Structural Transformation Of Ghana’s Economy

Structural Transformation Of Ghana’s Economy – The Role Of Long-Term Development Planning

A speech delivered at the 55th Anniversary Celebration of Ghana’s Independence Winnipeg, Manitoba, Canada

Saturday, 10th March 2012

Dr. Kwabena Osei-Bonsu

Introduction
When approached by friends to give a presentation on Ghana, the initial idea was to shed light on the much heralded status of Ghana, joining the exclusive club of oil producers and what would be the development prospects for the country. However, realizing that Ghana being a developing country, perhaps it would be a better idea to present a broader picture of the development challenges facing the country, including how prudent the new oil revenue will be managed.
As a matter of fact, those living in the West African Sub-Region do not need to be reminded that, being an oil producing country doesn’t necessarily translate into national prosperity. And in Ghana’s case, before the country became an oil producer at the end of 2010, the country has been a leading world producer of gold and cocoa for more than a century. But what do we see today? The country is still classified as developing, with not so impressive social indicators. Citing gold production for instance, comparing Obuasi, Tarkwa, Prestea, Dunkwa and Konongo major old gold mining towns in Ghana to Johanesburg, a wealthy city of gold industry in South Africa, tells the paradox of our homeland being a resource rich country and yet, not prosperous.
It all depends on the ability of Ghana to process its vast resources into value-added tradable goods, using the combination of human capital and technology. This is the surest way for the country to benefit from its resource endowments.
For a development economist, there is a feeling of great disappointment whenever one compares the rapid rate of economic development of some Asian countries to those in Africa, particularly Ghana. It appears as if Ghana and indeed most African countries are presently condemned to perpetual conditions of under-development; exemplified by the pictures of malnourished children in war stricken and drought prone areas on the continent that international NGOs put on TV screens to solicit for donations.
Apart from South Africa which is industrialized, only Botswana and Mauritius are openly mentioned as having achieved economic successes with middle income status in Sub-Sahara Africa.
On the contrary, Asian countries like India, Malaysia, Singapore, South Korea, China and others, continue to make rapid economic progress, in terms of industrial transformation of their respective economies. These Asian countries have moved from being primary commodity producers, like Ghana not long ago, to become exporters of manufactured and high tech goods with strong agricultural sector. Ghana and many African countries can do the same, provided the political leaders on the continent would appreciate and recognize the urgency and the need to use long term development planning as a tool for socio-economic transformation.
Therefore, the need for a new development policy that embraces structural transformation of Ghana’s economy, based on industrialization, cannot be overemphasized. A new development paradigm that gives investment priorities to quality education and human capital development; aggressive pursuit of agro and industrial technology acquisition and application; modernization and mechanization of agricultural production; a visionary, competent, and an accountable political leadership, supported by an efficient public administration and the active participation of the private sector in the economy, is certainly the answer.

A Brief Profile of Ghana’s Development History

Presently, Ghana’s population is estimated to be about 24 million and growing at the rate of 2.5% per annum, haven grown from 6.5 million at the time of independence some fifty-five years ago. To date, there have been about ten attempts to plan Ghana’s development. However, only four of such attempts deserve mention.
These are:

• Guggisberg’s Colonial Infrastructure Plan of 1919 – 1926
• Dr. Nkrumah’s 7 Year Development Plan of 1963 – 1970
• Rawlings’s Economic Recovery Program 1984 – 1990
• Ghana Vision 2020 (1996 – 2020)
The Guggisberg Infrastructure Development Plan, reputed to be the first of its kind in the world, built the Takoradi to Kumasi Railway Line, Takoradi Harbour, Achimota School, Korle-Bu Hospital, Cocoa Research Centre at Tafo, inter-urban trunk roads among others. In fact, the Guggisberg plan created the basis for the then Gold Coast to become a major global exporter of cocoa, timber and gold during the colonial administration. And coincidentally, that colonial infrastructure is still playing a vital role in Ghana’s economic well-being today, after ninety-three years.
Ghana’s first president, Dr. Kwame Nkrumah’s vision after independence in 1957, was to modernize the economy through industrialization. Under the comprehensive 7-Year Development Plan, schools, hospitals, motorways, trunk roads, housing projects, water supply facilities were constructed, but most importantly, the country embarked on industrialization of its economy for the first time.
Although the import substitution industrialization model was questioned by some economists, it was however a visionary attempt by the first president to transform the economy of the new country. As we speak, all the industries that operated under the Ghana Industrial Holding Corporation (GIHOC), have either been deliberately allowed to collapse due to mismanagement, or sold to the lowest bidder through corruption.
After the overthrow of Nkrumah’s government in 1966, Ghana experienced a succession of military coups and prolonged economic decline. Between 1966 and 1982, real per capita income fell by 2 percent annually, while inflation rose from 6.2% to 123% due to gross mismanagement of the economy by the various military leaders. During this period, Ghanaians from all walks of life faced tremendous social and economic hardships of untold proportions, as well as suffered human rights abuses living under different military dictatorships.
In the heat of the crisis, the Provisional National Defence Council (PNDC) military government led by Ft. Lt Jerry Rawlings, on the advice of the International Monetary Fund (IMF), launched the Economic Recovery Program (ERP) in 1983, with the objective of stabilizing and liberalizing the economy. Although economic growth averaged about 3.5% per annum between 1990–2000, the recovery was however fragile.
The Structural Adjustment Program (SAP) imposed by the IMF as a condition for balance of payments support, included massive devaluation of Ghana’s currency, the cedi, retrenchment of thousands of civil and public sector employees, budget cut backs on social services of health, education and welfare. These policies further increased levels of poverty and destitution in the country, just like adding insult to injury.
In 1994, the then ruling NDC government authorized the newly established National Development Planning Commission (NDPC), which I was one of its founding technocrats, to prepare a Long-Term National Development Policy Framework (Vision 2020) to develop the country. That policy framework set Ghana’s long-term development goal as “Achieving a balanced economy, and a middle income country status and a high standard of living, with a level of development close to that of Singapore within twenty-five years”.
Not forgetting that in 1996 when the Vision 2020 was launched, Singapore had a Gross Domestic Product (GDP) per head of $25,000 against Ghana’s $400. One could argue that, setting such a high national development goal at that time was a bit ambitious for a country saddled with structural socio-economic problems. However, that goal was achievable, but the difference was that the political leadership at the time, either did not believe in nor did not understand the magnitude of the development goal it had set for the country.
It is baffling to mention that since launching the Vision 2020 long-term development policy framework, almost sixteen years ago, both past and present governments have been silent on the implementation of the recommended core programs. It also appears Ghanaians have forgotten to remind the current president about the Vision 2020, since he was the vice-president of the country when that policy was launched in 1996. The truth is that, the Ghana Vision 2020 national development policy framework has been shelved and forgotten. Government is now preoccupied with macro-economic stability management of the economy and the implementation of short-term poverty reduction programs, as the main focus of the country’s development trajectory.
Paradoxically, in a country with such widespread endemic poverty, Ghana needs a long-term development policy, targeting the elimination of poverty altogether and not to reduce it in whatever form it manifests itself among the Ghanaian population.
Thus, the narrow scope of the policy of poverty reduction recommended by the World Bank and Donors, as the main development agenda in Africa becomes obvious, when one looks at the magnitude and the urgency of the retarded economic development conditions on the continent. What African countries, including Ghana need now, are long-term development policies to structurally transform their respective economies into becoming more productive with the capacity to ultimately eliminate poverty altogether.
That being the case, whether Ghana can truly achieve a medium income status like Singapore had in 1996, by the end of the remaining 8 years of Vision 2020, remains to be seen. Bearing in mind Ghana’s present income per head is estimated to be about $1,500; thanks largely to the increase in the world market price of gold and cocoa, as well as the new oil revenues. Meanwhile, Singapore’s present income per capita is more than $56,000. In other words, Ghana is not likely to achieve the long-term development goal it set in 1996.
Admittedly, there is little room for optimism, unless the country’s present political leaders moved away from the current preoccupation with short-term poverty reduction programs, and implemented appropriate long-term development policies to quickly catch-up with Singapore’s level of GDP in 1996. Remembering that, the countries ahead at the moment on the development ladder, are not waiting for those behind to catch up with them.
Despite all the noises being made by politicians in Ghana about recent high annual GDP growth rate of more than 10%, the structure of the country’s economy has remained virtually unchanged since Nkrumah’s first attempt at industrialization in the 1960s. The country still maintains an agrarian based economy, with most revenues earned from primary commodity exports. Recent figures available from the Bank of Ghana on the structure of Ghana’s economy indicate that the agricultural sector is dominant and contributes about 40% to GDP and provides 50% of employment. While industry dominated by gold mining, contributes 25% and the services sector contributing 36% to GDP respectively.
Ghanaians home and abroad keep wondering why Ghana, being a resource rich country, cannot make rapid economic progress like other countries in different regions of the World, particularly in Asia. This is a legitimate question citizens of the country have the right to know what is actually going on. And the attempt to find answers to the socio-economic development dilemma in our homeland, necessitated giving this presentation. With the aim of exploring other development policy options, that could possibly lead to the structural transformation of Ghana’s economy to improve the quality of life and standard of living of Ghanaians.
It was against the backdrop of the need for a new long-term development policy paradigm in Ghana, that the topic of this presentation was conceived: “Structural Transformation of Ghana’s Economy – The Role of Long-Term Development Planning”



Factors Driving Ghana’s Quest for Structural Socio-Economic Transformation:

• Need to modernize the Ghanaian society by planning urban and rural human settlements with good access roads, water supply, reliable utility services, adequate sanitation and waste management facilities;
• Urgency of providing increasing levels of well-paid professional employment opportunities for the youth after graduating from universities, colleges and polytechnics;
• Aspiration of Ghanaians for high standard of living with choices for better quality of life;
• The moral imperative to eradicate illiteracy and endemic poverty in the rural agricultural and urban informal sectors;
• Popular public demand for more employment opportunities to earn decent and sustainable incomes;
• Need to provide adequate and equitable social and economic services infrastructure throughout the country;
• Need for Ghana’s economy to become highly productive and globally competitive, and able to export quality manufactured and value-added industrial and agro-processed products;
• Need to develop and apply technology and technical know-how to improve productivity in all aspects of the Ghanaian economy;
• Need to create a booming economy where the construction, banking, housing, insurance, commercial, domestic and foreign trade sectors are contributing to industrial development and national prosperity;
• Desire to achieve and maintain Ghana first mentality and national cohesion, as well as a flourishing democratic governance and rule of law;
• Need to develop national capacity for sustainable management of the environment and natural resources.



Accelerated Transformation of Ghana’s Economy, focusing on Industrialization

Giving government’s current pursuit of uncoordinated and short term development policies to address Ghana’s long-term development needs, which arguably, has not succeeded in delivering rapid economic progress, a completely new Twenty-Five Year Long-Term Development Policy with a clear cut industrialization plan is needed.
It may be of interest to know that, the 1992 Constitution of Ghana enjoins government to prepare and implement long-term development plan to transform the country’s economy. The National Development Planning Commission (NDPC), the Regional Coordinating Councils (RCC) and the District Assemblies (DA) are agencies with additional constitutional responsibility for planning. Unfortunately, government at the moment, seem to have overlooked the planning mandate of these institutions with impunity.
The afore-mentioned planning institutions, when properly resourced and given political direction, have the capacity to synthesize district, regional and sectoral development objectives into a long term development plan for Ghana, using industrialization policy as a tool for the proposed socio-economic transformation. The proposed long-term development policy would have the following sub-themes, projects and programs as areas of investment prioritization:
1. Modernization and Mechanization of Agriculture

Modernization of the agricultural, livestock and the fishing sub-sectors for increased production and productivity; Introduction of medium to large scale mechanized commercial fruit, vegetables and cash crops farming as private business enterprises, managed by trained agriculturists; Expand irrigation services to cover 20% of arable land under cultivation within 10 years; Introduction of high-yielding crop seed multiplication services as private business enterprise; Provision of adequate post-harvest crop storage and marketing infrastructure in all agricultural production centres; Establishment of special financial credit facility for agricultural production; Guaranteed security in land tenure; Zone agricultural production based on soil fertility and crops suitability maps for the districts and regions; Establish forward linkage of crop, fruit and vegetable production to agro processing industries; Set high standards for agricultural production to achieve efficiency and competitiveness on local and export markets, etc.

2. Accelerated Agro-Based Industrial Development

Indigenization of private sector led agro-based industrial processing of fruits, vegetables and cash crops; Set up industrial starch and alcohol plants; Set up cane sugar, vegetable oil and bio-fuel industries; Set up livestock feed plants; Set up services and technical in-put supply centres in and around production areas; Ensure reliable energy and water supply and modern telecommunication services to agro industry centres; Agricultural and Rural Banks to provide financial services for the acquisition of equipment and operational capital to agro industries; Identify local and foreign sources of appropriate equipment with technology know-how transfer component for local agro industries; Encourage local manufacture of agro processing machinery and equipment; Identify districts and regions for the location of specific agro industries; Ensure continuous availability raw materials, skilled and competent human resources for optimum operation of the established agro industries; Develop reliable local and foreign markets for the processed agro industrial products; Establish backward raw material supply linkage to crops, vegetable and fruit producers, etc.



3. Increased Investment in Human Capital Development

Revise current pre-university school curricula and give priority and incentives to the study of science, mathematics, applied and information technology; Achieve 100% enrolment rate for all able boys and girls of school going age in both rural and urban areas within five years; Make pre-university education free and compulsory with zero tolerance for dropping out; Eliminate illiteracy among the population within ten years; Invest heavily in equity, quality and high standard of educational infrastructure throughout the districts and regions; Revise current science, engineering and technology syllabi of tertiary institutions, including polytechnics and make them relevant to national development objectives; Make industrial training a requirement for engineering, science and technology studies; Engineering and polytechnic institutions working closely with industry to develop and improve technology and resolve operational problems; Revise the current training programs of technical and vocational institutions and make them relevant to the skills need on the labour market; Training institutions to provide competency-based and high practical skills programs for self-employment vocations; Expand and equip technical and vocational training institutions with standard tools and equipment; Requirement for all teachers in pre-university and vocational institutions to have continuous career training to boost professional proficiency; Provide material and financial incentives to enhance productivity of teachers at all levels of education and training institutions; etc.

4. Integrated Mining and Manufacturing Industries

Facilitate local and foreign partnerships to revive the old industries: Reactivate the Bonsaso tire factory with rubber supplied from local plantations; Reactivate the Valco Aluminum Smelter with bauxite supplied from local mines; Reactivate the Aboso Glass factory; Reactivate the Saltpond ceramics factory; Reactivate the Kumasi jute factory with locally sourced raw materials; Establish the proposed paper mill at Daboase; Reactivate the Tarkwa gold refinery with technical inputs from the University of Mines and Technology; Produce cement based on limestone supplied from Nauli deposits; Develop the iron and steel industry based on the rich Opon Manso iron ore deposits; Facilitate the development of soap and cosmetic industry from local raw materials; Develop the pharmaceutical industry and make Ghana the supply hub for West Africa; Reactivate the textile industries; Develop salt based chemical industries; Integrate the operations of the mining industry into the local economy through backward and forward supply linkages; Review the existing policy on mining and renegotiate for the removal of stability clauses in contracts, towards a win-win financial, social and environmental relationship between the foreign mining companies, government, traditional rulers and the local communities; Make the operations of mining companies environmentally friendly; Negotiate for the recruitment of more Ghanaians into senior mining management positions; Ensure competency and accountability at policy management level of the mining sector; Encourage Ghanaians to go into mining business; Strictly enforce mining operational guidelines to limit adverse environmental impact, including the operations of local artisan gold mining (galamsey) conforming to prescribed standards; etc.

5. Integrated Oil and Gas Industry

Ensure transparency, accountability and enforcement of the legal framework governing the operations of the new oil and gas industry. Set up autonomous, transparent, accountable and non-partisan bodies to manage the oil and gas revenues; Accelerate the training of Ghanaian professionals for the oil and gas industry; Develop integrated oil and gas industry master plan, comprising refineries, petro chemical industries, fertilizer plants, agro chemicals, polyester and bitumen plants, etc. Develop national capacity to negotiate win-win contracts with multinational petroleum companies with no entrenched stability clauses and over bloated financial overheads; integrate the oil and gas industry into the local economy, etc.

6. Agricultural and Industrial Technology Development and Application

Develop a collaborative institutional framework to promote local and foreign technology development and application in the private formal and informal sectors; Set up a new public overarching apex institution to manage technology development and application, replacing the Ministry of Technology; Target and exceed Research and Development (R & D) allocation of 1% of GDP within three years; Provide incentives for the development of applied technology; Take inventory of existing technological innovations available in research and academic institutions and make them available for application in the beneficiary sectors; Enforce the teaching of applied technology alongside information technology in all pre-university educational institutions; Promote the practicalities of science and technology in everyday life activities of Ghanaians; Institute monetary and material awards for excellence in science, inventions, research and technological breakthroughs; Organize regular public exhibitions of achievements in science and technology; Promote radio and TV programs to explain existing science and technological concepts and broadcast the latest local and foreign technological news, etc..

7. Accountable Governance, Institutional Renewal and Strengthening

Ghana’s public institutions are inefficient and need restructuring and renewal to eliminate ineptitude, mediocrity, malfeasance and corruption; Promotion of professionalism and accountability in public administration by restructuring and reforming the Public Services Commission and the Civil Service; Implement accountable institutional tasking policy with new mandates and job descriptions to enhance efficiency and competency; Complete the decentralization of public administration began years back; Build the capacity of District, Municipal and Metropolitan Assemblies to deliver efficient public services, including planning the development of their respective areas; De-politicize national development policy; Contractual tenure for key positions in the public and civil service; Tripartite constitution of public boards and commissions (ruling party, opposition party and civil society); Promote strong cooperation and mutually supportive relationship between the public and private sectors towards the development of a viable mix-economy; Build public sector human resource capacity, competence and efficiency through regular training at MDPI and GIMPA to formulate, implement, monitor and evaluate national development policies; Effective public education on national development policies avoiding political propaganda, etc.

8. Taking Advantage of Globalization, Foreign Trade and Aid

Globalization, Foreign Trade and Aid present a lot of development policy challenges, considering the unequal relationship between developed and developing countries; Advantages include enhanced access to vital information on virtually anything through the internet; Export market information, easier access to technological know-how; opportunities for training in human capital development; financial and commodity market stocks information; Due diligence on international trade conventions, bilateral and multilateral trade agreements and strategize to take advantage of market access and financial mechanisms to benefit the national economy; Negotiate for positive development aid with technology transfer mechanisms to support national development; Seek cooperation in sharing development experiences and enhanced access to production technology and market access among south-south countries; Explore and exploit regional economic and industrial integration protocols to benefit the national economy, etc.


9. Accelerated Social, Economic, Telecommunication and Transportation Infrastructure Development

Achieve 90% access to safe drinking water within ten years for both urban and rural populations; Enforce land use and human settlement planning. Provide sewage systems and adequate waste management and sanitation facilities for all urban towns and cities within fifteen years; Build new hospitals and clinics; Expand the capacity and adequately equip existing referral and regional hospitals to provide quality health services; Provide hospitals in all district capitals and clinics in peripheral rural areas to improve access to basic health care for all within ten tears; Achieve improved health insurance coverage for all within ten years; Plan for adequate training of physicians, nurses and paramedical staff to help reduce the adverse per capita ratios, as well as the high mortality and morbidity rates in the health sector;
Construct modern wider gauge railway network between the North and the South, linking the landlocked countries of Burkina Faso and Niger within fifteen years; Construct the golden triangle first class dual carriage highway between Accra-Kumasi-Takoradi, as well as the eastern, central and western corridor highways between the North and the South; Double the total number of kilometers of inter-urban asphalted roads and all weather feeder roads to rural agricultural production areas within fifteen years;
Provide adequate number of standard classroom buildings, libraries and recreational facilities for all pre-university schools in rural and urban areas of the country, with greater emphasis in the North;
Improve and expand access to reliable telephones services and broadband internet connectivity to all districts and regions within ten years;
Reduce the housing deficit in the country by 50% within fifteen years, by utilizing less costly, but equally durable building materials to make houses accessible and affordable. Review existing building codes and strictly enforce compliance with planned land use guidelines, including provisions of roads, water and utility services before housing development; All human settlements in both urban and rural areas have to conform to layout master plans of the Lands, Survey and Town and Country Planning Departments; Develop land ownership maps to streamline land acquisition and registration by housing developers,
Reduce domestic energy dependence on wood-fuel by 80% within five years; Make Ghana’s economy energy efficient and self-sufficient by developing and diversifying energy sources, including petroleum, natural gas, solar, hydro and wind, etc.

10. Sourcing Finance for Ghana’s Long-Term Development

Prudent management of the national economy to generate financial savings for development capital; Generating domestic development capital through increased private savings by encourage individuals to deposit monies in bank accounts; Direct taxation for national development; Effective use of financial and technological grants from bilateral, multilateral and development partners to support national development; Promoting win-win foreign private investments; Direct borrowing from international financial markets; Mobilizing development capital from the Ghanaian community in the Diaspora.

Conclusion:
Fellow countrymen, women and children of Ghanaian heritage, the ideas enumerated in this presentation are by no means exhaustive of what needs to be done to fix Ghana’s economy. However, they represent good food for thought, considering our long delayed aspiration to see Ghanaians enjoy high standard of living and better quality of life. If our political leaders had the development vision and the courage to take bold and decisive steps, like the Asian countries have done, Ghana could experience a dramatic socio-economic transformation of the economy that would result in vast improvement in the standard of living of Ghanaians within two decades.
For that reason, the days when presidents toured the rural areas opening Kumasi Ventilated Improved Pit-latrines (KVIP), new markets, lorry parks, garri making enterprises and the likes, are long gone. Our presidents from now on should be cutting tapes to open new modern railways, harbours, airports and highways between the north and the south of the country. As well as cutting sods for petro chemical and integrated aluminium industries, iron and steel mills, factories producing microchips and high tech products for export, and many other major investment projects that would have direct and positive economic impact on Ghanaians and the national economy.
It took Europe and North America a century or more to industrialize. However, with a visionary leadership and appropriate policies, as well as determination and national mobilization, it would take any country a shorter period to achieve the objective of becoming either middle or upper level income status. It took China about two decades to emerge as a major modern industrialized country, overtaking Japan and Germany to become economically, the second most powerful country in the world after the US. China is even projected to overtake America sooner than later, as the world’s number one economic superpower.
The Asian countries did not re-invent the wheels of industrial and agro technology, but copied, modified and improved whatever they could lay their hands on. Also, these countries did not allow any international trade liberalization regime to compromise their national development interests. And above all, they used and continue to use long-term development planning, as a guiding tool for accelerated economic development.
Repeating what has been said earlier, Ghana and most African countries have much more resources and can do the same or better than the Asian countries. But, it calls for a bold, visionary, incorruptible, accountable and transformational political leadership that lives by example, to see to the realization of the development aspirations of Ghanaians and by extension, all Africans. So let us all continue praying for the emergence of a visionary and transformational leadership in Ghana, to lead the country into economic prosperity.
Thank you very much for your kind attention.
Dr. Kwabena Osei-Bonsu
Development Economist
Winnipeg, MB
Canada.
Tel: (204) 219-2783/ (204) 470-7857
Email: kwaboseibonsu@yahoo.com