Ghana’s economy has hogged headlines in the past few months amid soaring inflation, a decline in growth and an aggressive monetary policy tightening, prompting the country’s Government to approach the International Monetary Fund for assistance.  

That said, the African Development Bank forecasts that the Ghana economy will grow by 5.3% and 5.1% over the next 2 years while narrowing its fiscal deficit by 2.5% due to revenue enhancing reforms. Boosted by a rebounding resources sector and pleasing growth in the technology and telecommunications sector, which is encouraging news.  

If the above average growth rates forecast by the African Development Bank materialises, there is likely to be meaningful growth in the small and medium sized enterprise market and this gives us an opportunity to imagine the make-up of the economy in the coming years.

If one looks at organisations that transition from being small businesses into credible mid-sized entities, in almost all cases these businesses would transform as a result of being part of the supply chain of a major corporate. Not only do these SMEs move up the value chain, they also create local employment while capacitating the industry with local skills and ultimately have a multiplier effect on the domestic economy.

With its goal of being the leading Pan-African banking group, this transition is a key focus area for Absa which has developed significant experience in the development of Enterprise and Supplier Development initiatives. As proof of this commitment, Absa has recently partnered with the Ghanaian Chamber of Mines on their supply chain financing programme which is looking to build capacity of local suppliers over the long term to transition them from being mere importers of finished products into production and manufacturing activities along the mining value chain.

While stakeholders in both the private and public sectors have a common desire to boost SME participation in the economy, there are many legacy reasons why this does not always translate into reality.

Absa has conducted an analysis of the sector that showed that traditional loans were not necessarily helping small businesses that simply do not have the capacity or balance sheets to fulfil certain contracts that they had won. This was unfortunate as some of these contracts could have been transformative for promising young enterprises.

These SMEs need a variety of different integrated elements to ensure that they are able to deliver on bigger contracts. This goes beyond short-term funding and includes mentoring, access to technology, supportive legislation and partners with a long-term vision.

This is perfectly highlighted in a recent maritime transaction that Absa participated in.

Almost all transactions in the maritime sector in Ghana have typically involved joint ventures with smaller partners loaning vessels from bigger partners. The smaller players have been held back by a lack of access to capital to purchase their own ships.

In this transaction, the corporate off taker, Absa along with all respective players in the value chain were able to align and ensure the purchase of a vessel which was unique in being the first fully Ghanaian owned and operated vessel. This represented the single biggest Enterprise Development transaction Absa has done in Ghana to date and we believe it will be a blueprint for future transactions.       

What made this project stand out is the focus on long-term sustainability through the value-chain and the integrated approach that Absa was able to bring to the party. Even with external factors such as rising interest rates and external economic shocks, this project is expected to transform this SME into a major player in the Ghanaian economy over the coming years.

Projects that deliver impact like this are important for Absa as we see our role as the nurturer of tomorrow’s business giants.

With Ghana becoming a dominant force in gold production on the continent as well as significant investment seen in telecommunications and technology sectors, small businesses linked to these value chains have a lot to be optimistic about.

On the regulatory front, there is a focus on local content and this is expected to stimulate local SMEs and boost economic participation for businesses across the spectrum, with a particular focus on youth and women-owned businesses

Empowering the SME sector is a key focus for Absa, and we continue to look for opportunities to work with corporates who share this passion for developing their supply-chains. On our mission to be the leading Pan-African bank, Absa looks forward to sharing expertise to grow the future corporates of Ghana together.