Most business formation in Ghana is dominated by sole ownership, a survey on urban informal economy has revealed.
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Sole ownership dominates business formation
Commissioned by the Friedrich Ebert Stiftung (FES) Ghana, the survey sort to gain a better understanding of the urban informal economy from the perspectives of its operators in Ghana.
Commissioned by the Friedrich Ebert Stiftung (FES) Ghana, the survey sort to gain a better understanding of the urban informal economy from the perspectives of its operators in Ghana.
1,500 employers and 3,500 employees were surveyed randomly in all 10 regional capitals of Ghana.
The report revealed that business formation in Ghana was dominated by sole ownership enterprises (87.3%) followed by family enterprises (6.4%); partnerships (4.4%); and cooperatives (2.0%).
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Enterprises were concentrated in two main areas - Wholesale/Retail Trade and Services.
They constitute 61.5 % share of employment for employers and 65.2% for employees.
The rest are: Manufacturing (10.6%); Food and Related Services (15.5%); Building/Construction (5.0%); Agriculture, Forestry and Fishing (2.2 %); Mining and Quarrying (0.75%).
Wholesale and Retail trade as well as Food and Food related Services are female dominated. The rest are dominated by males, the report added.
Four reasons stood for engaging in business in the urban informal economy.
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They include: preference for being one’s own boss (18.2%); absence of formal work (14.4%); additional income (13.4%); and good income opportunities (11.8%).
The most preferred and intentional choice of premise is a permanent location by the roadside (67.7%) for employers and 46.5% for employees, according to the report.
Five main reasons were given for this and they include: best location available (28.0%); good sales (22.9%); close to home (12.3%); flexibility of managing job together with family duties (8.7%); and close proximity to other businesses (2.8%).
Majority of employers (55.6%) do not contribute to any pension scheme whilst 29.5% do, the report found.
Whereas most (35.0%) employers paid Value-added tax, less than a quarter paid personal income tax, depriving the state of revenue.
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Majority (73.3%) sold their goods and services by cash, 23.7% by credit and 3.1% on commission. Further, most employers (73.9%) acquired their raw materials/inputs by cash 15.6% on credit, family relations (4.6%), and from friends (4.2%).
Most employers (71.2%) believe that their enterprises have expanded since establishment and (70.2%) would still operate in the next five years. This implies that business has been good for most of them.
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