On the Rise

For decades, Ghana, like the rest of Western Africa, has been unable to muster itself to build a competitive manufacturing sector or industries. While the country and region have made several starts, global conditions usually bring these efforts to an end relatively quickly. Despite the odds, however, Ghana is taking initiatives at the state level to increase productivity and attract foreign investment.

Along with many other counties in Africa, Ghana suffers from a very high reliance on imports. Throughout Ghana and the region, everything from cars to toothpaste can be imported. Energizing local industries so that the country can begin to reduce its reliance on imports is key to giving the sector the strength it needs to grow.
To better understand the import conditions in the country, TBY sat down with Seth Twum-Akwaboah, the CEO of the Association Ghana Industries, a business association of over 1,200 large and small members across all sectors. “In order to solve the problem of imports, it is first necessary to fix the macroeconomic environment, stabilizing the exchange rate, and adjusting inflation to allow long-term business survival,” Twum-Akwaboah said. “The issue of finance is a big challenge as we are borrowing at a high cost; however, the treasury bills have been going down, which means the government will borrow less and banks have more choice to lend to the private sector, lowering interest rates. Second, the government also needs to reduce the cost of doing business to gain competitiveness and prevent foreign products taking over local market share.”
Improving the environment for SMEs is also a high priority. The majority of the Ghanaian economy is made up of SMEs; the government hopes that improving production conditions will allow local industries to develop as well as encourage Ghanaians to purchase locally, and thus ultimately put the private sector in the driver’s seat of the economy. As part of this effort, the Minister for Trade and Industry, Alan Kyerematen, recently led the country’s first SME CEO summit in November 2017. At the summit, Kyerematen advised the country’s entrepreneurs to adopt certain measures and management styles in hopes of strengthening the sector, specifically, to put in place a board of directors and establish plans for succession. The gathering also included a trade show, which allowed entrepreneurs to showcase their products in front of investors and the public.
The Ministry of Trade and Industry is also behind the Made in Ghana Campaign. The campaign has brought together industries across the board, including agriculture and pharmaceuticals. The middle class in Ghana is growing strongly, with its amount of disposable income growing every year; by 2019, retail spending is expected to hit USD11 billion. Made in Ghana seeks to harness this increasing local purchasing power and keep more money inside the country by directing it toward local goods. The campaign is working to underline the superior quality of Ghana-made goods, with an emphasis in terms of cost to value.
A recent survey conducted by Ghana-based African Center for Economic Transformation (ACET) sought to address impediments between the government’s objectives and the current state of the sector. The survey stated a mix of corruption, tax rates, availability of finance, electricity, and regulations were major hurdles for businesses trying to succeed. In recent years Ghana has made slight improvements on the World Bank’s Doing Business Report. Though marginal, the country has improved overall costs to starting a business. The price of dealing with construction permits has decreased as well as has the price of electricity; however, there have been no recent improvements in the number of electricity days, which currently stands at 79.
The ACET survey focused partly on access to energy, and unreliable access to electricity was commonly cited as a serious roadblock to doing business. Approximately 73% of survey respondents cited inadequate electricity as a reason for losses, which according to the study resulted in 13% of annual sales. Many industries have thus been forced to take electricity matters into their own hands, generating their own power, albeit at a significantly inflated price. According to the survey, nearly 60% of businesses said they faced difficulties in terms of accessing financing, and over 40% complained of corruption.