Invest in productive infrastructure - IFS to government

Government has been advised to invest massively in productive infrastructure, especially electricity, roads, schools, health centers and shops, among others, in farming areas and rural industrial centers to support its avowed agricultural transformation and industrialization programmes.

According to the Institute for Fiscal Studies (IFS), an economic think-tank, which made the proposal, infrastructure deficit would pose a major challenge to government’s agricultural and industrial transformation agenda.

It said: “Ghana is yet to adjust its infrastructure to accommodate the needs of the agricultural and industrial sectors, and the situation will be compounded with the coming on-stream of additional 216 factories scattered around the whole country. Shortages of electricity, water and rural roads are possibly the most pressing.”

The Institute revealed that road and transport infrastructure for the movement of agricultural commodities and inputs are inadequate, adding that such constraints, particularly limit the development of agriculture in high potential areas such as the Afram Plains and some areas in the Western region.

“The poor rural infrastructural facilities aggravate farmers’ time and constraints and hinder their productive work. Lack of good feeder roads linking farms and villages mean that farm produce has to be head-loaded to the buying centers. Physical markets for farm produce are characterised by decrepit infrastructure, lack of suitable commodity-specific storage facilities and unhygienic premises.

“Without addressing the infrastructure constraints in the countryside, the Planting for Food and Jobs (PFJ) and ‘One District, One Factory’ programmes will suffer the same fate as the rural banking programme and would have no significant impact on growth and job creation,” it emphasised.

Financing

Indicating that financing is another major challenge facing agribusinesses in the country, especially Small, medium and micro-businesses, the IFS stated: “Government expenditure on agriculture has also been low, both by regional and international standards, and declining in recent years. A large share of agricultural spending also supports the Ministry of Food and Agriculture (MoFA)’s routine operating expenses such as wages, salaries, good and services, leaving a very modest envelope for investment spending.”



It said that government spending on agriculture was also poorly targeted, adding that major initiatives such as the Agricultural Mechanisation Programme, Block Farming Programme, National Food Buffer Stock Company and the Fertiliser Subsidy Programme, have all produced mixed results.

“Moreover, these programmes tend to crowd out investment in proven strategies for promoting sustainable long-term productivity growth such as encouraging the use of improved seeds and fertilizers and expanding irrigation networks.

“Investment in irrigation development is especially low, as the Ghana Irrigation Development Authority receives no budget for capital spending from government, which provides financing for salaries only.”

On this subject, the IFS mentioned that the 6.8 growth rate for 2018 is encouraging but not robust.

The non-oil GDP is projected to grow at 5.4 percent this year from 4.8 percent expected in 2017, implying a projected increase of just 0.6 percentage point.

It said with the economy fairly stabilized and most of the macro-economic indicators moving in the right direction and investor confidence rising, it is difficult to understand why the non-oil GDP growth is targeted to increase by just 0.6 percentage points in 2018.

“Fiscal consolidation programmes implemented in Ghana since 2015 have had strong negative impact on economic growth because the adjustment fell more on capital expenditure and the 2018 budget is not an exception.

“The rush by government to reduce the fiscal deficit to below 5 percent in 2018, although very necessary to sustain macroeconomic stability and contain debt escalation, may have serious negative implications for the country’s economic growth.”