Contribution of non-farm enterprise development to poverty reduction: a case study of the Ahafo-Ano South District

The Ahafo-Ano South district lies within the green rain forest belt that runs across the Ashanti and Brong Ahafo regions. According to the 2000 Population and Housing Census of Ghana, 91 per cent of the population lives in the rural areas with the remaining nine per cent living in the three urban centres, namely, Mankranso, Adugyama and Sabronum. The district is therefore predominantly rural with agriculture and agro-based activities as the main pre-occupation. Household incomes are mainly derived from food crop farming whilst the dominant farming practice is subsistence which usually leads to poor harvests. Post-harvest losses are also very common to the rural farming community. Cocoa used to be the main cash crop but, as at now, most of the farms are over aged with some of them turned into food crop farms. As a result of the foregoing, incomes of the rural households are so low that their agricultural budgets are not enough to provide the most crucially needed basic and social needs. The ever increasing unmet household needs continue to challenge the rural households to look for ways and means of earning incomes to supplement the agricultural household budgets. Within the 12 months immediately preceding the survey period, 52 per cent of these rural households had taken to non-farm micro enterprise activities as the major source of supplementary income for the scanty household agricultural budgets. However, the capacity of the rural non-farm enterprises to increase employment and incomes depends on the district’s ability to accumulate enough capital, produce entrepreneurs and to acquire the appropriate technology. But, there are no institutional mechanisms in place to satisfy the three conditionalities. The study, after identifying the problem, set out to explore ways for optimizing the potentials of non-farm activities towards poverty reduction. Both the survey design and case study methods of data collection were employed as directed by the desktop study. The desktop study also identified the necessary tools for data collection in the form of two sets of questionnaire for structured interviews. The household and the non-farm micro enterprise were the objects of the research. The survey included institutions within and outside the district. The selected institutions were those with interests in programmes concerned with rural micro enterprise development as part of the total community development efforts in the study district. Some of these institutions were the Ahafo-Ano District Assembly, the National Board for Small Scale Industries, the regional office of the Ghana Statistical Service, traditional councils and schools in the study district and the district hospital at Mankranso. Evidence from both the macro and micro environments pointed to the fact that non-farm micro enterprise development in the district could be supported. From the macroeconomic environment, retrenchments in the 1990s led to growth in unemployment rates which enhanced the chances of micro enterprise development in the district. From the micro environment, the existing periodic and daily markets as well as the district’s per capita income of Cl, 457,997, which is higher than the national poverty line of C950, 000 provided very necessary potentials for marketing non-farm micro enterprise products. Based on the assumption that the development of micro enterprise activities in the rural areas is a vital tool for wealth creation in those areas, the hypothesis that income from non-farm micro enterprises contribute to household poverty reduction was tested as part of the data analysis. The Least Squares method was also employed to assess the contribution of non-farm enterprise activities to per capita incomes of households. The same method was used to determine the relationship between household poverty and levels of illiteracy and the effects of illiteracy on entrepreneurial performance and, subsequently, on household poverty reduction. All the three statistical analyses employed concluded that the development of non-farm micro enterprise activities in the Ahafo-Ano South district could accelerate household poverty reduction in the district, provided that the three conditions, namely, that the district accumulates enough capital, produces entrepreneurs and acquires the appropriate technical skills, are satisfied.

Source: KNUST