The Deputy Governor of the Bank of Ghana, Mrs Elsie Addo Awadzi, has said even though the micro, small and medium enterprises (MSMEs) has been hit hard by the COVID-19 pandemic, there is still hope for recovery.
Delivering the keynote address at the ENGINE Business Network’s MSMEs forum, Mrs Awadzi acknowledged that over the years, MSMEs have played and continue to play a critical role in Ghana’s socio-economic development by producing critical goods and services, creating jobs, and helping to reduce poverty and promote economic growth.
It is estimated that MSMEs represent about 85 per cent of Ghana’s private sector and contribute about 70 per cent of annual GDP.
In terms of employment, MSMEs account for an estimated 85 per cent of manufacturing jobs in the country.
The MSME sector has also provided women and the youth opportunities to harness their economic potential, and it is estimated by the World Bank that about a third of all MSMEs in Africa are owned by women.
“These contributions notwithstanding, MSMEs have always faced severe constraints that stifle their growth. For example, it is estimated that the MSME financing gap in Ghana is approximately 13 per cent of GDP, according to a World Bank 2019 Report on improving access to MSME financing in Ghana”, she said.
She said the forum, which was on the theme, ‘MSME Manufacturing Capabilities, Responding to COVID-19 and Opportunities Beyond’ was “timely and appropriate”.
“We are all witnesses to the unfolding impact of the COVID-19 pandemic on human lives around the world, and the significant disruptions in the global economy. These are certainly unusual times, and for many of us, unprecedented times”.
The Deputy BoG Governor continued: “There is recognition around the world that the economic impact of COVID-19 has been disproportionately felt by the MSME sector, owing to a number of factors. First, on the supply side, MSMEs have faced many challenges including (i) disruptions in their production cycles due to employees and suppliers infected by the virus; (ii) a shortage in raw materials and other inputs due to global supply chain disruptions; and (iii) increased costs of production due to a shortage of inputs, and spending on new health and safety protocols”.
On the demand side, she noted that “MSMEs have experienced revenue losses and severe liquidity stress arising from weak consumer demand due to closure of businesses in the hospitality, tourism, aviation, education and food industries, among other things. With little or no savings, MSMEs have had difficulty paying their workers and suppliers, paying rent and utility bills, and servicing their loans with financial institutions. This is, in many ways, an existential threat for the sector”, Mrs Awadzi said.
She said apart from the impact on MSMEs, major businesses, and multinationals, in some cases, have all been hit hard. “Corporate insolvencies around the world have increased exponentially due to the pandemic, and national economies are reeling from the loss of tax revenues and increased Government expenditures on health and safety and other measures to help contain the effects of the pandemic. In Ghana, the impact of the pandemic on businesses, Government revenues and expenditures, and on inflation, have compounded the problems of the MSME sector”.
Many countries around the world, the deputy governor noted, have responded to the economic impact of the pandemic with policy measures to cushion the impacts on small businesses. “Similarly, the government of Ghana has provided some GHS600 million through the NBSSI to cushion MSMEs against the devastating effects of the pandemic”.
“Through partnerships with banks and other financial institutions, this amount could potentially increase to GHS1 billion to provide even more support to this sector. Other interventions by Government, including the absorption of electricity and water bills of consumers, have also helped to support the MSME sector”.
She said “while the impact of COVID-19 on your sector has been severe, there is much hope. There is recovery ahead, and there are enormous opportunities in the post-COVID world. What is more, policy makers in Ghana have made interventions to help cushion the impact of the pandemic on the MSME sector”.
“A lot more work is ongoing, as we explore all available means to further stabilise the sector and the economy as a whole, while preparing for a major recovery in the medium-term. The financial sector is well-positioned to continue to support the MSME sector, while efforts continue to be made to expand access to innovative financial services and products for all.”, Mrs Awadzi said.
“In turn, MSMEs must strive to reposition themselves to lead in the post-COVID economic recovery. It is time to rethink your business models, to be more innovative, to embrace technology to help improve quality, efficiency, and management practices, and diversify the range of products and services for the local market, even daring to branch into the ECOWAS sub-region and beyond. It is also important for MSMEs to prioritise compliance with laws, standards, and ethical business principles, to help build strong foundations for robust growth and lasting impact. The current pandemic provides a lot of opportunities for MSMEs to reengineer themselves and to participate more fully in the national, regional, and global economy”.
“In conclusion, thank you for inviting me. I wish you fruitful deliberations at this forum, and very best wishes in all your endeavours. Ghana needs a strong and viable MSME sector, and EBN and its members must continue to soldier on, leveraging the opportunities available and creating new ones for themselves and future generations of entrepreneurs”.