© 1992 International Bank for Reconstruction and Development / The World Bank
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How Small Enterprises in Ghana Have Responded to Adjustment
William F. Steel and Leila M. Webster are with the Industry and Energy Department of the World Bank. The data were gathered with the assistance of the Ghana National Board for Small-Scale Industries. The authors are grateful to E. K. Abaka, Frederick Gyebi Acquaye, and John Wayem for assistance and to Kwamena Adjaye, Surendra Agarwal, Benson Ateng, Nancy Barry, Stephanie Gerard, Don Mead, and two anonymous referees for their comments.
Monitoring of adjustment has focused on larger, often state-owned enterprises, many of which have been adversely affected by the more competitive environment. Little is known, however, about the impact of adjustment policies on small firms. Firm-level data from Ghana show that the adjustment process was well under way across sectors and within firms and that new investment was taking place. The adjustment process had strained most firms' operations—profits were squeezed between rising input costs and weak domestic demand and low-cost competing imports. Small-scale industries were forced to become more competitive to survive. Interviews with owners of small firms revealed considerable entrepreneurial initiative in changing product mix and seeking newly opened market niches. Sample entrepreneurs fell into two broad groups: dynamic, successful adapters with good prospects (found mostly among small-scale enterprises) and stagnant producers who had not adapted to the new competitive environment (found mostly among microenterprises). For potentially dynamic small firms, the most critical constraint was lack of access to finance for working capital and new investment. Many microentrepreneurs were seriously constrained by a lack of purchasing power among the lower-income population and by saturation of the sector.
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