DYNAMICS AND GROWTH OF STREET FOOD ENTERPRISES IN KUMASI METROPOLIS

ABSTRACT

The informal economy in developing countries such as Ghana employs a large section of the economically active population. However, governments are skeptical as to the extent to which they should seek to formalize informal economy businesses as opposed to investing in the sector while enterprises remain informal. This dilemma arises because of two viewpoints. Romantics view the sector to be bursting with entrepreneurs managing businesses with the potential to grow and that enterprises provide enough income to sustain the livelihoods of owners as well as their dependents. Cynics view the sector to be inundated with persons having limited business opportunities and who have to grapple with certain forces present in competitive markets. Literature supports both sides of the debate and this study attempts to contribute to the discourse with evidence from street food vendors in Kumasi Metropolis. The research question investigated was how and to what extent can evidence of a progression over time be found among street food enterprises located in Kumasi Metropolis? This study sought to identify the dynamics underlying street food vending in the study area and also evaluated how street food enterprises had progressed in their organisational life cycle. The main hypothesis was that over time, traditional vendors would upgrade their enterprises and the way in which business operations were conducted in an attempt to improve their statuses while meeting existing and emerging demand. Multistage sampling was used to select vendors of multiproduct street food enterprises located in three distinct location classes namely low, medium and high business activity areas. Data was collected using a semi-structred questionnaire and analysed using both descriptive and inferential statistics and two-step cluster analysis in SPSS software.

The factors that could potentially drive the transformation of vending activities were identified as; motivation for engaging in street food trade, location of the enterprise, business training, financial assistance, certification and risk taking ability of vendors. The hypothesis that these forces will result in an evolution in the trade, in terms of business models, cuisine and assets was only partially validated. The implication is that there are insufficient dynamic forces driving the progression of street food enterprises in the study area. The conclusion is that even though most street food vendors have not made much progress in upgrading their statuses, the enterprises still have a potential for growth. It is recommended that vendors without business operating licenses must seek to register their enterprises for taxation and enterprise identification purposes. This will enable them to become visible economic units to justify any interventions from the government or other main stakeholder institutions in the sub-sector. Cluster analysis was employed to group enterprises into three stages of growth from the least to the most complex that is; emerging, transition and established phases. Socioeconomic factors influencing stage of growth include startup capital, daily net income and access to a permanent vending site inter alia. High cost of cooking ingredients was a major business challenge at all life cycle stages just as high taxes were. Operators of street food enterprises are advised to form strategic links with suppliers to ensure that they gain constant access to necessary inputs at discount prices. The study also recommends a review of taxes for street food enterprises in Ghana. Business strategies found to drive growth comprise sales promotion, personal selling, innovativeness, improvement of food quality and effective pricing strategy. Future researchers could modify the instrument used for the study so that a longitudinal study is conducted on street food enterprises in urban Ghana. More qualitative data could be sought from vendors to gain more insight into the determinants of growth of street food enterprises.

CHAPTER ONE

INTRODUCTION

1.1       Background to the study

Rural-urban drift is on the rise because of the notion that more livelihood opportunities exist in cities (Yankson & Bertrand, 2012). However, migrants soon find out that these perceptions are not always accurate. Rather, there are limited sources of income in the city and most employers have specific criteria for recruiting people. Many of such people participate in informal activities to enable them to meet their expenditure requirements. Asiedu & Agyei-Mensah (2008) state that the informal economy is one bustling with diverse income generating activities. The informal sector is not officially recognised by governments in developing countries, although activities are usually based on replicating goods and services offered by institutions in the formal sector but at a cheaper cost. Thus, the informal economy is considered in the light of the formal sector (Jimu, 2004).

Anyidoho (2013) reports that street vending in Ghana is a characteristic of the urban informal economy and must be understood within the contexts of urbanization and a dominant and growing informal economy. Iyenda (2005) classifies street vendors as mobile and fixed. Mobile vendors trade in items such as vegetables, fruits, bread and mobile airtime while fixed or sedentary vendors sell vehicle tyres, clothing, cooked foods, inter alia, and operate in booths. Whether activities in the informal economy, such as street food trade, can promote economic growth and development remains a much disputed subject to date (Walsh, 2010). This is because there are no clear guidelines from empirical studies. There are those who perceive the informal economy as important because of its ability to create employment and develop entrepreneurs with the potential to contribute to overall economic growth (Hart, 1973; Tinker, 1997). The implicit argument is that governments should invest more resources into the sector to improve the working conditions of these business owners because the sector helps in reducing poverty and unemployment.

Nevertheless, the contention of governments in developing countries is that because informal workers are not fully registered under the law, authorities are unable to obtain direct taxes from them. It is based on this fact that the cynic point of view is grounded. Davis (2007) contends that due to lack of regulation, informal activities are conducted in a haphazard manner and thus these individuals can only earn marginal incomes. The author maintains that, unless there is a major intervention in the sector the people will remain poor because of inadequate business opportunities to exploit. Current research supports both sides of the debate although those who view the sector as important have dominated in developmental studies (Verick, 2006; UNDP, 2007). Despite this, the informal economy has persisted especially in Africa. Street food vending provides people, mostly the urban poor women with little formal education, with a viable alternative to earn a living (Murray, 1991).

Dynamics in street food trade is a term used to describe the process by which sellers undertake vending activities and evolve. The evolution of street food vending occurs as a result of the interaction between certain forces which may position enterprises for growth and expansion. Asiedu & Agyei-Mensah (2008), using a qualitative study, reveal that there is an upward mobility in the conduct of street vending business in Accra, Ghana. Their study shows that there is a gradual ascent over time from the sale of simple, rudimentary goods to the more sophisticated and costly ones. This means that it is possible to identify growing street food enterprises (SFEs) capable of adapting their products to meet current trends; and by using developed business models compete with formal food joints for emerging business opportunities in the Kumasi Metropolis.

The study seeks to contribute to the debate by providing empirical evidence to demonstrate how vendors are upgrading their business positions and mode of operations in general as vendors endeavor to exploit existing and recent demands for street foods. An organisational life cycle (OLC) model, in which the process of enterprise growth is viewed as occurring in a series of stages can be used to explain the growth of small businesses (Churchill & Lewis 1983; Scott & Bruce 1987; Hanks et al., 1991; Dodge, Fullerton & Robbins 1994). Using the OLC model, an attempt is made in this study to identify the factors driving the growth of SFEs in their life cycle so that their progress over time can be evaluated.

1.2       Problem statement

In a developing country like Ghana, rising population in urban cities has resulted in a massive proliferation of individuals into the urban informal economy. This is because the formal sector is unable to absorb the extra numbers of city dwellers who have migrated from rural areas with the intention of getting employment in the cities (Khan, 2000). The sub-sector alone employs more than 60,000 people in Accra and generates an annual profit of over US$24 million (Tomlins, Mahara & Johnson, 2001). With time, the population of street food vendors (SFVs) is expected to be far more than this in recent times. Asiedu & Agyei-Mensah’s (2008) study in Accra, however reports that there is an upward mobility of some vendors over time and that they eventually upgrade their statuses. To support this assertion, research conducted in Bangkok demonstrates that a new cohort of street vendors have adopted modern strategies which make them unique (Maneepong & Walsh, 2009). Due to increasing urbanisation and rising pressures from work schedules the demand for street foods by consumers is increasing. In an attempt to capitalize on new opportunities while meeting existing demand it is expected that over time, as SFVs become established in business, they would evolve from running enterprises using traditional approaches to using more complex and modern ones.

Due to their informality status, participants in such economic activities face difficulties in gaining access to external financial assistance to start a business (Mitullah, 2003). Yet, the ease of setting-up an informal business can be commended because of the low capital involved. The result is that individuals with limited skill-set start SFEs using traditional business models. Bobodu’s (2010) study, also in Accra shows that a considerable number of street food vendors have been operating in the same locations for extended periods of time without any tangible progress. Some of the possible factors accounting for stagnation of these enterprises include, inter alia, low level of education and training (Lipman, 2008), lack of access to a permanent site for vending and certification (Cohen, 2000) as well as a small asset base (Bobodu, 2010). At the macro-level, lack of improvement of vendors means that the impact of SFT on economic growth will be impeded. Previous studies demonstrate that enterprises grow in stages and that to graduate to higher stages, strategies would have to be implemented to overcome the different problems at each growth stage (Dodge & Robbins, 1992; Hanks et al., 1993). However, there is paucity of literature regarding the extent to which vendors who have upgraded their status can be found in the Kumasi Metropolis. It is against this backdrop that this study attempts to address the main research question; how and to what extent can evidence of a progression over time be found among street food enterprises located in Kumasi Metropolis? Consequently, the following specific research questions were developed.....

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Item Type: Ghanaian Topic  |  Size: 143 pages  |  Chapters: 1-5

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