How does the lack of a manufacturing economy affect the growth of Ghana’s economy?


A nation’s economic development does not only derive from the reputable policies in regards to health, education, standard of living which effectively leads to the growth and the development of the people and effectively the nation, but also depends on the human capital, infrastructure, competitive development and having a manufacturing economy is important and it is the latter theme that will be addressed in this article. This piece will focus on Ghana a region in sub- Saharan Africa and their lack of a manufacturing sector in their country and how this affects the economy. Dr. Adjei Barwuah the former Ghanaian Ambassador to Japan will help shed more light on the matter.

J: Dr. Adjei thanks for joining me today.

DAB: Thank you for having me.

What prevents Ghana from becoming a manufacturing economy?

There is nothing preventing Ghana from becoming a manufacturing economy, after all in the 1960’s we had numerous industrial companies such as the Volta Aluminium Company, textile manufacturing, vehicle assembly plants, cement manufacturing, cocoa processing plants, oil refining etc. Our policies have either been wrong or poorly defined and managed.  We have not assiduously tried to develop a manufacturing base nor have we earnestly pursued a policy of infrastructural development aimed at industrialisation. Our earlier efforts were geared to setting up import substitution industries and they almost all failed due to poor product quality, uncompetitive pricing, ineffective marketing and poor management. Currently, lack of resources in terms of capital and the failure on the part of political leaders have tinted the image of Ghana leaving foreign investors uninterested.

What events in the past set the economy back?

In the 1960’s Ghana was identified as one of the richest nations in sub-Saharan Africa, with reforms such as abolishing price controls, privatization of state owned companies, however colonial policy of taking raw materials out to feed the factories of the colonial power and bringing in final consumption goods to our country, the development of cartels by colonial merchants to compromise the development of local entrepreneurship reduction in import tariffs etc. were setbacks. Despite the wealth generated through the numerous manufacturing companies, political events led to a decade of de-industrialization, crippling these businesses and reducing foreign exchange and the end of a successful era.

How is the government targeting importation levels?

There is not much evidence of the government making strenuous efforts to reduce the type and volume of importation.  There have been feeble efforts to stop importation of items like used clothing and some poultry items.  These attempts have been largely unsuccessful in reducing the volume of such commodities on the market. Even though we are supposed to be living in a global village there is so much protectionism in the industrialised countries that we have to institute enforceable bans on items that do not make any significant positive addition to our balance of payments.

 

What percentages of the countries goods are exported and how does this affect the economy?

It’s obvious that the balance between importation and exportation is vast. 9.6% and 3.4% of goods are imported and exported respectively. However the economy has only seen a 4.4% growth in the manufacturing industry which is lower in comparison to other sectors in the economy. 2008 figures will give you the following as proportions of the nation’s export products:                                      pearls, precious stones, metals, coins, 45%, cocoa and cocoa preparations, 27.4%, wood and wood charcoal 7.5%, edible fruits, nuts, peels of citrus and melons, 3.2% boiler, machinery, and nuclear reactors 1.9% Yet there is a low percentage of goods being exported, high costs of labour, utilities, machinery as well as raw materials pose as a setback. Evidently the country is dependent on imported goods and as a result the government is not doing much to target and reduce the level of importation into the country.

There is a huge boom of Ghanaians travelling to china to buy goods to sell in the country, what is your take on that?

The lack of supportive policies for local manufacturing has led to the development of a large wholesale and retail sector for consumer goods in the country.  And since China is perceived to be a source of less expensively priced goods, there has developed an army of itinerant importers of Chinese made goods.  This development is making the country a dumping ground for shoddy Chinese products and in the process Ghanaian ingenuity and manufacturing are being stifled.  The result is the rise of unemployment and under-employment which are detrimental to meaningful economic development and effective growth in the economy. The general lack of effort to engage in value-added activities to raise the world price of our natural produce has put the value of our natural resources to a discount.  This undermines our trade earnings and our balance of payments situation.

How are economies such as South Africa different from developing nations such as Ghana?

South Africa’s apartheid system gave her the kinds of advantages that Ghana never had:

–              Preferential treatment by most of the developed world, especially Britain, Belgium, Netherlands, France and the US.  This meant massive investment capital and preferential entry of South African goods into major world markets;

–              Control of the larger segment of the national population making the cost of labour significantly low;

–              Conscious development of infrastructure and manufacturing base.

Thank you Dr. Adgjei Barwuah for you time.

Ghana’s past political setbacks have resulted in their lack of development in the manufacturing sector; even though the economy is developing gradually they still have a long way to go as do their neighbours in the sub- Saharan Africa. Attaining a manufacturing economy will go a long way to contribute to the development in the sense that products produced are exported and wealth generated pumped into the economy alongside jobs for local active labour force resulting in a positive ripple effect which will enable the wealth attained through this economic sector of the economy to trickle down the wealth ladder to wider society.

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