How political uncertainty affects SME cash flow in December 2024 elections

Political
uncertainty
has
a
substantial
impact
on
nations’
economic
landscapes,
particularly
the
stability
and
operations
of
small
and
medium-sized
firms
(SMEs).
As
Ghana
prepares
for
its
December
2024
elections,
SMEs
face
increased
political
turbulence.
SMEs
are
the
backbone
of
Ghana’s
economy,
providing
significant
employment
and
economic
growth.
However,
their
size
and
financial
limits
frequently
make
them
more
sensitive
to
external
shocks,
particularly
those
caused
by
political
events.
Political
uncertainty,
which
is
characterized
by
shifting
policies,
regulatory
changes,
and
market
volatility
during
election
seasons,
presents
unique
challenges
for
SMEs
seeking
to
retain
financial
stability
and
operational
continuity.
This
article
examines
the
numerous
ways
in
which
political
instability
can
impair
the
cash
flow
of
SMEs
in
Ghana,
offering
practical
insights
and
examples
illustrate
these
challenges.


Investment
Delays
and
Uncertainties

During
election
seasons,
potential
investors
frequently
take
a
wait-and-see
attitude,
deferring
investment
choices
until
after
the
elections
to
evaluate
the
political
landscape
and
potential
legislative
changes.
This
hesitancy
can
have
a
substantial
impact
on
SMEs
that
rely
on
external
finance
or
collaborations
to
thrive.
Political
campaigns
and
anticipated
election
outcomes
can
cause
market
volatility,
impacting
investor
mood
and
leading
to
a
risk-averse
attitude.
For
example,
a
technological
business
in
Accra
may
have
its
funding
rounds
postponed
due
to
investor
prudence
in
the
face
of
political
instability.


Fluctuating
Consumer
Confidence

Political
instability
can
impair
consumer
confidence,
resulting
in
lower
spending
and
changing
consumption
patterns.
SMEs
must
prepare
for
probable
revenue
decreases
by
implementing
tactics
such
as
cost-cutting
measures,
diversifying
income
streams,
and
increasing
customer
engagement
to
reduce
the
impact
of
fluctuating
consumer
behaviour
during
this
important
moment.
SMEs
in
the
retail,
hospitality,
and
consumer
goods
industries
may
experience
lower
sales
volumes
as
customers
priorities
savings
over
discretionary
spending.
A
shop
in
Kumasi,
for
example,
may
experience
decreased
foot
traffic
and
sales
in
the
run-up
to
the
elections
as
buyers
limit
their
spending
due
to
political
uncertainties.


Regulatory
Changes
and
Compliance
Costs

Elections
frequently
signal
prospective
regulatory
shifts
as
new
governments
or
policies
come
into
effect.
SMEs
must
negotiate
these
developments,
which
may
necessitate
modifications
to
business
procedures
or
increased
compliance
expenditures.
For
example,
a
manufacturing
SME
in
Tema
may
need
to
invest
in
equipment
upgrades
to
fulfil
new
environmental
standards
required
by
incoming
regulatory
frameworks
following
the
election.


Currency
Volatility
and
Exchange
Rate
Fluctuations

Political
uncertainty
can
cause
currency
market
volatility,
affecting
SMEs
that
engage
in
international
trade
or
rely
on
imported
goods
and
commodities.
Currency
volatility
can
cause
SMEs
to
have
uncertain
financial
flows.
Increased
import
prices
might
limit
profitability,
making
it
difficult
to
manage
day-to-day
expenses
and
make
future
investments.
Fluctuations
in
the
Ghanaian
cedi
can
increase
import
costs,
reducing
profit
margins
for
SMEs.
An
agricultural
exporter
in
Tamale,
for
example,
may
face
higher
import
costs
for
machinery
or
fertilisers
when
the
cedi
depreciates
amid
political
uncertainty.


Delayed
Government
Payments
and
Contracts

SMEs
that
provide
goods
or
services
to
government
agencies
may
face
delays
in
payments
or
contract
renewals
during
election
seasons.
Political
upheavals
can
disrupt
bureaucratic
processes,
resulting
in
administrative
delays
that
impact
cash
flow
estimates
for
SMEs
that
rely
on
public
sector
contracts.
A
construction
firm
in
Ho,
for
example,
may
face
payment
delays
for
infrastructure
projects
that
require
government
budget
clearances
after
the
election.


Increased
Operational
Risks
and
Insurance
Costs

Increased
political
tensions
or
civil
disturbance
before
or
after
elections
might
expose
SMEs
to
additional
operational
risks,
demanding
higher
insurance
rates
or
risk
mitigation
techniques.
SMEs
in
volatile
locations,
such
as
Ashanti
or
the
Northern
regions,
may
face
increased
security
concerns
or
property
damage
hazards,
necessitating
proactive
actions
to
protect
operations
and
limit
financial
losses.


Conclusion

Handling
political
uncertainty
is
a
significant
concern
for
Ghana’s
SMEs
as
the
country
prepares
for
the
December
2024
elections.
The
impact
on
cash
flow
caused
by
investment
delays,
shifting
consumer
confidence,
regulatory
changes,
currency
volatility,
delayed
government
payments,
and
heightened
operational
risks
highlights
the
importance
of
proactive
planning
and
resilience-building
methods.
Understanding
these
dynamics
and
implementing
adaptive
business
strategies
would
help
SMEs
better
weather
the
financial
turbulence
associated
with
election
seasons,
ensuring
long-term
growth
and
stability
in
Ghana’s
changing
economic
landscape.


Dr
Andrews
Ayiku


Lecturer/SME
Industry
Coach


Coordinator
(MBA
Impact
Entrepreneurship
and
Innovation)


University
of
Professional
Studies
Accra


ayiku.andrews@upsamail.edu.gh


IG:
andy_ayiku


@AndrewsAyiku


F:
Andyayiku



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Source:


Dr
Andrews
Ayiku