IMANI’S Pre- Election Report: Whoever wants to win Election 2016 must pay attention (II)
Again, the small scale industrialisation initiative (SSDII) of the Ministry of Trade - a five-year rural based industrialisation programme which is to benefit all 216 administrative districts of Ghana is one worth mentioning. Under this, the Ministry of Trade and Industry and its implementing collaborators are to apply the Public Private Partnership (PPP) framework and the Corporate Village Enterprise (COVE) model in establishing commercially viable companies in all the Metropolitan, Municipal and District Assemblies (MMDAs).
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MOTI proposed in 2014 that the 216 MMDAs will be covered in the following structure: 30 in Phase 1 (2014), 48 in Phase 2 (2015), and 46 each in Phases 3 (2016), 4 (2017) and 5 (2018) respectively. The funding for the setting up of the SSDII-PPP Companies will come from equities by the respective MMDAS and private investors at the districts.
Milestone
With the following key milestones envisaged under the SSDII, over 258,000 Ghanaians, especially those in the districts/rural areas will benefit from both direct and indirect employment, over GHc471 million (US$174 million) worth of exportable and locally marketed value added goods or products will be produced and sold, a total of GHc278 million or US$ 103 million, will be required from Government (1.31%), MMDAs (39.48%) and private investors (59.21%) under shareholding/equity contribution arrangement for the 5-Years SSDII Implementation Plan and that of the REP and the other policy frameworks such as the Private Sector Development Strategy (PSDS II 2010-2015), the incoherence of government policy towards solving the industrialisation problem immediately surfaces.
These initiatives have been running concurrently since 1995 to date and have delivered little than desired results as the country has virtually nothing to show on “rural industrial development” if the numbers on industry output, value chains in Agriculture, job creation at the local level, rural urban drift and corresponding penalty, value received from non-traditional exports among many other indicators are anything to go by.
The question is don't we have too many districts? Average GDP of 160 million dollars and average population of 120,000 people per district does not allow for effective economic decentralisation. The districts are too small and weak to serve as viable units of industrialisation.
The marketing, legal, design and engineering skills needed to succeed require larger aggregates of economic activity than $160 million dollar enclaves to support. So the smart thing is either to focus on the regional level or to create new local units of about $1 billion of economic activity. We certainly do need radical and fresh thinking about how to spur higher value creating activity in Ghana. Capacity is still too low in the economy.
Attaining industrial growth
Crucially, until the question of reliable and cheaply available electricity is comprehensively answered, the issue of industrial growth is very much unattainable ideal.
It is still quite clear that there is a huge variance between what industrialisation actually is, and what the policy designers in the various parties perceive it to be. This is problematic in the perspective of the voters as it has tended to confuse them a great deal in appraising and appreciating choices to be made in this regard. It is also clear that political parties benefit from this confusion to cite numerous moribund factories as purely achievements in an industrialisation drive.
A great chance to revive Ghanaian industry is going to be lost because of misdirection of priorities.
Energy
A discussion on Ghana’s immediate future will never be complete without addressing perhaps the most influential sector of the economy that has been responsible for the nation’s industrial and productive fortunes over the last decade or so. Energy provision, or more specifically adequate energy production in relation to demand has become a recurrent influencer in Ghana’s drive towards sustained economic growth.
Key trend indicators for example show a cyclic flow of electricity usually with shortages around the months of May and June since 2008/2009. Between 2012 and 2016, the President of Ghana has made not less than 25 public statements promising to end Ghana’s electrical energy woes. The truth is that, while the energy generation capacity has increased, it has not increased commensurate to demand.
Chinese loan
What aggravates the current situation is the fact that the anticipated $1 billion Chinese loan (out of $3bn) to aid infrastructure in the energy sector materialised rather late, delaying the full operation of the Aboadze Gas plant by over 18 months. Even with the plant coming on stream, Ghana has had to depend on erratic supply of LNG from Nigeria.
The bid to stave off the acute electricity shortage, even more opaque dealings involving the state through the Ministry of Energy and other technical solutions providers have been brokered, involving the procurement of power barges. Apart from the fact that the power barges arrived later than anticipated, the government negotiated a deal far from beneficial either by other options available or by benchmarked parameters. Estimated annual payoffs will be in the region of US $120 Million, whereas the government owes existing suppliers in excess of US$1.5 billion. This is even on a measure deemed as “temporary”.
Increase in power usage
Independent power providers and the privatisation of the ECG, the retailer of Ghana’s electricity sector, will be very crucial if there is going to be any sustainable flow of power eventually. While domestic and residential power usage has risen to 50 per cent today from 36 per cent in 2000, it might not just mean an increase in residential use, but a decline in industrial consumption due to the prohibitively high cost of electricity and other fuel sources, compared to other countries like Nigeria and La Cote d’Ivoire. If solutions that are sustainable and more cost-effective are not deployed soon, it could cost the nation a decline in industrial activity and hence a loss of jobs.
The question of energy and fuel policy are also worthy of note. With the elimination of subsidies, it will be interesting to note the purpose of various taxes and levies on pump prices of fuel, considering that crude has not risen significantly in the last 8 months, whereas the ex-pump prices in the same time period have increased by some 15 per cent. While these could be attributed to foreign exchange fluctuations, it is also pertinent to examine what the government wishes to do with the fuel related levies that make for over 50 per cent of the ex-pump prices.
Demand for energy for transportation and other activity is going to rise, especially if there is any revival in the fortunes of the industrial sector. Note that the mining sector’s demand has reduced, thus freeing up their consumption, but overall, with new technology and dependence on electricity, demand for diesel and petrol will not only be exclusively for transportation, so it remains to be seen how these gaps will be filled by the provision of more affordable electricity.
It is hoped that a more open and less restrictive regime on solar technology be aggressively pursued. This means exemptions of duties and taxes on solar batteries and panels and all accessories, as against the policy that exists at the moment that are far from coherent.
Restricting Solar providers
It is expected that the existing restrictions that insist on solar providers having to register before practicing their trade does not bode well for ease of entry into business, which means that favored companies could easily corrupt what is a crucial space. An open approach will ensure that cheaper and newer technologies in alternative energy would be explored and the marketability and suitability of these will become the right competitive advantages to build up such a nascent but crucial sector that could potentially fill the gaps in national grid energy shortfalls.
Perhaps, a local model that has been able to discharge this via beneficial private-public approach is the Community Water and Sanitation model which involves both private and public stakeholders in the provision of rural water. Such a model could easily be adapted to run alternative and renewable energy solutions.
Countries like Germany, Norway and quite a few states in the United States have been able to promote solar and other alternative sources of energy to the extent that they have surpluses. These require huge capital expenditure but do not require the same amount of expenditure to maintain over their lifetimes, as well as the fact that they are sustainable, clean and green. Without opening up the private sector and municipalities to engage in such, the nation might lose on such a cheaply available raw material for renewable energy.
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Agriculture
Sadly, in the last few years, this sector has been viewed almost like an abandoned orphan in the focus of government related activity. Just over 50% of the nation’s labour force relies directly on agriculture for livelihood, yet over the past 3 years, however, it is alarming to note that the annual contribution of agriculture to GDP has reduced by over 12% since 2009. This means that farmers are earning less from the practice of agriculture.
Cocoa trees are already growing very old, and more are below peak production levels, yet new cocoa seedlings are not meeting the right level of demand to replace older trees. Very little has been done to energize and assist small-scale farmers and boost food sufficiency in Ghana. Over GHS25 million was wasted in the form of agricultural assistance to farmers via the Savannah Accelerated Development Authority (SADA), and while the loss has been written off due to drought, it is interesting that California, a state in the United States, with its worst drought in 1,200 years, still is able to produce ALMOST at the same levels.
At the same time, a bulk of agriculture based spending has been on poverty reduction strategies. These will never be productive as the focus on agriculture should be more on a drive to increased production and mechanization, and not just mere poverty reduction. Between January and September 2015 for example, 90% of the actual expenditure in agriculture was for poverty based programmes.
A rather more businesslike approach to agro-based policy is very important to keep agriculture afloat and not gain marginal increases in growth annually, considering its very important position in the national narrative. This will require programmes that are centered on motivation for increased mechanization, more scientific methods and a growth and export driven philosophy. It is surprising for instance that out of 180,000 metric tonnes of fertilizer required for the subsidy program in 2015, only 90,000 was distributed. This shows a poor attitude towards yield improvement measures that would rather be more cost-effective and business focused.
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A better way will be cross-sector facilitation between the ministry of Trade and Industry and the Ministry of Agriculture to see agriculture more as a fuel for local small-scale industrialization and not just poverty alleviation. Private sector players could then be incentivized for investments in the sector in areas with good growth prospects. This can fuel the micro-level industrialization as well as energize that part of the raw material feed as part of that ecosystem for food sufficiency, export activity and agro-based industrial growth.
Summary Decision Points
Mechanization
Production-based Financing v Poverty Alleviation Financing
Smart Agriculture
Better variety seeds
Focus on Feeder Farms for Industrial Raw Materials
SOCIAL POLICY
Income levels of most economically active Ghanaians are low. A major characteristic of past Ghanaian governments has been one of promising, and in some cases, delivering myriad social interventions aimed at poverty alleviation, among other pressing issues that ail the common Ghanaian.
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Of the major promises that Ghanaians have listened to over the years, issues related to stipends for the poor, like the LEAP, school-feeding project, stability and sustainability of health insurance and other related mother and child issues still remain paramount. Most Ghanaians have gained directly or indirectly from most of these schemes, and will expect subsequent governments to improve on these offerings, especially in the areas of education and health, which constitute expenditures that most disposable incomes at the family level are spent on.
In light of huge budget expenditure on education, and the subsequent hemorrhaging of the national kitty just to keep social interventions alive, it will be very interesting to see how support of activities like school feeding and other higher stake interventions are handled.
A clear example of such failures and the flagrant wastage of funds are the GYEEDA, SADA and more recently the scandals at National Service Secretariat and the implementation of several National Youth programs like Youth Enterprise Agency and others. There has been no metric to clearly identify their significance and value for investment. Social programs have to have measurable outcomes and have to be treated like all other investments, with valuations on resource inputs to clearly determine whether the outcomes provide value for money.
Summary Decision Points
Value for money
Clear Metrics of Benefits
Sustainability
Social Mobility
Termination/end-point of support
GENDER AND INEQUALITIES
One of the most encouraging points around the issue of gender is that of the near parity of enrollment of girl children in primary schools, which is in tandem with SDG benchmarks and targets. However, there is still a lot of inequality around wages in the informal sector, which engages 80% of Ghana’s labour force. From 1991/92 to 2013, the share of women in wage employment in non-agricultural sectors was still no more than 30.5%, which is just an improvement of 0.7% from 1991/92. This is a very disappointing development which shows that despite a lot of awareness on rights of women, economically, they might not be any better off than they were in aggregate terms in the early 90s.
Perhaps this trend also reflects in disappointing metrics when maternal mortality issues are investigated. While Sustainable Development Goals established that by 2015 maternal mortality should be in the range of 54 deaths per 100,000 live births, the figure is still 3 times that of a 2015 rate of 164 deaths per 100,000 live births. When women are poorer, they are unable to independently take care of their maternal health issues even with the intervention of programmes like the National Health insurance scheme, as the healthcare factors are a composite of different economic and social factors. Increased income levels however empower women to solve some of these problems related to anaemia, nutrition, basic ante-natal care and adherence to medication and diet instructions as well as easy access to healthcare facilities.
It is indeed disheartening to note for example that women’s healthcare issues are still not a national focus; over 40% of Ghanaian women are anaemic. Juxtaposed with child mortality rates for under 1 and under 5 children, it is evident that there is a very strong correlation between women’s well-being and major social issues related to their nutrition, welfare and vulnerable infants.
Income inequalities are on the micro scale biting very hard on Ghanaians because of the deformalized nature of the economy, and the fact that over 80% of the economy is not a formal one. While poverty reduction goals have been met, poor wage and work conditions mean that there isn’t enough protection against able-bodied people who enter the job market. This can only perpetuate the status quo and make it very difficult for the poverty barrier to be crossed easily, as self-improvement and skills training will have to give way for basic survival.
District and rural authorities should be able to develop the capacity of the informal sector to improve earning capacity of their constituents through engagement of transparent stakeholders for skills development, money management and the creation of cottage industries to help with self-sufficiency and market access for products with added value.
Summary Points
Child Mortality
Maternal Mortality
Skills Development Programs
Stakeholder Engagement
Nutrition and Health Support for Informal Business Models Protection of informal businesses Micro-level poverty reduction activities
INFRASTRUCTURAL DEVELOPMENT
Infrastructural Development has been a major election expectation since the birth of the nation. As one of the most obvious legacies of a government or regime, they have been at the core of most manifestoes. The current ruling government in its Green Book lists multiple infrastructural developments from roads, bridges, sports facilities and other such related activity as their contribution to the infrastructure stock of this country.
Most governments in Ghana are hailed the most for their addition to the stock on infrastructure, and it is high on every voter’s list. Particularly, estimates by the Finance Minister in November 2015 posited that Ghana needs to spend at least US$1.5 Billion annually in order to address some of the infrastructure deficit. This is plenty to go in in terms of expectations.
Critical in this sector will be the creation and expansion of routes that link agriculturally productive areas of the hinterlands to urban and peri-urban markets, which would then open up such areas for more aggressive agro-based activity. Processing and low level manufacturing could also be assisted in the hinterlands by better road networks, which open up such areas for more commercial activity.
Many voted officials, especially at the parliamentary level bear the brunt of the dissatisfaction of voters by losing their seats at election time.
Disappointingly neglible railway lines have been added to the existing line since independence. The expansion of the bigger urban enclaves, Accra, Kumasi and Takoradi, show clearly that an intra-metropolitan railway system will easily assist in the movement of people and goods in and around the cities in a more predictable manner, while easing road congestion. What remains to be seen is the commitment to the expansion of railways.
In the wake of recent scandals where monies for the advancement of railways rather got diverted into the branding of buses, it would have been very important for policymakers to have fully showcased how much equivalent investments into railways would have benefitted the nation. However, the focus shown on railways has been very negligible by most of the parties, hence not presenting itself as a factor “sexy” enough to command the attention of voters. A sure winner in the discussions around infrastructure will be a very solid and actionable rai