Although the improvement in the business environment is to empower the private sector to drive the growth of the economy, firms in Ghana have not been able to fully exploit the opportunities created to achieve this.
They are constrained in their ability to participate in markets because of weak competence and capacity, including lack of skill and knowledge.
People who do business invest in their companies to expand production, ensure that their products meet international standards, and adopt up-to-date technology, management and marketing systems.
"It is only with a proper structure and system that the private sector will be able to take advantage of the opportunities that an improved environment presents," the minister for Private Sector Development and President's Special Initiative (PSI), Kwamena Bartels said this at the 'Meet the Press' series in Accra yesterday.
The minister stated that government's intervention through the PSI, is a vision for the development of the private sector and it recognizes the fact that market reforms alone will not get Ghana to its economic destination.
"Indeed the assumption of policy reforms to free productive forces, has clearly not worked very well for developing countries like ours," he hinted.
According to him, four PSI areas are presently at various stages of implementation. These he said are cassava starch, palm oil, salt and textiles and garments.
Touching on the public-private dialogue in the country, he disclosed that to achieve these, corporate income tax rates have been lowered to 28% this year from 32%, promising this will be further reduced to 25% in 2007.
To further free up working capital from firms and to improve their cash flows, the withholding tax rate on the supply of goods and services will be reduced from 7.5% to 5%. The national re-construction levy is also to be lowered and gradually phased out by 2007.
Again, he added that to free up loanable funds for the private sector, the bank of Ghana has been persuaded to reduce the secondary reserve from 35% to 5%.
The minister said his ministry has supported the implementation of the business sector advocacy challenge fund to strengthen the quality and quantity of the dialogue.
Mr.Bartels also disclosed that government is working to increase the private sector participation in the provision of public infrastructure and service.
Cabinet has approved policy guidelines designed by the ministry for the implementation of public-private partnership in Ghana. The approved framework takes into consideration the public procurement act, financial administration act and requirement for project design and implementation.
Another point the minister highlighted was on the impact of reform efforts on the economy, saying the BoG survey on business confidence indicates that business sentiments about their own prospects and those of the economy in 2005, remain generally optimistic.
"The central bank's composite index of economic activity increased by 17.3% between June 2004 and June 2005."
Figures from BoG also indicate that the bank credit to the private sector has been increasing quite rapidly, relative to GDP. At the end of June 2005, credit to the private sector stood at 12.5% of GDP, up from 11.5% in June 2004. This is the highest in five years.
The Ghana investment promotion centre registered 54 new businesses in the first quarter of this year, compared to 48 in the first quarter of 2004.
Some larger businesses have folded up in the face of global competition and unfavourable terms of trade.
However, many smaller businesses have been established during the period.