AEE201 ASSIGNMENT 2

STUDENT ID:

1. Write on business organizations and their functions in the economy of Ghana.

Business organizations, is any firm established for the purpose of carrying out some kind of
economic activity. The activity maybe production or distribution of goods and services. Such an
organizations are predicated on systems of law governing contract and exchange, property rights,
and incorporation. Factors that influence business organizations include, the size of the capital,
the size of the market, Nature of goods and services, share of profit, technological needs, the risk
involved in a particular business and desire for control. The types of business organizations
include, Sole proprietorship, Partnership, Joint stock companies, Co-operative societies and
public corporations.

a. SOLE PROPRIETORSHIP

This is a form of business which a single individual owns and controls the affairs of the business
and assumes the responsibilities of bearing any risk of production. It is the commonest form of
business organization in West African. Examples, petty trade and storekeepers. In this type of
business organization, profit margin is low, there is small scale production, provision of capital
and unlimited liability. In this type of business, their sources of funds are personal savings,
ploughing back of profit, borrowing from financial institutions and inheritance.

FUNCTIONS OF THE SOLE PROPRIETORSHIP

1. Accumulation of capital - it encourages people to accumulate capital to embark on a

large-scale production. Their existence over the years leads to the accumulation of profits
which are mostly ploughed back, to enable one-man business to expand into large scale
enterprise. Prudent ones are able to save from their small profit, which are later ploughed
out to expand the output of the business.
2. Helps in the production and distribution of goods - they help to produce and distribute
goods fairly throughout the nation. Retailers and wholesalers provide an important role
between the producers and consumers. The Retailers sell goods at convenient hours
throughout the country and by this, they provide wide market for consumer goods and
 services produced by few large-scale enterprises in West African. This encourages
producers in West Africa to adopt modern methods of production, which brings about
enjoyment of economies scale.
3. Revenue to the government - the government obtain money from one-man businesses in
the form of direct and indirect taxes which is mostly imposed on certain goods or services
which are used by the farmers in the rural areas, some of these goods are matches,
kerosene, soap, cloth, cutlass, hoes and others. All these monies go to the government as
a source of revenue mostly used in financing development projects in the country like
roads, hospitals, schools which indirectly helps in the production of goods and services.
4. Employment avenues - it offers employment to large number of people within the
economies of West African countries and this helps to reduce unemployment. For
example, it has provided employment for hawkers, artisans and cobblers. Actually, most
of the peasant farming in Ghana are operated under sole proprietorship.

b. PARTNERSHIP

This is a form of business organization in which two or more individuals contribute capital to
carry out business for the purpose of profit making. They also secure organize and control the
factors of production required. There are two types of partnership, limited partnership and
unlimited partnership. In this form of business organization, their main source of fund is
membership contribution. In partnership there is large capital and qualitative decision making
though it may be delayed.

FUCTIONS OF THE PARTNERSHIP

1. It contributes to Government Tax Revenue - this is achieved through taxation imposed on

the partnership firm. Moreover, if some of these firms produce goods that the country
exports it could generate foreign exchange which could be used to develop other sectors.
2. It enables people with small capital to set up business by the way of teaming up with
others. This in a way help reduce the high rate of unemployment existing in most
countries.
 3. It helps people with specialized skills to work together to produce high quality goods.
The teaming up of small traders to form partnership produces more skilled work as
partners may bring new ideas and thinking into the business.
4. It enhances large scale production due to large capital outlay. The large-scale production
will result in consumers taking more goods at lower prices hence improving their
standard of living

c. JOINT STOCK COMPANIES

This is an organization whereby a group of individuals called shareholders come together to pool
their resources with the view of making profit but leave the management or control in the hands
of another group called BOARD OF DIRECTORS. This means that Joint stock company is
owned by the shareholders of the enterprise but the control is left in the hands of the directors
who may not necessarily be owners. In this form of business organization, there is legal entity,
limited liability, continuity of existence, relationship between ownership and management,
transferability of shares and absence of privacy. However joint stock companies are into two
forms, the private limited liability and the public limited liability. Sources of fund for joint stock
business include, issuing of shares, ploughing back of profit and Issuing of debentures.

FUNCTIONS OF THE JOINT STOCK COMPANIES

1. Ability to raise large capital for production, joint stock companies can easily raise large
capital and because of this, they are likely to undertake large-scale production. As a result
of this, unemployed resources will be employed which will reduce unemployment rate
and its adverse effects. As those employed receive income, they will be able to buy more
goods and services so as to improve upon their standard of living. This will promote
effective demand for goods and services produced in the country, and this will bring
about increase in National output hence National income.
2. High efficiency, joint stock companies are able to employ more skilled labour which
enable them to produce efficiently. This is because they have access to enough resources
that can enable them to employ skilled labour, hence solving the unemployment problem
in the country.
 3. They have helped increase the foreign exchange of a country through their activities.
They help to generate foreign exchange for the country through processing of raw
materials into semi-finished and finished goods for export. Sometimes they also invest in
mining and other export relating activities which helped increase the country`s foreign
exchange earnings over the years.
4. Employment of limited liability by members, as a result of the limited liability enjoyed
by members of joint stock companies, people are encouraged to invest in joint stock
companies especially with the establishment of stock exchange market in Ghana. This
mostly enables such business organizations to have more capital to expand their
productivity in order to enjoy economies of scale.

d. PUBLIC CORPORATION

These are business organizations wholly owned, organized and controlled by the state with the
aim of performing specific functions that will result in maximizing the citizens welfare.
Examples are Electricity Company of Ghana (ECG), Ghana Broadcasting corporation (GBC) and
Volta River Authority (VRA). Their sources of finance include, taxation through both direct and
indirect taxes and loans from direct and indirect sources

FUNCTIONS OF PUBLIC CORPORATION

1. To generate revenue for the state, Public corporations like State transport corporation,
Ports and harbor Authority, State hotels, Nsawam cannery, Ghana cement factory etc,
were establish to generate revenue for development.
2. To prevent foreign domination of the economy, the public corporation helps prevent
foreign domination, this is because if the government allows the foreigners to control
most of the industries, not only will they dominate the country but they will allow
repatriate (send back) the profits earned into their economies. To avoid this, the
government must control certain organizations or participate with controlling shares to
protect the dignity of the people (national interest) and the country as a whole.
3. To create employment, state corporations are established in order to provide and maintain
employment in order to reduce unemployment. That is, governments control certain
 organizations not only to create employment but also to maintain the labour force even in
the face of depression (low demand for goods and services) so as to provide employment
security to them. They do this by giving subventions and subsidies to maintain the
organization and its workers.
4. To compete with the Private sector, public corporations was established to offer
competition to private producers to ensure efficiency in production so that consumers
enjoy quality goods and services at reasonable prices. For example, State transport
corporation, Ghana cement factory, State housing corporation etc. were established to
compete with the private businessmen(individuals) to force them (i.e., individuals) to
provide quality services to consumers at reasonable prices.
e. CO-OPERATIVE SOCIETIES

Is an association of people with a common interest, who pool their resources together with the
purpose of engaging in business and the aim of maintaining the welfare and providing services
for their members? In this organization, their source of finance is members own contributions,
loan from money lenders or financial institutes, Trade credits and ploughing back profits. The
types of co-operative society include, Agricultural cooperative, Industrial co-operative, Financial
co-operative and Service co-operative.

FUNCTIONS OF THE CO-OPERATIVE SOCIETIES

2. What are the roles that Agriculture plays in the economy of Ghana?

Agriculture is the production of plant and animal products for human use. This includes the
livestock, forestry, poultry, cocoa and production of other crops. Ghanaian economy is
predominantly agriculture because agriculture is the backbone or mainstay of the economy. This
is due to its contribution of Gross Domestic Product (GDP) which was estimated to be 39.3% in
2006. Some of the roles played by agriculture include;

a) Raw material supply - Agriculture provides the basic raw materials needed by industries
in West African. Some of these raw materials are cocoa, sugarcane, palm oil, cotton and
others. For example, Kwae, Twifo Praso and Benso oil plantation supply the raw
materials requirement of lever brothers. This enables local industries to produce at
maximum capacity as well as help to conserved foreign exchange, which might have
 been used to import raw materials. The conserved foreign exchange can be used to import
other resources needed to speed up the rate of economic development.
b) Food supply - Agriculture provides the nutritional needs of the people of West African in
terms of the supply of foodstuffs such as yam, cassava, plantain, meat products and
vegetables. Agriculture provides about 60-90% of the food requirements in West African
countries especially Ghana and through this, the much-needed health, to bring about
increase in productivity, is easily provided. Adequate supply of food stuffs brings about
reduction in import bills of West African countries and leads to conservation of foreign
exchange.
c) Employment - The sector alone employs between 60-70% of active labour in West
Africa and about 90% of the labour force in the rural areas of Ghana. Those employed are
mostly engaged in lumbering, fishing, poultry, workers, of various agricultural research
institutions, marketing boards among others. Agriculture therefore, helps in reducing
rural-urban migrations and its adverse effects as well as unemployment problems.
d) Source of foreign exchange earnings - Greater percentage of foreign exchange needed
for importation of capital eq uipment to develop West African countries is mostly obtain
from the agricultural sector. This is obtained through exports of cocoa, timber, yam,
banana, sheanuts, palm oil and other agricultural products. For example, in 2007, export
of cocoa and timber, fetched the Ghana government about $11.03 and $249 respectively.
The foreign exchange earned through export of agricultural products helps in reducing
balance of payment problems in Ghana. In 2006 about 41% of foreign exchange earnings
were derived from agriculture.