CHALLENGES HINDERING THE SUCCESS OF PRIVATE SECTOR BUSINESSES IN AFRICA
The private sector has often been described as the engine for socio-economic development in Africa. This places huge burdens on the sector. Governments for that matter the States are supposed to create enabling environments for the sector to engender the needed growth. To this end, some governments on the continent have been encouraging their citizens both home and abroad to take advantage of investment opportunities available in their countries to make contributions to national development.
The question is, to what extent has the enabling environment been expanded for the sector to propel economic growth? A number of Businesses have collapsed for one reason or the other. Business development in Africa is saddled with a number of challenges. Ever-changing government regulations, use of multiple currencies, protectionist policies and the absence of scientific market research data make the assessment of the retail environment, consumer behaviour and consumer needs difficult.
In addition, businesses in Africa are fraught with technology and communication challenges as well as non-adherence to strict business management rules. Underdeveloped infrastructure makes delivery of goods and services to most parts of the continent difficult; unreliable road networks and transportation systems affect ability of businesses to meet deadlines. Erratic Electricity supply is a major threat to the survival of businesses on the continent.
In 2015 alone, about 13,000 businesses in Ghana were negatively affected by power cuts leading to employee lay-offs and liquidation. Business registration and contract execution processes have been a bane to the success of businesses on the African continent. For example, in the Democratic Republic of Congo, it takes about 155 days to complete a business registration process. In Ghana, a business certificate applicant is often assured of receiving the certificate in two weeks.
However, it takes several months for the certificate to be issued. In Angola, the successful execution of a contract involves 47 procedures and one thousand days to get registered. Foreign-investor participation in African economies is negatively impacted by these setbacks. High lending rates by financial institutions also hinder business development.
With a 21 percent policy rate, Ghana is occupying the 4th highest policy rate position in the world and 2nd highest in Africa. How can this engender private sector growth? No wonder about 90 percent of the continents businesses are dominated by menial buying and selling activities among informal retailers using stalls, kiosks, and non-organised open air markets.
To address the challenges, African leaders must strive to provide improved road and rail networks and other forms of transportation systems that could decrease employee work-travel hours to enhance productivity. Import-restriction measures must be tightened to provide protection for nascent businesses on the continent and Africans must do more to trade among themselves. Electricity supply must be reliable and affordable through diversified power generation sources. Unnecessary administrative bottlenecks in business registration and contract execution processes must be eliminated to make the continent an attractive investment destination. Interest rates on loans should be drastically reviewed downward to enable businesses to access credit at reasonable interest rates.
The Ministries of Education and Trade and Industry must liaise with the tertiary institutions to ensure contents of academic curricula are tailored to meet the needs and demands of businesses and industries. Industrialization is the only way out of the present economic predicament. Governments must do well to create the enabling conditions to woo investors and to ensure that their businesses become profitable to contribute to the much needed economic transformation.
The private sector cannot be the engine of growth when the engine is troubled. Our businesses must not walk the path of death. They must be assisted to thrive.
BY DR. EBENEZER MENSAH ASHLEY, A CHARTERED ECONOMIST AND COUNCIL MEMBER, INSTITUTE OF CERTIFIED ECONOMISTS OF GHANA.
The question is, to what extent has the enabling environment been expanded for the sector to propel economic growth? A number of Businesses have collapsed for one reason or the other. Business development in Africa is saddled with a number of challenges. Ever-changing government regulations, use of multiple currencies, protectionist policies and the absence of scientific market research data make the assessment of the retail environment, consumer behaviour and consumer needs difficult.
In addition, businesses in Africa are fraught with technology and communication challenges as well as non-adherence to strict business management rules. Underdeveloped infrastructure makes delivery of goods and services to most parts of the continent difficult; unreliable road networks and transportation systems affect ability of businesses to meet deadlines. Erratic Electricity supply is a major threat to the survival of businesses on the continent.
In 2015 alone, about 13,000 businesses in Ghana were negatively affected by power cuts leading to employee lay-offs and liquidation. Business registration and contract execution processes have been a bane to the success of businesses on the African continent. For example, in the Democratic Republic of Congo, it takes about 155 days to complete a business registration process. In Ghana, a business certificate applicant is often assured of receiving the certificate in two weeks.
However, it takes several months for the certificate to be issued. In Angola, the successful execution of a contract involves 47 procedures and one thousand days to get registered. Foreign-investor participation in African economies is negatively impacted by these setbacks. High lending rates by financial institutions also hinder business development.
With a 21 percent policy rate, Ghana is occupying the 4th highest policy rate position in the world and 2nd highest in Africa. How can this engender private sector growth? No wonder about 90 percent of the continents businesses are dominated by menial buying and selling activities among informal retailers using stalls, kiosks, and non-organised open air markets.
To address the challenges, African leaders must strive to provide improved road and rail networks and other forms of transportation systems that could decrease employee work-travel hours to enhance productivity. Import-restriction measures must be tightened to provide protection for nascent businesses on the continent and Africans must do more to trade among themselves. Electricity supply must be reliable and affordable through diversified power generation sources. Unnecessary administrative bottlenecks in business registration and contract execution processes must be eliminated to make the continent an attractive investment destination. Interest rates on loans should be drastically reviewed downward to enable businesses to access credit at reasonable interest rates.
The Ministries of Education and Trade and Industry must liaise with the tertiary institutions to ensure contents of academic curricula are tailored to meet the needs and demands of businesses and industries. Industrialization is the only way out of the present economic predicament. Governments must do well to create the enabling conditions to woo investors and to ensure that their businesses become profitable to contribute to the much needed economic transformation.
The private sector cannot be the engine of growth when the engine is troubled. Our businesses must not walk the path of death. They must be assisted to thrive.
BY DR. EBENEZER MENSAH ASHLEY, A CHARTERED ECONOMIST AND COUNCIL MEMBER, INSTITUTE OF CERTIFIED ECONOMISTS OF GHANA.
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