Only 28.2 per cent of micro enterprises in Ghana have transitioned fully from micro to medium scale, a study by the Institute for Liberty and Policy Innovation (ILAPI) has found. This translates to fewer than three out of every 10 micro businesses in the study reaching medium enterprise status.
Micro Enterprises Face Daunting Regulatory Hurdles
The study, which covered 600 businesses, found that only 28.2 per cent of micro-enterprises in Ghana have transitioned fully to medium scale. This low transition rate is attributed to structural, financial, and regulatory barriers. ILAPI stated that businesses encountered additional layers of compliance as they expanded, including new licences, tax registrations, approvals, and permits.
The regulatory burden is a significant obstacle for micro businesses looking to expand. According to ILAPI, a small factory seeking to expand could face requirements involving the Food and Drugs Authority (FDA), Metropolitan, Municipal and District Assemblies (MMDAs), Ghana Standards Authority, and other regulatory agencies. This duplicative requirement discourages some businesses from expanding beyond micro or small scale.
Transition from Micro to Small Takes Eight Years
The study also found that 44.64 per cent of micro businesses transitioned to small enterprises. However, this transition comes at a cost, with the average time taken to transition from micro to small being around eight years. ILAPI attributed the low transition rates to the limited capital and increasing regulatory requirements that businesses face when expanding from micro to small scale.
Reducing Regulatory Burden Could Improve Transition Rates
ILAPI stated that reducing duplicative requirements could significantly improve the transition of micro businesses into medium-scale enterprises. This, in turn, could lead to increased employment opportunities for Ghanaians. The study noted that the most significant drop-off occurred between micro and small enterprises, where businesses faced limited capital and increasing regulatory requirements.
The findings of the study highlight the need for policymakers to address the regulatory hurdles faced by micro businesses. By reducing the burden of compliance and making it easier for businesses to expand, Ghana can create more employment opportunities and stimulate economic growth. However, the path forward is uncertain, and it remains to be seen whether policymakers will take action to address the regulatory challenges faced by micro businesses.
Source: Joy Online
