Trade and Industry Minister, Hannah Tetteh

From independence to the late 1960s, a focus on industrialisation made Ghana one of the most diversified economies in sub-Saharan Africa. A new industrial policy now seems set to arrest the diminishing importance the country's industrialists have seen since that time.

The complaints of industrialists are a well-known and range from increasing operational costs to the skills mismatch between human resource requirements and the quality of graduates churned out of the country's tertiary institutions.

Ghana's industrial sector, despite reeling under the ever-present hurdles of doing business, is excited about a new, comprehensive industrial policy that aims at transforming the country into a leading agro-industrial economy over the next half decade.

One of the document's major architects, Trade and Industry Minister, Hannah Tetteh, said at the policy's launch last month: “The time has come for Ghana to embark on a vigorous industrialisation drive to transform our economy from a factor driven one to an efficient one.”

Ghana's newly attained lower middle-income status bodes well for the manufacturing sector as it increasing local demand for finished goods.

With the CIA World Fact Book estimating the country's 2010 per capita income at US$1,600, agro-processing is likely to contribute to the achievement of upper middle income level by 2015.

The president of the Association of Ghana Industries (AGI), Nana Owusu-Afari, also attributes the poor performance of the manufacturing sector to “the lack of a clear blueprint or framework for pursuing the industrial development agenda,” though he acknowledges that various policy documents have incorporated aspects of industrial development in their programmes.

Nana Owusu-Afari, President of
the Association of Ghana Industries (AGI)

Given that the government already promised to deploy significant resources to support private sector development according to the 2011 Budget Statement, the new industrial policy should also allow businesses to be more competitive and to create employment.

However, Ghana's challenges remain in using the power of the regulatory environment to translate opportunities into action and results. The manufacturing sub-sector has, for many years, only managed to wobble along without any meaningful impact. In 2009, the manufacturing sector recorded negative growth of 1.3%. Generally, the industrial sector's growth has lagged behind that of the services sector, a trend the new policy hopes to reverse.

This new policy however, as approved by Cabinet, comes with an implementation blueprint called the Industrial Sector Support Programme (ISSP), thus moving the discussion beyond mere intentions to practical steps.

The ISSP identifies 21 thematic areas for implementation, which have been categorised into four main components including: Production and Distribution, Technology and Innovation, Incentives and Regulatory Regime, and Cross-Cutting issues.

Many industrialists believe that this new policy has a tremendous chance of success at accelerating industrial development. As noted by Tony Oteng-Gyasi, a former president of the AGI, the policy was actually conceived and largely developed by the private sector, thus fostering a sense of ownership among industrialists.

The success of the industrial policy, Ms Tetteh observed, would ultimately be measured by the extent to which it empowers the private sector, especially SMEs, to expand and create employment opportunities, as well as generally reduce poverty and geography-based income inequalities in the country.

Key indicators that will be used to measure the overall performance of the ISSP include increased contribution of manufacturing to industrial sector growth and overall GDP growth.

The focus of the ISSP will therefore be on increasing value-addition to local primary products; volume and value of manufactured exports; flows of domestic and foreign direct investment into the manufacturing sector; employment in the manufacturing sector; and international competitiveness of the manufacturing sector.

This element of the policy comes as good news to local industrialists who, in recent years, have been harping on the need for government to check the influx of cheap imports.

The AGI president emphasised that at the country's current stage of development, industries needed special arrangements and support to "enable them to grow and become competitive and such support can be effectively delivered through a comprehensive and well thought-through strategy such as this new industrial policy.

“We, in Ghana, cannot accept that domestic policy interventions are detrimental to free trade and that market forces alone should determine everything,” Nana Owusu-Afari told GB&F. Ms Tetteh is also bent on making things happen speedily for local industry.

“The ministry, in order to help achieve the objectives of the industrial policy will present to Parliament, at its next meeting, a proposal for the amendment of the Export Development and Investment Fund (EDIF) Act to make it the Export Development and Agricultural Investment Fund, in order to expand its mandate to provide financing for agriculture and agro-processing activities," she said.

The ISSP also attempts to address improvements in the regional distribution of manufacturing plants in order to reduce poverty and income inequalities, and also tries to improve the performance of domestic firms and small and medium scale enterprises (SMEs) in the manufacturing sector.

Manufacturing site selection is a critical issue as over 80% of the country's manufacturing firms are located in the Greater Accra Region alone, with a significant proportion of the remaining 10% located in the Ashanti and Western Regions, while the 3 northern regions suffer a dearth of functioning manufacturing enterprises.

The policy also focuses on expanding technological capacity in the manufacturing sector and seeks to promote agro-based industrial development, which has long been identified as a potential high impact sector. Agriculture accounts for about a third of the country's GDP and more than half of the total workforce.

The Ministry of Trade and Industry also intends to present to Cabinet, and subsequently to Parliament, an Industrial Competitiveness Bill, which seeks to provide incentives for promoting the use of local raw materials and increasing domestic content in local industrial activities.  Such new legislations would complement the ISSP, which is to be implemented over a five-year period.

“Generally, the policy is aimed at ensuring that our industrialists are able to offer high quality and competitive products to enable them to gain access to the global market. It represents a critical component of Ghana's strategic effort to change the industrial structure by developing a competitive manufacturing sector,” Ms Tetteh said.

In addition to addressing other systemic challenges that have caused their share of the domestic market to shrink and weakened the ability of local firms to compete, the policy is expected to help the industrial sector to grow and absorb the ever-increasing number of college graduates.

The new industrial policy and its promoters seem to demonstrate the grit required to propel Ghana to the higher rungs of the middle income country rankings. The path to industrialisation has been long and hard, but Ghana may make it yet.

Thematic areas of the Ghana Industrial Policy in Summary