There is an emerging convergence of thought in Ghana that industrialization is the way forward for the country to achieve economic transformation.
Transformation is said to occur in the structure of an economy, when there are significant changes in the relative contribution of different sectors to the performance of the economy, often leading to long term growth and stability, a quantum leap in employment, income levels and standard of living of the citizenry.
Currently services remain the largest sector of the Ghanaian economy, contributing 54.1% share of GDP, followed by industry with 26.9% and agriculture accounting for 19%.
Although there is no standard prescription for the optimal structure required to be maintained for any economy, it is generally acknowledged both from development theory and the experience of the most advanced countries as well as emerging economies, that most developing countries transition from being dependent on agriculture and other primary commodities, to the secondary or industrial sector, before transitioning into the tertiary or services sector.
Whilst there are many exceptions to this development trajectory for a variety of reasons, it would seem that in the case of Ghana, we have “jumped” prematurely from being an economy dependent on agriculture, to become an economy driven by the services sector (of course, fuelled by massive investments in financial and telecommunication services), and have thus “skipped” the important phase of industrialization.
This is evident from the fact that Ghana’s agriculture still remains relatively underdeveloped, and its industrial base is also significantly weak and uncompetitive. The obvious solution therefore, would be for Ghana to retrace its steps and focus more intensely on agriculture and in particular industry, alongside developing the services sector. However, countries do not industrialize by chance. Industrialization occurs as a result of careful planning and implementation of targeted policies, programmes and projects.
It is against this background, that one should contextualize the recent pronouncement made by the flagbearer of the NPP, that an NPP Government when voted into office will promote the establishment of one factory in every district in Ghana. In my view, this is a positive policy recommendation which will help move Ghana forward. As would be expected, it has generated a spirited debate, with different political parties staking claims of “ownership” of the concept.
For the avoidance of doubt, the “one district one factory” concept was first introduced by the Ministry of Trade, Industry and Presidential Special Initiatives during the past NPP Administration, as part of an integrated programme for Accelerated Growth and Industrial Development. Originally designated as the Rural Enterprises Development Programme, and later rebranded as the District Industrialisation Programme {DIP}, it was designed as a comprehensive programme for rural industrialisation, involving the setting up of at least one medium sized factory in each of the administrative districts of Ghana.
While previous attempts at rural economic revitalization have focused mainly on the provision of physical infrastructural facilities, the DIP focuses on the promotion of commercially viable business development initiatives, to generate sustainable and accelerated economic development for rural communities.
The Programme is an attempt to deal with severe poverty and underdevelopment among rural communities, through the establishment of an institutional framework that will attract private sector participation in business development activities. It also seeks to promote citizen participation and new community-based public/private partnerships for rural development.
There are five strategic objectives for the DIP namely,
To create massive employment particularly for the youth in rural and peri-urban communities, and thereby improve income levels and standard of living, as well as reduce rural-urban migration.
To add value to the natural resources of each district and exploit the economic potential of each district based on its comparative advantage.
To ensure even and spatial spread of industries and thereby stimulate economic activity in different parts of the country.
To enhance the production of local substitutes for imported goods and thereby conserve scarce foreign exchange.
To promote exports and increase foreign exchange earnings.
Programme Implementation Framework
The framework for the implementation of the DIP revolves around four key activities:
Selection of Projects
Identification and profiling of potential priority projects for each District under a District Economic Development Plan that is developed with the active participation and involvement of the District Assembly and other stakeholders in the District. This Plan must flow from the District’s Medium Term Development Plan.
Selection of one priority project to be designated as the District Enterprise Project (DEP), with the assistance and collaboration of potential private sector investors.
Two or more districts may coordinate their efforts and collaborate to establish one Enterprise Project based on their specific circumstances, including but not limited to the existence of a common natural resource endowment.
The selection of a District Enterprise Project could involve the revitalization of an existing government owned or private sponsored project, which is deemed to be potentially viable.
Development of a Business Plan for the selected project or business venture.
The cost of each project will only be determined on the basis of the Business Plan, but as medium sized projects, it is envisaged that on the average it would range between USD 1million and USD 5million. The equity contributions of both Government and the private sector will be used to leverage additional debt capital
Incorporation of a private limited liability company under a public private partnership arrangement to establish and implement the project
All projects are to be managed by the private sector with representation of Government, only at the level of the Board.
A Technical Support Group (TSG) to be established at the Ministry of Trade and Industry will have overall responsibility for coordinating Government support for the implementation of the programme.
Financing of Projects
The financing of each project will be based on the shareholding structure agreed between the Government (represented by the District Assembly) and the strategic private sector investors (both domestic and foreign), which may include institutional investors such as banks and other financial institutions.
Additional government contribution may be in the form of infrastructural support including dedicated energy supply, tax incentives, subsidies, and facilitation of access to land.
Since it is envisaged that a significant number of projects may be agro industrial projects, government will provide specific incentives for the production and supply of quality, competitively priced, agricultural raw materials. This will include support to farmer based organizations in the form of extension services, provision of farm inputs, machinery and equipment, and access to credit.
Performance Benchmarking and Reporting Requirements
The performance of the DEPs will be tracked to:
Evaluate the progress of the implementation of the Business Plan against the key performance indicators (KPIs) and make necessary mid-course corrections to help meet the goals.
Identify specific problems for which the TSG at the Ministry of Trade and Industries and other government agencies can provide needed assistance.
Measure the impact of the DEP on the socio-economic development of the community.
Inter-Sectoral Facilitation
To ensure successful implementation of the Programme, an Inter-Sectoral Facilitation Committee will be set up to facilitate and coordinate all the support interventions required from sector Ministries, Departments, and Agencies.
District Oversight Committees
· All participating Districts will be required to set up a District Oversight Committee to oversee, and monitor the implementation of the DEP in the District. This Committee will liaise with the Technical Support Group at the Ministry of Trade and Industry, in the implementation of the programme.
Conclusion
The DIP is a well-structured programme that has the potential of transforming the industrial landscape of Ghana, and contribute significantly to the socio economic development agenda of the country. It is estimated that over 350,000 direct and indirect jobs would be created from all parts of the country, as a result of the implementation of the programme.
At the end of the second term of the past NPP Administration, over 100 Business Plans had already being finalised. This provides a strong basis for the revival of the programme. Other details on programme implementation will be provided in due course.
It is worth noting that the DIP is only one component of a comprehensive Five- Year Accelerated Industrial Development Plan to be implemented by the NPP if voted into office in the 2016 General Election.
The Plan also includes among other things, the development of selected large scale anchor industries that will serve as growth poles for the Ghanaian economy, such as Iron and Steel, Petrochemical, Integrated Aluminium, Industrial Salt, Vehicle Assembly, and the Manufacturing of Machinery, Equipment and Machine Parts.
The argument being advanced that the DIP is too ambitious, first does not take into consideration the fact that the private sector will respond to opportunities to invest, if the Government provides the right policy, regulatory and incentive framework for businesses to thrive; secondly financial institutions will finance projects that demonstrate clear potential for success based on bankable proposals; thirdly, public private partnerships provide an excellent opportunity for government to leverage private sector funding to finance development initiatives.
Above all, putting people to work is a development imperative, and industrialisation is one of the most powerful tools to realise this goal. Let us not be haunted by the fear of failure, but rather be inspired by the challenge of success.
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