Start-Ups Remaining Resilient In The Face Of Prevailing Harsh Economic Crisis In Ghana

By Van-Ess Alootey
Business Features Start-Ups Remaining Resilient In The Face Of Prevailing Harsh Economic Crisis In Ghana
AUG 30, 2022 LISTEN

The post COVID19 pandemic impact on global economies is happening faster in a rather harsh way than many economists in the world had predicted. The early days of post COVID19 pandemic impact is so frightening, businesses dread what will happen, when the full-scale impact eventually sets in, in the coming years. Challenges with global supplies of raw materials and finished products around the world, still remain a big issue in the face of record-breaking rising inflation figures recordings in developed and developing countries. When the whole world was beginning to sigh some relief from the ravages of the COVID19 pandemic , the world woke up to another needless Russia-Ukraine war that started late February this year and has since been going on for seven months now. What is worrying is the fact that, nobody knows exactly when this “senseless war” will end .

The unfortunate part of this war is the fact that, the two countries are important trading partners of the African continent in the area of food and petroleum products supply. The lessons from COVID19 pandemic triggered a new wave of thinking around self-sufficiency and dependency among Ghanaian entrepreneurs. The country saw a boom in the emergence of start-ups using indigenous technology and raw materials to produce items that were hitherto imported but because of the destruction in the global supply chain, Ghanaians entrepreneurs started producing these items locally.

The excitement from this new norm for me was that, young graduates from our tertiary institutions were beginning to put their skills to work, a plea that has been echoed over the years by captains of industry and the academia. Recent events in the Ghanaian economy partly caused by COVID19 pandemic and the Russia-Ukraine war have turned that excitement into one of worry. The statistics in Ghana doesn’t favour the survival of our fragile start-ups in difficult economic times. The current challenges facing the Ghanaian economy from rising inflation , continuous depreciation of the cedi to major international currencies , high debt to GDP ratio, low investor confidence , resulting from poor credit ratings from Moody’s, Fitch and S&P Global ratings makes it extremely difficult for any emerging start-up post COVID19 pandemic whether it’s a delivery business, Fintech, IT firm, Agro processing , retail and whole sale business to sustain its operations in the face of current harsh economic climate in the country . Like the famous saying “it’s in adversity that one finds strength”, this piece discusses some strategies start-ups can employ to remain resilient in the face of the prevailing harsh economic crisis.

Starts –ups as a first measure targeted at sustaining the business, will have to cut down on needless and wasteful expenditure that doesn’t bring any returns to the business. It has become critical that in the face of the daunting economic situation the country is currently experiencing and its attendant effect on start-ups, the only way start-ups can still maintain and sustain their operations, is to totally cut down on needless and wasteful expenditures that add zero profit to the business. This must be done with all the discipline that comes with prudential financial management that ensures value for money .Having frank and honest discussions with your team on the state of affairs and involving them in the process of doing away with needless and wasteful expenditure can turn out to be more successful than anticipated. The frank conversation must centre on taking drastic measures to either sustain the business or maintaining the status quo that will lead to an eventual collapse of the business. The time and effort that goes into starting any enterprise especially in Ghana is no child’s play and so the best way out, will be to streamline operations by doing away with needless and wasteful expenditure, that adds nothing significant to the business.

Another point to consider by start –ups is to let market demand guide what products or services to offer consumers. In trying to navigate and sustain the business in these difficult times , it is important for starts-ups to read, predict and anticipate the market demand and preferences of consumers , before they come out with a particular product or service targeted at the final consumer .It doesn’t make sense to adopt the traditional wholesale Chinese marketing strategy, it will fail in our current economic situation .Consumers have very limited purchasing power resulting from high inflation, it therefore limits what they can purchase at a particular time .An understanding of this situation should guide starts-ups in areas where they need to put in more resources to produce products or offer services that gives them the best return on investment .

Start –ups should also consider using alternative indigenous raw materials to reduce high importation cost .The current economic climate, requires start-ups to look within in finding local solutions to sustain their operations while supporting the Ghanaian economy The Ghanaian economy is reeling from the continuous depreciation of the cedi and rising inflation resulting in the high cost of goods and services. The Ghana statistical service has attributed our rising inflation to be an imported one, resulting from the importation of raw materials into the country for production. Starts –ups must source local raw materials for production in order to avoid importing inflation into the economy. The temptation to transfer the cost of production resulting from high cost of importation of raw materials to the final consumer becomes inevitable in our current situation .This will force consumers to look for alternatives , a move that can be counter-productive for the sustainability and survival of Starts –ups.

Starts –ups are advised to adopt local raw materials and indigenous technology in order to save cost and support the local economy to grow. This move in the long run will ultimately boost the strength of the cedi, which currently is on a free fall against major foreign currencies.

Start –ups need to develop partnerships and take advantage of various funding initiatives by international organisations. If there is a period in history, where owners and managers of start-ups must put their ears on the grounds to identify various government and international financial institutions led funding support and initiatives for SMEs in Ghana to recover from the ravages of post COVID19 pandemic and most recently the Russia-Ukraine war. For starts –ups to sustain their operations and avoid the risk of shutting down completely, it is important for them to take advantage of the various grant support systems that are rolled out by government agencies and donor institutions like GEA, GIZ, and MasterCard Foundation. Access to these grants and interest free loans will help shore up the financial muscles of starts-ups in these difficult economic times to still keep the business going. Start –ups must make a conscious effort to pursue such opportunities for the sake of their sustainability and continuous growth .These grants and support schemes usually come with strict and rather cumbersome procedures in terms of documentation but the saying “nothing good comes easy” should be the motivation for Starts-ups to pursue and take advantage of these opportunities in that space.

Start –ups must prioritise the use of modern technology to lower the cost of operations and ensure greater efficiency .If there is a time in our economic transformation agenda, where businesses especially starts-ups will need to employ the latest technology to improve and sustain their operations then it’s now. The current economic situation and unfriendly business climate makes it imperative for starts –ups to adopt and automate their operations in the way , that will help save cost and strategically sustain the business to survive beyond the current economic crisis.

“knowing is not enough, doing is critical”, start-ups that will still keep their businesses going, post the current economic challenges, are the ones that will make the right sacrifices and implement some of these strategies enumerated above. Starting a business in Ghana is not easy , it will be sad to see all the hard work and tireless sacrifices go waste. However, this can be averted, if start-ups will be proactive in adopting these strategies as part of measures to reduce cost expenditure while ensuring an efficient resource management plan for the growth of the business beyond the current economic crisis.

Long live the Ghanaian start-ups!!

Long live the Ghanaian Entrepreneurs!!

Columnist: Van-Ess Alootey.