Issues in Sme Development in Ghana and South Africa
International Research Journal of Finance and Economics ISSN 1450-2887 Issue 39 (2010) © EuroJournals Publishing, Inc. 2010 http://www.eurojournals.com/finance.htm
Issues in SME Development in Ghana and South Africa
Joshua Abor Department of Finance University of Ghana Business School, Legon Peter Quartey Institute of Statistical, Social and Economic Research University of Ghana, Legon Abstract This paper discusses the characteristics, contributions of SMEs to economic development, and the constraints to SME development in developing countries with particular reference to Ghana and South Africa. 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 and account for about 92% of businesses in Ghana. In the Republic of South Africa, it is estimated that 91% of the formal business entities are SMEs. They also contribute between 52 to 57% to GDP and provide about 61% to employment. Notwithstanding the recognition of the important roles SMEs play in these countries, their development is 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. The paper provides some relevant recommendations to policy makers, development agencies, entrepreneurs, and SME managers to ascertain the appropriate strategy to improve the SME sector in these countries.
Keywords: SME Development, Ghana, South Africa
1.0. Introduction
There is growing recognition of the important role small and medium enterprises (SMEs) play in economic development. They are often described as efficient and prolific job creators, the seeds of big businesses and the fuel of national economic engines. Even in the developed industrial economies, it is the SME
Issues in SME Development in Ghana and South Africa
Joshua Abor Department of Finance University of Ghana Business School, Legon Peter Quartey Institute of Statistical, Social and Economic Research University of Ghana, Legon Abstract This paper discusses the characteristics, contributions of SMEs to economic development, and the constraints to SME development in developing countries with particular reference to Ghana and South Africa. 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 and account for about 92% of businesses in Ghana. In the Republic of South Africa, it is estimated that 91% of the formal business entities are SMEs. They also contribute between 52 to 57% to GDP and provide about 61% to employment. Notwithstanding the recognition of the important roles SMEs play in these countries, their development is 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. The paper provides some relevant recommendations to policy makers, development agencies, entrepreneurs, and SME managers to ascertain the appropriate strategy to improve the SME sector in these countries.
Keywords: SME Development, Ghana, South Africa
1.0. Introduction
There is growing recognition of the important role small and medium enterprises (SMEs) play in economic development. They are often described as efficient and prolific job creators, the seeds of big businesses and the fuel of national economic engines. Even in the developed industrial economies, it is the SME
References: [15] [16] [17] International Research Journal of Finance and Economics - Issue 39 (2010) [18] 228 International Research Journal of Finance and Economics - Issue 39 (2010) (eds.), Structural Adjustment, Financial Policy and Assistance Programmes in Africa, IT Publications, London