Doing Business in Ghana: Three things Affecting Business operations | ILAPI

A widely accepted principle that had spurred the growth of businesses and entrepreneurship development is having a competitive economic environment that accommodates and reward efforts to jobs and wealth creation. Almost every business has to face regulations from government agencies to start or continue to do business. Clearly, a less strenuous regulatory environment is ideal for entrepreneurship development and business growth. Businesses are unable to expand when government policies mar their forecast to increase production and employment. The growth of the private sector as an engine to drive economic growth needs to be protected. However, most start-ups and existing businesses are folding up as a result of a number of policies causing stunted growth and extinction. This is because government’s regulatory system is often unresponsive to the needs of starts ups and cottage businesses.

Cost of Electricity

Most businesses one way or the other may use electricity. The high cost of electricity power remains a challenge in doing business. The Public Utility and Regulatory Commission (PURC) adjusted electricity tariffs upwards twice in 2019 with 11.17% and 5.94% in the first and second reviews respectively. While many businesses are struggling to make ends meet, there exist uphill battles in the wake of increased power prices. It is currently unclear how much businesses spend on cost of electricity annually. Obvioulsy, business may have high annual expense rate with a significant proportion of their profits going into energy related cost. The absolute effect of price hikes had led to hard breaking decisions of most business owners forced to cut down staffs, reduced wages, unable to pay arrears or forced to close down. In recent time, the Ghana National Association Garment Makers, disclosed how high cost of electricity affects their businesses. Most its members had to close their shops and enter into other ventures due to cost of power.

Exchange Rate Volatility

Exchange rate exposure can affect businesses and the economy. Businesses and entrepreneurs that interact with foreign markets are often affected by exchange rate volatility. The Cedi depreciation over the years had had a toll on businesses with direct link to the importation of raw materials for the manufacturing industries. When the Cedi depreciates it directly has a negative impact on import and purchase of raw materials. Cumulatively, the Cedi depreciated at 9.2% between January and September in 2019 and 7.0% for the corresponding period of 2019. Local business such us dealers in second-hand car parts, phones and accessories, building materials and hardware and those in sales of clothing would all not be spared in doing businesses. This will increase cost on products for consumers.

Cumbersome Business legislation  

There are over 19 Legislation that apply to Business Operations in Ghana. Laws applicable to the operation of business in Ghana are based on a framework of legislation relating to business activity, trademarks, disputes and labour relations.. These include:

1.The Companies Act, 1963 (Act 179)

2. Income Tax Act, 2015 (Act 896)

3. Fisheries Act, 2002 (Act 625)

4. Petroleum (Exploration And Production) Law 2016, (Act 919)

5. Forestry Commission Act, 1999 ( Act 571)

6. The Minerals Commission Act, 1993 (Act 450)

7. Minerals And Mining Act 2006, Act 703

8. Free Zone Act, 1995 (Act 503)

9. The Labour Act, 2003 (Act 651)

10. Foreign Exchange Act, 2006 (Act 723)

11. Ghana Revenue Authority Act 2009, (Act 791)

12. National Communications Authority Act, 2008, (Act 769)

13. Banks And Specialized Deposit Taking Institutions Act, 2016, (Act 930)

14. Environmental Protection Agency Act, 1994 ( Act 490)

15. Copyright Act, 2005 (Act 690)

16. Trade Marks Act, 2004 (Act 664)

17. Patents Act, 2003 (Act 657)

18. Ghana Investment Promotion Centre Act, 2013 (Act 865)

19. Foreign Exchange Act, 2006 (Act 723)

20. Ghana Standard Authority

These acts are interrelated and depending on the kind of business one would like to set up, it is important to meet more than 10 of the statutory instruments. These Laws hinders small business formation, growth and job creation in Ghana. This equally reduces new job creation and appetite for entrepreneurship. The cost of engaging the agencies and the bureaucracy of obtaining licenses are enough to throw in the towel.

It is therefore important to lower government barriers to enhance investment and entrepreneurship for job creation and economic growth. Government needs to create the simple economically enabling environment to help individuals monetize their innovations.  

 

 

Peter Bismark

ILAPI

Tema

Source: ILAPI