Employment generation and small medium enterprise (SME) development - the garment and textile manufacturing industry in Ghana

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Publication Date: 
21 June 2008
Afua A. Kufuor
UN Millennium Development Goal: 
Eradicate extreme poverty and hunger

Paper presented by Afua A. Kafuor at the Growing Inclusive Markets Forum in Halifax, Nova Scotia, Canada, June 19 - 21, 2008. Small medium enterprises (SME’s) in Ghana face a host of problems and constraints. These must be overcome if they are to be sustainable and move into the mainstream of the economy. The role of SME’s in employment generation and development in Ghana is explored in this paper. In particular, the paper looks at the Garment and Textile manufacturing industry in Ghana as one of the industries targeted as key to reducing poverty, promoting growth and generating employment. The impact of the president’s special initiative (PSI) as an intervention to boost production and growth in this sector is assessed. As an exploratory study, this paper identifies some of the constraints faced by SME’ in this industry and discusses key interventions for successful development of the garment and textile manufacturing sector in particular.

Private sector development is said to be critical for employment creation, growth and development of Africa (Kurokawa et al 2008). The development of small and medium enterprises (SME’s) is acknowledged as a key condition in promoting equitable and sustainable economic development in Africa. This sector, in terms of economic development has the potential to provide for growth in employment and contribute towards reducing poverty among urban cities in most developing countries. In Ghana, a key strategy the government has adopted for increasing employment and production is to take measures to improve the capacity of the private sector as a means of accelerating the growth of small and medium scale manufacturing industries (GPRS II, 2003). The GPRS is currently Ghana’s blueprint for growth, poverty reduction and human development.

SME’s make up the largest portion of the employment base in Ghana and are the bedrock of the local private sector. This sector is characterized by low levels of education and training of the self employed. SME’s in manufacturing are viewed as costly and high risk entities by the key players in the financial sector and hence many of the commercial banks avoid lending to them. These owner entrepreneurs who could play a much larger role in job creation and development of a sustainable SME sector are therefore marginalized.

The key objective of this paper is to examine the constraints faced by organized urban SME’s in the garment and textile manufacturing sector to development. Another objective of this paper is to investigate the efforts of the government initiative within the textile and garment industry and the impact these activities have for increasing the rate of employment and sustaining growth in this sector. The paper concludes by assessing the current constraints faced by the small and medium garment and textile manufacturing industry in Ghana and provides insight into what interventions are required to improve this sector to enable it become one of the viable growth and development areas among SME’s in Ghana.