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Why Businesses Fail in Ghana?

Industry watchers say business failure occurs when a company is unable to pay its creditors, shareholders and suppliers as a consequence of a national economic crisis reflected in some macroeconomic variables such as high unemployment, declining gross domestic product, declining foreign direct investment and inadequate income distribution.

The recent revelation that some multinational companies are leaving the shores of Ghana is really worrisome news, more so at a time when the country is struggling to put its economy in shape.

The impact of the multinationals leaving will be on job losses, tax revenue decline, shocks in the business plan, and high cost of goods hitherto produced by these companies.

Already market experts have been calling for a lot of measures including the following to forestall the future recurrence of the issue:

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1. Government support for local businesses through funding, training and mentorship programmes.

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2. Tax incentives and simplified regulatory processes to encourage foreign investment.

3. Promotion of economic diversification by encouraging local businesses to explore new markets and products.

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4. Investment in infrastructure and transportation to improve the business environment; and,

5. Encouragement of public-private partnerships to drive economic growth and development.

What we are failing to address as a people, however, is, why businesses fail in Ghana. What could have been done but we did not do?

Industry watchers say business failure occurs when a company is unable to pay its creditors, shareholders and suppliers as a consequence of a national economic crisis reflected in some macroeconomic variables such as high unemployment, declining gross domestic product, declining foreign direct investment and inadequate income distribution.

According to them, appropriate corporate governance must be put into place to involve all the methods a corporation uses to protect its investments and the interests of its stakeholders.

“The way business leaders conduct themselves and communicate on a daily basis – and the ethics and values they exhibit in doing so – are instrumental in setting the ‘tone from the top’. This tone shapes every action, decision and relationship across the organisation. As a result, the right leadership tone is the starting point and bedrock not just for corporate governance, but also for the effective overall management of any business,” the experts say.

Corporate governance is crucial but we must not miss out on other equally important factors.

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From Ghana Airways to Ghana Railway Corporation and a multitude of failed business entities, one thing that runs through is the attitude of the workers.

Lead Counsel at TJWricketts @ Law, a business and investment law firm, Thecla Wricketts, writing on business killers said whenever we discuss business killers in Ghana, people are quick to jump to external factors such as the lack of infrastructure and government support while we give less attention to internal factors that are negatively impacting the success and sustainability of businesses.

“People hardly understand how an internally well-structured business can survive external factors. Like the Bible says, a house that is built on a rock survives the rains, storms or harsh conditions but when a house is built on sand, a little rain and it falls down into ruins (Matt 7:24-27)”, she says.

According to Thecla Wricketts, in the same way, business owners should be intentional about building a business that has strong foundations that can survive harsh external factors, Ghanaians should pay attention to their actions and activities that have over the years destroyed businesses.

To her, if people understand that directors manage and administer the affairs of the business and are responsible for strategic decisions, then it is important that whoever they appoint as a director should be able to perform these roles in the most professional and efficient manner.

“You should not choose board members based on emotions and attachments and even if you would, for whatever reason, you must ensure that there are independent qualified experts appointed on your board to help make the best decisions, she posits.

She explains further that though there are many genuine people out there, the fact still remains that a considerable number of people have negative attitudes that destroy businesses.

Further, she says, “In my practice, I have worked with and continue to work with Ghanaians and foreigners but my worst business experiences have all been from our own Ghanaians. For example, I have consulted on different partnership agreements for Ghanaians and foreigners and I can tell you that Ghanaian partnerships are almost impossible”.

“The Ghanaian partners do not perform their obligations and even if they do, it will not be perfectly done until they are micro-managed. They always demand benefits at the wrong period of the project lifecycle. For example, a project just begins and the next thing will be the Ghanaian partners asking for a loan or advance payments. They squander money and resources without any reasonable explanations and cause several disagreements or disputes. We are never on time, never sincere, and never willing or ready to make sacrifices to promote any project,” she says.

She points out that in employment, it is either the employer is seen as the “villain” who is out to harm employees, so the employees protect themselves by stealing, lying, mismanaging funds, not concerned with the interest of the business, self-seeking and causing unnecessary rifts or vice versa.

On financing, she states that “Financing businesses in Ghana continue to be expensive because Ghanaians do not pay back loans and make no or less returns on investments. Once they receive the investment, the first thing they do is to buy a car, move to expensive communities and disappear when it is time for accountability”.

Many Ghanaian businessmen share the concerns expressed by Lawyer Thecla Wricketts. Speaking recently to The Accra Times, P. K. Amoabeng of defunct UT Bank fame, minced no words in his condemnation of some relatives he employed to work with – instead of working to move the business forward, their activities were rather drawing the business backwards.

A well-known politician and businessman on the radio recently said he would rather use his money to buy treasury bills and bonds than to establish any new business. Swearing, he said, the three businesses he established in the past five years to provide jobs for his constituents have all collapsed due to the attitude of the workers – especially, stealing and work attitude.

A cursory look at workers’ unions also shows the spirit with which they operate. For instance, when over-patronised trains did not have money to buy fuel, the Railway Workers Union was clamouring for salary increases.

Management in one of the abattoirs in the country in consultation with the local union raised salaries three-fold – three times their previous earnings. To check pilfering, management installed CCTV cameras.

Within three weeks the workers led by their union were up in arms against the Managing Director for installing the CCTV cameras; they rather preferred the low salaries and the ability to steal meat every day!

Recently, the Vice-President, Dr. Mahumudu Bawumia, said digitalization of electricity payment has increased revenue from GHC450 million to over a billion cedis monthly. Where was the vociferous workers’ union when the IT department decided to sabotage the ECG by tampering with the computers?

We all agree that government support is crucial in business advancement or growth but we must not downplay the negative attitude of workers in the business set-up. Also, business managers must set up the right systems, work with the right people, and not collude with local unions to enrich themselves. If we do these things, we may be able to stem the tide of multinational businesses departing our shores in droves.

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