British High Commissioner's speech at the Enterprise Africa Summit
British High Commissioner, Jon Benjamin delivered a speech at the Enterprise Africa Summit organised by the British Council.
Honourable Ministers, Members of Parliament and other dignitaries present, particularly our colleagues from the British Council who have put together this wonderful and so necessary event. Ladies and Gentlemen.
Economic development is a major priority for the UK government, domestically, here in Ghana and across the world.
We recognise the fundamental importance of economic growth in enabling lower and middle income countries to develop and eradicate poverty; and the importance to millions of individual citizens of having the means to earn income to meet their and their families’ needs. And that of course means jobs.
I start this morning from the premise that governments do not create jobs, the private sector does. And that within the private sector, MSMEs – Micro, Small and Medium Enterprises, or ones that employ between one person and 250 people, are central to that. Together these entrepreneurs are the real job creators.
But governments do set and police the rules, including incentives and disincentives, and ensuring a level playing field or otherwise. Government should focus on creating the right macro-economic environment for business to flourish; and on building the infrastructure and policy environment needed to facilitate the provision of credit and services.
We believe that enabling governments are actually acting in their own strong self-interest and that of their populace: boosting the private sector helps generate not only growth in the economy but the taxes that companies pay on their profits when they’re successful. And those taxes allow the government to fund the sort of public infrastructure and other investments that help the economy grow further. So, when governments help small businesses to flourish they create a virtuous circle.
We know too that today’s global economy is increasingly competitive. That means that governments should not be propping up failing ideas or those that are not economically viable and should welcome responsible Foreign Direct Investment too.
In other words, governments can be either an enabler or an obstacle. In the UK, our government’s aim - obviously - is to be such an enabler so that businesses grow and flourish. We know that is a declared aim of the new government here in Ghana too; and we are impressed by their early measures and plans in this regard.
Entrepreneurs and the companies they create are so economy vital. In the UK around 40% of tax is from SMEs. SME’s generate around 80% of employment. There are over 5 million companies in the UK, the vast majority of them SMEs, employing over 15.5 million people and with a combined annual turnover of £1.8 trillion or over 2 trillion US dollars. In Ghana, the comparative figures are currently so very much smaller. So, the potential of Ghana’s SME industry is therefore still significantly that – potential.
But self-dependent small businesses have the potential to grow into major new industries for Ghana. Industries that aren’t necessarily tied to fluctuating commodity prices. Industries that create jobs. Jobs that could transform the lives of the growing number of highly educated people in Ghana who have access to too few employment opportunities.
Across the British High Commission we work with government, private industry and civil society to create mutual opportunities for the UK and Ghana to flourish. Our aim is to support Small and Medium scale Enterprises and Ghanaian entrepreneurs in general to overcome barriers to growth and build competitive businesses in Ghana.
The UK is supporting enterprise growth in Ghana in many ways. Our Department for International Development - or DFID - run a range of economic development programmes including ENGINE, a £4 million programme which offers advisory and financial services to over 1,000 Ghanaian businesses. This is done in a transparent and market led way where only the most competitive are supported. And we’ve had some stunning successes already, such as Boomers Bikes, producing bamboo bikes in Mampong near Kumasi and employing 40 people. Now these Ghanaian bamboo bicycles already being exported to the European market.
And there are many other success stories under this ENGINE programme: Mansuki Ghana Limited and Tiwajo Industry Ltd both manufacture cosmetic products using agriculture biomass and other raw materials such cocoa husk and shea butter here in Accra and now employ 40 people between them, having employed only a third of that number when they joined our programme.
Ritadams Ventures in Tamale similarly manufactures cosmetic products for the local market but has just secured export orders from Europe and other African countries, employing 46 people, compared to just 3 when it joined the DFID programme in 2014. And:
America Continental Automobile Ltd joined the ENGINE programme in 2015, with a sales revenue of GHC 167,000 and employing 13 people. Now just 18 months later its revenue is GHC1,400,000 and it employs 28 people right here in Accra.
So, real success and genuine new employment here in Ghana thanks to British Government seed money.
We are also helping to increase the incomes of poor farmers and small-scale rural entrepreneurs with a focus on improving how agriculture markets work; and we recently launched an investment fund which will provide much needed long term finance and hands-on management support for small agricultural businesses in the north of Ghana.
DFID’s Business Enabling Environment Programme (BEEP) is providing £10 million during the period 2015-2018 to help improve the business enabling environment in Ghana. It also directly complements the Government’s ambitious export strategy. This funding supports targeted institutions within the Government of Ghana to enact reforms, while building an evidence base for such reform through independent analysis and research.
And we support a Public-Private Dialogue to enhance the demand for and the effectiveness of reform, focusing on supporting reforms to reduce red tape, promote competition, strengthen security of land and other property rights, improve access to commercial justice, and strengthen the functioning of institutions charged with regulating markets and maintaining professional standards. This is an important issue for all businesses but in particular for small businesses who should not have to wait for long periods of times to obtain permits or certificates. Small businesses simply cannot afford to have their small and expensive capital locked up at ports or idle because a license has not been granted. The cost is that they either fold up, reduce in size or at least stop expanding their businesses, meaning fewer jobs; or that they operate informally, meaning less tax revenue for government.
Separately, our CapitalSME project helps support Ghanaian SMEs who are ready to scale up raise capital by providing them with information about Ghana’s alternative stock market and support to those ready to list.
Meanwhile, the British Council Young Creative Entrepreneurs programme celebrates entrepreneurial leaders in the creative and cultural industries. And their Blazing Trails project supports young entrepreneurs interested in developing social enterprises, including through their new skills hub at the British Council office here in Accra.
Ladies and Gentlemen
Foreign Direct Investment is a very important part of the equation as no country in the world has all the capital to grow and stimulate its economy alone. In continuing to welcome FDI, we know that Government of Ghana is well aware that investors have a wide and competitive global choice as to where they invest. UK and other companies will invest here if the conditions are favourable. If they are not, they will invest elsewhere instead. But, in investing here, we will also always encourage UK firms operating in Ghana also to create opportunities for Ghanaian entrepreneurs in their supply chains by creating jobs, and by raising local skills and training opportunities for professionals and ancillary workers.
And that already happens. British entrepreneurs, such as Anthony Pile, founder of Blue Skies, are providing thousands of direct jobs here in Ghana. Indeed, by some measures, Blue Skies, which exports several tons of fruit products to the UK from Ghana every day, is already the single largest private sector employer in the whole of Ghana. However, the fact that a company like Blue Skies can be the largest private sector employer with under 3,000 direct employees in a country of 28 million people also shows how far there still is to go here in terms of private sector business expansion.
You can expect the UK High Commission here and our diplomatic missions throughout this continent to continue being a key advocate with the national governments to improve the investment climate for the private sector. We know that entrepreneurs here still face many challenges in establishing thriving businesses. That is true everywhere of course.
To put things in perspective: around 400,000 new businesses start-up in the UK annually, but one-third of start-ups cease trading within three years. It’s not a lack of customers or products that typically destroys a business – most often it’s a simple lack of cash. But there are also normal competitive factors which mean that only the best can survive - those with the best ideas and who most understand their markets: that is normal economics.
But where the obstacles entrepreneurs face are the results of bureaucracy or poor public policy, it is the duty of governments to do something about it, starting by managing the macro-economy as optimally as possible so that the overall economic environment is as favourable as it can be.
When we look at the problems which entrepreneurs face here in Ghana, credit is obviously a major problem with commercial interest rates currently amongst the world’s highest, at often well over 20%. And that’s if you have any access to credit in the first place of course. At the same time, inflation remains stubbornly high, though finally falling and at around 13% now. Hence the importance of good overall stewardship of the national economy, so that these key indicators fall as low as possible.
But we know there are other plenty of other obstacles too: unstable, sometimes unpredictable power supply; over-regulation; inconsistently applied legislation and tax rules; and of course corruption.
Corruption is often posited as a moral issue – and it should be. After all, corruption is a long, sophisticated word for which a much shorter, clearer word more than adequately substitutes – namely, theft. If someone steals from the state budget, or uses their state position to enrich themselves, then it is the wider population that loses out, as money meant to benefit the whole society ends up benefitting just a few.
But corruption is also a matter of simple economic efficiency: if an entrepreneur has to pay government officials more than officially published rates to obtain licenses; to settle a land dispute or another issue in the courts; or to win a public sector tender - assuming of course that those state tenders are not single sourced to “friends” - then that entrepreneur will have less to invest in his or her own business expansion and personnel. Put another way, entrepreneurs who have to contend with engrained corruption end up employing fewer people, so someone who could have been employed remains unemployed, while someone employed by the State or in a position of political influence grows rich at their expense. Corruption is a serious issue which merits more open public discussion and disclosure, rather than being placed in the ‘too difficult’ tray of allegedly intractable issues. In that regard, we are greatly encouraged by the determination of HE The President to tackle this entrenched curse in the economy and in wider society.
Ladies and Gentlemen The UK’s vision is to work in partnership with African countries and institutions to achieve a secure, self-financed and timely exit from poverty that put them beyond aid. But we also know that no poor country ever became prosperous through aid. What made previously poor countries rich is a private sector set free to invest, employ people and expand. Look at South Korea, Singapore or where I was previously posted in Chile. The examples are numerous. It is an expanding private sector, backed by sensible public investment, most particularly in education and infrastructure – and based on the rule of law, and on efficient and clean government - that best promotes economic growth and prosperity for all. In that regard, I am pleased to say that we are having positive engagement with the Government - in particular the Minister of Trade and Minister of Business Development who are here - with credible steps already in place by Government to address some of these issues in the short to medium term.
In conclusion, I hope I have managed to make the case this morning that the UK’s goal is to help African countries develop and for their people, especially young people, to meet their aspirations for security, opportunity, accountability and prosperity. Inclusive economic growth is core to achieving this vision, as no country in history has ever been able to eradicate poverty without sustained economic growth.
Within that, we firmly believe in the importance of entrepreneurship as a motor of growth and employment creation in both developed and developing economies alike; and in the role of governments in enabling entrepreneurs to succeed by promoting a business-friendly environment both domestically and through the export market.
Sometimes, however, the very best thing governments can do for entrepreneurs like you is - to simply to get out of their way.
In the UK, as a government, we are supporting our entrepreneurs domestically and internationally, and we are delighted to also be able to support entrepreneurs here in Ghana and throughout this continent. Entrepreneurs - you gathered here today - represent the best hope for a bright, prosperous, economically stable future: we wish you well in developing your own companies for the social good of all your compatriots.