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Opinions of Saturday, 21 March 2015

Columnist: Appiah-kubi, Kojo

The failing Mahama’s transformation agenda

Appiah-kubi, kojo, phd

The president reiterated on February 26th, 2014, in his state of the nation address, his vision to transform the structure of the Ghanaian economy through diversification and value addition to our primary products. By extension the government accepted industrialization, through manufacturing, as the precondition for the country’s economic transformation. President Mahama even espoused on page 8 of his address a transformation agenda to accomplish his vision.
What is rather more striking is that, despite the much touted economic transformation by the President, the Ghanaian industrial sector has rather experienced deindustrialisation in recent years. Even though the industrial sector has always been promoted as the engine of growth, Ghana appears to be rapidly losing manufacturing capacity, particularly, under President Mahama’s regime. Every available measure of the manufacturing capacity of Ghana shows a negative trend under President Mahama. These negative indicators apparently provide strong evidence that the transformation agenda of the president is failing.
The declining growth trends in recent times, for instance, suggests strongly that the manufacturing sector is rapidly declining and thus lends credence to the failure of the president’s transformation agenda. Since the phenomenal growth of (7.6%) 17% in 2011 (2010), growth of the manufacturing sector has been on the downward decline. It declined to 2% in 2012, further to 0.6% in 2013, and down to -8% in 2014 and is expected to reduce further in 2015.
It is indeed fair to say that deindustrialization began to set in Ghana in the 70s but the pace of deceleration in manufacturing production under President Mahama is alarmingly. The share of the country’s manufacturing GDP, for instance, has declined consistently from a peak of 10.2% in 2006 to less than 5% of total GDP in 2014.
Another evidence of the declining capacity of the manufacturing sector is also reflected in the declining employment trends in the sector. A close look at sector employment trends suggests that the president’s transformation agenda is failing miserably. There is today lesser number of people employed in the sector than any time since the 70s. The manufacturing sector, which, by its specific characteristics, is supposed to absorb labour from the transforming agricultural sector, is rather shedding off employment rapidly in recent times. For this reason the unemployment rate has shot up, particularly, with the youth unemployment rate having risen successively from 6.6% in 2005/06 to over 12.9% in 2013. Even job vacancies of businesses, as proxied by advertised job vacancies in the Daily Graphic and analysed by the Bank of Ghana, have declined successively from a peak level of 6,574 in 2010 to 2,582 during the third quarter of 2014. Apparently the situation keeps on worsening over time under President Mahama. In 2014, for instance, the cumulative number of job placements from January through September 2014 was about 47.3% lower than 4,896 re¬corded during the same period in 2013.
Experts estimate that overall employment and employment in the industrial sector have decreased by 0.3% and 0.2% respectively on average per annum over the years. This has impacted negatively on the overall employment situation of the country, as evidenced in the overall decline of the share of economically active population in formal employment from 17.8% in 2000 to less than 12.8% in 2014.
Analysis of investment and gross fixed capital formation trends over time also confirms the rapidly shrinking manufacturing sector capacity in the country. According to ISSER the value of the manufacturing and construction sub-sectors as a proportion of total investments from 2008-2013 as reflected in their gross fixed capital formation has been dropping consistently with increasing shares of total investments accounted for by investments in oil and gas production and exploration.
The falling investments in the manufacturing sector seem also to be compounded by the massive successive declines in government investment spending and other government capital expenditure, which have fallen in absolute and relative terms under President Mahama Since 2008 total government investment spending, for instance, has declined by more than 50% of total government expenditure from 36% in 2008 to less than 17% in 2014 and this has affected negatively the manufacturing sector.
Another indicator that seems to underscore the recent rapid declines in the level of invest¬ments and the capacity, particularly, of the manufacturing sector, is also the consistent decline in the share of credit of DMBs to the sector from 21.4% in 2004 to less than 8% 2014.
The rising de-manufacturing trend in Ghana can be attributed, largely, to the worsening government policy shortfalls, which manifest themselves in lack of clear cut government industrialization policy and prioritization of government goals, lack of consistency, continuity and political commitment in the pursuit of government policies, constant shifts in policy directions, etc.
These shortfalls seem to have been compounded by a never ending serious energy crisis, deterioration of the macro-economic environment, declining government investment expenditure in infrastructure, high costs of business credit and dwindling availability of long term financing, etc. These factors are contributing to a near strangulation of the industrial sector and a rise in the de-manufacturing trend in the country and consequently a failure of all transformational efforts.