By Philip Antoh
A recent study by the Institute of Liberty and Policy Innovation (ILAPI) has revealed that cumbersome bureaucratic processes are forcing over 40% of micro, small, and medium-scale enterprises (MSMEs) in Ghana to collapse or abandon their registration entirely.
According to the research, navigating the country’s business formalization process is heavily delayed and financially draining, acting as a major deterrent for first-time entrepreneurs.
The study found a stark contrast between Ghana and its peers: while registering a business takes just two to three days in other African countries, 40.8% of Ghanaian firms reported waiting between one week and a month to receive their business certificates.
The Executive Director of ILAPI, Mr. Peter Bismark Kwofi, highlighted the staggering disparity between official and unofficial fees. While the approved fee for a business registration certificate is just GH₵60, systemic bottlenecks force applicants to pay an average of close to GH₵2,000.
The situation is similarly dire at the Metropolitan, Municipal, and District Assembly (MMDA) level. An official permit costs GH₵50, but respondents reported paying a maximum of GH₵2,500—averaging GH₵1,275—before a permit is granted. For micro-enterprises and starters, these hidden costs are simply unsustainable.
The ‘Goro Boy’ Menace
The survey of 600 respondents laid bare the deep-rooted reliance on middlemen. A staggering 84% of applicants admitted to using ‘goro boys’ to bypass red tape.
The data revealed that without these middlemen, the system practically stalls. Of the 16% who attempted to navigate the process independently, a staggering 80% waited over six months for their certificates. Only 17% of all first-time registrants managed to secure their certificates within a week, and they did so strictly through the assistance of ‘goro boys.’
Operating in the Shadows
These delays have severe macroeconomic consequences. MSMEs represent approximately 92% of all businesses in Ghana and contribute nearly 70% to the national GDP. However, the ILAPI study found that 42.4% of MSMEs wait anywhere from three to over nine months for their operating licenses. As a result, 57.3% of MSMEs in the country are currently operating without the required licenses.
Rather than investing scarce capital into productive business activities, entrepreneurs are forced to drain their resources on bureaucracy. For many, the delayed and expensive registration acts as a punitive tax on formal entrepreneurship.
A Fragmented Regulatory Maze
The study identified part of the problem as a highly fragmented system. Business registration in Ghana requires navigating about 10 major regulatory agencies, including the Office of the Registrar of Companies, Ghana Revenue Authority, Food and Drugs Authority (FDA), Environmental Protection Agency (EPA), Ghana Standards Authority (GSA), Ghana National Fire Service, and local assemblies.
ILAPI noted that despite the existence of digital platforms, these agencies largely fail to allow online registration, do not publicly publish fee information, and rarely offer downloadable application forms.
The Way Forward
To dismantle these barriers and unleash MSME-led growth, ILAPI has proposed a series of institutional reforms; Unified Digital Portal, this create an industry-specific portal where all permits, EPA clearances, factory inspections, and manufacturing licenses are processed through a single, coordinated system.
On Regulatory Harmonization, the study advocate for the elimination of rarely used factory and industrial design permits to simplify the licensing regime, adopting the inter-agency coordination mechanism which mandate the GSA to coordinate with the EPA and FDA to eliminate duplicate testing and inspections.
ILAPI concluded that by streamlining these processes, ensuring transparency, and leveraging technology, the government can dramatically reduce the administrative load on businesses.
Ultimately, these evidence-based reforms are crucial to fostering a dynamic formal economy, attracting investment, and realizing the proposed 24-hour economy policy for job creation.