Small Scale Enterprise and Poverty Reduction

CHAPTER ONE

INTRODUCTION

Background to the study
It is estimated that one-fifth of the World’s population currently lives on less than a dollar a day (Annan, 2001). It is also estimated that around one-third of the people living in developing countries continue to live in ‘income poverty’ by earning less than one US dollar per day. This affects children and so nearly 12 million children die each year before their fifth birthday. This brings in the issue of human capabilities such as being illiterate, unhealthy and inadequately nourished. For instance a UNDP (1998) report shows that 30 per cent of all children under five years are malnourished and 38 per cent of all adult women are illiterate in developing countries.
We are living in a world where of the world 's 6 billion people, 2.8 billion – almost half of world’s population – earning less than $2 a day and 1.3 billion – about fifth of the world’s population – live on less than a $1 a day in extreme poverty (Bradshaw, 2005). To be poor is to be hungry, to lack shelter and clothing, to be sick and not cared for, to be illiterate and not schooled. But for poor people, living in poverty is more than this. Poor people live without fundamental freedoms of action and choice that the better-off take for granted. They often lack adequate food and shelter, education and health, deprivations that keep them from leading the kind of life that everyone values. They also face extreme vulnerability to ill health, economic dislocation, and natural disasters. And they are often exposed to ill treatment by institutions of the state and society and are powerless to influence key decisions affecting their lives. Some progress has been achieved over the last 40 years regarding life expectancy and health, education, infant mortality, and clean water, but the figures given above show that a lot more work needs to be done (Bradshaw, 2005).
In 2000/01, the issue of the vulnerability of the poor stimulated another stress for governance and institutions. As a result, the World Bank promoted three ways to tackle poverty: opportunity, empowerment and security (World Bank, 2001a). Despite the above strategies, poverty is still the world’s greatest challenge. In 1998, for example, of the world’s 6 billion people, 2.8 billion lived on less than $2 a day, and 1.2 billion lived on less than $1 a day. Of that 1.2 billion, South Asia, Sub-Saharan Africa, East Asia and the Pacific accounted for 44 per cent, 24 per cent and 23 per cent of this total, respectively (World Bank, 2001a). In the next 25 years, according to the World Bank (2001a), the world’s population will roughly increase by an additional 2 billion. About 97 per cent of this increase will be in developing countries. This population increase encourages concern for the world, as it will result in problems of environmental degradation, unemployment, poverty and other social and political problems.
In East Asia the number of people living on less than $1 a day fell from around 420 million to around 280 million between 1987 and 1998 - even after the setbacks of the financial crisis. Yet in Latin America, South Asia, and sub-Saharan Africa the numbers of poor people have been rising. And in the countries of Europe and Central Asia in transition to market economies, the number of people living on less than $1 a day increased to more than twenty fold (World Bank, 2000). There have also been major advances and serious setbacks in crucial non-income measures of poverty. The varying infant mortality rates across the world Sub-Saharan Africa’s is 15 times that of high-income countries give an idea of this widely differing experience (World Bank, 2000).
Despite spirited efforts to reduce poverty in urban sub-Sahara Africa (USSA), a high degree of absolute urban poverty still persists in these areas. Poverty in these areas manifests itself as rampant and high unemployment; hunger; decayed, unventilated, unplanned and shapeless dwellings; prostitution; numerous, unplanned, dirty and naked children who are either not going to school or are going to bad schools; fear; injustice; sickness; illiteracy; abundance of garbage and human waste; torn and tortured roads and scary alleyways; unlit streets; crime and criminals of all sorts (Balihuta, 2001).
Ghana faces widespread poverty characterized by a low quality and quantity of employment opportunities. It ranks 131 out of 177 countries listed in the 2004 Human Development Index. Per capita income is about US$ 380 (compared to US$ 450 in 1975). The workforce is growing by about 230,000 annually. Given the lack of opportunities for employment and income generation, almost 40 per cent of the population was living below the poverty line in 1998/99, according to the latest available Ghana Living Standards Survey (GLSS4).
Women are disproportionately affected, with the incidence of poverty higher amongst women than men across virtually every sector of the economy. This is particularly evident in the two ‘hotspots’ of poverty in Ghana: agriculture and the informal economy. After farming, non-farm self-employment in micro- and small enterprises has the highest prevalence of poverty. About 29 per cent of all persons whose livelihood depends on it live below the poverty line.
The Ghana Living Standards Survey (GLSS IV) revealed that, of the labour force aged 15 to 64 years, 52 percent were self-employed in agriculture, 34.3 percent worked in the informal economy, and only 13.7 percent worked in formal public or private employment. The number of households whose main source of income is in the informal economy is growing fast, particularly in non-farm self-employment.
Job quality is low in the micro and small-scale enterprises that are predominantly operating in the informal economy. In addition to often being below the poverty line, remuneration is irregular, working hours are long, and few benefit from leave provisions. There is considerable gender-based discrimination and child labour is on the increase. Workers rarely have opportunities for formal skills training or other incentives to contribute to the success of the enterprises. Most workers and employers work under unsafe and unhealthy conditions, with probably grave consequences for their productive life span and life expectation in general. The great majority of workers and employers are covered by neither health insurance nor by pension schemes. However, this may change in the near future as mutual health schemes at district level are being introduced across Ghana. Few workers are organized and therefore do not to have a collective voice. Employers are much better organised although many business associations do not meet their members’ expectations. Interestingly, Small Business Associations (SBAs) that are affiliated to national federations are mostly members of the Trade Union Congress (TUC) (Boeh-Ocansey, 1996).
Poverty reduction is an important part of the coping strategies to solve the above problems. This is partly because poverty is often seen as a root cause of the problems, especially problems occurring in developing countries. Hence, the elimination of poverty is currently a key concern of all those interested in developing countries. In addition, the World Bank, the UNDP and other major donors often assess their policies in relation to their impact on poverty, ranging from debt relief to macro economic stabilisation (Boeh-Ocansey, 1996).
A small-scale enterprise is seen as one of the poverty reduction strategies. Brown (1996) stated that there is a growing recognition of the potential contribution of the small-scale enterprise sector to the economic development and the achievement of improved standard of living. Efforts to promote small-scale enterprises have a relatively long history. In Latin America, well-organised programmes existed as early as the fifties. Small-scale enterprise development had extended in Mexico, Venezuela and Argentina. Governments came out with programmes to develop small-scale enterprises in these countries. Such programmes covered technical and financial assistance. These initiatives were followed by Brazil, Chile and Columbia who launched their own programmes in the sixties (UN, 1979). In Asia, also in the fifties, the Indian government created elaborated small-scale enterprise promotional schemes. India instituted programmes addressed to village and cottage industries. In contrast to the Latin American approach to the promotion of small-scale enterprises, the Indian government set out to protect cottage and village industries through a complex system of incentives, subsidies and market reservation regulations intended for their development. A similar approach was tried later in Indonesia and Korea (Daniels, 1993).
Several arguments have been advanced in favour of the development of small-scale enterprises. Among such arguments is realization that the development of small-scale enterprises helps in reducing unemployment and poverty. The post-war period saw high and accelerating rates of economic growth and industrialization in most developing countries. Between 1958 and 1975, the annual per capita income in the developing world grew at an average of 3.1 per cent (Morawetz, 1974). Most of the benefits had accrued to those with access to jobs in modern industries while a sizeable proportion of the population continued to depend on low-productive activities for survival or remained unemployed for extended period. The failure of the large-scale industries in this respect called for attention to be given to small-scale enterprises.
In Africa, programmes oriented towards supporting small-scale enterprises appeared soon after independence of many countries in the mid-sixties, Tanzania and Kenya being among the earliest to adopt these policies. The African programmes emphasised the provision of industrial estates and training of entrepreneurs. Botswana and Ghana are also examples of African countries that welcomed the idea of promoting small-scale enterprises (Livingstone, 1982). These were programmes often linked to Africanisation policies in which assistance was aimed primarily at transferring businesses to indigenous nationals (Page, 1979). Furthermore, the development of small-scale enterprises is based on the ‘Schumpeterian’ thinking about the fundamental role of entrepreneurship and management skills in development. The scarcity of both resources in developing countries highlights the potential role of small-scale sectors in two complementary aspects: as training ground and seedbed for the medium and large-scale sector, and as an efficient use of existing indigenous entrepreneurial and management skills which would otherwise remained unused (Page, 1979). Small-scale enterprises constitute an integral part of the industrial structure of any country especially in the less developed countries. In Ghana, they developed before the advent of modern sized and large-scale industries and despite the growth of modern industries they have generally continued to exist. In fact, the industrial programme of a developing country can be more solid, better balanced and more efficient in meeting the industrial needs of people only when attempts are made to develop a range of industries of all types including small-scale enterprises. In Ghana, the activities and the advantages of small-scale enterprises to the national economy are enormous. Small-scale enterprises have been given recognition. This stems from the premise that small businesses have the capability to serve as means of realising the objectives of industrial development. They contribute greatly to the socio-economic development of the country. The small-scale enterprise sector has acquired a place of prominence in the economy of the country. Small-scale enterprises have contributed to the reduction of the unemployment problem in the country. The sector employs about 15.5 per cent in of the labour force in Ghana (Parker, 1994). This emanates from the fact that most of them are labour-intensive. Most of the small-scale enterprises use local raw materials for their production. This reduces pressure on foreign exchange since the demand for imported goods will be less. They also act as agents of development in the sense that they spread development to regions. Small-scale enterprises have come in to fill the industrial gap created by the poor performance of large-scale industries. More recently, small-scale enterprises have been viewed as an effective way of fostering the private sector’s contribution to both the growth and equity objectives of developing countries (Parker, 1994). In order to realise the full potentials of small-scale enterprises, several institutions have been set up by government and other private entities to provide technical, financial, and managerial services all geared towards the development of small-scale enterprises. Among such institutions are the National Board for Small-Scale Industries (NBSSI), Business Advisory Centre (BAC), Central Region Development Commission (CEDECOM), Intermediate Technology Transfer Unit (ITTU), Ghana Regional Appropriate Technology and Industrial Service (GRATIS), Fund for Small and Medium-Scale Enterprise Development (FUSMED), Rural Banks among others. This shows the importance attached to the development of small-scale enterprises in the country.
In Ghana and very much so in the Cape Coast Metropolis of the Central Region, the contribution of small-scale enterprises to national and local development is potentially very large. About 95 per cent of 8500 enterprises registered in Ghana as at 1993 are classified as small businesses. It is estimated that about 80 per cent of the labour force are employed in the informal sector which is dominated by SSEs. This underscores the important role that SSEs play in the country’s socio-economic development (Boeh-Ocansey, 1996). In Ghana, by 1986, about 60,000 civil servants had been redeployed and gained productive employment in small scale enterprises (Baah–Nuakoh, Osei, Sowa, & Tutu, 1992). SSEs from the perspective of the Economic Recovery Programme (ERP) and from an economic point of view are supported to generate wealth, reduce unemployment, improve service infrastructure, and develop particular groups or sectors for economic development (Abaka & Mayer, 1994).
The realisation of the potential of the small-scale sector to contribute to the economic development of the country is not entirely a recent phenomenon. The National Liberation Council (NLC) policy document aimed at the development of the small-scale sector was introduced in July, 1968 (NLCD 330). This policy was followed up with the Ghanaian Business Promotion Act (Act 334) that led to the establishment of the Office of Business Promotion with the objective to assist Ghanaian entrepreneurs to enter sectors support of small scale industrial formerly dominated by foreigners but which became open to Ghanaians after the ‘Alien Compliance Order’ in 1970 (Mensah, 1996). These developments together with promotional institutions such as the National Board for Small Scale Industries (NBSSI), the Business Advisory Centre (BAC), and the GRATIS Foundation among others have helped the small and medium scale sector to make enormous strides and contributions especially in the sphere of employment. According to Steel and Webster (1991), SSEs established between 1984 and 1989 in Ghana increased employment by 71 percent.
Statement of the problem
It is clear that as the world economy continues to move toward increased integration because of advances in communications technology, growth in developing countries, and reductions in trade barriers, some of the greatest opportunities for small businesses will derive from their ability to participate in the global marketplace (Alvarez, 1999). Within the developed and especially developing countries of the world, where the incidence of poverty is generally considered to be very high, it is now accepted by policy-makers at local, regional and national level, that small-scale enterprises are becoming increasingly important particularly in terms of employment creation, wealth creation and the development of innovation (Nieman, Hough & Nieuwenhuizen, 2003; Vesper, Boden & Roman cited in Carland, Carland & Ciptono, 1999).
In spite of these, there are considerable doubts about the quality of management in this sector, with policy-makers suggesting that there are particular weaknesses in innovation, lack of financial acumen, marketing, entrepreneurial flair, practical knowledge, and human resource management (Hodgetts & Kuratko, 1995). As a result, many enterprises do not reach their full potential and fail to grow, resulting in creating debt and lost of wealth for their region in which they are based which consequently do not result in the reduction of their poverty levels.
In spite of the above-mentioned contributions of small-scale enterprises towards poverty reduction, they are faced with certain challenges which hinder their smooth operations and development. Among such challenges include: inadequate capital; inadequate input supply; low patronage of locally produced goods and services among others (Thomi & Yankson, 1985). Even though institutions have been setup to promote the development of small-scale enterprises, most enterprises especially those found in the rural areas do not have access to these institutions and for that matter affect their businesses which in tend aggravate their poverty levels.
In Cape Coast Metropolitan, the small-scale enterprises (SSEs) are complaining of unavailability of funds to expand their businesses, managerial capacity, state of technical know-how, strength of market, capital adequacy and business registration. However the emphasis is laid on the inadequacy of capital for small scale enterprises. It is against this background that this study sought to assess the role of small-scale enterprises in poverty reduction in the Cape Coast Metropolis.
Objectives of the study
The general objective of this study is to assess the contributions of small-scale enterprises to poverty reduction in the Cape Coast Metropolis.
Specifically, this study seeks to: * examine how SSEs has affected the poverty indicators of entrepreneurs in terms food, clothing, shelter, health, education, capital accumulation and employment; * examine the extent to which to which the small scale enterprises in Cape Coast Metropolis utilize the services of the promotional institutions; * analyse and compare the performance of SSEs that have received institutional support and those that have no support; * make recommendations based on the findings of the study.
Research questions
The research sought to provide answers to the following: * How has small scale enterprises improved poverty indicators of entrepreneurs? * To what extent has small scale enterprises utilize the services of promotional institutions? * To what extent promotional institutions support enhanced the activities of small scale enterprises?
Significance of the study

The study of this nature is crucial in a sense that it would present the poverty situation in Cape Coast and provide insight on activities of small-scale enterprises in trying to reduce poverty situation in the Cape Coast Metropolis. The study will also assist to identify growth constraints of small-scale enterprises and how to control these factors.
The study will cover policies and programmes that can facilitate the growth of small-scale enterprises in Ghana. This will assist the Ministry of Trade and Industry in formulating policies and programmes, which will be responsive to the needs of the small-scale enterprises in the country. The findings of the study will provide current information on small-scale enterprises in cape coast metropolis.
The Central Regional Development Commission (CEDECOM), Business Advisory Centre (BAC), National Board for Small-scale Industries (NBSSI) and other promotion institutions will not be left out since they will have the fair share based on the findings of this research. This is important to enable these promotional institutions assess the effect of their efforts on small-scale enterprises in cape Coast Metropolis. The study will, therefore, serve as a document for further research in the other regions in Ghana.
Organisation to the study The research work is organized into five (5) chapters. Chapter one is the general background and perspective of problem. It provides an introductory overview of the entire study comprising the statement of problem and objectives, research questions and the significance of the study. Chapter two comprises the review of relevant literature on poverty, small-scale enterprises and its effects on poverty reduction. The evolution of small-scale enterprises (SSEs), constraints operational challenges of SSEs in the Cape Coast Metropolis, importance of SSEs in socio-economic development and theories on poverty and small enterprise development will also be reviewed. The third chapter is a discussion on all methodological issues of the research. It will include the study area, research design, study population and sampling, sampling procedure, sources of data and data collection techniques and data processing and analysis.
The fourth chapter contains the discussions and analysis of data and will centre primarily on the objectives of the study; whiles Chapter five covers the summary of major finding, recommendations and areas for further research.

CHAPTER TWO
REVIEW OF RELATED LITERATURE
Introduction
The review of literature related to the topic was necessary to guide the researcher to establish a conceptual, a theoretical framework for the study. The chapter discusses the work of earlier researchers which have relevance to this study.
The literature was reviewed in the following sub-topics: * Definitions of poverty * Theories of poverty * Poverty situation in Ghana * Poverty Alleviation Strategies by Various Governments in Ghana * Definition of Small-Scale Enterprise (SSE) * Evolution of small-scale enterprises (SSEs) in Ghana * Characteristics of small-scale enterprises (SSEs) in developing countries * Characteristics of small-scale enterprises in Ghana * Promoting small-scale enterprises in Ghana * Promotion institutions of SSEs in the Cape Coast Metropolis * General constraints of small-scale enterprises (SSEs) to development * Empirical evidence of small scale enterprises and poverty reduction
Definitions of poverty
Poverty has been argued to be a concept that defies a single definition. There has been academic and political debate about poverty not merely being descriptive but prescriptive. It is not just state of affairs; it is an unacceptable state of affairs. Therefore, the first thing to understand about poverty is that it is not a simple phenomenon that can be learned to define by adopting the correct approach. It is a series of contested definitions and complex arguments that overlap and at times contradict each other (Alcock, 1997).
The need for definition of poverty is in fact recognized by most researchers and commentators. Poverty has no precise definition. It is a multi-dimensional phenomenon related to the inadequacy or lack of social, economic, cultural, and political entitlements. Poverty is hunger. Poverty is lack of shelter. Poverty is being sick and not being able to see a doctor. Poverty is not being able to go to school and not knowing how to read. Poverty is not having a job, is fear for the future and living one day at a time. Poverty is losing a child to illness brought about by unclean water. Poverty is powerlessness, lack of representation and freedom (World Bank 2000).
According to the Ghana Poverty Reduction Strategy (GPRS, 2003) document, poverty is multi-dimensional with complex interactive and causal relationships between the dimensions. In addition, poverty was defined to include low level of income, the absence of medical care, poor sanitation, the absence of good drinking water, illiteracy, the inability to participate effectively in decisions that affect an individual’s life directly, and the lack of security and protection from crime. It identifies the causes of poverty to include macro-economic instability, inability to optimize benefits from global economic system, low levels of consumption, limited use of technology, belief in superstition and myths, as well as powerlessness of the poor and women. The Ghana Living Standards Survey (GLSS) on the other hand defines poverty using an economic index, characterizing the poor as those subsisting on a per capita income of less than two thirds of the national average. The ‘hard core’ poverty line is defined as income below one third of the mean.
It has however, been argued that if poverty levels changes as society become more affluent, then it is not clear how the position of the poor can be distinguished from the others who merely less well-off in an unequal social order. This therefore, raises the question of where, and how, to draw a line between the poor and the rest. In essence the argument is that any cut-off line is arbitrary and merely involves the imposition of subjective judgment of what is an acceptable minimum standard at any particular time (Piachaud, 1981).
The World Bank defines poverty as “the inability to attain a minimum standard of living” and produced a “universal poverty line”, which is “consumption-based” and comprised of two elements: “the expenditure necessary to buy a minimum standard of nutrition and other basic necessities and a further amount that varies from country to country, reflecting the cost of participating in everyday life of society (Duy Khe, 2003). Similarly, the Development Assistance Committee (DAC) of the OECD defines poverty as “the inability of people to meet economic, social and other standards of well-being” (OECD 2001: 37).
Sen (1999) identified five dimensions of poverty namely political space, economic space, social space, transparency and protective security. He views poverty as deficits along these five dimensions which limit the ability of the people to develop their capabilities, and function effectively. In other words poverty is not only lack of income, education or health but also on a broader approach, lack of voice, lack of empowerment and lack of good governance.
The above definitions show that at the heart of poverty is an idea of basic needs. Typically, a person is considered as poor if he/she does not have the capabilities to meet the basic needs. Poverty is not a paucity of income only, but goes beyond that to consider the social context in which the person lives that determines the extent of poverty a person or family experience.
Theories of poverty
It is believed that it is by knowing the factors responsible for poverty that policies can initiated to overcome poverty. This section discusses poverty caused by individual deficiencies, poverty caused by cultural belief systems that support sub-cultures of poverty, poverty caused by economic, political, and social distortions or discrimination.
Poverty caused by individual deficiencies
This first cause of poverty is a large and multifaceted set of explanations that focus on the individual as responsible for their poverty situation. The proponents of this cause of poverty as the product of the weakness and fecklessness of the individual. Typically, politically conservative theoreticians blame individuals in poverty for creating their own problems, and argue that with harder work and better choices the poor could have avoided (and now can remedy) their problems. Other variations of the individual theory of poverty ascribe poverty to lack of genetic qualities. The genetic explanation of poverty seeks to relate social status with supposedly inherited characteristics such as intelligence and psychological approaches which explains individual (non)achievement by reference to acquired or developed personality traits. They do include a dynamic, albeit a largely immutable one, deriving from nature rather than nurture. (Alcock, 1997; Bradshaw, 2006).
Another aspect of this cause of poverty is the blame on the family and the community as the cause of poverty. Thus when those children reach adulthood their expectations and abilities were lowered and they more readily expected and accepted the poverty and deprivation of their parents and acquaintances (Alcock, 1997). Keith (1972) referred to this as “cycle of deprivation” in which the inadequate parenting, lowered aspirations and disadvantages environment of families and communities become internalized as part of the values of their children as they grew up.
Poverty caused by cultural belief systems that support sub-cultures of poverty
The second theory of poverty roots its cause in the “Culture of Poverty”. This theory is sometimes linked with the individual theory of poverty or other theories to be introduced below, but it recently has become so widely discussed that its special features should not be minimized. This theory suggests that poverty is created by the transmission over generations of a set of beliefs, values, and skills that are socially generated but individually held. Individuals are not necessarily to blame because they are victims of their dysfunctional subculture or culture.
Technically, the culture of poverty is a subculture of poor people in ghettos, poor regions, or social contexts where they develop a shared set of beliefs, values and norms for behaviour that are separate from but embedded in the culture of the main society. Oscar Lewis was one of the main writers to define the culture of poverty as a set of beliefs and values passed from generation to generation. He writes, once the culture of poverty has come into existence it tends to perpetuate itself. By the time slum children are six or seven they have usually absorbed the basic attitudes and values of their subculture. Thereafter they are psychologically unready to take full advantage of changing conditions or improving opportunities that may develop in their lifetime (Scientific American, October 1966 quoted in Ryan, 1976: 120).
Poverty caused by economic, political, and social distortions or discrimination Whereas the first “individualistic” theory of poverty is advocated by conservative thinkers and the second is a culturally liberal approach, the third to which we now turn is a progressive social theory. Theorists in this tradition look not to the individual as a source of poverty, but to the economic, political, and social system which causes people to have limited opportunities and resources with which to achieve income and well being. The 19th century social intellectuals developed a full attack on the individual theory of poverty by exploring how social and economic systems overrode and created individual poverty situations. For example, Marx showed how the economic system of capitalism created the “reserve army of the unemployed” as a conscientious strategy to keep wages low. Later Durkheim showed that even the most personal of actions (suicide) was in fact mediated by social systems. Discrimination was separated from skill in one after another area, defining opportunity as socially mediated.

A parallel barrier exists with the political system in which the interests and participation of the poor is either impossible or is deceptive. Recent research has confirmed the linkage between wealth and power, and has shown how poor people are less involved in political discussions, their interests are more vulnerable in the political process, and they are excluded at many levels. Coupled with racial discrimination, poor people lack influence in the political system that they might use to mobilize economic benefits and justice. A final broad category of system flaws associated with poverty relate to groups of people being given a social stigma because of race, gender disability, religion, or other groupings, leading them to have limited opportunities regardless of personal capabilities. No treatment of poverty can be complete without acknowledging that groups against which discrimination is practiced have limited opportunities regardless of legal protections. The process of gaining stronger rights for minorities in poverty is an ongoing one, for which legal initiatives and public policy reform must work with efforts to change public attitudes.
Poverty situation in Ghana
Poverty has been known to exist in the country since time immemorial. All development programmes are geared towards its eradication. However, pragmatic effort towards its alleviation was seriously started in the 1980s. It was within this period that the Ghana Living Standard Survey (GLSS) was commissioned and since then five (5) surveys have been conducted, all aimed at assessing the level of poverty in the country. A report published by the United Nations International Children’s Educational Fund (UNICEF) in 1986 on the poverty situation in the country brought to the fore the level of deterioration of the key sectors of the social indicators such as roads, educational facilities, healthcare delivery and others between the period of 1970s and 1980s. The report continued to indicate that absolute poverty in the country rose from 60 – 65 per cent to 70 – 75 per cent in the rural areas in the same period. In the urban areas, the level was from 30 – 35 per cent to 45 – 50 per cent. Since then several studies have been conducted on the poverty situation in the country indicating reduction through the provision of social services and infrastructure.
In 1988, Poverty Profile for Ghana was published from the first ever Ghana Living Standard Survey (GLSS), this was conducted in 1987/88. The survey estimated that in 1988 some 36 per cent of the total population lived in poverty. To date, GLSS IV have been carried out and the fifth (5th) which has just been released, estimate the national poverty level at 25 per cent (GLSS, 2007). These surveys expressed poverty in terms of the locality, socio-economic groups and basic needs such as education, health, water and sanitation, nutrition and housing. From the various reports on Poverty in Ghana, the following observations have been made: -
1) Between the period of 1970s and 1980s. The report continued to indicate that absolute poverty in the country rose from a range of 60 – 65 per cent to 70 – 75 per cent in the rural areas in the same period. In the urban areas, the level was from 30 – 35 per cent to 45 – 50 per cent. Since then several studies have been conducted on the poverty situation in the country indicating reduction through the provision of social services and infrastructure.
2) Turns to mark the incidence of the pockets of poverty that exists in the region of which Cape Coast Metropolis is one. That the socio-economic groups affected by poverty include fishermen, fishmongers, food crop farmers, the non- farm self-employed and non-formal sector employees. This is the characteristic of the socio- economic group found in the Metropolis where 73 per cent of the labour force is found in small-scale enterprises (CCMA, 2006).
3) That the poor have limited access to social services and infrastructure. Between the periods of 1987/88 to 1991/92, only 3 per cent of the rural households had access to a medical doctor and only about 50 per cent lived in communities with a modern health care facility. In Central Region it is one (1) doctor to over 20,000 people (CCMA, 2004). Educational facilities were woefully inadequate, especially in the Northern part of the country.
However, using the provision of social services as indicator of poverty, there is clear evidence of some reduction in the poverty incidence in the country. At least provision of social facilities has increased tremendously since 1988 across the country. For example, the provision of electricity to the rural areas rose from 8.7 per cent in 1992 to 17.6 per cent in 1999, a period of seven years. By 2000, it has increased to almost 40 per cent. The supply of potable water also improved as did the availability of health facilities. This has contributed to the decline in the national poverty level from 53.7 per cent to 44 per cent (GPRS I 2002-2004). Cape Coast Metropolis has had its fair share of these services, but what is the poverty situation in the area? Can the reduction in poverty level nationwide be attributed to the increase in the provision of social services and infrastructure? These statistics, according to Beck (1994), tend to hide the real face of poverty and that policies formulated to alleviate poverty do not have positive impact. According to Kyei (2006), poverty has a woman face. Gender activists claim that women, who form about 51 per cent of the country’s population, are the most vulnerable. This is premised on fact established from some research conducted on the status of women as far as poverty issue is concerned. Women are said to be hard working, feeding the families and supplementing household income through small holder agricultural production and petty trading (Kasente, 2003). Women in Ghana form an estimated 52 per cent of agricultural labour force and produce 70 per cent of subsistence crops. To the labour force engaged in marketing of farm produce, women perform 90 per cent of that activity (NDPC, 1994). According to Kyei (2006) women are disadvantaged and suffer from both poverty and gender-based exclusion, making it difficult for them to rise out poverty. The Cape Coast Metropolis could be an exception in that the male population not only outnumbers the females; they (females) also own property such as land and other productive assets (CCMADP, 1999). This shows that poverty does not affect one sex only; any of the sexes or all sexes are at disadvantage and can suffer poverty. There is therefore no gender inequality as far as the issue of poverty is concerned.
Poverty Alleviation Strategies by Various Governments in Ghana
A number of strategies are needed to tackle the causes and mitigate the consequences of poverty. Poverty alleviation strategies, policies or efforts in Ghana date back since the colonial era. The effectiveness of some of these strategies, otherwise termed development plans, is another dimension of study. There have been several of these plans since independence in 1957. Some of these plans have had the chance of implementation whilst others were thrown overboard due to interruptions in the political landscape of the country. The plans that have had the chance of implementation have impacted both positively and negatively on the development of the country.
Ghana has been drastically affected by the negative impact of the development strategies adopted by some governments, although others adopted strategies that introduced tremendous growth into the economy. This has, however, been emphasized by Asamoa (1996), who stated that several studies, especially of western origin, explain the failure of Ghana to take off socio-economically in terms of unrealistic strategies, mismanagement, the dominant position of public entrepreneurship and incompetence, among others. According to Asamoa (1996), since the first African administration under Dr. Kwame Nkrumah was installed in 1951 to be in charge of Government Business till formal independence in 1957, ten development plans have been launched. After formal independence in March, 1957, the Nkrumah Government declared the first two years of political independence as a period of consolidation. Hence, the Consolidation Plans of 1957-1959. The first Five-Year Plan and the Two-Year Consolidation Plan were greatly influenced by Sir Arthur Lewis’ blueprint for industrializing Ghana. Briefly, the plans were concentrated on communication, public works, education and general services.
The basic objective of the Second Five-Year Development Plan was to show what Ghanaians had to do by their own hard work, the use of natural resources, and the promotion of investment in Ghana. This was aimed at giving Ghanaians a standard of living which will abolish disease, poverty and illiteracy and to give the people ample food and good housing. It was also aimed at developing strong basic services like communication, power and water for the provision of effective foundation for the industrialization of the country; and to ensure the continued expansion and diversification of agriculture. Almost all the development plans focused on similar development issues with varying emphasis throughout the period.
The development efforts of the First Republic chalked a lot of successes even though the regime did not complete its mandate. According to Asamoa (1996), the key element is the provision for the development of hydroelectric energy. The expansion and development of schools, junior and senior technical institutions, the College of Technology, the University College were all meant to systematically meet the manpower requirements of the industries, the administrative machinery and the general physical infrastructure such as roads, bridges, airports and Ghana Airways, railways, post and telecommunication, ports and harbours. The National Liberation Council (NLC), the military junta which succeeded the Nkrumah government, reopened the negotiations and easily came to terms with the IMF, under stiff conditionalities which brought a lot of negative effects on the economy. It was against this background that the Two-Year Development Programme (1968-1970), was prepared as a transitional programme. The following short-term objectives were outlined in the plan:
i. To provide the foundations for self-generating growth; ii. To achieve growth over the short period with an improved efficiency in the use of imports and investment resources likely to be available; iii. To reduce the high level of unemployment and check the rate of migration to the cities; iv. To maintain internal financial equilibrium by avoiding, on one hand, an inflationary rise in prices and, on the other, the creation of additional idle capacities; and
v. To maintain external financial equilibrium in such a way that the balance of payments shows no larger deficit after accounting for debt service than can be covered by foreign aid and long-term loans (Asamoa, 1996, p.88-90).
The Two-Year Plan, intended to restore growth, could not make any impact. The import and exchange liberalization exacerbated the imbalance in imports and export values (Asamoa, 1996). During the Second Republic, measures were put in place to foster the growth of private industry within the existing installed capacity, while new state enterprises were to be set up. Export promotion was to be encouraged because of the immense constraints of the traditional import substitution regime. According to Asamoa (1996), the impact of Busia’s development programme was generally negative. In the first place, the export-oriented One-Year Plan did not make any impact on the steady decline of the economy.
The National Redemption Council (NRC) government reversed the pro- IMF policies of the two previous governments. The NRC government, later known as the Supreme Military Government (SMC) launched a five-year plan, which was meant to build an independent national economy, based on the resource potentials of the country. The immediate objectives were:
i. General accelerated industrial development; ii. Self-sufficiency in the production of selected consumer goods; iii. Diversification of industry; iv. Appropriate intersectoral linkages in the economy;
v. Stimulation of small-scale industries; vi. Promotion of exports; and vii. Spread of industrial establishments.
In support of the plan, the government launched a vigorous “Operation Feed Yourself” campaign, aimed at increasing agricultural production by inducing all social strata of the urban population to get involved in back-yard gardening and other agricultural activities any where else, so as to supplement food production (Asamoa, 1996). However, the PNDC adopted a radically different and more market oriented programme, launched in April 1983 under the Economic Recovery Programme (ERP). The policy reforms implemented under the ERP had the aim of stabilizing the economy and turning it round towards the path of recovery and to promote economic growth. Among the specific objectives of the ERP were:
i. Halting the long period of decline in production of goods and services by realigning relative prices in favour of production and away from trading and rent seeking activities; ii. Bringing down the high rate of inflation and keeping it at low levels; iii. Reducing the high budget deficits; iv. Improving government finances;
v. Rehabilitation of the social and economic infrastructure; vi. Eliminating smuggling and black market activities in currency transaction; and vii. Realigning the currency with the major currencies in the world (Nyanteng,1997)
Nyanteng (1997) assessed that the economy responded strongly to the policy reforms under the ERP. The recovery of the economy showed in the real GDP, which rose from negative to over 8 percent in 1985 and maintained growth rates above 5 percent in 1985 and 1986. The stabilization of prices was achieved to a large extent. Cocoa as well as some industrial production improved markedly. Inflation was brought down to 10 percent in 1985 and even though it increased to 25 percent in 1986, it was still much lower than the high inflation regime in the 1970s and early 1980s.
According to the World Bank (1991) and Nyanteng (1994), even though a substantial progress was made in reversing the downward trend, ERP brought to light some major problems of the economy. Exports, particularly cocoa, remained far below historical levels. The weakness of the financial system hindered the mobilization of savings and the resurgence of private investment. Production of goods and services was well below potential, particularly, in agriculture and manufacturing. Public sector administration was still very weak partly because the senior staff was underpaid and the “brain drain” continued unabated, while there were too many employees at the lower level. In view of these and other problems and in order to lay a solid foundation for sustained growth, Nyanteng (1997) added that the government in August, 1986 broadened the reform effort by implementing a Programme of Structural Adjustment (SAP). The objectives of the SAP, among others, were:
i. To attain a 5 percent average annual rate of GDP growth in order to improve real per capital income by about 2.5 percent per annum after adjustments have been made for population growth; ii. To bring down inflation to about 8 percent by 1990; and iii. To maintain balance of payment surpluses averaging about U.S.$110 million per annum to enable Ghana pay off all external debt arrears by 1990. Nyanteng (1997) again reported that the target of annual average GDP growth rate of 5 percent was nearly achieved. The actual average growth rate for the period 1986-1990 was 4.8 percent and it exceeded 5 percent in 3 of the 5 years in 1991. It was actually 5.3 percent. The target inflation in 1990 was 37 percent but it was actually brought down to 18 percent in 1991. Other efforts were put in place as measures to alleviate the sufferings of the masses. One of these efforts worthy of mention was the Programme of Action to Mitigate the Social Cost of Adjustment (PAMSCAD). The PNDC, fully aware of the social hardships brought about by the ERP, initiated the programme in 1985 (Asamoa, 1996).
In 1988, the governing Provisional National Defense Council (PNDC) of Ghana put in place an administrative and political structure that aimed at supporting a greater degree of popular participation in rural development. The District Assemblies are now the fulcrum of political and administrative authority in Ghana (Kyei, 1996). The District Assemblies were to be responsible for the overall development policies and programmes to be co-ordinated by the National Development Planning Commission (NDPC). Decentralization was, thus, envisioned to transfer functions, power, means and competence to the District Assemblies from the central government ministries and departments (Republic of Ghana, 1996).
During the regime of the National Democratic Congress (NDC), a development framework was prepared by the government, known as the Ghana Vision 2020. This document was the framework for formulating development policies covering the period 1996-2020. The long-term vision of Ghana, as stipulated in this document, was to become a middle-income country, achieving an average per capita income from the level of $430 to about $4000 by the year 2020. The policies and programmes to achieve this target were to be designed and implemented in phases of five years through a series of medium-term development plans based on the routine, decentralized, participatory planning framework at district level with a focus on poverty reduction (Nyanteng, 1997). The swearing in of the National Patriotic Party (NPP) government saw the introduction of the Highly Indebted Poor Country (HIPC) initiative with the intention that, debt relief will be used in a way that is beneficial to the poor. The argument is that the servicing of debt seriously compromises the ability of governments to provide basic social amenities, especially for the poor. With debt relief, more resources can be made available for investment in both human and physical capital, with the consequent result that HIPC can make significant inroad into achieving pro-poor growth targets as well as attain sustainable debts (Sachs et al, 1999). The preparation of a Poverty Reduction Strategy Paper (PRSP) was a key condition for HIPC. Therefore, in May, 2001, the new government rejected Vision 2020 as a framework for formulating policies and replaced it with the Ghana Poverty Reduction Strategy (GPRS). According to Sachs et al (1999), the goal of the GPRS is to achieve sustainable equitable growth, accelerated poverty reduction and the protection of the vulnerable and excluded within a decentralized democratic environment.
The GPRS analysis and policy statement on growth and prosperity in 2003, states that the GPRS represents comprehensive policies, strategies, programmes and projects to support growth and poverty reduction over a period. The government of Ghana aims to create wealth by transforming the nature of the economy to achieve growth, accelerated poverty reduction and the protection of the vulnerable and excluded within a decentralized, democratic environment. This goal will be achieved by:
i. Ensuring sound economic growth management for accelerated growth; ii. Increasing production and promoting sustainable livelihoods; iii. Direct support for human development and the provision of basic services; iv. Providing special programmes in support of the vulnerable and excluded;
v. Ensuring good governance and increased capacity of the public sector; and vi. The active involvement of the private sector as the main engine of growth and partner in nation building (Republic of Ghana, 2003).
The emphasis over the period will be on the stability of the economy and laying the foundation for a sustainable accelerated and job creating agro-based industrial growth. The GPRS will also focus on providing the enabling environment that will empower all Ghanaians to participate in the wealth created. It will ensure that all Ghanaians, irrespective of their socio-economic status or where they reside, have access to basic social services, such as health care, quality education, potable drinking water, decent housing, security from crime and violence, and the ability to participate in decisions that affect their own lives. If most or all these targets are met then the incident of poverty would have been greatly achieved (Republic of Ghana, 2003).
The Ghana Poverty Reduction Strategy (GPRS) has been revised to read “The Growth and Poverty Reduction Strategy (GPRS II)”. The GPRS II will be the country’s road map for policy direction, as well as the concentration of resources and interests for the 2006 fiscal year. The GPRS II, which is to run from 2005 through to 2009, is to achieve accelerated and sustainable-shared growth, poverty reduction, and promotion of gender equity, protection and empowerment of the vulnerable and excluded within a decentralized, democratic environment. But, even more important, the GPRS II provides the conduit through which government’s three-pronged strategy namely: Human Resource Development; Private Sector-led Growth; and Good Governance, will be affected. The GPRS II is, therefore, anchored on the following: continued macro-economic stability; accelerated private sector-led growth; vigorous human resource development; and good governance and civic responsibility (Daily Graphic, Nov. 22, 2005).
Definition of Small-Scale Enterprise (SSE)
The issue of what constitutes a small enterprise is a major concern in the literature. Different authors have usually given different definitions to this category of business. SSEs have indeed not been spared with the definition problem that is usually associated with concepts which have many components. The definition of enterprises by size varies among researchers. Some attempt to use the capital assets while others use skill of labour and turnover level. Others define SSEs in terms of their legal status and method of production. Storey (1994) tries to sum up the danger of using size to define the status of a firm by stating that in some sectors all firms may be regarded as small, whilst in other sectors there are possibly no firms which are small. The Bolton Committee (1971) first formulated an “economic” and “statistical” definition of a small firm. Under the “economic” definition, an enterprise is said to be small if it meets the following three criteria: * It has a relatively small share of their market place; * It is managed by owners or part owners in a personalized way, and not through the medium of a formalized management structure; * It is independent, in the sense of not forming part of a large enterprise. Under the “statistical” definition, the Committee proposed the following criteria: * The size of the small enterprise sector and its contribution to GDP, employment, exports, etc.; * The extent to which the small enterprise sector’s economic contribution has changed over time; * Applying the statistical definition in a cross-country comparison of the small enterprises’ economic contribution.
According to Addaih (2007) Technology Training Centre (TTC) report on small scale enterprise (SSEs), the Georgia Institute of Technology alone has compiled more than 50 definitions in about 75 developing countries, which could be classified into the following groups: * Economic sectorial definition * Commercial financial definition * Statistical definition * Functional definition * Technological definition
According to the International labour Organisation (ILO), as stated in Addaih (2007:35) SSEs, in the broadest meaning of the term; include modern industrial firms of up to 50 employees, family units of 3 or 4 people, village of cottage industries, associations, companies, cooperatives, owner-operators, mini firms and self employed in the non-structured sector of the economy. The term also covers small firms carrying on small-scale, non-manufacturing activities in construction, transport, maintenance and repairs, trade, etc. (ILO, 1986).
It can be seen that there is no agreement on the definition of SSEs in Africa. Perhaps, this shows a lack of adequate theory and practice relating to the evolution and role of SSEs on the continent. A report by CSIR for the World Bank suggest that a definition of SSEs as enterprises employing not less than 30 people, including apprentices and permanent employees, as the true reflection of the SSEs sector given the current size of most African economies as stated by Addaih (2008).
There have been various definitions given for small-scale enterprises in Ghana but the most commonly used criterion is the number of employees of the enterprise (Kayanula and Quartey, 2000). In applying this definition, confusion often arises in respect of the arbitrariness and cut off points used by the various official sources. In its Industrial Statistics, the Ghana Statistical Service (GSS) considers firms with fewer than 10 employees as small-scale enterprises and their counterparts with more than 10 employees as medium and large-sized enterprises. Ironically, the GSS in its national accounts considered companies with up to 9 employees as SMEs (Kayanula and Quartey, 2000). The value of fixed assets in the firm has also been used as an alternative criterion for defining SSEs. However the National Board for Small Scale Industries (NBSSI) in Ghana applies both the “fixed asset and number of employees” criteria. It defines a small-scale enterprise as a firm with not more than 9 workers, and has plant and machinery (excluding land, buildings and vehicles) not exceeding 10 million Ghanaian cedis. The Ghana Enterprise Development Commission (GEDC), on the other hand, uses a 10 million Ghanaian cedis upper limit definition for plant and machinery. It is important to caution that the process of valuing fixed assets poses a problem. Secondly, the continuous depreciation of the local currency as against major trading currencies often makes such definitions out- dated (Kayanula and Quartey, 2000). In defining small-scale enterprises in Ghana, Steel and Webster (1991), and Baah-Nuakoh, (1993) used an employment cut-off point of 30 employees. Baah-Nuakoh, (1993), however, classified small-scale enterprises into three categories. These are: (i) micro - employing less than 6 people; (ii) very small - employing 6-9 people; (iii) small - between 10 and 29 employees. A more recent definition is the one given by the Regional Project on Enterprise Development Ghana manufacturing survey paper. The survey report classified firms into: (i) micro enterprise, less than 5 employees; (ii) small enterprise, 5 - 29 employees; (iii) medium enterprise, 30 – 99 employees; (iv) large enterprise, 100 and more employees (Teal, 2002).
In Ghana, for example, several definitions have been considered at one time or the other. In the industrial statistics published by the statistical service, small-scale enterprises are defined as those employing 29 employees of fewer, the rest are all considered medium and large scale. The National Board for Small Scale Industries, on its part, considers a contribution of assets as a basis of classification. This apex body charged with the promotion of SSEs in Ghana defines a small-scale enterprises (SSE) as an enterprise which employs not more than 9 workers with an investment in plant and machinery, excluding land and building, not exceeding US$ 100,000 (Addaih, 2007). From the above, two key contrast can be drawn between the definitions of SSEs in Ghana and their counterparts in South Africa. First, Act 102 of 1996 defines SSEs in South Africa whereas there is no such legislation in Ghana. Secondly, the cut off points for the various SSE size categories in South Africa are much higher than that of Ghana. This may be a result of the fact that South Africa has a much higher income levels than Ghana.
Sowa (1992) defined small-scale enterprises as one engaging less than 30 workers. They made a further disaggregation for ‘micro’ (less than 6workers). ‘very small’ (6 to 9 workers) and ‘small’ (10 to 29 workers). The NBSSI and the Fund for small and medium-scale enterprise development (FUSMED) use a definition involving multiple criteria of fixed assets and size of employment. The board considers a small industry to be one employing not more than 9 persons, with plant and machinery (excluding land, building and vehicles) not exceeding 10 million cedis or US$100,000 (Sowa, 1992). The NBSSI and Friedrich Ebert Foundation (FDF) in two surveys commissioned in the central Region in 1990, defined SSI as an industrial or service unit with a labour strength of up to nine persons, irrespective of the level of investment, both household and non-household unit (Acquah-Harrison, 1990 and Star International Consultants Limited, 1990).
Evolution of small-scale enterprises (SSEs) in Ghana
Ghana’s strategy after independence tended to favour large-scale relative to SSEs, even though the latter provided greater share of employment. A 1963 sample survey showed a small scale, manufacturing accounted for about 17 per cent of total non-agricultural employment, as against 3 per cent in large scale manufacturing. These figures excluded household and self-employment activities that are estimated to account for nearly 6 per cent of non-agricultural employment (Steel & Webster, 1991).
According to Aryeetey (1994), President Nkrumah’s modernisation efforts during the 1960s promoted foreign investments and minimized the role of the domestic indigenous sector. This was because that sector lacked sufficient capital for major investment, and a strong local entrepreneurial class represented a political threat. Large industries were given tariff protection, monopoly positions, low-cost credit and investment incentives. From 1963-1970, employment in large-scale manufacturing grew by 8.4 per cent per annum, despite relatively high capital intensity, while SSEs in self-employment manufacturing grew at 5.6 per cent (Aryeetey, 1994).
During the 1970s deterioration in balance of payment and overvaluation of the exchange rate curtailed capacity utilization in the import dependent large-scale sector. At that same time, rising inflation in falling real wage drove many modern sector workers into secondary self-employment activities in an effort to maintain incomes. As the economy declined from 1970 to 1984, large scale manufacturing employment remained stagnant, while small-scale and self-employment grew at 2.9 per cent per annum and accounted for nearly ten times as many jobs as the large scale sector, but only about a one third (1/3) of the value added (Steel & Webster, 1991). Although incomes were generally falling and many small producers were constrained for lack of key imported inputs (screws for carpenters, yarn for weavers, ink for printers, etc), some innovative small entrepreneurs used domestic materials to substitute for previously imported products such as soap, vehicle parts and metal products (Anheier and Seibel, 1987; Dawson, 1990).
According to Aryeety (1994), the rationale behind the promotion of small-scale enterprises in the context of adjustment was the government’s view of small-scale enterprises as playing an important role in the transition from private-oriented development strategy. The main reasons outlined were to:
Help take up the slack as the state reduces the extent of its involvement in indirect production; absorb employment, given the relatively labour intensive techniques of small and medium scale enterprises compared to larger enterprises; generate a quick production supply response because small and medium scale enterprises low level of technology enable them to adopt/adapt quickly and operate with minimal dependence on weak infrastructure; and develop indigenous entrepreneurial and managerial skills that would be a foundation for sustained industrialization.
Kellick (1987), states that attempts by Ghana to achieve full employment through public investments in large-scale industries could not achieve the desired results. This in the view of Mensah (1982) was due to the fact that the Government headed by Dr. Kwame Nkrumah equated industrialization with development, believing, as many economists did at that time, that growth could become self-sustaining once it reached a critical “take off” point, and what was required was a “big push” – massive investment, especially in industrialization. It was thought that industrialization would supply its outputs to other sectors or by increasing the demand and for their products as inputs to other sectors.
Since the private sector was neither a describable vehicle for Nkrumah’s socialist modernization, nor a political tool for the level of investment sought, accelerated industrialization was to be achieved through massive planned state intervention in the economy. However, scarcity of foreign exchange caused by low commodity prices and poor management of the economy reduced the capacity utilization of the enterprises (Mensah, 1996). Thus, many of large firms according to Steel and Webster (1991) were unable to survive without heavy protection or subsidies. In the process, many enterprises were squeezed by the economic crisis and subsequently, by adjustment policies which reduced subsides, cutback protection, restrained demand and changed relative prices.
While manufacturing as a percentage of GDP had risen from 10 per cent in 1960 to 14 per cent in 1970, most new enterprises were capital intensive and were completely dependent upon raw-material (imported), spare parts and technicians. Some state enterprises leached/drained the central bank without ever beginning production, few achieved capacity beyond 60 per cent, thereby mocking the ambitious plans that had been set for them and draining off precious foreign exchange (Mensah, 1982).
Had the small scale sector been consciously developed alongside the large-scale industries, the situation could have been avoided and most large-scale enterprises could have survived in the midst of economic crisis had they evolved from small scale enterprises. As asserted by Parker (1992), nations do not have large enterprises to begin with. It is some of the existing small-scale enterprises that grow into large capital intensive industries. The industrialization process usually begins with the rapid growth of small-scale industries/enterprises, some of which expand to medium and large scale firms while the rest survive the market where they remain competitive with their large-scale counterparts. This is summed up dramatically by Nwosu (1981) that, even in the advanced industrialised countries; it was the craftsman who gave pedigree to today’s manufacturer.
Characteristics of small-scale enterprises (SSEs) in developing countries
Fisher and Reuber (2000) enumerate a number of characteristics of SSEs in developing countries under the broad headings: labour characteristics, sectors of activity, gender of owner and efficiency. Given that most SSEs are one-person businesses, the largest employment category is working proprietors. This group makes up more than half the SSE workforce in most developing countries; their families, who tend to be unpaid but active in the enterprise, make up roughly another quarter. The remaining portion of the workforce is split between hired workers and trainees or apprentices. SSEs are more labour intensive than larger firms and therefore have lower capital costs associated with job creation (Anheier and Seibel, 1987; Liedholm and Mead, 1987; Schmitz, 1995). In terms of activity, they are mostly engaged in retailing, trading, or manufacturing (Fisher and Reuber, 2000). While it is a common perception that the majority of SSEs will fall into the first category, the proportion of SSE activity that takes place in the retail sector varies considerably between countries, and between rural and urban regions within countries. Retailing is mostly found in urban regions, while manufacturing can be found in either rural or urban centres. However, the extent of involvement of a country in manufacturing will depend on a number of factors, including, availability of raw materials, taste and consumption patterns of domestic consumers, and the level of development of the export markets. In Ghana, SSEs can be categorized into urban and rural enterprises. The former can be sub- divided into “organized” and “unorganized” enterprises. The organized ones mostly have paid employees with a registered office, whereas the unorganized category is mainly made up of artisans who work in open spaces, temporary wooden structures, or at home, and employ few or in some cases no salaried workers (Kayanula and Quartey, 2000). They rely mostly on family members or apprentices. Rural enterprises are largely made up of family groups, individual artisans, women engaged in food production from local crops. The major activities within this sector include: - soap and detergents, fabrics, clothing and tailoring, textile and leather, village blacksmiths, tin-smiting, ceramics, timber and mining, bricks and cement, beverages, food processing, bakeries, wood furniture, electronic assembly, agro processing, chemical-based products and mechanics (Baah-Nuakoh, et al 1993; Kayanula & Quartey, 2000). Majority of SSEs are female-owned businesses, which more often than not are home-based compared to those owned by males; they are operated from home and are mostly not considered in official statistics. This clearly affects their chances of gaining access to financing schemes, since such programmes are designed without sufficient consideration of the needs of businesses owned by females. These female entrepreneurs often get the impression that they are not capable of taking advantage of these credit schemes, because the administrative costs associated with the schemes often outweigh the benefits. Prior empirical studies in Ghana have shown that female-owned SSEs often have difficulty accessing finance. Females are mostly involved in sole-proprietorship businesses which are mainly micro enterprises and as such may lack the necessary collateral to qualify for loans (Aryeetey, Baah-Nuakoh, Duggleby, Hettige, Steel, 1994; Abor & Biekpe, 2006). Measures of enterprise efficiency (e.g. labour productivity or total factor productivity) vary greatly both within and across industries. Firm size may be associated with some other factors that are correlated with efficiency, such as managerial skill and technology, and the effects of the policy environment. Most studies in developing countries indicate that the smallest firms are the least efficient, and there is some evidence that both small and large firms are relatively inefficient compared to medium-scale enterprises (Mazumdar, Little, and Page, 1987). It is often argued that SSEs are more innovative than larger firms. Many small firms bring innovations to the market place, but the contribution of innovations to productivity often takes time, and larger firms may have more resources to adopt and implement them (Acs, Morck, and Young, 1999).
Characteristics of small-scale enterprises in Ghana
In Ghana, small scale enterprises (SSEs) form a huge chunk of businesses in both the formal and the informal sector. Whilst SSE’s in developed countries make a significant contribution to GDP and national employment (Culkin and Smith, 2000), there is not sufficient data to say the same about SSE’s in Ghana. In Ghana, classification of enterprises by size as given by the regional project on enterprise development paper defines SSE’s as enterprises with employee size of less than one hundred (Teal, 2002). There are variations in the definitions of small medium enterprises. The most commonly used criterion is the number of employees of the enterprise. The Ghana Statistical Service (GSS) considers firms with less than 10 employees as small scale enterprise whilst those with more than ten are categorized as medium and large enterprises. Another criterion for defining SSE is the value of fixed assets in the organization. In Ghana the national board of small scale industries applies both of these criteria. Small scale enterprises (SSEs) in Ghana tend to have few employees who tend also to be mostly relatives of the owner hence there is often lack of separation between ownership and control. Also since SSEs do not traditionally rely on public funds there is lack of accountability and no regulations to comply with in relation to compliance (Abor & Adjasi, 2007). Mostly, the owner managers of these SSEs are hampered by lack of managerial competencies (Gockel and Akoena, 2002). There are a number of factors which pose as barriers to the development of the SSE sector in Ghana. These are identified as access to international markets, technology, equipment and finance (Aryeety, 1994).
In Ghana, small scale enterprises (SSEs) contribute about 85 per cent of manufacturing employment and account for about 92 per cent of businesses (Steel land Webster, 1991). Ghana has a relatively small domestic market and hence provides little scope for the growth of firms beyond a certain point, in addition manufacturing performance differs by the size of the firm and by the sector in which they are in (the Ghanaian Manufacturing enterprise survey 2000).
In general, small and micro firms in Ghana experience more variable performance than medium and large firms. According to the survey report, larger manufacturing firms in Ghana tend to be older and are more likely to have foreign or state ownership, there is the tendency for such firms to be more capital intensive, export more and have a higher labour productivity.
On average in the mid 1990’s medium firms increased value added and the micro and large firms increased employment. Export propensity and export intensity differs widely across sectors for example, firms in the wood and furniture sector have a tendency to export more than for example the garment and textiles sector which has the lowest tendency to export its products. In general, the garment sector is more labour intensive and less capital intensive as compared to other sectors. Most of the firms in manufacturing are not involved in export and those that do, do not export more than 35 per cent of their output. It is the aim of the government to enhance the productive capacity of small scale producers as this will have a direct impact on boosting employment levels in the country.
Contributions of small-scale enterprises (SSEs) to economic development
There is a general consensus that the performance of SSEs is important for both economic and social development of developing countries. From the economic perspective, SSEs provide a number of benefits (Advani, 1997). SSEs have been noted to be one of the major areas of concern to many policy makers in an attempt to accelerate the rate of growth in low-income countries. These enterprises have been recognized as the engines through which the growth objectives of developing countries can be achieved. They are potential sources of employment and income in many developing countries.
SSEs seem to have advantages over their large-scale competitors in that they are able to adapt more easily to market conditions, given their broadly skilled technologies. They are able to withstand adverse economic conditions because of their flexible nature (Kayanula and Quartey, 2000). SSEs are more labour intensive than larger firms and therefore have lower capital costs associated with job creation (Anheier and Seibel, 1987; Liedholm and Mead, 1987; Schmitz, 1995). They perform useful roles in ensuring income stability, growth and employment. Since SSEs are labour intensive, they are more likely to succeed in smaller urban centres and rural areas, where they can contribute to a more even distribution of economic activity in a region and can help to slow the flow of migration to large cities. Due to their regional dispersion and their labour intensity, it is argued, small-scale production units can promote a more equitable distribution of income than large firms. They also improve the efficiency of domestic markets and make productive use of scarce resources, thus facilitating long-term economic growth (Kayanula and Quartey, 2000).
SSEs contribute to a country’s national product by either manufacturing goods of value, or through the provision of services to both consumers and/or other enterprises. This encompasses the provision of products and, to a lesser extent, services to foreign clients, thereby contributing to overall export performance. In South Africa, SSEs represent a vast portion of businesses contributing between 52 per cent and 57 per cent of GDP and providing about 61per cent of employment (Berry, Blottnitz, Cassim, Kesper, Rajaratnam, and Seventer, 2002; CSS, 1998; Gumede, 2000; Ntsika, 1999;). In Ghana they represent about 92 per cent of Ghanaian businesses and contribute about 70 per cent to Ghana’s GDP and over 80 per cent to employment. SSEs also account for about 91 per cent of the formal business entities.
From an economic perspective, however, enterprises are not just suppliers, but also consumers; this plays an important role if they are able to position themselves in a market with purchasing power: their demand for industrial or consumer goods will stimulate the activity of their suppliers, just as their own activity is stimulated by the demands of their clients. Demand in the form of investment plays a dual role, both from a demand-side (with regard to the suppliers of industrial goods) and on the supply-side (through the potential for new production arising from upgraded equipment). In addition, demand is important to the income-generation potential of SSEs and their ability to stimulate the demand for both consumer and capital goods (Berry, Blottnitz, Cassim, Kesper, Rajaratnam, and Seventer, 2002). Promoting small-scale enterprises in Ghana
Small-scale enterprises have the potential to play a much bigger role in developing national economies, alleviating poverty, participating in the global economy and partnering with larger corporations. They do, however, need to be promoted. Such support requires commitments by and between governments, business and civil society (SNV/WBCSD, 2004). Like bigger firms, SSEs require a favourable institutional framework. Most are however overlooked by policy-makers and legislators, who tend to target larger corporations. SSEs often miss out on tax incentives or business subsidies. They suffer more than big companies from the large burden and cost of bureaucracy, as few SSEs possess the necessary financial or human resources to deal with this (SNV/WBCSD, 2004).
Recognising the critical role of the small-scale enterprises (SSEs) in poverty reduction, a number of existing institutions with the mandate to promote industrialisation in the rural areas, have been strengthened to facilitate more economic change on the countryside (Tetteh & Frimpong, 2007). However, to Kayanula and Quartey (2000), governmental support or promotion of small-scale enterprises is usually in the form of technical, institutional and financial supports and done at the institutional and regulatory levels.
Government, in an attempt to strengthen the response of the private sector to economic reforms undertook a number of measures in 1992. Prominent among them is the setting up of the Private Sector Advisory Group and the abolition of the Manufacturing Industries Act, 1971 (Act 356) which repealed a number of price control laws, and The Investment Code of 1985 (PNDC Law 116) which sought to promote joint ventures between foreign and local investors Kayanula and Quartey (2000). To augment the above, a Legislative Instrument on Immigrant Quota which grants automatic immigrant quota for investors has been enacted. Besides, certain Technology Transfer Regulations have been introduced alongside providing equipment leasing, an alternative and flexible source of long term financing of plant and equipment for enterprises that cannot afford their own. A Mutual Credit Guarantee Scheme was also set up for entrepreneurs who have inadequate or no collateral and have limited access to bank credit. To complement these efforts, a Rural Finance Project aimed at providing long term credit to small scale farmers and artisans was set up Kayanula and Quartey (2000).
Kayanula and Quartey (2000) further added that Government in 1997 established the Export Development and Investment Fund (EDIF), operational under the Exim Guarantee Company Scheme of the Bank of Ghana. This was in aid of industrial and export services within the first quarter of 1998.
According to the Ministry of Trade and Industry (2002), government policy for small-scale enterprises (SSEs) which is under review has the objective of creating a conducive environment for SSEs to grow and facilitate the development of a vibrant, productive and competitive SSEs sector in the country. Under the policy, the Government, among others, seeks to Promote dynamic enterprise culture for innovation; Promote employment growth within the informal sector; Develop SSE to serve as a means to establish linkages between the formal and informal sectors of the economy; Improve the technology base, product quality and productivity of the SSEs sector; and Upgrade the application of indigenous technologies (Ministry of Trade and Industry, 2002).
In a bid to improve trade and investment, particularly in the industrial sector, trade and investment facilitating measures were put in place. Visas for all categories of investors and tourists were issued on arrival at the ports of entry while the Customs Excise and Preventive Service at the ports were made proactive, operating 7-days a week. The government continued supporting programmes aimed at skills training, registration and placement of job-seekers, training and re-training of redeployees. This resulted in a 5 per cent rise in enrolment in the various training institutes such as The National Vocational and Training Institute (NVTI), Opportunity Industrialisation Centres (OIC) etc. As at the end of 1997, 65,830 out of 72,000 redeployees who were re-trained under master craftsmen have been provided with tools and have become self-employed (Kayanula and Quartey, 2000).
Direct financial assistance according to (Aryeetey and Quartey, 2001) has also been advanced to SSEs as a form of governmental support to promote the growth of the sector. Kayanula and Quartey (2000), had earlier presented that, in a bid to help small-scale enterprises (SSEs) address the issue of their lack of access to credit (most SSEs lack the necessary collateral to obtain bank loans), the Central Bank of Ghana established a credit guarantee scheme to underwrite loans made by Commercial Banks to small scale enterprises. Unfortunately, the scheme did not work out as expected. It was against this background that the Bank of Ghana obtained a US$ 28 million credit from the International Development Association (IDA) of the World Bank for the establishment of a Fund for Small and Medium Enterprises Development (FUSMED). Under the Programme of Action to Mitigate the Social Cost of Adjustment (PAMSCAD), a revolving fund of US$ 2 million was set aside to assist SSEs (Kayanula and Quartey, 2000).
The idea of small-scale enterprises (SSEs) promotion has been in existence since 1970 though very little was done at the time according to Quartey (2001) and Aryeetey, (2001). Key institutions have been set up by over the years to assist SSEs and prominent among them being The Office of Business Promotion, the present Ghana Enterprise Development Commission (GEDC). It aims at assisting Ghanaian businessmen to enter into fields where foreigners mainly operated but which became available to Ghanaians after the ‘Alliance Compliance Order’ in 1970. GEDC also had packages for strengthening small scale industry in general, both technically and financially. The Economic Recovery Programme instituted in 1983 has broadened the institutional support for SSEs (Kayanula and Quartey, 2000).
Institutional support to SSEs has largely been in the form of setting up various institutions to regulate and control various aspects of SSEs activities and to promote their welfare. In this, wise a number of promotional institutions have been set up with the key or main ones being the National Board for Small Scale Industries (NBSSI); the Ghana Appropriate Technology Industrial Service (GRATIS Foundation); and the Rural Enterprise Project (REP).
Promotion institutions of SSEs in the Cape Coast Metropolis
Successive governments of Ghana have made various attempts promoting the small scale enterprises sector. Most of these attempts could not achieve the required results. This might be due to the fact that there were no proper structures in place to see the needs of the small scale enterprise’s sector. It was in this light that various promotional institutions were established in some regional capitals to assist small scale enterprises in the country. Among these promotional institutions in the Cape Coast metropolis are National Board for Small Scale Industries (NBSSI), Business Advisory Centre (BAC), Central Regional Development commission (CEDECOM), Kakum Rural Bank (KRB).
National board for small-scale industries (NBSSI) / business advisory centre (BAC)
The SSEs sector has been recognised as having the capability to serve effective means of realizing the objectives of industrial development. It was in this light that government established the NBSSI in 1985. The board was created to perform the functions of an apex body that coordinates activities in the SSE sector and help to develop the sector well. The NBSSI was set up to address problems that inhibit the successful operation of SSIs and also identify potential private entrepreneurs to be developed and supported in all respects. It was also to advise the Ministry of Trade, industry, science and Technology on policy formation pertaining to the development and promotion of entrepreneurial activities.
Abaka (1994:7) states some of the functions of the board as follows:
Assist the minister responsible for industries in the development and support of SSEs; implement policies in relation to SSEs duly approved by government; design, develop and implement specific plans of action to meet the needs and expectations of organized groups; organize a field extension network that will identify projects, collect relevant data, disseminate information and provide feedback; stablish the infrastructure required to accelerate the implementation of policies or execution of programmers’ and encourage the formation associations, cooperatives or groups and build industrial estates or any other organization deemed beneficial to SSI development. The NBSSI was established as a change agent or catalyst to create conditions suitable and favourable to a healthy development of SSEs sector. The nature of the industrial sector and generally unfavourable business environment helped to shape NBSSI operational policies, strategies and programmes. The activities of the NBSSI for the SSEs sector can be condensed into the following four main areas: provision of non-financial assistance; provision of financial assistance; facilitating access to an enabling environment; and assistance to trade and sector associations.
In 1988, the NBSSI lunched the entrepreneurship development programme (EDP) with the following objectives: generate self employment through the establishment of SSEs; stimulate indigenous entrepreneurship; promote the growth of the industrial sector, mobilise and optimise the use of local resources and reduce regional imbalances; improve the performance of SSEs through training and develop entrepreneurial skills; improve relationship between SSE and credit institutions, and generate, stimulate and encourage cultural and behavioural attitude necessary for evaluation of a health industrial sector.
The implementation of the entrepreneurship development programme involved the following activities: * Identification, selection, training of potential entrepreneurs to develop the business capabilities; * Preparation of viable projects suited to the entrepreneurs capability, inclination and experiences * Imparting basic managerial skills, and * Helping trainees’ secure needed financial, infrastructure and related assistance, so that the business venture develops within the shorted possible time (Tettey, 1994:12).
Tasked with responsibility for the promotion and development of SSIs in the country, the NBSSI found its resources to be limited. From such a position, it became increasingly difficult to provide services required by entrepreneurs. The only alternative was to solicit the assistance of some foreign donors (Behrendt, 1994:22).
The Friedrich Ebert Foundation of Germany (FEF) came to the aid of the board and offered useful suggestions and encouragement that marked the beginning of a longstanding bond of development cooperation and the establishment of BAC. As Brown (1994) state the BAC at Cape Coast the first of its kind to be established in the country, was set up with the assistance of (FEF) on June, 10th 1991. It was established jointly under the board guideline provided by the NBSSI for the establishment of BACs.
In an attempt address the constraint affecting the development of SSEs in Cape coast, the BAC was established to assist entrepreneurs exploit business opportunities within the Cape Coast Metropolis through counselling, the development of individual Personal Entrepreneurial Competencies (PECs) and participation in workshop, seminars and training programmes. Specifically, the BAC was established to undertake the following major activities: * Provide business counselling; * Organise seminars, training programmes and workshops management and production techniques; * Provide marketing assistance; * Provide marketing assistance; * Undertake pilot and demonstration projects.
In effect, the centre helps: * People who want to start a new business; * People whose businesses are experiencing problems, such as managerial, material or financial; * People who wish to expand their business; and * People who want to form trade linkages (Brown, 1994). * Added to the above, Behrendt, (1994) grouped the activities of BAC into two categories, namely: (a) assistance to small-scale entrepreneurs and (b) assistance to business associations. The former comprises of the following: * Management training courses on effective selling, investment planning, book-keeping, tax-records preparation, quality control and others; * Technical workshops in production and repair techniques; * Internships as short-term attachments of entrepreneurs to larger companies, to fill knowledge gaps in production/servicing; * Individual counselling on the business premises; * Marketing clinics in small groups; * Entrepreneurship awareness programmes for final year students at universities and polytechnics in the Central Region; * Publishing of Business Information Series (BIS): easily applicable information booklets on management issues; and * Organising mini trade fairs in Cape Coast to expose entrepreneurs to the local and regional market.
The assistance to business associations comprises: * Assistance in organising information seminars on all matters of concern to entrepreneurs: * Providing the means for one-day familiarisation (industrial) visits to selected companies which are advanced in production, services, marketing, organisation or other business oriented activities to be show-cased to their clients; * Contributing to regional or national conferences association; * Providing support in setting up a Forum of Small-scale Business Associations (FOSSBA) in Cape Coast as an umbrella or organisation that meets to discuss organisational matters and business related issues.
The above stated activities explicitly show that the NBSSI and BAC are for the development of the small-scale enterprise sector. But the linkage patterns between institutions and the small-scale enterprises in the Cape Coast Metropolis need to be carefully looked at. This is important because a much as linkages between enterprises enhance industrial growth, technology transfer and job creation, Little (1982) makes it clear that not all linkages will create economically desirable inducements.
The Central Regional Development Commission (CEDECOM)
In 1990, the Central Region Coordinating Council (RCC then Central Regional Administration) set up CEDECOM as a regional Development Secretariat to manage and implement a UNDP assisted integrated development programme in the Central Region. The programme was executed by the Ministry of Finance and Economic Planning under the National Execution (NEX) modality.
This involved the identification, development and promotion of tourism attractions, including the Elmina and Cape Coast castles, Fort St. Jago, Kakum National Park, Cultural festivals and event attractions such as the Pan African Historical Theatre Festival (PANAFEST), Emancipation etc. In line with Government’s decentralization programme, CEDECOM which is currently under the Ministry of Trade and Industry (MOTI) acts both as the RCC’s technical wing and development agency. CEDECOM’s primary focus has been to spearhead private sector development and activities that spread the benefits of development to the people of the region. It coordinated the implementation of integrated regional economic development programme with tourism as the lead sector. It has also coordinated training of hotel and restaurant staff in the Central Region. Besides tourism development, CEDECOM’s activities include; Investment Promotion, Enterprise Development, Environmental Management within communities; Women-in-Development; Poverty alleviation and support for the achievement of decentralization; Communication and Research and Good Governance. CEDECOM’s approach to micro, small and medium enterprise development has involved micro-finance delivery, technology transfer; investment and trade expositions, business management training and marketing. It currently runs a USAID sponsored community learning centre, which among others, is involved in enhancing the efficiency of the private sector through the use of information communication technology (ICT). CEDECOM brings to the project, experienced and competent staff with a track record of work with the private sector, District Assemblies, traditional authorities, community-based organizations, public sector institutions, tourism practitioners and development partners.
Decentralization implies the ability of the people to pursue development that is tailor-made to suit their own felt needs. As the brainchild of the Regional Coordinating Council, CEDECOM is committed to supporting the achievement of decentralization in the Central Region. To this end, CEDECOM is providing technical support to the District, Municipal and Metropolitan Assemblies in the region to enable them plan and implement a development strategy that seeks to spread the benefits to majority of the people. Accordingly, CEDECOM is strengthening the capabilities of the Districts in the following vital areas of their work: * Data management for effective planning * Preparation of development plans * Investment promotion * Tourism development * Small enterprise development and * Environmental management
Cognisant of the fact that private sector development must occur within the framework of Good Governance, CEDECOM is collaborating with the German Development Service (DED) to promote Good Governance both within the public and private sectors. Accordingly, CEDECOM organizes capacity building workshops in collaboration with the DED for representatives from the Traditional Council, Metropolitan, Municipal and District Assemblies, Electoral Commission, RCC, Government Agencies, NGOs, and Opinion Leaders. Some of the modules treated relate to local governance, election offences, women’s representation and human rights and fundamental freedoms. Additionally, the collaboration seeks to strengthen the capabilities of these actors in strategic planning for communities (CEDECOM information unit, 2010).
The objective of CEDECOM is to promote an integrated development of the Central Region, especially in areas such as tourism development, investment promotion, enterprise development, environmental management within communities, women in development, poverty alleviation, rural housing, support for achievement o decentralisation within the Central Region, and human resource development. Currently CEDECOM has three operating units. They are: (i) the investment promotion and entrepreneurship development unit, (ii) environmental management and population unit, and (iii) the tourism development unit (CEDECOM Information Unit, 2010).
Services provided at the investment Promotion and Entrepreneurship Development unit can be categorised into two: Investment Promotion and Enterprise development. The investment services provided include: * Preparation of profiles on investment opportunities in the key sectors of the region’s economy; * Investment advice; * Preparation and updating of feasibility reports; * Forging linkages with financial institution; and * Developing skills to access the external markets.
With enterprise development, CEDECOM provides a package deal for entrepreneurs in the form of management training, access to new and appropriate technology, access to marketing information and credit delivery. These services cover entrepreneurs in fisheries, mining, and hospitality and handicraft production sectors.
The environmental management and population unit focuses on public education on environmental sanitation, waste management and promotion of agro-forestry practices. The tourism development unit dwells mostly on developing and packing the attractions that have identified as the region’s tourism products; identifying additional tourist potentials of the region in order to diversify the products of that sector;
Developing the souvenir sector; improving on the exposure, understanding and knowledge of tourism with a view to achieving to a corresponding qualitative improvement in the goods and services produced by the sector.
Kakum Rural Bank
Kakum Rural Bank was given the license to operate as a rural bank on 8th February, 1980 by the Bank of Ghana under the Banking Act of 1970 (Act 339). The mission for the establishment of Kakum Rural Bank is to facilitate the socio-economic development of its catchments area through the provision of innovative, customer-centred financial and non-financial products and services to economically active individuals and corporate entities using a team of dedicated and reliable staff and also collaborate with the government and be a key player in the reduction of poverty in the Central Region.
Currently, Kakum Rural Bank has 10 agencies. Out of this number, three are in Elmina, one in Agona Abrem (KEEA municipality) and one each at Abura, Kotokuraba (Cape Coast Metropolis), Jukwa (Twifo-Hemang Lower Denkyira District), Moree (Mfantsiman Municipality), Abakrampa (Abura-Asebu-Kwamankese District), and Mankessim (Mfantsiman Municipality). Kakum Rural Bank has staff strength of 124 regular staff and about 30 casual workers.
Kakum Rural Bank is rated as one of the rural banks doing well in the country, and is a member of the prestigious Ghana Club 100. The customer category of the bank include: farmers, fishermen, cottage industrialists, small and medium-scale entrepreneurs, traders, transport owners, salaried workers, among others. The bank offers services, including accepting savings, time deposits and demand deposits. Again, it gives out loans to its customers. Kakum Rural Bank engages in foreign and domestic transfers. In the bid of KRB to instil in people banking habit, it also engages in ‘susu’ business. In all, the bank has a total of 38,708 customers. Out of this number, 29,224 are savers (i.e. savings, time deposits and demand deposits, ‘susu’ customers) and 9,554 are creditors (loans and overdraft). By the close of the year 2008, the bank was able to mobilise up to GH ¢1,180,591.00 in savings deposits, grants and in concessional loans (KRB, 2009).
General constraints of small-scale enterprises (SSEs) to development
Despite the potential role of SSEs to accelerated growth and job creation in developing countries, a number of bottlenecks affect their ability to realize their full potential. SSE development is hampered by a number of factors, including finance, lack of managerial skills, equipment and technology, regulatory issues, and access to international markets (Anheier and Seibel, 1987; Steel and Webster, 1991; Aryeetey, Baah-Nuakoh, Duggleby, Hettige, and Steel, 1994; Gockel and Akoena, 2002). The lack of managerial know-how places significant constraints on SSE development. Even though SSEs tend to attract motivated managers, they can hardly compete with larger firms. The scarcity of management talent, prevalent in most countries in the region, has a magnified impact on SSEs. The lack of support services or their relatively higher unit cost can hamper SSEs’ efforts to improve their management, because consulting firms are often not equipped with appropriate cost-effective management solutions for SSEs. Besides, despite the numerous institutions providing training and advisory services, there is still a skills gap in the SSE sector as a whole (Kayanula and Quartey, 2000). This is because entrepreneurs cannot afford the high cost of training and advisory services while others do not see the need to upgrade their skills due to complacency.
In terms of technology, SSEs often have difficulties in gaining access to appropriate technology and information on available techniques (Aryeetey et al, 1994). In most cases, SSEs utilize foreign technology with a scarce percentage of shared ownership or leasing. They usually acquire foreign licenses, because local patents are difficult to obtain. Regulatory constraints also pose serious challenges to SSE development and although wide-ranging structural reforms have led to some improvements, prospects for enterprise development remain to be addressed at the enterprise-level.
The high start-up costs for enterprises, including licensing and registration requirements, can impose excessive and unnecessary burdens on SSEs. The high cost of settling legal claims, and excessive delays in court proceedings adversely affect SSE operations. . It takes longer (176 days) in South Africa and there were 18 procedures involved in dealing with licensing issues. In the case of Ghana, the cumbersome procedure for registering and commencing business are key issues often cited. The World Bank Doing Business Report (2006) indicated that it takes 127 days to deal with licensing issues and there are 16 procedures involved in licensing a business in Ghana. Meanwhile, the absence of antitrust legislation favours larger firms, while the lack of protection for property rights limits SSEs’ access to foreign technologies (Kayanula and Quartey, 2000). Previously insulated from international competition, many SSEs are now faced with greater external competition and the need to expand market share. However, their limited international marketing experience, poor quality control and product standardisation, and little access to international partners, continue to impede SSEs’ expansion into international markets (Aryeetey, Baah-Nuakoh, Duggleby, Hettige, and Steel, 1994).
Conceptual framework
The conceptual framework for this study is represented diagrammatically in the Figure 2 below. In this framework, it is assumed that the development of small-scale enterprises in the Metropolis would have a positive impact on the poverty reduction. The development of small-scale enterprises would depend a lot on the support services from the promotional institutions such as the National Board for Small-Scale Industries (NBSSI), Business Advisory Centres (BAC), Central Regional Development Commission (CEDECOM), Kakum Rural Bank and others established by the government for the said purpose, the Metropolitan Assembly and the Rural Banks. It is also expected that some entrepreneurs out of their own ingenuity and resourcefulness can develop their enterprises. In addition, well organized business associations have the potential to mobilise resources together and offer some support systems that can assist in the development of small-scale enterprises, for their effective operation. These support services offered by these institutions would develop the small-scale enterprises. In collaboration with other sources of income, such as ecotourism, wealth creation and employment generation would enhance the livelihood abilities of the masses, which would then enhance wealth generation by offering employment to the people. The incomes that would accrue as a result would then go a long way to reduce poverty. Out of this income and related benefits can then afford good nutrition and health, quality education, especially for their children, good shelter and decent clothing, just to mention a few.

Figure 2:
Conceptual framework of small-scale enterprises and poverty reduction
Eco-tourism
Formation of Small-Scale Enterprises

CEDECOM
NBSSI
BAC
KRB
Entrepreneurs

Contribute to community stability
Mobilization of human and financial resources Skill training
Sources of market
Capital formation

Create wealth and generate jobs

Access to education
Good shelter
Decent clothing, etc
Good nutrition and health

Reduce poverty

Authors own construct 2010

Empirical evidence of small scale enterprises and poverty reduction. This section reviews the empirical works on the effects of small scale enterprises on poverty reduction. There have been many research works on the impact of small scale enterprises and how it affects poverty and few of them have been reviewed below. In the first place, Belete, Masuku, and Mavimbela (2010) analysed the contributions of small scale enterprises to poverty reduction in Swaziland. Eighty small entrepreneurs’ were interviewed in the 2008. Dressmakers, metal fabrics, mechanics, and carpenters were interviewed on how their involvement in the enterprise had impacted in their livelihood. The primary data was collected from Ludzeludze and Bhekinkhosi or Mliba Rural Development Areas. The Cobb-Douglas production model was used to analyse the contributions of small scale enterprises and poverty reduction in Swaziland. The results indicated that averagely, entrepreneurs’ who were members of the promotional institutions and other cooperative societies used more capital than non- members. He found out that the average income of respondents was dependent on to their ability to spend more on material inputs. They concluded that support services from the promotional institutions play an important role in reducing poverty and suggested that entrepreneurs needed to be encouraged to join cooperatives so they could have access to microfinance to improve their production through the use of technology. Even though, the study has given a good account of credit it can be seen that the sample size for the study was very small. Definitely, the small sample size for the study incapacitates the results for generalisation. However, it fixes into this study which also looks at how credit affects the activities of small scale enterprises. In a related study, Amin, Bashir and Naeem (2010) assessed the effect of microcredit on poverty alleviation in Pakistan. The study was conducted in the Jhelum District of Pakistan. In all, 80 respondents were selected for the study. These farmers were all smallholder farmers. The researchers used the two-phase multiple regression model under Cobb-Douglas production function to analyse the data. The main reason for splitting the data was to get to know the real situation because credit does not have direct impact on poverty but rather income. The results of the first phase regression analysis proved that microcredit has a very positive impact on the income of people and subsequently on poverty. They suggested that the ‘system’ should ensure easy availability of credit and in proper amount. Again, technical assistance and training needed to be organized to help farmers; credit repayment schedule should also be improved to give borrowers breathing space to repay their loans, interest rates should be reduced substantially and there must be continuity in policies on microcredit. The study could have been much helpful if the sample size had been increased. Definitely, 80 respondents cannot be enough for adequate assessment and reliable information. In spite of this, the recommendations confirm the assertion made earlier by Matsumoto and Yamano in 2010. In addition, Adil, Ahmed, Chattah, Hassan Javad, and Nawaz (2006) worked on impact of microcredit programme of Punjab Rural Support Programme (PRSP) on crop production in Pakistan. The study interviewed small scale wheat and sugarcane farmers in Faisalabad. Two field units in the Faisalabad district were selected for the study. Ninety small farmers were randomly selected and interviewed directly in 2002. The ‘before and after’ approach was adopted in this study. The linear multiple regression analysis was used for the analysis. The study revealed that availability of finance affected crop production, in that it facilitated small and marginal farmers to purchase inputs at the proper time. This also increased their income and improved their standard of living. In spite of the success, some farmers reported of decline in crop production. This was attributed to mismanagement of credit, small loan size, increased expenditures, no farming experience and drought. They suggested that loan size should be increased and disbursed in proper time. They added that post disbursement monitoring should be carried out both internally and externally. The outcome of this study confirms other research findings; however, the sample size is inadequate and will affect the report. The work can therefore not be generalised. Kidane (2007) on his part worked on impacts and implications on promotional institutions for small scale enterprises in Southern Ethiopia. In all 450 households comprising beneficiaries of promotional institutions and non-beneficiaries from purposively selected seven zones were interviewed. Descriptive statistics such as mean, standard deviation and percentages were used to analyse the data. The t-test and chi-square were also employed to compare beneficiaries of promotional institutions and non-beneficiaries. The Cobb-Douglas production function was employed to analyse the contributions of credit on gross farm income. Evidence from the descriptive statistics showed that promotional institution was beneficial to entrepreneurs. It was revealed that business size and educational level of the head entrepreneurs were highly important factors of production that contributed to gross income whereas financial assistance, adult labour and oxen number were less important variables contributing to gross income. Kidane (2007) came out with results that satisfy a theoretical claim but the impact of financial assistance could have been much felt if net income was used. This is because net income would have included at least the cost of financial assistance which is a major component in assessing the impact of small scale enterprises.

CHAPTER THREE
METHODOLOGY
Introduction
The following will be the main aspects for the study which the chapter describes in details; research design, study area, population and sample size determination, research instrument, data collection procedures, data analysis procedure and the problems that were uncounted in the collection exercise.
Research design
The study will employ descriptive, evaluative and case study designs. The descriptive design sought to establish opinions that were held, processes that had gone on and effects that were evident with regard to how small-scale enterprises had helped in alleviating poverty in the Cape Coast Metropolis. Also, the descriptive design helped to answer research questions concerning the current status of poverty within the Cape Coast Metropolis. The evaluative research design was used to assess the extent to which the poverty level of small scale operators has been reduced.
The case study was an appropriate design since a holistic, in-depth investigation of the contribution of small-scale enterprises (SSEs) to poverty reduction was the aim of the study (Feagin, Orum, & Sjoberg, 1991). This design helped to provide great depth of understanding on how SSEs helped in poverty reduction owing to its longitudinal data collection and its usefulness in providing in-depth information (Whitley, 1996). However, has the problem of generalisation from one case. Consequently, the findings of the study could not be generalised for all small-scale enterprises in Ghana except the small-scale enterprises in the Cape Coast Metropolis (Dufour, Fortin & Hamel, 1993).
Study area
The Cape Coast Metropolitan was selected for the study because it is located within the Central Region which is one of the smallest in the country. The Metropolitan also has the highest industrial establishments/units in the region. The Metropolitan had a population of 118,106 people and 71 localities with a sex ratio of 7:6:6 as at the year 2000 (Ghana Statistical Service, 2000). The Metropolis has a total land area of 112 square Kilometers which qualifies it as the smallest district in the country in terms of land size. It is bounded on the South by the Gulf of Guinea, on the North by the Twifo – Hemang Lower Denkyira District, on the East by Abura – Asebu – Kwamankese and the Komenda – Edina – Eguafo – Abrem (K.E.E.A) district bounds the Cape Coast Metropolis on the West (GSS, 2002).
The Metropolitan lies partly in the dry equatorial zone and partly in the West semi-equatorial zone. Both zones experience relatively similar temperature conditions throughout the year. Mean annual temperature of about 29o C in warmest months (March – July) and 24o C in the coolest months (August- February). The differences between the two climatic zones result basically from rainfall (GSS, 2002).

Figure 3: Map of cape coast metropolitan assembly showing the location of small scale enterprises.
Source: Department of Geography and Regional Planning, UCC, (2012)

Annual rainfall ranges from 100cm along the coast to about 150cm or more in the interior. Both areas have double maxima rainfall with the major season between May and July and the minor season between September and October. Relative humidity is between 60-90 percent during the Harmattan period of November-January (Ghana Statistical Service, 2002).
Major sources of income and livelihood of the people is the informal sector activities and administrative or clerical jobs. The informal sector are largely small-scale product enterprises engaged in various trades like vehicle repair, metal fabrication, dress making, hairdressing and barbering, fish mongering and smoking, carpentry and crafts and retail trade among others. Others are engaged in small scale farming with the service and production sectors employing majority of the workforce.
The following categories of SSEs will be considered for this study: vehicle repair, dress making, hairdressing and barbering, fish mongering and smoking, leather works, fast food sellers’, carpentry and crafts and retail trade.
The study population
The study population was made of all the staff of all the promotional institutions or agencies and all the small-scale entrepreneurs which have registered with these agencies for the past three years and beyond in the Cape Coast Metropolis. The agencies were Central Region Development Commission (CEDECOM) Cape Coast, National Board for Small Scale Industry (NBSSI) Cape Coast, Business Advisory Centre (BAC) Cape Coast and Kakum Rural Bank (KRB) Cape Coast. The study population, hence, was made up of 741 small-scale entrepreneurs and 71 staff in these agencies. The idea for selecting small-scale entrepreneurs which have registered with these promotional institutions for the past three years was that, it was believe they would be in a better position to tell the benefit accrued from operating with these institutions/agencies. The distribution of the staff of promotional institutions and small-scale entrepreneurs are shown below in table 2.
Table2: Distribution of promotional institutions and entrepreneurs

Agency Number of staff Entrepreneurs

CEDECOM (Cape Coast) 14 276
NBSSI (Cape Coast) 30 138
BAC (Cape Coast) 5 93
KRB (Cape Coast) 22 207

Total 71 714
Source: Data from Institutions, (2009)
Sampling procedures
Both probability and non-probability sampling methods will be used in the selection of respondents for the study. First, the purposive non-probability sampling technique will be used to select eight (8) staff of the agencies for the study. Purposively, the General Managers, the Accounts, Heads of Research, Project Officers and four junior staff (clerks) of all the agencies and owners of the enterprises, four apprentices and employees were selected. This sampling technique was the most appropriate because these categories of people were knowledgeable about the activities, operations and the constraints of the small-scale enterprises.
Second, the systematic sampling technique will be used in selecting entrepreneurs’ in the study. In all 254 entrepreneurs of small-scale enterprises were selected for the study. According to Krejcie and Morgan (1970), cited in Sarantakos (1998), a sample size required for a population of 750 is 254. The sample size of 254 was proportionately distributed among all the four agencies in order to ensure fairness in the distribution of the sample among the four agencies, using the formula: m=q t×y, where m was the sample size, q represented the population for the respective agencies, t represented the total population for all the four agencies, and y represented the required sample size. The proportionate distribution of the sample among the agencies is shown in Table 3.
Table 3: Sampling distribution of the agencies
Agency population percentage
CEDECOM (Cape Coast) 98 38.6
NBSSI (Cape Coast) 49 19.3
BAC (Cape Coast) 33 13.0
Kakum Rural Bank (Cape Coast) 74 29.1
Total 254 100
Source: Computed from Institutions Records, 2009.

The systematic sampling method will be used to select respondents from each of the agency.

Sources of data
The study will use both primary and secondary data in the research. Primary data were gathered from the respondents of the study through field survey. Though the study population comprised all identified SSEs in the Cape Coast Metropolis, the units of analysis were the owners of these enterprises, few apprentices and employees.
Secondary data sources on the other hand included official information from the Cape Coast Metropolitan Assembly, Central Region Development Commission (CEDECOM) Cape Coast, National Board for Small Scale Industries (NBSSI), Business Advisory Centre (BAC) Cape Coast and Kakum Rural Bank (KRB) Cape Coast, relevant thesis, books, journals articles, and documents from academic and organizational sites on the internet, periodicals among others. Such materials were extensively reviewed and relevant portions extracted and used in the study.
Data collection instruments
Three sets of questionnaire were used for this study to collect data from specific groups and individuals. The use of the questionnaires was appropriate since questionnaires offer considered and objective view on the issue at stake since respondents can consult their files, and because many subjects prefer to write rather than to talk about certain issues (Sarantakos, 1998). The first questionnaire (Appendix A) was used to elicit information from the entrepreneurs of Cape Coast Metropolis. In situations where the respondents could not read and write the same questions were administered in the form of an interview. The questionnaire for the entrepreneurs had four sections: Section A sought information on the background characteristics of respondents; Section B focused on entrepreneur’s knowledge on some of the poverty-related activities of cape Coast Metropolis in terms of the current poverty situation in the metropolis and other educational, counselling and support services; Section C was on how the poverty levels of entrepreneurs had reduced with the operations of the Agencies; the last section, Section D, looked at the challenges entrepreneurs faced in their operations with the Agencies.
The second set questionnaire (Appendix B) was used to elicit information from Managers and Project Officers of the Agencies or institutions promoting small-scale enterprises. The questionnaire had four sections: Section A elicited information on the background characteristics of respondents; Section B sought information on how the Agencies were helping in poverty reduction in the Cape Coast Metropolis; Section C sought information of challenges entrepreneurs of the Agencies face in their operations with the Agencies; and Section D sought information on the challenges that Agencies faces in its operation in the Cape Coast Metropolis.
The third set of questionnaire (Appendix III) was designed to elicit information from clerks of the Agencies or institutions promoting small-scale enterprises. The questionnaire had three sections: Section A elicited information on the background characteristics of respondents; Section B sought information on how Agencies were helping in poverty reduction in the Cape coast Metropolis; and Section C sought information on the challenges that Agencies faced in its operation in the Cape Coast Metropolis.
Pre-test
In order to test the validity and reliability of the data collection instruments, as well as data processing and analysis procedures, a pre-test will be conducted using the Intermediate Technology Transfer Unit (ITTU) Cape Coast, Small and Medium-Scale Enterprise Development (FUSMED) Cape Coast, National Council on Women and Development (NCWD) Cape Coast, and Kakum Rural Bank (KRB) Abura. During the pre-test, 8 officials, 20 entrepreneurs from all the Agencies were given the questionnaire and interviewed respectively to test the validity and reliability of the instruments. The lessons that were gathered during the pre-test were very useful in the actual fieldwork. The researcher got to know, approximately, the time that could be spent in an interview and, for that matter, the number of research assistants to employ. In addition, ambiguous questions were detected during the pre-test and necessary corrections were made accordingly.
Data processing and analysis
The data collected will first of all be edited, coded and organised in a form that will allow easy entry and analysis by the computer. Data from the field will be reorganised in a form that made them amenable to quantitative research. The Statistical Product for Service Solutions (SPSS, Version 16) and Microsoft Excel (2007) tools will be use for data processing and analysis. The data will be then grouped and described using tables, graphs, charts as well as descriptive statistics, such as the mean, frequencies and percentages.

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