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Problems facing business associations in emerging countries: the case of Ghana.

Ghana, like other lesser developed countries in transition, has attempted to increase its GNP through an Economic Recovery Programme. This programme begun in 1983, involved policy reforms directed at increasing private business activity, especially from export oriented industries. The reforms included new exchange rate policies, trade liberalisation, rationalization of state-run enterprises, control of inflation, and expansion of the private sector. One of the strategies of strengthening the role of private industry in emerging countries is to increase the membership and activities of business associations. Outside of social and political theory, little is known about the role of business associations in development (Becker, 1990). This note examines the historical and current role of these associations in strengthening the private sector by studying a cross section of Ghanaian business associations. The note compares the characteristics, services, and problems faced by the associations and presents their suggested solutions.

A business association may be defined as voluntary group of people having a common interest and acting together to satisfy that common interest. Businesses may join an association to improve their own profitability and/or to improve the industry and general economic environment (Rose, 1954). Trade associations can have a significant impacts on growth, consumer prices, and producer output (Austin, 1988). Each country has its own unique network of business associations. The network structure will depend on problems, personnel, and resources within the economic environment (Glasser and Sills, 1966). The stage of economic development will influence the number and types of associations. Colman states that business associations always have close ties to the respective governments. Linkages between established associations and the government will be changed as the economy liberalises (Colman, 1990).

The need to satisfy business self-interest would be less in a perfectly competitive world where information is freely available, prices are instantaneously determined, and transactions are free. Market imperfections are well known, especially in Third World countries. The role of associations in Third World settings is to reduce economic uncertainty and imperfect information while somewhat offsetting strong bureaucratic dysfunctions (Austin, 1988). Business associations are having difficulty developing and surviving the economic transition now taking place in Ghana. According to Stein, privatization initiatives may actually reduce industrialization which will adversely affect membership in some business associations in Ghana (Stein, 1992). However, Nelson and Langlois suggest that the more government agencies are involved with firms in various industries the lower the firms' level of performance (Nelson and Langlois, 1983). Donor support of private associations may cause a dependency relationship which could make the association vulnerable (Flynn, 1993).

Scope

The participants in the study were selected from Ghanaian product and professional business association. The selection came from two categories of associations. The product association category is composed of approximately 15 traditional and emerging industries' Associations representing traditional industries included cola nut dealers, precious minerals, and timber. Emerging industries included horticulturist, marine fisheries, scrap metal, and vegetables exporters. The professional industries included such types as accountants, bankers, and women's groups.

The associations representing the non-traditional export industries and selected professional groups were invited to participate in a 1/2 day workshop to share information and to develop ideas which might strengthen their operations. The conference was attended by 18 participants representing nine organizations.

The workshop was sponsored by government training agencies and the Association of Ghana Industries. The government training agencies were the School of Administration, University of Ghana, the Ghana Institute of Management and Public Administration, and the Institute of Management and Productivity.

During the workshop the participants were asked to complete a questionnaire. The questionnaire was composed of 32 questions consisting of open-ended and closed questions included association and industry characteristics, current and planned services, and training needs. The associations were asked to identify activities which might improve their service to members. Finally, they were asked to identify types of training which might be offered to improve their association's performance.

Finding and Analysis

An attempt was made to condense and summarise the responses in the case of open ended questions. Under characteristics, the associations' employees ranged from 0 to 15. The age of the associations ranged from 31 to less than 1 year. The Association of Ghana Industries (AGI) and the Ghana Chamber of Commerce (GCC) employed the most while Ghana Federation of Business and Professional Women (FPBW) and the Non-Ferrous Scrap Metals Export Association (NFSMES) employed the least. The number of employees and membership size seems to be directly related to the age of the organisation.

Stated membership ranged from 10 to 1,500 members. When ask to estimate their potential membership (i.e., number of firms in their industry) many of the associations were unable to give even an educated guess as to the actual number. With exception of the scrap metal industry, the more established industries were experiencing a decline in membership. Emerging industries and women's organizations were experiencing growth in both the industry and association membership. Declining membership was attributed to financial pressures, the inability to pay dues, competition from imports, economic liberalization, member apathy, lack of staff, and in ability to gain financing. Membership increases were attributed to increasing exports, expanding foreign markets, new leadership in the organisations, and government requirements.

The Ghana Assorted Foodstuffs Export Association (AFEA) had the highest percentage of members exporting while the women's associations had the lowest percentage of members exporting. Almost all associations had members who were exporting a significant portion of their total output. For those who did export, the NSFNEA and the AFEA had members that exported their entire output.

The dues ranged from 2,000 cedis to 100,000 cedis (1 dollar = 415 cedis). It should be noted that 98 per cent of the firms represented by these associations employ fewer than 10 employees. The GCC and Ghana Furniture Producers Association (GFPA) varied their dues with firm size. Disturbingly, over 40 per cent of the association's members had not paid their dues this year. The low level of dues collections means that the number of members in each association is overstated. The executives attributed the slow payment of dues to both association and general economic problems.

Association problems included member apathy, inactive members, and the lack of services from the association. Poor economic conditions included falling prices for exports and business closing. The Association of Ghana Industries noted that economic liberalization was causing manufactures to move into commercial ventures involving importing finished goods and selling them locally. These shifts further contributed to the decline in the vitality of that association.

The executives were asked to explain the types of actions taken to collect dues and increase membership. The responses suggested a variety of actions which included searching for grants from donors, improving member sales through group marketing, membership drives, improving the associations' image, and providing more services.

The participants were also asked to list the value activities they are now offering their members and those activities they would like to offer. Except for scrapmetal, all of the associations provide information to their members. The methods used to provide information included circulars, handouts, workshops, and a library. All but GFPA provided domestic information which included legislation, sourcing, pricing, and markets.

Foreign market services were provided by all of the association except Women's World Bank (WWB) and NFSWEA. These services included pricing, credit, trade information, information about potential foreign joint partners, packaging, and foreign sales contacts. Like information, all the associations except NFSMEA provided access to training for their members. In several cases, however, the government sponsored Export Promotion Council was relied upon to actually offer the programs.

Political action was conducted by only the GFPA, Horticulturist Association of Ghana (HAG), and AFEA. Most of the associations provided some support services. The GFPA did co-operative buying for their members, NFSMEA provided group marketing, while others gave advise on products and prices. Only the FBPW and AFEA have begun to develop a database.

The FBPW distribute information on pricing, credit and training and the AFEA keep data on what to export by season. The remaining groups would like to start data bases. About half of the respondents indicated that they are providing networking opportunities for each other and their members. The WWB indicated that they also provided industrial business counselling for their members.

When asked what additional services they would like to provide their members, a wide range of services were suggested. Member training was the most frequently mentioned service. Credit services and market information were also mentioned. The associations indicated that capital purchases such as a kiln drying facility, additional port facilities, and a cold storage facility would be desirable to support member operations. None of these facilities could be afforded by individual firms and could be a reason for joining an association.

All association indicated that they provided some help in exporting and would like to significantly increase these type services. The export services might include improving the quality of member exports, increasing access to credit, training, and funds for foreign marketing trips.

Some of respondents indicated that they had attended training programmes, mostly sponsored by the government agency, Ghana Export Promotion Council, in the past two years. They also indicated that they would willing pay to attend future training programmes.

Summary and Conclusions

The problems faced by executives in developing effective associations are a microcosm of the economic development problems found in Ghana. Associations are affected by the economic adjustment problems associated with the transition from a centrally planned to capitalistic economy. The free movement of imports and exports combined with a floating currency has created disruptions for once protected industries. The responses by HAG, GFPA and GCC reflect these economic problems. Conversely, new opportunities are emerging for export oriented businesses. The falling currency value is increasing the competitiveness of some of the associations such as food processing and horticulture. The role of women in Ghanaian business is growing in importance as cultural attitudes change creating opportunities for women and women focused business associations.

The membership increases or declines appear to be directly linked to the fortunes of their respective industry. The newly established associations are gaining in strength while the more established associations are declining. The creation of new associations by government to reflect the interest and needs of non-traditional export industries seems to be an appropriate development action. However, steps need to be taken to strengthen the activities and services of these newly organized associations. Many of the new associations do not have full time leadership. Unfortunately, the government through the Ghana Export Promotion Council are interested in providing services that could be offered by these new associations.

In the transition, government bureaucrats are reluctant to relinquish control. Furthermore, some of the newly formed associations are in industries that have few firms. Low membership will result in the inability to deliver value activities. In these cases, the associations might be better managed though a consolidation effort through the Association of Ghana Industries. Until the associations are strengthened to the point where they are able to prove valuable services, they can not expect to increase membership.

The decline of mature associations reflects not only the decline in the Ghanaian economy, but also their inability to develop meaningful services for assisting members. The mature associations can not be expect to survive if they do not provide assistance to their members during the economic transition.

Providing valuable services is essential for both established and emerging associations. These associations are experiencing difficulty in identifying member needs. For example providing domestic and foreign market information, although done, is sporadic. Political action, a major reason for the existence of Western style association, is still shunned. In the socialistic system, the associations were an arm of government not an agent for political change. Under privatization, the associations must become demand rather than supply driven. A new mentality is required.

This note is an initial attempt to explain the role of associations in emerging and transitional economies. Much more work needs to be done before the extent of their impact is understood. Strong associations can serve as a voice from the private sector for change. The associations will need to provide effective leadership and be responsible for their own survival in the transitional economy where self-interest and private initiative are rewarded. Failure to become demand driven will result in failure.

References

Austin, J. Jaffe, `Toward an Evolutionary Theory of Trade Associations: The Case of Real Estate Appraisers,' AREUEA, Vol. 16, No. 3,1988. Becker, D. G., `Business Associations in Latin America: The Venezuelan Case', Comparative Political Studies, April, 1990. Colman, William B., `State Traditions and Comprehensive Business Associations: A Comparative Structural Analysis', Political Studies, 1990, Vol. 38. Flynn, David, `Sponsorship and Survival of New Organisations', The Journal of Small Business Management, Vol. 3 1, No. 1, January 1993. Glasser, W. A., and Sills, D. L., The Government of Associations, Bedminister Press, 1966) Nelson, R. G., and Langlois, R. N., `Industrial Innovation Policy; Lessons From American History', Science, Vol. 219. Rose, A. M., Theory and Method in the Social Sciences, University of Minnesota Press, 1954. Stein, Howard, `Deindustrialization, Adjustment, The World Bank, and the IMF in Africa', World Development, Vol. 20, No. 1, 1992. The Ghana Exporters Directory 1991, Ghana Export Promotion Council, 1991.

Dr John Masten is a Professor of Business Administration at Tennessee State University, Nashville, Tennessee, USA, and Dr. Steve Brown is a Professor of Business Administration, Eastern, Eastern Kentucky University, Richmond, Kentucky, USA. Dr Masten served as a USALD Visiting Professor in International Business at the University of Ghana in 1992. Business associations are being used to strengthen the private sector in transitional economies. Ghana provides a typical example of a country changing to a market economy. This note examines the role of business associations in Ghana. Eight associations representing non-traditional and traditional industries were studied. The characteristics, services, and problems of these associations are compared to gain a better understanding of the role they play in the economic liberalisation process.
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Author:Masten, John; Brown, Steve
Publication:International Small Business Journal
Date:Jul 1, 1995
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