Potential role of small & marginal farmers in food security
real sector
1. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Real Sector
The real sector of an economy refers to the
economic sector which brings about the
productions of goods and services through
combined utilization of raw materials and other
production factors such as labour force, land and
capital.
The Ghana Statistical Service classifies the
economy of Ghana into three sectors:
Agricultural Sector
Industrial Sector
Services Sector
2. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
198
4-88
1989
-82
1993-
96
199
7-00
200
0-05
200
6-10
2011 201
2
2013
Agricultur
e
49.0 43.5 40.9 40.2 39.7 28.2 25.3 23 22.0
Industry 13.0 14.0 10.2 10.1 27.4 21.7 25.6 28.6 28.6
Service 37.9 42.5 31.2 32.1 32.9 50.1 49.1 48.4 49.5
Source: Ghana Statistical Service (GSS)
Distribution of Gross Domestic Product (at
Basis Prices) by Economic Activity.
3. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
The Agricultural Sector
Agriculture has always been the dominant sector
in the Ghana economy. Prior to the discovery of
precious minerals and oil in the country, it
contributed more than 60 per cent of domestic
gross domestic product (GDP). Currently, it
contributes about 30% to GDP, employs almost
60% of the population on a formal and informal
basis and contributes about 45% of all export
earnings.
Agricultural Sub-sectors
The agriculture sector is made up of five major sub
sectors; food crops, livestock, fisheries, cocoa and
forestry.
4. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
2009 2010 2011 2012 2013
1. AGRICULTURE 31.8 29.8 25.3 23.0 22.0
1.1 Crops 23.6 21.7 19.1 17.3 16.9
with cocoa 2.5 3.2 3.6 2.6 2.2
1.2 Live Stock 2.0 2.0 1.8 1.6 1.5
1.3 Forestry and Logging 3.7 3.7 2.8 2.6 2.2
1.4 Fishing 2.5 2.3 1.7 1.5 1.4
Source: Ghana Statistical Service
(GSS)
5. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Characteristics of the Agricultural sector
This section identifies and discusses the salient
features of the domestic agricultural industry.
Land Area
Ghana’s total land coverage area is 23,853,900
hectares, of this, agricultural land is about 13.6
million hectares representing 57.1 percent of the
country’s land area.
Of the total agricultural land, about 4.32 million
hectares or 31.7 percent were cultivated in 1990
and 5.3 million or 38.9 percent in 1994.
6. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Demographics of Farmers
Agricultural activities are mainly concentrated in
rural areas or the countryside with farmers that are
generally illiterate or semi-literate.
About 85 % of rural households are engaged in crop
and/ or animal keeping compared to only 28% of
urban households (Ghana Statistical Service, 2008).
Individuals engaging agriculture are mostly older than
40 – 50 years. The general perception by the youth is
that it is not a career for those seeking a high social
status.
Another feature of the sector is the fact that majority
of those living at or below the poverty line, are
employed in the agricultural sector.
7. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Size of Farms
Agriculture is predominantly practiced on a
smallholder basis in Ghana. Majority of the small
farmers involved in subsistence agriculture, or
semi-subsistence in that some of their produce is
for home consumption and any excess is
exchanged or sold for other commodities not
produced by the farmer.
Nature of Farming Entities
Most farms are informal concerns. Some are wholly
family-owned, whereas the general case is that the
land belongs to the family but a member or group of
the family use it for farming. Only a few farms are
legal entities. Some are co-operatives. These may be
organized on different underlying agreements and
objectives.
8. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Types of Farming Methods
Family-operated farms using rudimentary
technology such as hoes and cutlasses to
produce about 80% of the total output.
Method of land preparation remains slash and
burn methods. The small holders farmers
especially embark shifting cultivation, mixed
cropping and bush fallowing to restore soil
fertility.
The use of fertilizers is very low because they are
expensive or unavailable, and also the effort
involved in drying, turning and caring for the
compost or mulch discourage its use.
9. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
The Agricultural production is primarily rain-fed
with less than 1 percent of the cultivated area
irrigated. The unpredictable nature of the rainfall
pattern makes agricultural production very
unstable and insecure.
Relevance of agric sector
The sector is a major contributor to GDP over the
years. It’s contribution to GDP averaged 55% in
the 1980s, declined to 41% in 1995, to 36.5% in
1999, 35.6% in 2010 and further declined to 22%
in 2003.
10. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Though the share of agric in GDP has been on the
decline over the years, the sector still contributes
more to employment generation than any of the
other sectors. The Ghana Statistical Service (2008)
estimates that 55.8% of the working population is
involved in agricultural activities.
Agricultural sector produces raw materials for
agro-based industries in Ghana, for example, the
textile factories depend on local cotton and agric
products are serving as raw materials for local
industries which produce soap and
pharmaceutical/herbal products.
11. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Agriculture contributes to government revenue
mainly through duties paid on exports of
selected agricultural commodities, particularly
cocoa. From 12.2% in 1990, the agric sector
contribution to tax revenue declined
consistently to 4.1% in 2000 and rose again to
5% in 2008.
Agriculture sector also serves as market for
other sectors. The large agricultural
population is capable of providing a
substantial market for the output of the
industrial and services sectors.
12. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
The sector contributes substantially to foreign
exchange earnings as a result of export of mainly
cocoa and timber, and non-traditional exports of
other crops.
For instance, the agric sector exports contributed
76.2% of total export earning in 1986 but its
contribution has been decreasing over the years to
35.7% in 2000, 38% in 2008 and 25.5% in 2011.
The agricultural sector also serves as the main
source of food supply for the large non-agricultural
and mainly urban population.
13. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
To assess how food-secured a nation is, we use the
domestic production, consumption and deficit or
surplus as an indicator.
According to MOFA, records on all the major staples
have shown that the country has been food secured
since 2008 except in the case of rice. The demand
and supply of local rice for 2012 and 2013 recorded a
shortfall of 359 (000mt) and 285 (000mt)
respectively.
Fish landing was estimated at about 800,000 metric
tons per annum in the past but this has fallen to an
annual fish catch of 400,000 metric tons currently.
Ghana, the has to import fish to meet demand.
14. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Major Challenges in the Agricultural Sector
The agricultural sector in Ghana faces a number of
challenges. The constraints of the sector are
classified under:
Insufficient access to credit
Most farmers lack sufficient personal capital, to
thoroughly self-finance their operations. The only
source of funding therefore available to the farmers
is credit.
Banks and other financial institutions are
reluctant to lend to farmers mostly because they
lack formal legal ownership title of their
possessions especially lands. Because there is no
document to indicate ownership, they cannot use
these resources as collateral.
15. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Infrastructural Constraints
Another major challenge in the sector is
inappropriate and / or inadequate infrastructure.
More than 80 per cent of agricultural concerns are
located in rural areas. Some of these have no
paved roads connecting them to any near market.
Apart from roads, portable water is lacking. This
makes irrigation very difficult and expensive. It is
therefore not surprising that only about 1 per cent
of cultivated land is under irrigation. Farms that
use irrigation are usually located in close
proximity to water bodies such as rivers. However,
insufficient rainfall in a particular year depletes
these water resources.
16. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Lack of appropriate and sufficient energy in rural
localities further complicates farmers’ plight; they
are unable to establish cold storage facilities for
livestock products.
Furthermore, the technology to preserve other
agricultural produce such as roots and tubers can
also not be used due to the lack of energy.
Estimates conclude that between 30 per cent and
45 per cent of agricultural produce perishes before
it gets to market causing small scale farmers to
lose a substantial portion or their incomes or
wealth.
17. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Socio - Cultural Constraints
The lack of education or illiteracy of most farmers
makes it difficult for them to learn new and
improved agricultural technologies.
Even when modern farming implements and
equipment are provided by government or a non-
governmental organization (NGO), the farmers
cannot read the attached instructions or manual.
Without actual demonstrations of how to apply or
use a particular technology, the newly provided
implements are of no benefit.
18. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
In addition, certain cultural practices such as
how family farms and resources are made
available to those desiring to enter into
agriculture impede agricultural advancement.
Division of large farmlands for each family
member for different purposes results in small
fragmented farms for each individual. This
makes large scale farming difficult, if not
impossible. Such small farms cannot enjoy
economies of scale.
19. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Regulatory Constraints
Farmers in addition to the other challenges,
are faced with regulatory constraints. An
instance of this is the cost of formalizing
agricultural enterprises; the offices where
such registrations can be done are mainly in
Accra and the regional capitals.
Farmers have to incur transportation costs of
going back and forth for several days, printing
documents, accessing a communication center
to develop the necessary documents in
hardcopy and paying the necessary fees and
rates.
20. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Political leaders and policy makers focus more on
acceding to the needs of farmers in semi-urban
areas. The urban and semi-urban farmers have
greater access to political leaders, press and media
and are able to pressure and lobby them.
Some of the formulated laws have conflicting
effects on agricultural production. An instance is
the law regarding distribution of premix fuel for
fishermen. Such laws have loopholes through
which middlemen benefit at the expense of the
fishermen for whom the law was enacted.
21. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Agriculture sector policies in Ghana
Pre-Structural Adjustment Era
Agricultural policy prior to independence
emphasized the extraction of natural
resource(cocoa, coffee, oil palm, etc.) with little
attention on the production of staple foods.
The Cocoa Marketing Board (CMB), was
established by the colonial government during the
Second World War, and became the monopoly
buyer of cocoa at a fixed price paid to producers .
22. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
The agricultural policies from the late colonial period
prevailed until the country became a republic in 1960.
Large-scale state farms, known as State Farms, were
established and an Agricultural Development
Corporation (ADC) was set up to promote agricultural
modernisation and development through the State
Farms.
The ADC’s role was put on import-substituting
industrialisation, mechanised agriculture and direct
public intervention in production. Small-scale
independent farmers were organised for mechanised
agriculture through cooperative efforts.
23. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
In 1972, the programmes Operation Feed Yourself (OFY)
and Operation Feed Your Industries (OFYI) were put
into action to increase agricultural production to self-
sufficient levels and agricultural raw materials
production.
ERP/SAP Era
In 1986-88 the government drafted a new agricultural
policy: the ‘Ghana Agricultural Policy: Action Plan and
Strategies. The Key objectives outlined in this initiative
were:
Self-sufficiency in cereals, starchy staples and animal
protein food,
Maintenance of adequate buffer stocks for price
stabilization and food security during shortfalls; and
Improving institutional facilities such as research,
credit and marketing.
24. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
However, putting these objectives into practice
proved difficult, in part due to the weak
institutional capacity of the country.
The Government in collaboration with the World
Bank, consequently embarked on the ‘Agricultural
Services Rehabilitation Project (ASRP)’ over the
1987-1990 period.
The goal of ASRP was to enhance the Ministry of
Food and Agriculture’s (MOFA’s) capacity to
provide effective policy and institutional support
for rehabilitation and recovery of agricultural
growth.
25. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
The specific objectives of ASRP were to:
Provide foreign exchange to finance imported
inputs;
Build technical and managerial capacity within
MOFA;
Streamline and rationalize agricultural research
and extension;
Pilot-test low-cost, farmers-managed small-scale
irrigation schemes; and
Privatized input markets.
The ASRP project did succeed in strengthening the
institutional base of the sector.
26. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
To build on these short-term gains, the
government with support from the World Bank,
decided to implement the Medium Term
Agricultural Development Program (MTADP) in
1991.
A number of stand-alone projects were launched
under MTADP such as:
The ‘National Agricultural Research Program’
(NARP),
The ‘National Agricultural Extension Program’
(NAEP), and
The ‘Fisheries Capacity Building Project’ (FSCBP).
27. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Current Agricultural Programmes and Projects
In 2003, MOFA developed a ‘Food and Agriculture
Sector Development Policy’ (FASDEP). The policy
was meant to provide a framework for modernizing
the agricultural sector and making it a catalyst for
rural transformation, in line with the goal set for
the sector in the Ghana Poverty Reduction
Strategy.
Infrastructure development, promotion of
appropriate technologies, and improved extension
services were to be implemented to achieved the
aim of the policy.
28. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
After nearly four years of its implementation, the
policy was not be able to achieve the desired
impact because of a number reasons, including
the following:
Failure to properly target the poor farmers;
Problem analysis was weak and did not sufficiently
reflect client perspectives on their needs and
priorities; and
The process by which the Ministry of Food and
Agriculture (MOFA) was to stimulate response
from other MDAs for interventions that fell outside
the domain of MOFA was not specified.
29. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
It therefore became necessary to revise FASDEP to
reflect lessons learned and to respond to the
changing needs of the sector. The strategic objectives
for the agricultural policy (FASDEP II) are as given
below:
Food security and emergency preparedness.
Increased growth in incomes.
Increased competitiveness and enhanced
integration into domestic and international
markets.
Sustainable management of land and environment
Science and technology applied in food an
agriculture development.
Improved institutional coordination.
30. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Some of the programmes and activities for the Agric
sector planned by the government since 2010
includes:
Buffer Stock Management
Provision of improved seedlings
Provision of hybrid improved livestock
Irrigation development and mechanization systems.
Provision of requisite equipment, fertilizers and
machinery
Buffer Stock Management
The National Food Buffer Stock Company (NAFCO)
was established to hold security buffer stocks and to
Intervene in the market to ensure competitive prices
at all times.
31. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
The company acquired and rehabilitated two
warehouses for the storage of grains.
About 6,949 metric tones of paddy rice and 416
metric tones of maize were purchased and stored.
Improved Seedlings Provided By Government
In 2011, 55 licensed rice buying firms were
established to purchase rice for milling and
storage by the Nasia mill, which was revived by the
state. 148 tons of nerica seeds were produced and
distributed to farmers at a subsidized rate.
In 2012, 44,000 improved cashew clones were
provided to help establish 2,500 new cashew
farms. Also, 20,000 kg of improved maize, rice and
soybean seeds was distributed to 300,000 farmers.
32. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Provision of Improved Livestock
19,300 day-old chicks were procured and
distributed to farmers at subsidized prices in
2011. Furthermore, 2.5 million doses of I-2 poultry
vaccines were produced and used to vaccinate
poultry against Newcastle disease in the same
year.
In 2012, farmers received 5,687 cockerels raised
and distributed to them at subsidized rates. 206
improved breeding livestock were also supplied
freely to farmers.
79 new fish ponds were constructed covering
about 450.26 hectares. 36, 682, 500 fish
fingerlings were distributed to farmers at reduced
prices.
33. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Agriculture Mechanization
89 mechanization service centers were established.
Each of these centers was supplied with, on
average, 5 tractors,, maize shellers and water
pumps.
400 operators of mechanical agricultural
equipment were trained in the operation,
maintenance and repairing of combine harvesters
and tractors.
Irrigation Projects
The second phase of the rehabilitation of the Tano
irrigation dam was 90 per cent completed and
currently, it has 1,850 hectares of farms under
irrigation.
34. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Additionally, the rehabilitation of dams in the
three Northern Regions were 70% completed.
Fertilizer Subsidy Programme
The fertilizer subsidy programme was reviewed and
a more efficient waybill system was introduced.
The new system was to replace the existing coupon
system, to enhance the delivery of the programme
and ensure a more transparent distribution
system.
GH¢ 54.9 million (114,160 metric tons) worth of
fertilizer was provided to farmers at reduced
prices.
35. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
The Way Forward
The question for policy-makers is, how best can
they support farmers to raise productivity and
production. The following should be considered:
The government’s should invest more in irrigation
facilities as it has been realized that most of the
crops that did not do well or experienced a
decrease was as a result of the inconsistent
rainfall pattern of the year.
An improvement in irrigation facilities for farmers
will therefore help reduce the effect of rainfall and
climate variability.
36. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
It is also necessary that the government invests
more in new improved seeds and new technologies
that can perform well in poor rainfall conditions.
The government’s policy should be directed
towards improving the human resource base in the
agricultural sector, as that is one of the major
deficiencies experienced by the sector. More
extension service officers should be recruited and
existing ones trained well with respect to new
technologies and modern agricultural extension
service methods.
37. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
The government at a national and regional level
need to revise land tenure policies to encourage
farmers to produce on large basis.
Industrial Sector
After the rebasing of the national account
estimates in November 2010, Ghana’s industrial
sector currently consists of five subsectors, namely
manufacturing, construction, mining and
quarrying, electricity and water and sewerage.
The rebasing of the Ghanaian economy reflects the
change in the total value of goods and services
produced, growth rates, sectoral distributions and
other related indicators driven by GDP from 2006.
38. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Ghana’s manufacturing activities include the
production of food, beverages, tobacco, textiles,
petroleum refinery and cement, among others.
Construction deals with the construction, repairs,
maintenance, alteration and demolition of
buildings, highways, streets, bridges, roads,
railways and communication systems.
The mining and quarrying subsector covers the
extraction of natural minerals, in the form of either
solids, liquids or gases. This subsector in Ghana
produces mainly gold, diamonds, manganese,
bauxite, salt, stones and sand.
39. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
The activities of the public sector-dominated
electricity and water and sewerage subsectors
include production and distribution of electricity
and water and sewerage. Prior to rebasing, the
electricity and water and sewerage subsectors had
been lumped together.
In terms of industry’s contribution to GDP, it has
overtaken agriculture since 2011 as the second
largest sector. Tentative estimates for 2012 show
that industry contributed 28.6 per cent to GDP,
making it the second largest after the service
sector (48.4 per cent) and exceeding agriculture
(23 per cent).
40. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
The Table below shows the growth rates of the
industrial sector in recent times. The performance
improvement of the industrial sector in 2008 was
underscored by the strong showing of the construction
and the electricity subsectors which expanded 39 per
cent and 19.4 per cent, respectively.
The strong showing of the construction subsector in
2007 and 2008 largely reflects the massive
infrastructure projects (stadia, real estate, roads etc.)
that were constructed to celebrate Ghana@50 in 2007,
host the CAN 2008 tournament and the African Union
Heads of State conference in 2008.
Industry’s increasing contribution to GDP also can be
attributed to the commencement of crude oil mining in
2010, which quadrupled the shares of mining and
quarrying to GDP
41. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Overview of the Industrial Sector’s
Performance
2009 2010 2011 2012 2013
2. INDUSTRY 19.0 19.1 25.6 28.6 28.6
Mining and
Quarrying
2.1 2.3 8.4 9.5 9.8
o.w. Crude Oil 0.0 0.4 6.7 7.8 8.1
Manufacturing 6.9 6.8 6.9 6.4 5.8
Electricity 0.5 0.6 0.5 0.5 0.5
Water and Sewerage 0.7 0.8 0.8 0.7 0.6
Construction 8.8 8.5 8.9 11.5 11.8
Source: Ghana Statistical Service
42. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Characteristics of the Industrial Sector
The industrial base of the country is characterized
by the following features:
Ghana’s key industrial sub-sectors are highly
import-intensive. An average of 45% of our
industrial sub-sectors are highly dependent on
imported inputs for production.
Underutilization of installed plant capacity as a
result of obsolete plant and machinery, inadequate
raw material inputs and high cost of locally
produced raw materials and inadequate power
supply.
43. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Most firms and factories are urban centred
because the factors, which influence location are
developed there. An examination of the regional
distribution of firms in Ghana shows that in 2003
the Greater Accra region, followed by Ashanti,
encompassed the majority of industrial
establishments, with these two regions accounting
for 50 per cent of the total.
Together the Eastern, Central and Western
Regions accounted for about 30 per cent of the
total number of establishments .This implies an
approximately 80 per cent concentration in the
major cities/urban areas in five of the country’s
ten regions.
44. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
The Ghanaian industrial sector primarily
comprised of micro (an establishment that employs
less than five people) and small firms ( between 5
and 19 people ) form close to 94% of the total
number of firms in the industrial sector. Mediums
firms (employing between 20-49) on the other hand
make up only 4.0 percent with the remaining 2.3
per cent being large firms ( 50 employees and
above).
There is also a low level of indigenous
ownership and controls, because of difficulties of
financing industrial projects. The total share of
credit facility to sector, dwindled from 60.94% in
2000 to 59.63% in 2001 and further declined to
56.71% in 2002.
45. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
There is a high labour usage as compared to
capital utilisation since many of them were
established as avenues of employment.
There is high dependence upon what is termed
as apprentices. Many firms have apprentices
only, with no purely wage earning employees.
Industrial clusters in Ghana have either developed
spontaneously or were established in response to
government/public interventions or policies.
Example is the industrial zones set up by the
Ghana Free Zones Board (GFZB) as export
processing zones (EPZs).
46. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
The industrial sector, given the contribution it makes to
GDP, continues to support the growth of the Ghanaian
economy.
Industrial sector products are also crucial foreign
exchange earners. Foreign exchange earnings from
the industrial sector comes mainly from minerals.
In 2012,, total earnings from the minerals sub-
sector US$5,770.5 million and US$5,140.7
million in 2013 (BOG)
The sector also fulfils almost all of the nation’s
power and water requirements at the household
and industrial level
47. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Employment
The industrial sector provides jobs and income for
the country’s labour force, its contribution to
employment since 2000 has been almost one -fifth
of total employment (15.5 per cent and 14.4 per
cent in 2000 and 2006, respectively).
Out of a total number of 413,603 new jobs that
were created between 2001 and 2010, the
manufacturing and construction subsectors were
considered to have generated about 28 per cent.
It serves as a source of market for agricultural
products. Agro-based industries processes raw
materials produced form the industrial sector.
48. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Challenges facing the Industrial Sector
The major problems currently facing industry are:
Weak infrastructural (road, railways, harbour, power,
water etc) base of the economy.
Human capital constraints: The level of education and
skills of the labour force are still low. Also there is the
problem of a wide gap between skills required by
industry and what is turned out by training
institutions.
High cost of doing business in Ghana (limited access
to affordable finance, high utility tariff, foreign
exchange constraints & institutional corruption)
49. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Trade Liberalization :Ghanaian industries face
stiff competition from both developed & emerging
countries and are not able to penetrate into export
market of developed, emerging countries & even
sister countries in the sub-region.
The continuous depreciations of the cedi erodes
the liquid resources, which could help firms to
undertake the necessary investments.
Weak institutions: institutions established to
support the sector (GSB, GIPC, CSIR, etc) have
failed to live up to expectation. This is mainly
because they are under-resourced and
understaffed).
50. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Key Policy Interventions in the Industrial Sector
Pre-ERP (1960s)
Prior to 1957, the industrial sector was a small
sector (mainly manufacturing) that contributed
very little to economic growth.
The sector had been under-developed mainly
because the colonial rulers were interested in
extracting raw materials from the Gold Coast; and
creating an economic system heavily dependent on
manufactured products from Britain.
51. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Nkrumah led government viewed industrialization
as a key factor to the modernization and
development of the country. The industrialization
policy was based on import substitution
industrialization (ISI) to be managed through
effective protection in the form of a highly
restrictive trade policy regime.
The ISI strategy was centered around the
development of a large-scale public sector
investment that was to become the leading edge in
Ghana’s industrial development.
52. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
The ISI strategy relied on administrative controls
rather than market mechanisms to determine
incentives and resource allocations. Policies to
achieve this objective included:
Quantitative import restrictions (i.e., foreign
exchange rationing; import licensing);
heavy tariffs on imported consumer goods, and
domestic price controls in the form of
administrative fixing of minimum wages, rents
and interest rates
53. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Post-ERP (1983-2000)
The main policy initiatives under the ERP for
the industrial sector included:
The introduction of a market-determined
exchange rate with minimal intervention,
Removal of price and distribution controls,
Liberalization of the financial sector and interest
rates,
Abolition of the import licensing system,
rationalization of import tariffs and the taxation
system,
Promulgation of the new investment code (PNDC
law 116), Establishment of the Ghana Investment
Centre (GIC) and privatization of state-owned
enterprises.
54. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
In addition, the SAP sought to instigate a SOEs
reform programme in order to stimulate
competition within the state dominated industrial
sector. This led to the privatization programme of
the 1990s.
During the first half of the 2000s, there was a shift
in the focus of Ghana’s industrialization strategy.
The policy strategies within the industrial sector
that were adopted were aimed at :
promoting agro-processing;
facilitating the development of commercially viable
export and domestic market-oriented enterprises
in the rural areas;
55. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
improving agricultural marketing and enhancing access
to export markets;
improving the competitiveness of domestic industrial
products;
promoting industrial sub-contracting and partnership
exchange; and
promoting the development of the craft industry for
export.
Current Industrialization Strategy
Ghana’s new industrialization strategy is aimed at
creating an industrial architecture based on value-
added processing of the country’s natural resource
endowments through a private sector-led
accelerated industrial development strategy.
56. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Under the national industrial policy, the industrial
sector-specific policies include measures to:
strengthen the linkages between industry, and
research and development institutions;
decentralization of industrial development to
exploit the resource endowments of districts;
establishment of new and emerging industries
such as petrochemicals, fertilizer and LPG cylinder
production on the back of the new oil and gas
industry;
establishment of manufacturing enterprises to
process agricultural produce, especially beans,
fruits and shea nuts;
57. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Exploitation of the limestone deposits in northern
Ghana for the production of cement for industry,
as well as utilization of the country’s significant
clay deposits for the production of bricks and
other building materials to support the programme
for the construction of affordable housing units;
Rejuvenation of the textile industry in an
integrated manner, from seed production to
spinning to ginning, and printing;
Establishment of integrated shea butter processing
factories in the three northern regions, targeting
the processing of 50,000 tons of shea butter per
annum for both local and international markets;
58. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Rehabilitation of abandoned but viable
manufacturing enterprises, including jute factory,
tomato cannery, gold refinery and ceramics
production;
Establishment of a second oil refinery in the
Western Region to boost the production of
petroleum products for exports and for national
energy security;
Establish industry support centers to assist firms
become internationally competitive ;and
To seed and facilitate the creation of industrial
anchors, and deploy the full benefits of existing
free zone, export zone and related investment laws
to accelerate industrial development
59. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
The way forward for the sector:
Promotion of joint ventures by
Ghanaian/International partners.
Human resource development and institutional
capacity building for key stakeholders in the
public and private sectors, including attachments,
study tours etc.
A well functioning infrastructure (roads, ports,
telecommunications, energy etc) would be a
necessary precondition for industrial development.
Learning from Best Practices around the world.
E.g. learning from emerging economies such as,
South Korea, China, Malaysia etc.
60. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Enhanced access to the West African sub-region
and the Sub Saharan African market with the
locally manufactured products.
Strengthening industrial support institutions
(Universities, Technical and Vocational
institutions, Ghana Chamber of Commerce etc) to
enable them provide more effective management
and advisory services, including the organisation
of management training programmes.
Strengthening the links between industry and
other sectors of the economy.
The practice good governance in order to attract
more private sector investments.
61. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
Service Sector
Service sector is the portion of the economy
that produces intangible goods. The focus is
on people interacting with people and
servicing the customer rather than
transforming physical goods. The service
sector is also called the tertiary sector.
Since 2006, the services sector has been the
highest contributor to Gross Domestic Product
(GDP), taking over from the agricultural
sector.
62. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
2013, of the GH¢93,461 million GDP, GH¢44,988
million (or 48%) came from the services sector This
output came from the 10 subsectors:
Transport and storage
Trade, repair of vehicles, household Goods
Hotels and restaurants
Information and communication
Financial intermediation
Business, real estate and others
Public administration, and defence, social security
Education
Health and social work
63. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
2009 2010 2011 2012 2013
3. SERVICES 49.2 51.1 49.1 48.4 49.5
3.1 Trade; Repair
Of Vehicles, Household
Goods
5.9 6.2 5.9 5.3 4.9
3.2 Hotels and
Restaurants
6.2 6.0 5.4 4.7 4.3
3.3 Transport and
Storage
10.5 10.6 10.7 10.9 11.2
64. THE REAL SECTOR OF THE GHANAIAN
ECONOMY
3.4 Information
and communication
1.8 1.9 1.8 2.2 2.4
3.5 Financial and
Insurance Activities
4.3 5.2 4.4 4.8 6.5
3.6 Real
Estate, Professional
Administrative &
Support Service
activities
4.1 4.5 4.6 4.6 4.4
3.7 Public
Administration &
Defense; Social
Security
7.0 7.0 7.0 6.8 6.9
3.8
Education
4.2 4.3 4.1 4.3 4.2
3.9 Health
And Social Work
1.4 1.6 1.3 1.3 1.2
3.10 Community,
Social & Personal
Service Activities
3.7 4.0 3.9 3.5 3.4