14.05.2003 Feature Article

Light Off Sums Up Ghana's Industrial Woes

By Press
Light Off Sums Up Ghana's Industrial Woes
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Amos Safo for Public Agenda

It was not the first time, neither was it the second nor the third time. For the umpteenth time an unannounced light off at the noses of Ghanaian industrialists and trade policy makers told the real story of why the Ghanaian economy is tottering.

The members of Association of Ghana Industries (AGI), trade negotiators from the Ministry of Trade, financial journalists and others from civil society had gathered at the Ghana International Trade Fair Centre on Thursday, Many 8 to brain storm on ways to make Ghanaian industries competitive.

The poorly attended function barely started when the lights rudely went off. Participants, including the President of AGI, Mrs Elizabeth Villars, the Deputy Minister of Trade, Kojo Afram, Dr. Osei Boeh-Ocansey, Director-General of Private Enterprise Foundation and other resource persons sat glued to their seats and prayed for the light to come on. It did not. So a standby generator was switched on to provide light. When the deputy minister was delivering his opening remarks the generator went off minutes after, as he made frantic efforts to conclude his speech in darkness.

The dejected participants determined not to cancel the function reluctantly moved their chairs to the corridor of the conference hall for the continuation of the programme.

Coming on the heels of the recent high-powered ACP/EU Trade Ministers conference in Accra, the programme was to assess the impact of Multilateral Trade System (WTO, ACP/EU) on the Ghanaian economy, with special emphasis on small-scale enterprises (SMEs). Reference was also made to the on going debate on the proposed Government Procurement Bill. The bill is before parliament and will likely be passed into law by June.

Even as the discussion went on the impact of the light off, which has been a regular feature in Ghana was boldly written on the faces of the industrialists. Erratic provision of utility services like electricity, water and telephone has been identified as the major cause of supply side constraints facing Ghanaian manufacturers and exporters.

The irregular supply of utility services have combined to make the cost of doing business very high, a situation that works against the country's competitiveness on the international market. Add the utility crisis to the high and escalating interest and lending rates and one would appreciate the hurdles confronting the exporters and industrialists.

As if on cue, the Minister of Energy, Dr. Paa Kwesi Nduom last Friday challenged the management of Electricity Company of Ghana (ECG) to provide better services to customers in the country or risk losing government financial support.

During a tour of ECG facilities Dr. Nduom said Ghanaians accepted the high power tariffs in the hope that they would receive better services from the company, but the current erratic supply of power has raised doubt about the ability of ECG to provide power for sustained industrial growth.

"When you are going to cut off power supply, let the customer know ahead of time and when there is going to be a problem they must be informed", the minister said.

That is the telltale of business in Ghana. Tetteh Hormeku, a trade expert at Third World Network hit the nail on the head when he said for Ghana to make headway in trade, she must strike a balance between imports and exports. Unfortunately, while Ghana, like other developing countries are able to control their imports, they have no say over their exports because of discriminative tariffs from the north.

"Trade liberalisation must give way for each country to strike a balance between imports and exports, but that is not so", said Hormeku, who argued that even the WTO, ACP/EU rules, as well as our own NEPAD are geared toward further opening the local markets to foreign goods.

He drew the attention of the participants to the dangers of parliament passing the Government Procurement Bill. To start with, Hormeku said the passing of the bill is part of conditions for Ghana reaching the decision point of the HIPC initiative. He questioned why the World Bank and IMF tied the bill to continuous donor support.

"Should loans from the IMF and World Bank dictate Ghana's trade policies that are bent on strangulating local industries?" Contrary to what the promoters of the bill say, Hormeku argued that bill was not to promote the so-called transparency, rather it is intended to pry open the local market for foreign goods.

At the heart of the procurement bill is the removal of government discretion in awarding procurement contracts to local companies. Hormeku thinks that government should retain its discretion in the national interest, in the same way Malaysia, Singapore and Hong Kong did to develop their economies.

Hormeku stressed that these countries at a point had discriminatory tariffs that promoted their SMEs and made them competitive. In a paper "The Multilateral Trade System and Industrial Development: The Case for SME's, Boeh-Ocansey said under the current global system, Ghana has few options, arguing that protectionism is not the way forward.

In his view many SMEs are facing export difficulties because of their narrow market segmentation, in addition to lack of long-term credit and good corporate governance.

No doubt, SMEs in Ghana, as in other African countries make the largest portion of the employment base and indeed are often the foundation of the private sector.

Unfortunately these SMEs have lack capital and other logistics to expand. Viewing these smaller firms as costly, high-risk firms, Ghanaian commercial banks deny them credit, concentrating instead on 'safer' options like large multinational corporations.

Some experts believe this approach dims the prospects for sustainable development by ignoring the necessity of a bottom-up capital formation, which is crucial for job creation and poverty reduction.

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