Background Governance plays a direct role in whether a small- or medium scale business survives beyond its founder, uses resources efficiently, attracts finance and responds succes
The report indicates that governance plays a direct role in whether a small- or medium scale business survives beyond its founder, uses resources efficiently, attracts finance and responds successfully to changes in the market. In Ghana, this issue is particularly important because the business sector is dominated by small enterprises and a large proportion operate informally. The 2024 Integrated Business Establishment Survey covers businesses operating from fixed premises, open spaces and mobile locations, showing the breadth and diversity of Ghana’s enterprise sector. (Stats Ghana)
It further notes that the World Bank’s 2023 Enterprise Survey for Ghana interviewed 713 formal firms between February 2023 and February 2024. Of these, 52.5% were small firms employing 5 to 19 workers, 37.7% were medium sized firms employing 20 to 99 workers, and only 9.8% were large businesses. (Enterprise Surveys) This distribution makes governance especially relevant because governance problems in small businesses are often different from those found in large corporations. Small firms may not need elaborate boards or large compliance departments, but they still need clear responsibility, financial controls, reliable information and rules for major decisions.
Governance in an SME should therefore not be understood narrowly as having a board of directors. In practical terms, it concerns who controls money, who makes decisions, how those decisions are checked, how employees are supervised, how conflicts are resolved, how the business complies with regulations, how risks are managed and what happens when the owner is absent.
The central argument is that governance contributes to SME sustainability when it reduces excessive dependence on individuals and replaces informal habits with systems that are appropriate to the size of the business. However, governance can also become costly and bureaucratic if structures designed for large corporations are imposed mechanically on very small firms. The issue is therefore not simply whether SMEs have governance structures, but whether those structures solve the actual problems affecting their survival and growth.
FIFTEEN (15) KEY ROLES OF GOVERNANCE IN SME SUSTAINABILITY;
One of the most common practical governance problems in Ghanaian SMEs is the concentration of ownership, management and control in one person.
The founder may approve purchases, negotiate with suppliers, receive payments, control the bank account, recruit employees and decide salaries. In many cases, even experienced employees cannot make routine decisions without consulting the owner.
This arrangement can work during the early stages of a business because decisions are quick and the owner understands almost every part of the operation. The problem emerges when the enterprise begins to grow.
Consider a small furniture manufacturer employing 15 workers. If only the owner can purchase timber, approve customer credit, sign cheques and negotiate major orders, production can slow whenever the owner travels or becomes unavailable. The problem is not necessarily a shortage of employees. It is a governance problem caused by excessive concentration of authority.
A sustainable business needs limited but meaningful delegation. The owner can retain control over major investments while allowing a production supervisor to approve routine material requests within a defined amount.
For example: Purchases below GH¢2,000 may be approved by an operations manager. Purchases between GH¢2,000 and GH¢10,000 may require the owner and manager. Purchases above GH¢10,000 may require documented quotations and additional review.
Such controls provide both speed and accountability.
The critical point is that delegation should not mean loss of control. Good governance creates controlled delegation. Without delegation, the business cannot scale. Without controls, delegation may expose the firm to fraud or poor decisions.
2. Financial Governance Is Closely Connected To Survival
