Small scale industrial agglomeration - a case study of the small scale wood industry spontaneous agglomeration at Anloga, Kumasi

Like most developing countries, Ghana since the independence has adopted the import substitution industrialization strategy. Under this strategy, many relatively large scale industries were established. Unfortunately, this strategy failed to make any significant contribution to the economic development. As a result of this strategy coupled with poor macro-economic management and political instability, the country witnessed a period of economic stagnation and decline during 1970s and early I980s. During the same period, the small scale industrial sector experienced dramatic growth. Recognizing the role of small scale industries in the development, the policies of the Economic Recovery Programme (ERP) emphasized the promotion of small and medium scale industries. Notwithstanding this recognition the sector has not received enough and adequate support it deserves. There is still much official harassment especially for those stall scale industries Subject to spontaneous agglomeration operating in urban areas. In addition to the problems of lack of capital, raw materials supply and lack of management, inter alia, they are under threat of ejection from their location. The small scale wood industries agglomeration at Anloga, Kumasi, is one of the most dense and active Spontaneous agglomeration in Ghana. Although the industry is facing many hardships, the agglomeration is showing remarkable growth. The underlying factors for the growth of the industry have been explored in this study. Information for the study was collected through the administration of a questionnaire in a field survey and informal interviews with the institutions supporting the snail scale industries. The survey covered 35 percent of the total snail scale wood industries at Anloga. The analysis of the data revealed that the growth of the area has been affected by exogenous and endogenous factors. The exogenous factors include the government policies and the assistant institutions while the endogenous factors include the intra-business structure an1 the linkages. The fall in the production capacity of the large scale industries during the period of the economic decline provided unsatisfied demand that the small scale industries catered for. It was also found that some of the ERP policies wore indirectly advantageous while the others were indirectly disadvantageous. Moreover, the assistant institutions and schemes designed especially for the sector did not make much contribution to the growth of the area. In this unfavourable business environment, the small firms tried to adjust themselves to these conditions. They adopted different strategies to cope with their problems and endeavoured to enlarge their scale of operation. It was found that most of the firms have increased their skilled labour and have used power driven machines. There is also an increasing tendency towards the division of labour in the firms. The capacity utilization of power driven machines was found relatively high. These factors coupled with the job formation characteristics of the small scale industries an attracted a encouraged many firms to establish in the area, The analysis showed also that there are strong backward ‘and forward linkages between the firms. The spatial distribution of linkages is strengthened by operation in the agglomeration. The establishment of new firms attracted by the agglomeration environment creates multiplier that attracts new firms in cumulative fashion. Based on those findings, it can be concluded that most of the firms benefited from operating in the agglomeration. Any promotional programme should aim at improving the micro- and macro-business environment to create an agglomeration environment for the effective development of small industries. In order to improve the macro-business environment, it is recommended that the stratageies for promoting SSIs should be integral part of the development stratagies at national, regional and local level. The performance of the assistant institution should improve. It is also recommended to increase the accessibility to create to credit facilities, promote trade and exporting capabitity of small scale industries, and improve upon their management skills and technology capacity. The recommendation for improving the micro-business environment aimed at giving suggestion for the relocation programme, providing the necessary infrastructure and common production facilities, and strengthening linkages. It is recommended that at the new site of the small scale woos industries, a specialized International Technology Transfer Unit (ITTU) be established to provide the necessary services to the firms. The promotion of small scale industries needs a pragmatic approach based on the participation and the understanding of the target group industry.

Source: KNUST