Growing the Ghanaian Informal and Small Businesses
Author: Nana Owusu- Afari
Prof. Peter Quartey
(Head, Economics Division, ISSER, University of Ghana)
Many developing countries have a dual economic structure, namely formal and informal. The informal sector plays a dominant role in these economies and accounts for a greater share of GDP and employment compared to the formal sector. Therefore, roping in the informal sector into the formal economy through taxation, income generation etc provides enormous opportunities for national development. I can therefore say without hesitating that this book titled ‘Growing the Ghanaian Informal and Small Businesses’ is not just timely but very appropriate.
The 165-page book, authored by Nana Owusu-Afari, an experienced industrialist, provides valuable insights into the operations and the important developmental effects of informal and small businesses in Ghana and in other parts of the developing world. Structured into eight separate chapters, the book analysed, in particular, the characteristics of informal businesses in Ghana and in other developing countries, the role played by informal and small businesses in employment creation and national productivity, the constraints to the growth and survival of informal and small businesses and suggests approaches to improve the business landscape of informal and small business operators in Ghana.
In chapter one, the author laid the foundation for the work by providing an extensive background literature on the origin of the term ‘informality’ or the phrase ‘informal sector’ and the associated ambiguity in defining it. The author’s conceptualization of the term sits well with Hart (1973) position that informal activities are those activities which are unregulated by state institutions. The second chapter provides an in depth analysis of the characteristics of the Ghanaian informal sector. It highlights some of the main features of Ghana’s informal sector but notes that none of the features discussed in the book alone can be used as a basis for classifying a business as either formal or informal. The third chapter examined the contributions of the informal sector to the Ghanaian economy. Similar to the analysis presented in chapter one, the author reiterates the immense contribution of the informal sector to employment generation in Ghana, making the case that the informal sector’s share of total private employment surpasses that of the formal sector.
“It is evident that Ghana’s unemployment rate has been increasing over the past decades, especially with the increasing number of people graduating from secondary and tertiary schools. The labour force is large and the number of available jobs, particularly in the formal sector is inadequate. Therefore, many people fail to find work although they are educated. Thus, the informal sector serves as the only option available to them to earn a living”
The challenges encountered by informal businesses in Ghana are discussed in chapter four. Among these are: (i) low level of government recognition; (ii) overcrowding by bigger and formal businesses; (iii) financial challenges such as lack of access to credit; (iv) lack of business management skill and inadequate access to market information; and (v) poor job security conditions. Chapters five, six and seven discussed various government strategies to bolster the growth of the informal sectors in Kenya, Zimbabwe and India, respectively.
On the basis of the evidence presented in the preceding chapters, the book concludes by offering insights into how government can promote the growth of the Ghanaian informal sector. Given the significant developmental contributions of the informal sector in most economies in the world, including Ghana, it is clear that the informal sector cannot continue to be perceived as marginal and illegal. Thus, efforts must be made to promote their growth and development, and ultimately their migration into the formal sector.
In conclusion, the book which is a must read, provides useful evidence on the salient characteristics of the informal sector in Ghana including the nature of informal businesses in Ghana, their employment creation and poverty reducing roles as well as the challenges they face. By drawing on these characteristics as well as the successful strategies adopted elsewhere to promote the operations of informal sector businesses, the book concludes by offering suggestions on ways to improve the operations of informal and small businesses in Ghana so as enable them achieve their full potential. It is my hope that the second volume of this book will look at digitization, taxation and regulation of the informal sector as well as incentives to encourage `informal’ businesses want to `formalize’. I strongly recommend this book to academics, students, private sector operators as well as policy makers.