Regulatory burden threatens SME growth, job creation – ILAPI study

Ghana's regulatory environment is hindering Micro, Small and Medium Enterprises (MSMEs) from growing, creating jobs, and contributing to national economic growth, according to a new study by the Institute for Liberty and Policy Innovation (ILAPI). The study, titled "Removing Business Regulatory Barriers for Economic Prosperity in Ghana," surveyed 600 MSMEs to examine the challenges they face and their impact on economic growth.

ILAPI Executive Director Peter Bismark Kwofie highlighted that businesses encounter lengthy registration processes, numerous regulatory requirements, and steep compliance costs.

Approximately 40.83% of respondents reported that obtaining their business certificates took over a month, while 22.83% experienced delays between three to four weeks. A smaller percentage, 13.8%, completed registration within one to two weeks, while 17% finished in less than a week. A mere 5.54% did not respond. The registration process often relies on intermediaries known as "goro boys," with 84% of respondents relying on them, and 16% not relying on them.

The study found that the average cost for business-entry registration was GH¢1,030, with fees ranging from GH¢60 to GH¢2,000. Kwofie emphasized the need for flexible payment arrangements for businesses struggling to meet renewal requirements. He warned that closing a business for non-compliance can lead to the loss of livelihoods for owners and employees.

The report also revealed that 27% of businesses spend less than 5% of their capital on compliance, while 31% spend between 6% and 10%. Kwofie argued that this regulatory burden leaves businesses with fewer resources to expand and create jobs.

Moreover, ILAPI expressed concerns about the ability of smaller businesses to grow into larger enterprises, with only 44.64% transitioning to small businesses and 28.2% moving to medium-sized enterprises. The institute recommended a unified digital registration and licensing platform to simplify compliance procedures. Food entrepreneur Samira Sakibu echoed these sentiments, stating that navigating multiple regulatory requirements is frustrating and is limiting her ability to expand her business and hire additional workers.

ILAPI called for a comprehensive reform of the regulatory system to foster a business environment that encourages enterprises to formalize, survive, expand, and employ.