Ghana: Ghanaian micro, small, and medium enterprises (MSMEs) allocate up to 30% of their capital or profits to regulatory compliance, as estimated by research from the Institute for Liberty and Policy Innovation (ILAPI).
According to Ghana News Agency, the institute highlighted that this significant expenditure reduces the resources available for production, expansion, and employment within these businesses. During a press conference, Mr. Peter Bismark Kwofie, Executive Director of ILAPI, emphasized that the problem extends beyond the frequently mentioned issue of access to finance. He noted that a substantial portion of funds acquired by businesses could end up being consumed by compliance obligations.
Interviews conducted as part of the study revealed that some businesses believed that even after securing capital, up to 30% might be spent on meeting regulatory requirements. Mr. Kwofie remarked, "If you get this money, 30 per cent of this money will eventually be used for your regulation," indicating that businesses might remain financially constrained despite receiving loans or investment capital.
The ILAPI executive director further explained that funds spent on regulatory compliance do not directly contribute to the productive activities of the business but are necessary to meet governmental standards and requirements. The research's compliance chart indicated varying proportions of capital spent on regulatory compliance, with a segment reporting expenditures between 26% and 30%.
ILAPI noted that this burden is particularly significant for small businesses with limited working capital. The institute argued that reducing unnecessary compliance costs could enable businesses to allocate more resources toward machinery, stock, production, and human resources. Consequently, ILAPI recommended the harmonization of licenses and certifications, joint inspections, and the establishment of a unified digital registration platform to minimize duplication and administrative expenses.