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Opinions of Tuesday, 29 December 2020

Columnist: Kordson Ayrakwa

Infrastructure development in Ghana and a comparative analysis with other African countries and their position in the global market place

The Akosombo Dam The Akosombo Dam

Investment in infrastructure development has become a key feature of development plans of many nations across the globe for which Ghana is no exception. This has become more important in recent times where infrastructure in many developed and developing nations are crumbling and there is the urgent need for new investment in this area to stimulate growth across several sectors of the economy. To this end, Ghana over the years has put in place various infrastructure programs to develop the country.

Particularly of great interest, are the infrastructure projects that were started in the country during the Kwame Nkrumah regime. Notably among them are: the construction of the Akosombo Hydro Electric Dam, the Tema Harbour, Tema Motor Way, The Kwame Nkrumah University of Science and Technology (KNUST), many of the Colleges and Secondary Schools built in the 1960s, Factories such as the Pwalugu Tomato Factory, Nsawam Cannery, Gihoc Distilleries Company Limited, Ghana Cocoa Processing Company, State Housing Corporation, Tema Textile Limited, Ghana Textiles Printing Company, Ghana Food Distribution Company, etc, etc. All this infrastructure development was aimed at making Ghana a self-sufficient country and an industrial powerhouse in the West African sub-region, the African continent and globally. Also, the infrastructure development was aimed at stimulating economic growth and economic rejuvenation and creating employment for the Ghanaian people.

In this piece, I examine the effects of infrastructure investment and development on Ghana's position in the global market place.

To respond to the above question, I define what infrastructure is, I then review literature on the importance of infrastructure development to the economy. Further, I examine the achievements and challenges in infrastructure development in Ghana. I suggest a number of measures to improve Ghana’s future prosperity which will complement existing infrastructure investment within the internal and the international context; and the political, social and economic implications for Ghana’s development strategy with comparisons to other African countries. Then, I offer policy recommendations to address Ghana's infrastructure needs and I conclude the paper.

Definition of Infrastructure:

Infrastructure defined by Ashcauer (1990) is “the public stock and economic overhead capital” while the World Bank indicates that it is the “the basic installations that support a community’s to-day life and economic activity, including roads, electricity, water systems, telecom services, and public transportation”. The World Bank further points out that, a number basic things taken for granted like cars, radios, subways and clean drinking water are all part of the infrastructure that supports a community’s needs. Yet the importance of infrastructure goes beyond such basic needs. It argues that infrastructure “plays a key role in reducing poverty. It increases productivity and improves the quality of life for a community. Roads transport people to markets, schools, and health care facilities. Safe water is essential for life and health. Reliable electricity saves businesses and consumers from investing in expensive back-up systems or more costly alternatives, and spares rural women and children from the laborious task of collecting firewood. Widely available and affordable telecommunications and transportation services can generate employment and advance economic growth”. Dr. Jeffrey Delmons, a senior infrastructure specialist of the World Bank indicates that, “poor infrastructure impedes a nation’s economic growth and international competitiveness while Willloughby (2004) argues that, “insufficient infrastructure also represents a major cause of loss of quality of life, illness and death”.


Literature Review:

Chanda Kochhar indicates that "investment in infrastructure is a long-term requirement for growth and a long-term factor that will make growth sustainable." For Robert Trout, he argues that, "a successful society is characterized by a rising living standard for its population, increasing investment in factories and basic infrastructure, and the generation of additional surplus, which is invested in generating new discoveries in science and technology." While Noble Laureate in Economics, Joseph Stiglitz proposes that "international lending banks need to focus on areas where private investment doesn't go, such as infrastructure projects, education and poverty relief."

Speaking on the importance of infrastructure to the American economy, Senator Cory Booker of New Jersey points out that "for an economy built to last we must invest in what will fuel us for generations to come. This is our history - from the Transcontinental Railroad to the Hoover Dam, to the dredging of our ports and building of our most historic bridges - our American ancestors prioritized growth and investment in our nation's infrastructure”. And this should be the aim of all countries around the globe.

Interestingly, along similar lines of thinking, Corrine Brown indicates that, “states get to improve transportation infrastructure; that creates economic development, puts people back to work and, most important, enhances safety and improves local communities." While Mark Zuckerberg argues that, "there is a huge need and a huge opportunity to get everyone in the world connected, to give everyone a voice and to help transform society for the future. The scale of the technology and infrastructure that must be built is unprecedented, and we believe this is the most important problem we can focus on". While Janet Yellen, the new proposed Treasury Secretary of the incoming Joe Biden Administration, and one-time Chairwoman of US Federal Reserve Board, points out that " productivity depends on many factors, including our workforce's knowledge and skills and the quantity and quality of the capital, technology, and infrastructure that they have to work with". Speaking in tangent with Janet Yellen, President Bill Clinton argues that, " it turns out that advancing equal opportunity and economic empowerment is both morally right and good economics, because discrimination, poverty and ignorance restrict growth, while investments in education, infrastructure and scientific and technological research increase it, creating more good jobs and new wealth for all of us". While, Carol Moseley Braun points out that, "we must invest in infrastructure development and rebuilding communities to create jobs."

On the Ghanaian situation, the Ghana Investment Promotion Centre (2020) indicates that “Ghana’s capacity to fully absorb and benefit from increased investments would depend to a large extent on the availability, quality and efficiency of its infrastructure base. Infrastructure significantly permeates various sub-sectors including ports, roads, rail, aviation, electricity, water supply, transportation and telecommunications.

The soft components of Ghana’s infrastructure base have witnessed improving performance over the past two decades, thereby helping the country to maintain satisfactory growth. The country’s rising trade has been reflected in growing cargo throughput, which increased from 15.99 million in 2014 to 23.13 million in 2018. From 17.71 million in 2010, the mobile telephony subscriber base expanded to 20.9 million by December 2018. Data and mobile penetration rates stand at 88.8% and 138.8% respectively in December 2018”.

The Ghana Investment Promotion Centre (2020) further indicates that “the transportation segment, made up mainly of road transport, maritime and water transport, aviation and rail, is also witnessing significant development. Aside the Kotoka International Airport, located in the Greater Accra Region, there are five domestic airports in Kumasi, Tamale, Ho and Takoradi and two airstrips in Wa and Kpong”.

On the energy side, one could argue that, Ghana has total installed electricity generation capacity of 4,420 Mega Watts (MW). It is estimated that there was a total dependable capacity of 3,877 MW as of March 2019. This energy sub-sector is constituted by a mix of State-Owned Agencies and various Independent Power Producers. The government’s medium-term target is to attain generation capacity of 5,000 MW (The Ghana Investment Promotion Centre 2020).

The Infrastructure base of the ICT sub-sector involves undersea cable connectivity, Private Licensed VSAT Systems, Fixed Wired Line Networks, Wireless Mobile Operators, Public telephone systems, Internet connectivity, Broadcasting Systems, etc. The National Fibre Communications Backbone Infrastructure Network aimed at providing open access broadband connectivity is also being steadily developed.

In terms of housing, Ghana has a backlog of two million housing units nation-wide and a delivery of 20,000 housing units annually is needed to meet the housing needs of Ghanaians in the next 10 years.

There is also the need for major investing in roads, railways, air transport and other transportation systems in the country. This is because most of this infrastructure is in a deplorable state and needs urgent attention.

In this regard, David White (2020) in the Africa Report indicates that, “Ghana Infrastructure Investment Fund has secured $85 million from France for infrastructure development projects in country. The Oxford Business Group (2020) also argues that “infrastructure development and public-private partnerships drives can increase construction activity in Ghana”. The Oxford Business Group (2020) further indicates that, “Ghana’s construction sector is growing, led by the development of affordable housing and critical infrastructure such as road, railways, ports, hospitals and schools. It has also been bolstered by a steadily growing economy, which has since 2017 outperformed the global economy. Expansion is expected to continue, with a GDP growth rate of 6.8% for 2020 ( but it is possible to argue that, the Coronavirus pandemic has had a dent on this figure). Improvements in land registration and permit systems, coupled with new regulatory support, reflect the authority’s efforts to address structural challenges. At the same time, increased government and private sector investment reflects optimism for future expansion. While Badu et al (2013) indicates that, there are challenges confronting rural infrastructure development in Ghana. Urgent action or requisite incentives are needed to boost it. The incentive systems identified include the provision of mobilization funds for projects; a plant pool of rural contractors, special allowance for rates of project items and the provision of letters of credit to ensure loans for projects, institutional support, portable water, efficient health care system and good markets for the supply of materials.

But, Vivien Forster and Nataliya Pushak (2011) in their Policy Research Woking Paper for the World Bank entitled “Ghana’s Infrastructure: A continental Perspective” argued that, “infrastructure contributed just over one percentage point to Ghana’s annual per capital GDP growth during the 2000s. Raising the country’s infrastructure endowment to that of the region’s middle-income countries could boost annual growth rate by more than 2.7 percentage points.

Ghana has an advanced infrastructure platform when compared with other low-income countries in Africa. The country’s coverage levels for rural water, electricity, and GSM signals are impressive. A large share of the road network is in good or fair condition. Institutional reforms have been adopted in the ICT, ports, roads and water supply sector (Forster and Pushak 2011).

Ghana’s most pressing challenges lie in the power sector, where outmoded transmission and distribution assets, rapid demand growth, and periods of hydrological shocks leave the country reliant on high-cost-oil-based generation. Exceptionally high losses in water distribution makes it difficult to reach customers, who are thus exposed to intermittent supplies (Forster and Pushak 2011).

Forster and Pushak (2011) further indicate that, “addressing Ghana’s infrastructure challenges will require raising annual expenditures to $2.3 billion. The country already spends about $1.2 billion per year on infrastructure development - equivalent to about 7.5 percent of it's GDP. A further $1.1 billion is lost each year to inefficiencies notably underpricing of power. Ghana’s annual infrastructure funding gap is about $0.4 billion per year, chiefly related to power and water. Following, its recent oil discoveries, Ghana can raise additional public funding from increased tax receipts. The country has several strong areas on which to build a solid economic base from by raising funds incrementally ”.

However, the World Bank (2019) Results Briefs, point out that “drawing upon International Development Association (IDA) funding, Ghana has strengthened its intergovernmental fiscal framework and local public financial management and improved social accountability of urban services and management. The Project strengthened the capacities of 46 Metropolitan and Municipal Assemblies (MMAs) to deliver infrastructure and services to the more than 6.6 million urban citizens, of which 54 percent was female”.

Adding his voice to the importance of infrastructure to Africa’s development efforts Mthuli Ncube (2010) indicates that, financing and managing infrastructure in Africa through various public private partnerships is crucial in promoting infrastructure development and economic growth on the continent. This is critical in comparing the level of infrastructure development on the African continent to countries in Asia and Latin America. While Cesar Calderon and Luis Serven (2010) in their article “Infrastructure and Economic Development in Sub-Saharan Africa” point out that, “an adequate supply of infrastructure services has long been viewed by both academics and policy-makers as a key ingredient for economic development. Sub-Saharan Africa ranks consistently at the bottom of all developing regions in terms of infrastructure performance, and an increasing number of observers point to deficient infrastructure as a major obstacle for growth and poverty reduction across the region”.

But, interestingly, Winnie V. Mitullah, Romaric Samson, Pauline M. Wambua and Samuel Balongo in their Afro Barometer Report No.69 entitled “Building on Progress: Infrastructure development still a major challenge in Africa” indicate that, “Infrastructure is a bedrock for development. As an essential part of a supportive environment for investment and livelihood, adequate infrastructure promotes growth, reduces poverty, and improves delivery of health and other services. The World Bank (2014) and Wantchekon (2014) all emphasize that, The African Development Bank (ADB) strategic position for 2013–2022 stresses that, infrastructure development is one of it's key priorities. They note that, the African Development Bank (ADB) argues that, “Africa still has massive infrastructure needs, yet invests only 4% of its Gross Domestic Product (GDP) in infrastructure, compared to China’s 14% investment in infrastructure. Thus, the African Development Bank (ADB) indicates that, “bridging the infrastructure gap could increase GDP growth by about 2 percentage points each year (African Development Bank 2013).

It is to this end that, both leaders and ordinary citizens in Ghana and the African continent in general, must see how critical infrastructure development is to our own development, living conditions, energy and power needs, industrialization, housing, improvement in health, transportation, institutions and our over-all well being.

Achievements in Infrastructure development in Ghana:

1. Ghana’s road transport indicators are appreciably strong. By almost all measures, they are well ahead of those found among low-income peers and nearing the level expected by a middle-income country. The length of the main road networks are more than adequate to achieve regional and national connectivity. The record on road network quality is quite reasonable, with 75% of the paved road networks in good or fair condition and more impressive, 74% of the unpaved road networks are also in good and fair condition (Forster and Pushak 2011). According to the Oxford Business Group (2020) “a substantial portion of income from construction activities is expected to be generated from transport networks as the country works to address infrastructure gaps and improve the efficiency of the movement of people and goods. In November 2019 China released the first round of funding tie to Ghana’s $2bn bauxite agreement with Sinohydro. Under the first phase of the deal, 442km of roads will be constructed for a total of 646m. Approved projects include the construction of an interchange in Tamale and Sekondi-Takoradi; inner-city roads in Accra, Kumasi, Mampong, Sunyani, Cape Coast, and the Berekum and Prestea Townships, covering a total distance of 255km; a 66-km stretch of road between Hohoe-Jasikean-Dodo Pepesu on the Eastern Cooridor; and 106 km of roadway which will be upgraded or rehabilitated in the Ashanti Region, Western North Region, and along the Akim Oda-Ofoase Road (Oxford Business Group 2020).

2. Ghana has also relatively done well with railway development in comparison to other African countries, although Ghana Railways Company is a national operator without any connections to railway services to or with other neighbouring countries. The Ghana Railways operates between Accra-Kumasi-Takoradi. However, it is only the Kumasi-Takoradi segment that has been operational in recent years. Thus, this reflects the main pattern of traffic on the railway, which involves, the transfer of bauxite and manganese from the mining areas around Kumasi to the Port of Takoradi.

Nonetheless, it is important to note that, “while the bulk of inland transportation is carried out on the roads, shifting logistics to rail could lower cost and improve efficiency. But, it is also significant to indicate that, there is about 1300 km of track across Ghana, yet only 373km is in operation due to poor maintenance. The 2013 Ghana Railway Master Plan is supposed to develop the uncompleted segments of the railways; including the construction and rehabilitation of a 4000-km network at a cost of $23bn. The plan also aims to link all regional capitals and drive development outside Accra, and is seen as vital for mining and manufacturing. Several projects were prioritized for completion by 2020/2021, including the construction of a 339-km western line between Takoradi and Kumasi, 300-km eastern line between Takoradi and Kumasi, 300-km eastern line between Accra and Kumasi, and 595-km central spine line between Kumasi and Paga (Forster and Pushak 2011).

3. Ghana has made significant progress in modernizing its ports and is committed to making further improvements. It is one of the few African countries in the process of adopting the landlord model, which has become the preferred institutional framework for the sector around the world. At the national level, stevedoring operations have been privatized to improve efficiency and reduce cost of operations. The Port of Tema awarded a container terminal concession in 2006 and the dry-bulk handling operations have been fully privatized. Further concessions are envisaged at the Port of Takoradi, where major new terminal developments are planned.

4. Ghana’s air transport market is small in absolute terms and middle of the range in the African context. It amounts to less than 2 million seats per year across all traffic categories. The domestic market developed only recently and remains small, with five domestic routes served by a single carrier in 2007. The bulk of Ghana’s air transport market is international and about evenly divided between intra-African and inter-continental flights. By far the best served routes is that connecting Ghana to Nigeria, which is also an important route for the ECOWAS sub-region. International service is highly competitive, with a Herfindahl index of only 6.4%.

5. Ghana is one of the only five African countries that has already achieved the Millennium Development Goals target for water supply. According to DHS survey evidence, the percentage of households with access to improved drinking water sources rose from 69% in the 2003 survey to 84% in the 2008 survey, exceeding the MDG target of 76%.

Compare with other low-income African countries, Ghana has a relatively large share of the population relying on private and public taps. In the mid 2000s, 25% of Ghanaian households reported access to water of some kind, well ahead of the 26% in the low-income peer group, but still far behind the 76% in the middle-income peer group. By 2008, that figure had exceeded 40%. During the period 2003-08, coverage of standing pipes in Ghana rose by 1.8% of the population per year and reliance on surface water declined by 1.4% of the population per year. Nevertheless, as of 2008, about 11% of the population continued to rely on surface water. The performance of the Ghana Water Company has improved somewhat in recent years following institutional reforms and the contracting of a private operator.

Challenges in Infrastructure development in Ghana:

1. In recent years, the depreciation of the national currency has gradually eroded the real value of the fuel levy. Adjusting its value is essential, if Ghana is to sustain its relatively good performance on road network preservation. The absolute value of the existing fuel levy is already relatively low by African standards - about half the levels found in Ethiopia, Kenya, and Tanzania which suggest that, a revision to preserve the real value of the levy should not be overly burdensome for the transportation sector in Ghana (Forster and Pushak 2011).

2. One other factor, affecting the Railway sector in Ghana, relates to its inability to carry the full volume of the mining traffic. This situation can be attributed to a combination of factors such as the lack of rolling stock, poor quality infrastructure, strikes and low speed of railways. This has diverted a growing share of mineral traffic to road networks, at an additional cost of $1per tonne of the manganese ore and more for bauxite.

Relative to other railways in West Africa, Ghana Railways Company has modest traffic levels and operational performance that ranges from mediocre to lacklustre. For example, freight wagon productivity is about half of the best practice levels internationally. Tariffs are just over $0.02 per tonne-kilometer, which is typical for West Africa, though significantly lower than those found in Central and Southern Africa.

3. In terms of Port development, one of the challenges Ghana faces is heavy congestion. The port has a container handling capacity of around 375,000 TEUs per year but has been handling 420, 000 TEUs in recent years. The congestion problem lies behind a number of shortcomings in port performance and these can be addressed only once the capacity increases.


4. Ghana, like many other African countries face a significant problem with safety and security issues in air transport. Ghana failed the FAA/IASA audit and none of its carriers has passed the IATA/IOSA audit. More significantly, it is important to argue that, West Africa lacks clear air transportation hub to play the role airports such as Addis Ababa, Johannesburg and Nairobi are engaged in on the other side of the continent. Abidjan, Accra, Dakar and Logos each play a significant role with respect to their immediate neighbours, but connectivity between each other in this zone is much more limited and as a result connections can be much more complicated.

5. Despite the water utility’s improvements in cost recovery and revenue collection, distribution losses remain high at around 50% with adverse impacts on service quality. By comparison, best practice levels of distribution losses are 20% and the benchmark is 33% for low-income countries. There appears to be two reasons for this state of affairs in water distributions losses in Ghana. The first is aging distribution infrastructure is prone to leakages and the second is large scale commercial theft from various networks with the purpose of selling or retailing water to water sachets or private water companies. This leads to large financial losses to the Ghana Water Company.

Recommendations:

1. It is recommended as indicated by Richard Dombo CEO of the Ghana Railways Development Authority that “the government intends to revise the 2013 master plan to accommodate new mineral discoveries in regions that were not initially included when it was introduced. The total distance of railways originally announced has also increased following the establishment of several major free zones, particularly those in Shawa, Dawa and Tema”.

2. It is further recommended that, the ongoing expansion of the Tema and Takoradi ports is expected to support road and rail activity between 2020/2021 and will include the construction of 700 metres of quay wall, two berths and a rail container platform. Five new berths will be built at Takoradi, together with 600 meters of quay wall along a basin dredged to 16 meters, with completion anticipated for the second half of 2021(Oxford Business Group 2020).

3. It is suggested that, Ghana establish or install at least a capacity of 4780.5 MW of electricity. But actual production hovers around 2400MW due to the poor infrastructure, inadequate fuel supplies and hydrological conditions. The sector is too dominated by state-owned companies and some independent power producers. It is important that, the level of power production be increased to meet the increasing needs of the population and industry. Thus, several energy projects are under way as the government pushes forward with a medium-term goal to attain a generation capacity of 5000 MW, although the authorities missed the original target deadline of 2016. It is important to note that, Cenpower thermal IPP is supposed to complete its project with an additional electricity generation capacity of 340 MW, while in December 2019 Genser Energy Ghana received a $366m loan facility from a consortium of South African banks to extend its natural gas business and expansion of operations (Oxford Business Group 2020).

4. Although Ghana is on track to meet the MDGs for Water, it is not track to meet the MDGs for sanitation. According to DHS survey, the percentage of households with some kind of access to an improved sanitation facility rose from 52% in the 2003 survey to 66% in the 2008 survey. However, the bulk of those accessing improved facilities do so on a share basis, which does not count for achieving the MDG target. Therefore, it is recommended that, government must focus more attention on providing clean and healthy sanitation facilities for the general population in Ghana. The current level of available sanitation facilities is only 12% far below the MDG targets of 53% (Forster and Pushak 2011).

5. The construction of affordable housing should remain a priority as the country tackles a housing deficit of over 2 million housing units. With the government aiming to reduce the housing deficit in the country, it is recommended that, the construction of at least 20,000 houses a year over 10 years should be targeted. The Ministry of Works and Housing must look into attracting developers that have traditionally stayed away from lower-and lower-middle-income segments of the population because of low margins and high cost of construction. It is in this regard that, the 2019 proposal by the Ministry of Works and Housing of establishing a National Housing Fund that would finance affordable housing projects and help establish a sustainable and affordable housing supply in the country is in the right direction.

Conclusion:

Infrastructure investment and development is critical to spurring economic growth; improving the quality of life, services, housing, water, sanitation, energy and technological advancement and innovation in any country. Therefore, any country that lacks modern infrastructural development lacks the capacity to develop rapidly and stimulate economic growth and social development that meets the needs of its people. Hence Ghana’s efforts at maintaining and promoting new infrastructure development will make Ghana more competitive and an economic leader in the global world. It is therefore, imperative that, all governments on the continent channel their scarce resources to this sector of the economy to afford Ghanaians and the African people improved living conditions with healthy environments, good sanitation conditions, reliable and safe drinking water supplies, affordable housing, efficient transportations systems and sustained development for generations to come.