Decentralisation campaign under way in Ghana's industrial sector

A defining characteristic of President Nana Akufo-Addo’s industrial policy is decentralisation. The new administration is hoping to drive economic growth and employment by encouraging the development of industry in every region of the country.

The headline policy of these wider industrialisation and diversification efforts is the One District, One Factory initiative (1D1F). The scheme seeks to establish a factory in each of Ghana’s 216 districts over 2017-21. 1D1F will be developed through public-private partnerships (PPPs), with the estimation that each factory will require between $5000 and $5m in funding. In 2017 the government targeted 51 districts and allocated $171.4m under that year’s budget for this purpose.

Early Promise

While Ghana – and indeed a variety of markets across the continent – has witnessed some obstacles to development of the sector, the early signs of 1D1F look positive. In March 2017 Gifty OheneKonadu, the national coordinator at the 1D1F secretariat, told local press that the initiative had already received $3bn in pledges from local and foreign investors and that 40 business proposals out of 310 enquiries were under consideration. In the same month Universal Merchant Bank offered $100m for the programme. This funding is partly dedicated to the establishment of PPP centres to support successful applicants and expedite the process of launching operations.

Following this promising news, in June 2017 it was announced that China had also committed $2bn towards the scheme. In a memorandum of understanding with the Association of Ghana Industries and several Ghana-based banks, the China National Building Materials and Equipment Import and Export Corporation agreed that it would offer up to 85% financing of viable projects approved by the 1D1F Secretariat. “The most exciting part of the financing is the Chinese will provide a huge market access for most of the export commodities, which is expected to bring $2.5bn revenue to Ghana annually,” Ohene-Konadu told local press.

New Zones

The government hopes the scheme will create 350,000 jobs and support regional economies. However, the administration is not pinning all its hopes on 1D1F. In May 2017 Alan Kyerematen, minister of trade and industry, also announced plans for a new industrial zone in each of Ghana’s 10 regions. “If we are talking about enhancement of industrial production, then obviously access to lands [and] energy must be a critical factor. That is why these industrial parks are actually important. The magic of Asia, China [and] Korea are all about the establishment of industrial parks and special economic zones,” he told local press.

Development of both hard and soft infrastructure will be crucial to the success of such industrial zones. Indeed, the latter will be particularly important. “Ghana still needs to find the right business environment and taxation balance,” Hayssam Fakhry, managing director of Interplast, told OBG. “The possibilities are endless if the country can simplify its taxes and export procedures, while simultaneously bringing additional foreign currency through tourism,” he added.

Challenges

Although these decentralisation efforts have gained momentum, they will likely face significant hurdles. Beyond the perennial problem of power supply (see overview), industrialisation in rural areas will test infrastructural capacity. While industrial corridors experience some challenges, factories in rural settings face a different set of obstacles.

Ghana has a $1.5bn infrastructure funding gap to bridge to enable district factories and industrial zones to market their goods and generate export revenue. Indeed, while 1D1F and the industrial zones plan offer a lot of potential, infrastructure and incentives will ultimately determine their success. “Agriculture and food processing offer the most potential, especially those related to cocoa products, cassava, palm and exotic fruits,” Jamil Mouganie, assistant general manager of Latex Foam, told OBG. “Development of the infrastructure for transport will be the key to their growth.”