Challenges and coping strategies of Small and Medium Scale Enterprises (SMEs) in the Tema Metropolis

Abstract

Small and medium-scale enterprises (SMEs) are considered as the heartbeat of every economy due to their immeasurable contributions to GDP as well as employment (Aryeetey, 2001; and Abor and Adjasi, 2007). Despite all these, they face myriad of challenges from capital inadequacy to technological deficiency. This study, therefore, sought to identify the source(s) of funding available to SMEs in Tema Metropolis, their performance and prospects as well as the challenges and coping strategies. The study employed the descriptive survey design and administered questionnaire to 120 owners, managers and employees within the metropolis. The business operators were largely satisfied with their performance in terms of employment, customer base, sales, cost/expenditure, profit and physical expansion. The main prospect indicators included customer base, cost or expenditure reduction and increased sales and firm growth. The main challenges facing businesses in the metropolis were as follows: high taxes; Cedi depreciation; low demand/sales; high rent; high interest/lending rates; theft/burglary; payment of high salaries and utility bills and lack of technology. The coping strategies that firms adopted were bulk purchasing, judicious use of input material, bargaining on input prices and employees‟ salary negotiation. Timely intervention by Government and other stakeholders, through: reducing taxes, interest rates, rental cost and utility bills; ensuring stable exchange rate regime; and improvement of research and development, among others, is needed to avert the possible collapse of many of these businesses.