial role in economic growth, need to do more than they are currently doing to withstand competition, macro-economic challenges and other influences so as to grow and become multinationals.

“You need a governance structure: a proper independence board, and then you need management. You need to separate your personal expenditure from company expenditure and you need to show financials properly audited by an independent auditor, who doesn’t have to be a top four like KPMG or PwC; there are many SME-like accounting firms that can help you audit,” he said.

Held under the theme: “Sustaining SME Opportunities in Today’s Market”, the one-day conference pulled together hundreds of SMEs which were tutored by finance, human resource and management experts on how to sustain and grow their businesses in difficult economic times.

The boards of many SMEs, Kojo Addae-Mensah noted, are constituted by family members and cronies of the CEO, making no room for “independence” and “someone to come in with a clear eye to give proper direction.”

With about 90percent of companies in Ghana registered as SMEs, these companies employ more than 80percent of the workforce and contribute about 70percent to GDP. SMEs therefore have catalytic impacts on economic growth, incomes and employment.

Mr. Addae-Mensah urged SMEs to have proper and credible financials. “You cannot have different financials for different purposes or institutions like the tax authority, investor, bank, your friends or board and management. That is not the way to go. You have to have financials to stand the test of time,” he added.

He further called on SMEs to employ the most competent staff who must be competent and not just friends or family.

Finally, the Databank boss, called on SME bosses to remove the fear of losing their companies.

“What is the point in owning a 100percent of a 1000 than owning 10percent of a million? That fear should be removed. Be part of a growing company. The conglomerates that have grown to become multinationals are not 100percent owned by the founders,” he said.

Danie Nii Sackey, Managing Consultant at Ephesus Consulting, also added that SMEs are still not investor ready. “Very many SMEs are not ready and that is the essence of the discussion we have had today.”

Speaking on the topic: “Positioning Your Business for Investment”, he explained that SMEs need to understand that they must have structures to make them attractive to investors.

“They must be investor-ready. They must understand what an investor is looking for and position themselves as such. Too often you don’t find the distinction between the affairs of the owners and that of the business,” he added.

To him, what SMEs must focus on is growth. “If you don’t grow you will cease to exist because competitors are coming in. And for SMEs to perform their roles in the economy, they must grow, employ people and add value to what they are doing and create value for their shareholders.”

He added that too many times people are too comfortable with the very little they have and therefore are not able to think big and beyond their own lifetimes.

“If you do not have money you need to find money elsewhere and that is where the potential investor comes in but if you do not put your house in order, how will the person coming into your business feel comfortable that at the end of the day they will get the kind of returns expected?”