Entrepreneurship Development and New Business Start-Ups: Challenges and Prospects for Ghanaian Entrepreneurs’

 

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produce better quality products and services at lower prices. While many entrepreneurs in developing countries 

have full knowledge of their product or service, they do not know how to promote them or market them 

successfully. They lack effective marketing strategies for competitiveness due to inadequate financial resources for 

marketing and advertising products, which leads to their inability to be competitive and capture a greater part of 

the local and international market-segment. They also have low capacity for product innovation due to the belief 

that market demand may not pay for quality, coupled with over-pricing of goods are some of the major obstacles 

that make locally made goods less competitive even on local markets in developing countries. A major challenge 

relating to gaining customer loyalty and market share is the result of the colonial antecedent which has led to 

Ghanaians and generally, Africans’ preference for foreign goods and services as compared to domestic ones. As a 

new business, building brand equity poses one of the most challenging tasks in order to break into the existing 

market competition, since the business lack an existing track record or reputation for potential customers to trust 

your product or service. Although an entrepreneur may have the zeal to succeed, but without any confirmation of 

a successful track record, existing large firms and government organizations will not trust an entrepreneur to award 

large contracts to his/her new business. 

 Despite the substantial dividends that can yield from advertising and marketing, SMEs in developing countries 

rarely engage in aggressive marketing of their products because they lack the required resources, and are deterred 

by the cost of marketing. Since many SMEs increase production only when they receive an order, they are unwilling 

to deal with the risks of producing in larger quantities. As a result, SMEs generally sell directly to customers based 

on advanced orders rather than producing for stock. Poor market responses and the tying-up of capital when 

producing for stock are among the reasons SMEs manufacture and sell their products mainly on advanced orders 

(Director, AGI, Accra, 2016). While information, communication and technology is increasingly becoming a critical 

factor in developing businesses, due to lack of technological knowhow, the technological gap in most developing 

countries has always posed a serious setback to entrepreneurship development. These challenges experienced by 

SMEs such as poor transportation and infrastructure, low-level of information communication technology (ICT) 

knowledge and other factors that impact their operations have national implications and require government 

intervention to address them appropriately. 

Entrepreneurs also face enormous challenge in terms of competition from external transnational firms. The trade 

liberalisation policy being promoted by the government influenced by advocates of the free market system/neo-

liberalism such as the International Monetary Fund (IMF), the World Bank and the World Trade Organisation (WTO), 

as well as the impact of globalisation makes it easier to import foreign products into the local economy, without 

adequate protection for local industries. Entrepreneurs with the potential to succeed exhibit an incremental 

approach to risk taking and have the motivation, drive and ability to mobilise resources to take advantage of 

market opportunities. Nonetheless, the small local market, limited access to external suppliers and demand, limited 

export volumes and high costs often lead to difficult entry into larger international distribution channels. More 

significantly, many entrepreneurs are unable to meet the resulting demand due to the fear of not recouping their 

investment, which explains their inability to compete in the international export markets. Some officers from the 

Private Enterprises Federation noted that protectionism, trade tariffs and barriers in the international markets as 

well as the emerging competition due to the deregulation and liberalisation of the local market are some of the 

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major obstacles to the innovation and expansion of SMEs in Ghana (Economist, the Private Enterprises Federation, 

Accra, 2015). In addition, due to the unstable economies in developing economies, the overarching mindset of 

many new entrepreneurs in these countries is the fear of failure, which can be a barrier to many potential 

entrepreneurs and need to be changed. The Global Entrepreneurship Monitor Report for 2013 reveals that Ghana’s 

‘Fear of Failure’ for new entrepreneurs stands at 24.6% as compared to 10.4% in 2010. This is probably due to the 

weakening economy, which has made many potential entrepreneurs skeptical towards embarking on new 

investments. How to break through into the existing competition is an important challenge for new SMEs. New 

entrepreneurs must recognise competition as a benchmark for creativity and the main motivator for innovation for 

your business. While competition can make a new business make in-roads into the existing market, it can also 

make it lose its relevance in the eyes of its customers. Therefore, new entrepreneurs need to adopt different 

business strategies by constantly improving the quality of their products and services or reducing cost to create 

value for their customers.  

iv)

Legal and regulatory framework and Social factors – corruption, cultural attitudes and politicisation of

government-sponsored loan schemes

Government policies towards new entrepreneurs are often not favourable for business start-ups. Public sector 

bureaucracy with licensing of new businesses, and delays in payments for public sector contracts discourage people 

from setting up new businesses. The high duties and the complexity of the tax systems by the agencies under the 

Ghana Revenue Authority is a major disincentive to new entrepreneurs. Other factors such as sustainable power 

supply, lack of infrastructural facilities, non-availability of good road networks and ineffective internet and 

communication systems discourage many potential entrepreneurs from embarking on business start-ups. 

Partisanship is part and parcel of many developing countries’ politics and permeated every aspect of many societies 

including the disbursement of loan schemes, which hinder the hinder the development and sustainability of SMEs. 

Partisanship and government victimisation of opposition party members’ businesses often shorten the lifespan of 

many SMEs since a change of government may result in cutting-off a group of businesses that may have benefitted 

from access to loans under a previous government. Some entrepreneurs interviewed admitted that lack of support 

for SMEs due to politicisation of government-sponsored business loans and corruption of officials in charge of 

government-sponsored organizations and bank officials have led to the demise of many businesses that used to 

operate successfully.  Focus group interviews with entrepreneurs who have participated in the NBSSI and MASLOC 

loan schemes over the years cited excessive government officials’ control and politicisation of funding, victimisation 

of entrepreneurs and corruption as main reasons why many SMEs have gone bankrupt, especially those that are 

not supporters of a ruling government. In many developing countries like Ghana, the political culture also fosters 

attitudes that militate against personal efforts, induce apathy and carelessness in the service to the public, and a 

careless attitude towards public funds and property.  

The politicisation of government loans to businesses has also led to the high default rate by borrowers who have 

the impression that by getting a loan from their party’s government, they are being rewarded for their support, 

and loan defaulters are not punished due to their party affiliation. It is apparent from the above discussion that 

entrepreneurs and SMEs in developing countries face numerous challenges, which are diverse and complex, and 

require prudent measures by the government and its development partners to address them appropriately. These 

 

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challenges have similar characteristics with the problems commonly associated with entrepreneurs and SMEs in 

Africa and the developing world.  

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