Why Ghana’s MSMEs must rethink human capital investment: Seven strategic benefits

Ghana’s Micro, Small and Medium Enterprises (MSMEs) form the foundation of the nation’s economy, employing 80% of the workforce and contributing 70% of its Gross Domestic Product. However, a significant challenge persists: more than 90% of these enterprises are micro-sized, with a high failure rate of 50% and a low survival rate of just 20% for start-ups.

This predicament can be traced back to a fundamental issue: inadequate investment in human capital. Nana Dr E. Adu-Sarkodee Afriyie, President of the Ghana Employers Association, has highlighted that "we are still producing large numbers of MBAs, but nobody needs them," emphasizing the misalignment between Ghana’s human capital and national development needs.

For MSMEs, it is no longer optional but a strategic necessity to rethink training and human capital investment. An initiative led by the Ghana Employers Association (GEA) in the Ada East and Kpone Katamanso Districts witnessed over 800 young entrepreneurs benefiting from an Entrepreneurship training programme. This hands-on experience underscored the crucial role of equipping individuals with the necessary skills to venture into micro and small businesses.

Ghana faces a paradoxical situation in its labour market: while youth unemployment is high at 32.5% for those aged 15-24, businesses struggle to find workers with practical skills. This disconnect stems from universities producing graduates who lack the real-world skills demanded by the industry. The core issue is a "structural coordination failure" between education and industry demands, with MSMEs bearing the brunt of this mismatch due to limited resources.

To address this, MSMEs must transition from viewing training as a "post-hire remedial measure" to a "strategic capacity building" approach, actively shaping the talent pipeline to meet industry needs.

Training also plays a critical role in improving employee retention and organizational resilience for resource-constrained MSMEs. Studies have shown that employee development positively impacts retention, especially during global shocks. MSMEs that invest in structured talent development, leadership responsiveness, and career progression frameworks tend to retain their workforce better. This investment in employees is often valued more than higher remuneration in Ghana’s socio-cultural context.

Training directly contributes to productivity gains and profit growth for MSMEs. Research on Ghanaian SMEs found that training accessibility and relevant content significantly influence managerial effectiveness. The study highlights that managers need training that is both accessible and tailored to their specific industry, size, and development stage.

A separate qualitative study on small-scale industrial enterprises also found that transformative training leads to improved performance, increased productivity, and enhanced employee confidence.

Apprenticeship in the informal sector is a vital pathway for skill transfer, especially for women entrepreneurs. However, a study on Ghanaian MSMEs revealed that fewer than 3% achieve sustained growth, largely due to the prevalent survival mode of most enterprises. Traditional apprenticeship training programs need reform to become more effective and inclusive. By investing in strategic human capital investment, Ghana’s MSMEs can overcome these challenges, enhance productivity, and unlock their full growth potential.