Transport infrastructure upgrades take shape in Ghana

Rapid economic development, demographic growth and regional dynamics have put increasing pressure on Ghana’s transportation system over the past decade, and it has at times struggled to keep pace. Rather than allow the transportation sector to become a victim of the country’s success, the government has pushed forward infrastructure development projects, with the private sector encouraged to take a major role in finance, construction and management.

The economic slowdown of 2013-14 gave some respite as, for example, air passenger growth and trade volumes through the biggest port stalled. With the growth outlook set to brighten in 2016 and beyond, important investments are moving ahead, from large increases in port capacity to upgrades of regional airports. Some areas have moved more quickly than others; roads around urban areas are traffic-clogged, and a long-awaited railway overhaul seemed to be gaining momentum again in mid-2015.

Meanwhile, investors hope to see opportunities arise from a raft of proposed public-private partnerships (PPPs), from toll roads to a national airline.

Private Sector Involvment

Ghana has had a policy of openness towards private investment in infrastructure for some years. The importance of private participation in transport infrastructure has become ever more apparent in recent years, as Ghana has grappled with limited public resources to invest, while pressure on its transportation system has increased due to economic and population growth, as well as rising numbers of visitors and growing trade, including with the landlocked countries to the north.

The government expects to run a budget deficit of 7.3% of GDP in 2015, while debt tops 70% of GDP. Under the terms of a deal signed with the IMF in April 2015, the government is obliged to reduce the deficit and curtail debt growth to ensure more sustainable finances over the longer term, and reduce pressure on the cedi and the country’s creditworthiness. As such, the government is keen to encourage private participation in the financing, construction, management and ownership of transport infrastructure.

In a March 2015 report, “Building the future of Africa”, professional services company PwC forecast that annual infrastructure spending in sub-Saharan Africa would grow by more than 10% a year to top $180bn by 2025, with growing opportunities for PPPs. It noted that private companies would increasingly need to work more closely with the government on infrastructure development projects, particularly in urban areas, but that this would become easier thanks largely to improving political stability.

Closing The Gap

In its “African Construction Trends Report 2014”, professional services firm Deloitte said that 10% of construction projects across Africa had been structured as PPPs in 2014, up from 4% in 2013. “We believe that significant private sector participation alongside government is required to enable Africa to close the infrastructure gap,” it said.

In October 2015, in a press conference in Accra, Dzifa Attivor, the minister of transport, emphasised the importance of the private sector in transport infrastructure development, particularly through PPPs. She highlighted projects with particular potential for private involvement including the proposed new national airline; the airport at Ho, the capital of the Volta Region; the rehabilitation of the airport at Wa in the Upper West Region; and the expansion of Kotoka International Airport (see analysis).

In the ports sector, a new fabrication facility at the Port of Takoradi to support the country’s oil and gas industry – centred on the coastal city – and the expansion of the Port of Tema are priority projects.

In land transport, priorities include the Sekondi-Takoradi railway line via Kojokrom, and the Eastern Corridor Multi-Modal Transport project, linking Lake Volta with Tema, including a railway line. Other procurement projects included a new electronic roadworthiness sticker issued by the Driver and Vehicle Licensing Authority from November 2014, and a payment platform already introduced in Accra and Tema and being rolled out across the country, as well as the purchase of nearly 500 buses to enhance urban transport provision.

Awaiting Framework

In June 2011 the government published the National Policy on Public-Private Partnerships, which made a commitment to using PPPs in delivering public goods where appropriate. The document estimated that the country had an infrastructure gap requiring $1.5bn of investment a year over the following decade.

It emphasised the scope of PPPs to leverage the expertise, technology, capital and human resources of the private sector, while freeing limited government resources for use elsewhere. The pooling of risk and the efficiency of the profit-driven private sector were also cited as advantages.

The policy document set out how PPPs should work, including the responsibilities of the partners, and new government agencies to be involved in the processes. In May 2013 it was followed by the second draft of the Ghana Public-Private Partnership Bill, a more thorough piece of legislation on PPP management end-to-end. While the bill was due to be passed into law by the end of 2014, as of October 2015, it was still before Cabinet. Government officials quoted in the local press said that it would be passed “very soon” and would support the implementation of the 2011 PPP policy, bringing transparency and accountability to the partnerships, and boosting the confidence of domestic and foreign investors.

The National Development Planning Commission, which monitors, evaluates and coordinates development policies, programmes and projects in the country, is in the process of drawing up a list of infrastructure projects, from which PPPs will be initiated. However, the government has emphasised that it will not resort to private sector participation in all cases; if the cost to the taxpayer is regarded as too high, the government will seek alternatives. In August 2014 the government published a pipeline of current and potential PPP projects, including several of the most significant transport infrastructure schemes.

Road Projects

One of the most pressing of the projects highlighted is the expansion of the 24.7-km Accra-Tema Motorway. This is a hugely strategically important road linking the capital with the country’s largest port, and a notorious traffic bottleneck that sees 30,000-40,000 vehicles a day, up to half of them heavy goods vehicles coming to and from the port. Easing traffic pressure on Tema is important not only for domestic reasons, but to strengthen the overloaded port’s position as a trading centre for Ghana’s landlocked neighbours. The government intends to expand the road to develop a six-lane highway, President John Mahama said in his State of the Nation address in February 2015, pledging that work would be underway by the end of the year. The project, including broader improvements to the road and ongoing maintenance, is likely to be awarded on a build-operate-transfer (BOT) basis. The project includes the construction of interchanges to link roads from Accra Abattoir, Trassaco Valley, Sakumono, Nungua and Ashaiman.

The Accra-Tema Motorway is part of the Trans-West Africa Highway network, a strategically important but patchy series of roads along the coast of the region, connecting Mauretania with Nigeria and beyond, and earmarked by regional governments for development, with a view to boosting regional economic integration. Another section of the regional highway is the Accra-Takoradi Motorway, a 185-km stretch between the capital and the centre of Ghana’s oil and gas industry to the west. The dualisation of this road, single-lane for all but around 10 km of its length, is another major potential PPP project. The government has earmarked the highway for a BOT, with the private sector taking over design, financing and construction, including bridges and interchanges, as well as the maintenance and operation of the road.

Multi-Billion-Dollar Investment

In March 2015 President Mahama said that the government would spend $1bn annually for the following five years in road construction. The cash is part of the government’s “transformation agenda” to link regional and district capitals to improve cross-country connections and stimulate economic activity. Mahama was speaking at the ground-breaking ceremony for the reconstruction of the 209-km Oti Damanko-Nakpanduri road, part of the broader “Eastern Corridor”. The Eastern Corridor road runs from Tema in the south to Kulungugu in the Upper East Region.

The Oti Damanko-Nakpanduri road is expected to be completed in 2016, with financing from the government of Brazil ($240m) and the Ghanaian government ($50m). The government is seeking Chinese financing for the reconstruction of the remainder of the Eastern Corridor. Mahama highlighted the importance of the Western Corridor, linking Enchi near the border with Côte d’Ivoire in the Western Region to Hamile on the border with Burkina Faso in the north.

Broader Network

Ghana’s roads system is overseen by the Ministry of Roads and Highways. Under the ministry, several departments operate, each with responsibility for different road classifications and areas of operations: the Ghana Highways Authority, the Department of Feeder Roads, the Department of Urban Roads, the Ghana Road Fund (which finances the maintenance, upgrade and rehabilitation of roads, as well as road safety activities), and the Koforidua Training Centre (which provides skills training for transport sector professionals, including engineers, consultants and administrative staff).

Roads are by some way the dominant form of transport in Ghana, given the limited state of the operational railway network. Roads carry 95% of passengers and 98% of freight cargo, according to “Africa Rising”, a 2013 report by PwC. The report noted that the World Bank says Ghana’s road transport fundamentals are good, being ahead of almost all low-income countries on most indicators, and nearing average levels for a middle-income country. The government allocates around 1.5% of GDP to roads, one of the highest proportions in West Africa. Nonetheless, congestion is a major concern in some areas.

As the Ghana Highway Authority (MRH) suggests, the network is separated into trunk roads (major routes connecting regions and neighbouring countries), feeder roads (linking towns and villages to trunk roads), and urban roads in built-up areas. In all, there are 71,063 km of roads, 42,190 km in the feeder system, 14,000 km of urban roads, and 14,873 km of trunk roads, according to the MRH’s Sector Medium-Term Development Plan (SMTDP) 2014-17.

At the time of the SMTDP’s publication, 45% of the road network was classified as being in good condition, 25% in fair condition and 30% in poor condition, a clear indication of the need for investment in the system. Only 30% of the network was paved, and policy has focused on the maintenance of the existing roads. A breakdown of the figures indicates where road quality issues are most acute: investments in recent years have helped bring more key roads up to standard. In the trunk road (highway) segment, 52% of the network was in good condition, 34% fair and 14% poor; of urban roads, 49% were in good condition, 32% fair and 19% poor; and of feeder roads, the respective proportions were 30% good, 38% fair, and 32% poor. As recently as 2010, only 29% of trunk roads were classified as good, 44% fair and 27% poor. The SMTDP sets the target of 60% of all roads being classified as good by 2017, with 20% fair, and 20% poor.

The SMTDP provisionally allocates GHS7.6bn ($2.1bn) of expenditure over the four-year period 2014-17 (inclusive), with 60.27% allocated to construction, 33.45% to rehabilitation and maintenance, 3.39% to road safety and environment, and 2.88% to management and administration. The plan sets out a range of priority projects, including specific road construction and rehabilitation schemes, urban transport programmes, maintenance programmes, and human resource development targets. Projects include the dualisation of the Accra-Kumasi road; the complete rehabilitation of the Central Corridor, Coastal Corridor and Eastern Corridor; stricter enforcement of axle limits to help preserve roads; better mapping; and increasing the fuel levy from 6.5 cents to 9.5 cents per litre to fund road projects.

More effective monitoring and management of the roads system is also a priority, which will entail greater utilisation of ICT and staff training.

Tema

Both of Ghana’s major ports, Tema and Takoradi, are undergoing expansion and upgrade programmes intended to support rising trade volumes, and maintain their position as competitive ports for regional traffic. The container terminal at the Port of Tema is one of Ghana’s most successful examples of PPPs and often cited as an example that shows how well the partnerships can operate. It is run by Meridian Port Services (MPS), a joint venture between APM Terminals, Bolloré Group (each with a 35% stake), and including the state-run Ghana Ports and Harbours Authority (GPHA) with 30%.

In June 2015, MPS confirmed plans to invest $1.5bn in a new 3.5m twenty-foot equivalent unit (TEU)-capacity deepwater port and supporting logistics centre in Tema. The project will see the construction of a new, greenfield port development outside the existing port, and improvements to the much-pressurised surrounding road network (see analysis).

GPHA is also undertaking $423m in upgrades to Tema and Takoradi. At Tema, this has included installing four rubber-tired gantry cranes and additional container-handling equipment, character recognition systems that help monitor container and vehicle movement, improving security and efficiency, and a $450,000 trucking village satellite of the port, including parking, offices for processing documentation, and maintenance warehouses.

Takoradi Port

Takoradi is Ghana’s second port, handling 4.3m tonnes of cargo in 2014, approximately 25% of total seaborne trade, according to the Ghana Shippers Authority, quoted in the local media.

However, Takoradi remains Ghana’s primary export port, accounting for around 70% of outbound seaborne trade, according to the GPHA. This is partly because it is the major port for bulk cargoes, such as cocoa, and is located closer to Ghana’s main cocoa, gold, bauxite, manganese and oil-producing areas.

In 2013, the last year for which full statistics were available, ship calls at Takoradi fell to 1364 from 1664 in 2012 and 1798 in 2011, but cargo volumes grew 2.6% to 5.45m tonnes, from 5.31m in 2012 and 4.94m in 2011. Exports totalled 3.45m tonnes and imports 1.99m, the former rising from 2.96m, and the latter dropping from 2.35m. Container traffic dropped by 16% to 52,373 TEUs from 60,746 TEUs in 2012, falling to the lowest level since 2009.

Takoradi Expansion

Takoradi has been operational since 1928, without any major expansion or overhaul. In 2009 GPHA announced a $450m rehabilitation and upgrade to the Port of Takoradi, including an oil services facility, expansion of harbour capacity, new quay walls, warehousing and an oil berth. One of the aims is to develop Takoradi as a centre for the regional oil and gas services industry, a burgeoning sector, taking advantage of its position in the centre of the West African coast. The first-phase contract was awarded to Belgian contractor Jan De Nul and financed by a loan from KBC Bank, also from Belgium. The extended 1.7-km breakwater at Takoradi will give sufficient space for extensive land reclamation totalling 53,000 ha, and establish new berthing facilities and oil and gas platforms. Meanwhile, the harbour has been dredged to increase the draught from 11.5 metres to 16 metres, allowing Panamax vessels into the port. Under the development plan, container terminal operations will be shifted north, allowing more space for bulk cargo and oil and gas services in the main port. Singapore-based Viking Offshore and US company Halliburton are developing oil and gas facilities, part of an “oil hub” involving companies such as Tullow and port operator Bolloré.

Fuels & Bunkering

According to David Ameble, the CEO of Inter Maritime Services, there is a lot of room for growth in Africa in the fuels sector, including bunkering, but more needs to be done in terms of improving enforcement of regulations. “Given the level of competition, the country’s fuels sector needs appropriate support from the government, not only in terms of supply but also including ensuring that current players abide by regulations and in a transparent operating environment,” Ameble told OBG.

Railway

One of the most keenly anticipated developments in the Ghanaian transport sector is the long-awaited overhaul of the country’s rail network. The 953-km mainline network forms a triangle between Accra-Tema, Kumasi and Takoradi, theoretically giving a strong backbone on some of the busiest transport routes in the country. However, it is only part-operational after years of insufficient investment, and railways carry only a tiny fraction of Ghana’s goods and passenger transport. The Western Railway line, linking Kumasi with Takoradi, is traditionally the main route for export-bound shipments of bauxite and manganese, two of Ghana’s biggest export commodities. The Ghana Bauxite Company has stopped using rail altogether, using road transport that is up to 50% more expensive, Johan Ferreira, president of the Ghana Chamber of Mines, told local press, while the Ghana Manganese Company uses rail on a reduced basis – though it has offered to invest in the railway.

A $10.4bn deal with the Export-Import Bank of China signed in 2010 was intended to include funds to rehabilitate the Western Railway, but progress has slowed on the project, which was initially seen as a first step in a vast project of increasing Ghana’s track length to a total of 4000 km by 2047. This would, over the much longer term, enhance Ghana’s position as a regional transport centre. A front end engineering and design feasibility report commissioned by the Ghana Railway Development Authority found a number of technical challenges, including illegal mining and illegal construction around the railway route.

Renewed Interest

In July 2015 Transport Minister Dzifa Attivor admitted that Ghana should have started on its rail development projects some time ago, noting how capital-intensive railway construction is, but said that investors had expressed interest in funding the development of the 330-km Western Railway. The project would cost an estimated $1bn, and the government is eyeing a PPP, potentially including substantial public investment. As well as bauxite and manganese, the railway could be used to transport greater volumes of gold, diamonds, timber, cocoa and palm oil. Poor roads in the region have arguably hindered the development of these resources.

The Western Railway redevelopment project includes laying standard-gauge rails with concrete sleepers, and the renovation of 38 stations, including two terminuses, and running sheds. Other work includes strengthening and widening bridges and culverts, and installing new signalling and telecommunications systems. The minister’s announcement of investor interest in the Western Railway is the latest encouraging sign of forward momentum. In January 2015, Attivor’s deputy Joyce Bawa Mogtari said that a contract for the railway would be awarded by the end of 2015, following the appointment of PwC as a transaction advisor, with World Bank support, in July 2014.

Boankra Inland Port

The railway rehabilitation programme is designed to dovetail with the creation of the long-awaited Boankra Inland Port near Kumasi. Boankra would be a dry port and intermodal transport centre with Customs and logistics facilities on a 160-ha site. It is partly intended to ease pressure on congested Tema, by allowing goods to be transported inland for Customs clearance and processing before being forwarded elsewhere, particularly to the landlocked countries to Ghana’s north. Work started on the site in 1996, but progress has been hampered by land disputes and a shortage of funds. The dry port would be developed under a BOT model, potentially allowing an investor to tap into the profitable trade flows through Ghana. But the longer Ghana goes without developing its railways and inland logistics to match its growing ports, the harder it will be to keep pace with competitors like Côte d’Ivoire and Togo.

Air Travel

With an increasingly mobile middle class, a large diaspora, a growing tourism sector and lively interest from international investors, air connectivity has become ever more important in Ghana in recent years. It looks set to continue to be a growing concern, despite a slowdown in the growth of international arrivals at the country’s only fully-fledged international airport, Kotoka (KIA) in Accra. Domestic air travel has burgeoned, and even with international traffic falling in 2013 and 2014, KIA is operating above capacity. Ghana receives around 1m tourists a year, and has a target of attracting 5m arrivals by 2027.

The government is pushing a range of airport expansion projects, including raising KIA’s capacity to 5m passengers a year (it handled a total of 2.4m in 2014 according to the Ghana Airports Company), expanding and internationalising Tamale Airport in the Northern Region, and a similar project at Kumasi, which officially became an international airport in December 2014 (see analysis).

Airlines

KIA is served by major international airlines, including British Airways, Delta, Emirates and KLM. Major African hub-and spoke carriers operating at the airport include South African Airways (SAA), Ethiopian Airlines, Kenya Airways and EgyptAir. Privately owned Ghanaian carriers include Starbow, Africa World Airlines and Meridian Airways. However, Ghana lacks a national flag carrier since 70%-stateowned Ghana International Airlines (GIA) suspended its operations in 2010. GIA went the way of predecessor Ghana Airways; both were hampered by poor management and political interference.

Establishing a new national airline is one of the government’s key transport PPP projects, with the intention being that the private partner would have greater management control over the airline, to improve efficiency and lower the risk of political interference. In October 2015 Ativor announced that the government intended to choose a private investor for the proposed airline in 2016. The government had previously suggested a time frame of early 2015.

One of the aims of the airline would be to develop KIA as an aviation hub for West Africa. The region currently lacks a strongly established hub-and-spoke airline along the lines of those operating from Kenya, Ethiopia, South Africa and Egypt, so theoretically there could be a gap in the market, though Asky, a Togo-based carrier in which Ethiopian has a 40% stake, is making inroads into the market, and is seeking new investors for expansion. A number of other carriers, including Senegal Airlines and Air Côte D’ Ivoire, are vying for the market as well. In June 2014 an SAA spokesman told Bloomberg that the airline was considering making Ghana its West Africa hub, in a bid to compete with Ethiopian Airlines and Kenya Airways. The spokesman said that SAA was considering taking a stake in Asky and moving its hub to Accra.

New Connections

While little has come of SAA’s proposition, in August 2015 it launched direct flights from Accra to Washington, DC. SAA said that there was considerable demand for flights between Ghana and the US, and that the connection would boost trade and tourism ties between the two countries.

In October 2015 Brussels Airlines, a Belgium-based part of German flag carrier Lufthansa Group, relaunched direct flights between Accra and Brussels. Philippe Saeys-Desmedt, vice-president for Africa and global cargo at the airline, told press that the airline’s decision was based on Ghana’s economic growth, and the potential of linking the country to Europe and North America via Brussels.

With thin profit margins in the airline industry, carriers are focusing on cutting costs and improving revenue growth. “The entire aviation industry is trying to reduce costs across the board, including catering spend,” Yves Palazot, the managing director of Servair Ghana Company, told OBG. “Some will even purchase meals for 90% of passengers, knowing that a number of passengers will probably not request a meal.”

However, according to Koen Neven, the CEO of NHV Aviation, aviation services have been given a boost by Ghana’s hydrocarbons sector. “With the increased activity in terms of upstream exploration, we have seen steady growth in demand from the hydrocarbons sector for aviation services,” Neven told OBG.

Outlook

Ghana’s emergence as one of Africa’s most dynamic emerging markets has been rapid, and transport infrastructure has not always kept pace with the economy. With growth expected to pick up again from 2016, demands on the system will grow.

With its openness towards PPPs and international contractors, Ghana has one of the best enabling environments for private participation in transportation development on the continent.

However, the country is still awaiting PPP legislation that should clear the way for greater international investment in roads, airports and airlines.

With commodity prices still low in late 2015, and the global economy uncertain, not all schemes on the drawing board will be implemented immediately. However, where private investors see opportunities for profit, many will continue to roll forward.