Ghana is one of the top producers of shea butter in the world.
Ironically, the nation has not been able to successfully create beauty and cosmetic products out of its shea butter.
In June 2019, the research firm Konfidant, released a report that over 90% of products within the Beauty and Cosmetics industry in Ghana’s leading supermarkets were imported into the country.
In less than two years, this percentage has decreased to 70%, allowing more local businesses to gain the visibility they need to grow their ventures.
Sharon Acheampong, the founder of Eya Naturals, shares how transformational the support of the supermarkets has been to her business:
“There was one shop, our products were down the shelves but one year on, we have the top-shelf. That makes a difference because as a consumer, when you are walking through the aisle, it’s what you see that you go for.”
One of the challenges local businesses face is getting access to market. The supermarkets play a crucial role in granting them direct access to consumers.
Unfortunately, the credit-based agreement the supermarkets have with the local businesses threatens their growth.
Sharon shares how this impacts small businesses, “I have experienced some shops that pay in 90 days, three months. For a small business, that’s a big deal because the loss of the cash flow coming in is the same one, we turn around to buy our raw materials, to pay staff, and all other expenses. If this money is stuck for three months it is worrisome because, in those three months, you are still supplying the shops.”
Some business owners like Nana Ama Yankah, the founder of NAYA by Africa, have been forced to set up her own brick and mortar shops to address this challenge.
“The initial idea was to make the products and sell them in retail shops, but a lot of the shops were not willing to take the products for starts, so you had to know somebody who knew somebody to get into the shop. Once you are in there, and they finally sell your products, getting your money back is another challenge. Sometimes you go there for 60 to 90 days, and you will still not get your payment. Some have still not paid me three-four years now, I just left the money.”
The global beauty industry is estimated at $670 billion. It is crucial for local businesses to grow beyond their current micro and small sizes into big businesses in order to take a significant portion of this market.
Joshua Ansah, a researcher at Konfidant, believes that will serve as a deterrent to shops who take advantage of the credit agreement with small businesses.
“It is one of not sticking to the contract. If the contract says we will pay you in 30 days, there should be a way to hold the supermarkets accountable and protect our small businesses. There are other entrepreneurs and financial institutions that can find ways to do this. Some FinTech’s handle invoice financing to help entrepreneurs survive the period.”