Manifestos and the Development of Ghana

MANIFESTOS AND THE DEVELOPMENT OF GHANA

The Industrial Sector

The industrial sector of Ghana has five subsectors: mining and quarrying manufacturing, electricity generation and distribution, water and sewerage and construction. The weak performance of Ghana’s economy (3.9) according to ISSER (2016) was due to the weak performance of the industrial sector. This clearly points to the fact that industry is a key driver of Ghana’s economic growth and subsequent development.

Industry has been projected to be the driver of Ghana’s economic growth process in 2017 and beyond. ISSER (2016) projected that industry could drive Ghana’s overall economic growth to reach 7 and 8 percent GDP in 2017 and 2018. This outlook was based on several factors prominent among which are the $498 million dollars grant from the Millennium Challenge Corporation of US into the energy sector, and increase in the volume of gas and oil.  

Who is Promising What?

Going back into the recent history of Ghana’s economic growth, Ghana recorded 14% growth in 2011 (IMF, 2015a). This growth was propelled largely by the growth in the industrial sector.  According to ISSER (2016) the growth in the industrial sector in 2011 was driven by the procurement from local manufacturing industries related to the oil sector and ready market for goods and services. Given this background, it is no wonder the political parties are promising so many things in the industrial sector.

(A) The flagship initiatives by the NPP under industry include: (i) One factory one district (ii) Growth pole industrial initiative and (iii) National Industrial Sub-contracting Exchange for local suppliers of goods and services that industry needs.

Critique

One factory one district is overly ambitious promise.

  

Firstly, large market for the sale of goods and services produced in Ghana is a great challenge facing the Ghanaian industrial sector today. Do we have the domestic market to consume the larger part of all the goods and services that will be produced by these factories? Can the products meet the quality demanded by Ghanaians at the cheapest cost? Will the new factories be export driven or import substitution? Has Ghana the raw materials base to sustain continuous production of these factories? Can these factories produce in large volumes to offset unit costs? These are critical questions that were not clearly addressed in the manifesto. The question of market is very important to the sustenance of jobs that may be created by these factories. In fact, Honorati and Johansson de Silva (2016) posited that the sustenance of Ghana’s job strategy is to boost internal demand and exports of goods and services produced.

Secondly, the link between the one district one factory policy and the next flagship initiative – anchor industries – to serve as growth poles is blur. The growth pole concept in siting industries is based on the type of industry, the natural resources that exist in an area and the human capital available. Besides, the question of efficiency in the performance of the yet to be established industries is equally important. Here there would be the need for clusters of industries to be formed, backed by innovativeness, entrepreneurship and training.  Will the anchor industries serve as poles along which there would be backward and forward dependence by the district factories in the supply/demand chain?

Thirdly, the NPP intends to pursue a consumer protection law from inferior goods, products and services. Will this law enable these yet to be established factories produce quality goods to meet the taste of Ghanaians and beyond? How does the support for young businesses and start-ups relate to the one district one factory? Will it not become a game of unevenly matched competitors?

Fourthly, the link between the key subsectors of the industrial sector is not properly linked under the industrialization section of the NPP manifesto. For instance, for manufacturing to do well, there is the need for improved and consistent supply of power. In fact, ISSER (2016) documents that the improved performance of manufacturing in 2015 was due to power supply.  

The sources of revenue and related resources to undertake such a monumental venture need to be made clear. The volume of Ghana’s exports have dwindled, the cedi has depreciated, oil prices have fallen and tax revenues have also fallen short of the projected targets. If it is to be financed through loans, will it not defeat the excessive borrowing argument by NPP? If it is through public private partnership which strategic investors are the targets?

(B) The NDC’s industrial policy in the manifesto appears to be based on the philosophy of resource endowments of each district. There are ten major areas it intends to cover: (i) An Integrated Aluminum Industry (ii) Fertilizer Production (iii) Mineral Processing (iv) Steel Mills (v) Glass, Bottle, Rubber and Ethanol Production (vi) Ceramics, Bricks and Tiles (vii) Light Manufacturing (viii) Machine Tools (ix) Shipyard and Dry dock (x) Agro-Industrialization.

Critique

The geographical contiguity of these industries favour only a few areas in terms of spatial distribution. How do we spread development to other areas of the country to stem the tide of rural-urban migration? In any case, this policy direction only goes to reinforce the urban bias hypothesis in terms of the spread of industries. What about those areas of the country that are endowed with a large number of human resource? Honorati and Johansson de Silva (2016) documented that there is “a strong need for balance between job opportunities in urban and rural areas in Ghana”(p. 123). The light manufacturing phase of industrialization lacks specificity. Will it not be driven by the same resource endowment philosophy? Where will the industrial estates be located? Will it help break the urban bias hypothesis and ensure equity in terms of distribution?

In the manifesto it was mentioned that there would be establishment of plants for glass and bottle-making in the early part under industry only for the last part of industry to declare a conduction of a feasibility study into Abosso Glass factory to ascertain its viability. Putting the cart before the horse?

The manifesto also argued for agro-based on-farm industries. In contrast, there is a move away from this strategy.  Given the nature of the Ghanaian economy, many citizens have found “better” jobs by steering clear of on-farm jobs to off-farm self-employment (Honorati and Johansson de Silva, 2016).  They argued that the off-farm sector employed 2.6million workers between 1991 and 2012 and created 200,000 jobs per year. The strategy should rather focus on structural transformation of the Ghanaian economy through formalization. This is what the many self-employed informal entrepreneurs need.

Re-engineering of the domestic demand for goods and services is also important for sustainability of these industries and stimulation of the domestic economy and the subsequent growth that is needed. In fact, the linkage to the domestic demand and market is missing under the industrial sector of the manifesto. 

Are there significant differences?

The difference in the industrial policy between NPP and NDC is an issue of eclectic versus specificity on one hand linkage and non-linkage on the other.  

Implications for Growth and Development

NPP

There appears to be a synergy between the third flagship industrial initiative of NPP and what ISSER (2016) identified to propel the growth of Ghana’s economy. If NPP wins and fine-tunes the first two innovations carefully and get the linkage right, the growth in 2017 and 2018 as mentioned by ISSER is likely to be triggered. This positive outlook is based on the shopping mall and big super markets syndrome currently developing in major cities in Ghana, which are likely to serve as markets for import substitution.  Secondary, there may be the need for a moral suasion for Ghanaians to change their taste for foreign goods and exploration of the ECOWAS market. If NPP is able to do this, the challenge of demand for goods and services would be resolved. Spare parts dealers were able to lower the prices of their goods to enable former president Kufour succeed, so it could be done. Thirdly, these yet to be established factories/industries must also produce to meet the standards required in terms of quality of their goods.

Ghana’s technical schools/polytechnics are now more of Arts degree institutions. Are we going to import the middle manpower needed for these industries? To answer this question, NPP intends to “establish apprenticeship and skills development centres to train skilled labour force for specific industrial sectors”. Inasmuch as NVTI is engaged in such skills development the current concept of NPP calls for paradigm change in the curriculum of such institutions or at best new curriculum for the centers that will be established. 

NDC

Atuabo gas and its utilitarian value for the fertilizer factory proposed by NDC bring to the fore, the efficiency argument in blending factors of production. This can lower the production cost of fertilizer and the downstream effect on farmers is colossal. There is a clear link between power supply and the subsector industries NDC wants to undertake in its manifesto. Again, shipbuilding and repair is a huge industry that can generate forward and backward link within the domestic industrial sector and connection to the global market. In fact, ‘job opportunities that reduce poverty, connect the local economy to global markets’ Honorati and Johansson de Silva, 2016). 

Like NPP, NDC also intends to solve their middle manpower conundrum through the convention of polytechnics into technical universities. However, re-orientation of the curriculum with focus on the core mandate of developing middle manpower is needed. Though many of the proposed industries are concentrated in a few areas in Ghana there is an element of prioritization and specific focus on key industries. This will make implantation relatively easier.

Conclusion

The true measure of viability of any policy is when the felt needs of the people are addressed in the face of the quantum of projected revenue and related resource inflows, and the opportunity costs therein. Both parties (NDC & NPP) did not attach any projected inflow of revenue and related resources to undertake their respective projects. In deed, in the face of NPP’s promise to reduce corporate tax, remove import duty and abolish the special import levy, the expected levels of tax gain may fall, raising the question of where to get the funds to undertake the projects and programmes. On the other hand, NDC’s penchant for borrowing at high costs to undertake its projects is likely to create an albatross around the neck of the present and future generations if it is not checked.   

Bibliography

Honorati, M and Johansson de Silva, S (2016). Expanding Job Opportunities in Ghana. Directions in Development. Washington, DC: World Bank.

doi:10.1596/978-1-4648-0941-5. License: Creative Commons Attribution CC BY 3.0 IGO.

Institute of Statistical Social and Economic Research (2016). The State of the Ghanaian Economy 2015. ISSER, Accra University of Ghana.

International Monetary Fund, IMF (2015a), “Navigating Headwinds”, Regional Economic Outlook: Sub-Saharan Africa, April 2015. Available at http://www.imf.org/external/pubs/ft/reo/2015/afr/eng/pdf/sreo0415.pdf.

National Democratic Congress 2016 Manifesto.

New Patriotic Party 2016 Manifesto.