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08.11.2005 Business & Finance

Editorial: Govt Must Focus More On Local Businesses

By Statesman
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THE controversy over President Kufuor's numerous travels abroad has once again highlighted the fact that more needs to be done for the economy. So using economic diplomacy to attract resources, investors and tourists to address Ghana's poverty and under-development is good news. Indeed, the IMF-sponsored liberalisation reforms implemented over the last two decades have seen a positive bias for the hitherto illusive foreign investor – with tax breaks, etc. But, is that where the real focus must be or are we giving the deservedly superior attention to the indigenous private sector? While it is difficult to argue against President Kufuor's policy of Economic Diplomacy, his Foreign Minister's statement Friday that “the primary focus is on growing local businesses and empowering Ghanaian entrepreneurs,” is highly debatable. In an earlier interview with The Statesman (Wed 18 – Thurs 19 May, 2005), Nana Akufo-Addo saw support to the local private sector as “absolutely crucial.” He noted, “No country can develop without an indigenous thriving private sector… Our ability to develop the nation is dependent on our ability to mobilise resources.” On the wider policy level, Government's three-pronged plan of private sector development, human resource development and good governance favour local businesses. This is because local businesses require a constant supply of well trained and committed staff, good transport links and a professional public sector to continue to thrive.
Our difficulty, however, is that Government has not been bold enough in showing a conscious policy bias for the local entrepreneur. We are urging both Government and the people to become a big believer in 'keeping it local' when it comes to spending money. It is the trifecta system: a patriot must be always conscious of helping to keep the local economy afloat, but she must also like saving money whenever possible; and, thirdly, getting to support a worthy cause. Simply put, we want to see a deliberate national strategy to put in the extra effort to keep it local.
The much hailed Public Procurement Act 2003, (Act 663), and Government's apparent innocent implementation of it without any serious back-up policy to support local businesses, is a matter we find quite worrying. This weakness in the Public Procurement Board Strategic Plan 2005-2007 has been most apparent recently. As we listen to local publishers protesting against the award of $28 million to Unimax-Macmillan (a joint Ghanaian-British venture) what struck us most was the apparent lack of foresight. The money was for the procurement of two main items, one being English Dictionary. So could those who gave out the contract not have commissioned a consortium of local English language professors, to come out with a comprehensive Ghanaian English dictionary that could incorporate all the words in a typical good English dictionary but also include words and terms that are uniquely Ghanaian, like 'Wahala'? And then make sure Ghanaian printers were in a position to put in, at least an equal bid?
The WTO Government Procurement Agreement (GPA), which led to Act 663, opens up most government contracts of its members to international competition. Suppliers of each GPA member have the right to participate in procedures for the award of government contracts of other GPA members, under the conditions laid down in the GPA. The GPA rules aim inter alia at ensuring that GPA members do not discriminate against foreign suppliers covered by the Agreement. Public services are also included in the GPA. Under GPA, public procurement contracts, whether for roads, sewers or prisons, must be open to all, including foreign companies. Services have become big business with the phenomenal growth in international trade during the 1990s. A large part of an average developing country's income is made up of the spending of its national government, on the purchase of goods, payment for all kinds of services, and a variety of projects, from the building of schools and roads to billion-dollar mega-dams and industrial complexes. Add also the expenditure of state and municipal governments, statutory bodies and state-run enterprises, and the total amount of money spent by the public sector becomes enormous; for many countries, larger even than their total imports or exports.
Here in Ghana, the biggest spender by far is Government. Therefore, Government has a big role to play in building up local businesses. While, we appreciate that through maintaining macro-economic stability and providing on-lending concessionary loans, Government is supporting local businesses, we remain unconvinced that more, at least in the field of procurement cannot be done. We estimate that this year alone about $600 million could go to foreign companies from Ghana through government procurement deals alone. Before Act 663, our government had been able to pretty much decide for itself how the money was to be spent, the system of procuring goods and services, and the tendering, scrutiny of applications and award of projects, subject of course to local laws and procedures.
Today, due to Ghana's adoption of the WTO's plurilateral agreement on government procurement, the requirement of non-discrimination against foreign companies in central and local government purchasing has a dangerous potential of killing or stunting the growth of local businesses. Indeed, it could only end up making the contracts more expensive as the foreign companies are sometimes required to have a local partner, but with the bulk of the profit going out.
We shall urge Government to be bold in rendering various kinds of support to local businesses. We shall also urge the public to do same.
Supporting local business gives strength to Ghana's economy. By utilising the resources that are available within our community, we are able to retain wealth commensurate with our abilities and capacity to manage resources. The decision to support a locally owned business, or one that provides goods and services with locally acquired materials, implies a commitment to consider oneself part of a larger community, rather than an independent unit.
We recommend the following initiatives to support local business: Ensuring that all tenders have evaluation criteria, so that there is consideration of factors other than lowest price alone; simplification of tender documents wherever possible; offering constructive debriefing to all those who compete for contracts in order to help them become more competitive; publishing Government's contract requirements; providing comprehensive information on the government website and in a public procurement periodical, including all contracts, current public notices and key contacts and regular monitoring of the number of local companies doing business with Government. The rest are providing advice and assistance on compliance with statutory requirements for government procurement; extending credit to create Ghanaian multi-national companies. We need to look after our own first.


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