Perspectives on The New Government’s Industrialization Policy in Ghana
By Rhea Kumar
[dropcap]“T[/dropcap]here are two main political parties in Ghana. One party [the incumbent National Democratic Congress] is great at winning elections, poor at governing. The other party [National Patriotic Party] is good at governing but poor at winning elections,” Alex Asiedu, who runs Stanbic Investment Management in Ghana, said. “Now for them to govern, they have to get better at winning elections, which would mean selling us stories like One District One Factory.”
The wall next to President Nana Akufo-Addo’s residence in Accra is lined with pictures from his election campaign. Amidst all the catchy slogans – One District One Factory, One Village One Dam, a single word stands out – Change. It’s an overused word, and, ironically, also one that never fails to draw votes. Implementing promises of change into reality is relatively rare.
In December 2016, Nana Akufo-Addo of the National Patriotic Party won the country’s presidential election on the promise to “get Ghana working again”. In particular, his One District One Factory (ODOF) policy – through which the government would provide a million dollars to every district of Ghana to enable them to set up factories – struck a chord with many voters. If implemented, the policy could reduce unemployment, regional disparities and rural-urban migration, while also promoting local and foreign businesses that want to invest in Ghana.
Cosmos, a Kente cloth weaver in the village of Adonwomase near Kumasi, expressed optimism about ODOF. “We are very glad that the President is launching One District One Factory,” he said. “As of now, many of the raw materials from our weaving community are being exported to China. Now, we will be able to produce cloth here.” The business community agrees. Nathaniel Quarcoopome, Director of Finance and Administration at the Association of Ghanaian Industries, said, “AGI is very much [sic] pleased with the ODOF policy. The new government is private-sector friendly.”
Other Ghanaians admired the President’s governmental experience. “He had a clean record as a foreign minister,” said Yao Sachi, a cab driver in Accra. “He is a just man.” Asiedu asserted, adding a little more color: “Do we have a selfless leader? I don’t know. But he seems to be in a better place to clean things up than his predecessor.”
The ODOF story allowed Akufo-Addo and his team to win the election by more than a million votes. For a country with 28 million people, that is fairly huge. But can it be more than a story?
What’s In a Name?
“…We have had bits and pieces of certain projects- they may not have been named ODOF, but they would have been in the same spirit,” said Patrick Stephenson. Stephenson has worked on public policy in Ghana for several years and is currently involved with the Imani Center for Policy Education. “You typically wouldn’t change programs when there is a change in government, even though there is a drastic need for that,” Stephenson continued.
Like many other programs before it, One District One Factory aims to achieve development via industrialization. The previous government’s export diversification strategy identified 12 different value chains as sectors of priority, and spoke about economic activity at the local level, according to Stephenson.
“The only difference between ODOF and earlier policies is that now we’re trying to ensure that all parts of the country industrialize,” conceded Ernest Agyapong, a senior bureaucrat at the Ministry of Trade and Industry. Still, in a country where most development is concentrated in the urban centers of Accra, Tema, Kumasi and Takoradi, ODOF is no small feat, and not one that any government has tried before.
“There is a lot of goodwill around this current government… if they stick to the policies… [they] will bring a lot of transformation,” said Peter Quartey, Head of the Department of Economics at the University of Accra in Legon.
“But it will be tricky,” he added quickly.
Who Will Pay?
To begin with, the million dollars that the government has allocated to every district is not marked out only for implementing ODOF, but also for various poverty-reduction and economic-development initiatives, including One Village One Dam, Free Secondary High School Education and the National Identification Scheme. Achieving all these goals with only one million dollars seems nearly impossible for district administrations.
Further, it is unclear whether the government has sufficient funds even to meet its current commitments. There is a “conflict [between the government’s] willingness to please the electorate with ODOF and their ability to balance the books,” said Asiedu. He added that the government faces double-digit deficits and has recently cut taxes, an important source of revenue.
Asiedu felt the key was “incentivizing the private sector to put in what is desired at places that are advantageous.” The policy has certainly attracted interest from the private sector, with as many as 120 proposals from both local and foreign investors to build factories across different regions of Ghana as of May 2017, according to Agyapong.
While the number is impressive, it does not solve the question of how these proposals – most of which are open to operating in any district – will be distributed across different regions of Ghana. “Once we get proposals, we are going to do a resource profile of all the districts, and then tell businesses [our suggestions]…let them make a choice. As one example, a cashew processing factory would be well suited to the Brong Ahafo region,” Agyapong explained. However, conflicts are likely in the future.
The Pitfalls of Going Local
ODOF at its core aims to eliminate Ghana’s regional disparities, particularly between the developed Southern regions and the less developed Northern and Central regions. Yet this goal is also its biggest challenge.
“As part of the ODOF policy, we are also looking at setting up industrial parks in all the regions…That will ease the problem of getting land or infrastructure [for businesses],” Agyapong explained.
Christopher Udry, an economics professor at Northwestern who has conducted extensive research in Northern Ghana, noted that it might be “inefficient” to build a factory there. “It makes more sense to set up a factory where infrastructure is available,” he continued.
According to Stephenson, it isn’t just about more investments in infrastructure. “Consider a sugar processing factory with a capacity to crush 125,000 sugarcanes per day, which means you need raw material supplies of more than 125,000. Under the ODOF guidelines, immediate farmers are supposed to provide the canes to feed the factory … [meaning] you will need the production of 2 or 3 districts combined,” he said. “If [the factories] were to be set up in small, subsistence based districts [they] would be operating below capacity, which would ultimately have to shut down because they would be too costly to operate.”
“Even if you fix the production problem, the business and marketing problems remain,” Stephenson continued. Many of the products that ODOF hopes to produce can be imported cheaply. Import quotas could be an option, but in Stephenson’s view, they have not worked well in the past.
“I doubt anyone has given thought to the complex social landscape,” Stephenson said. “[It] may
not be directly related to the business models themselves, but [it] can define whether or not the business will make sense.”
The challenges raised by academics and policy experts are also reflected at the voter level. Immanuel Aladi, a taxi driver in Accra, was disappointed that unemployment remained high despite governmental promises. Richard Fifi, a car dealer in Accra who hails from the Brong Ahafo region, was convinced that the entire premise of ODOF was misguided, and said that he preferred to have factories concentrated in certain regions of Ghana. “We need to be focused and do one thing at a time. We cannot do everything,” he added.
Quartey, on the other hand, was reluctant to completely denounce the government’s approach, despite challenges of implementation. Referring to relatively underdeveloped Northern Ghana, he said, “[They could] create factories that use existing resources, such as a tomato processing factory, shea butter- [it] doesn’t have to be anything big.” But he did recognize that the government may be focusing on too many other programs that could prevent it from focusing on ODOF. Quartey thought Free Secondary High School Education, for example, was both infeasible and unnecessary, arguing “You do not subsidize the rich.”
Will they get to the full 200 [districts]? No, not in four years. But to the extent that they are able to get the private sector to put some factories in place, they can argue at the end of four years that they are making progress, ” said Asiedu. This isn’t the message that the smiling faces on the campaign posters convey. But it is a firm start.
Rhea Kumar ‘18 is an Ethics, Politics, and Economics major in Pauli Murray College. Contact her at firstname.lastname@example.org.