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“Ghana must still prioritize agriculture…” – Edward Kareweh

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An in-depth look at the sector’s economic role in the past, present and future with Agricultural Economist and General Secretary of the General Agricultural Workers Union, Edward Kareweh.

I t is an undeniable fact that agriculture plays a vital role in any economy as increased agricultural productivity tends to boost overall growth by way of job creation, foreign exchange etc. – due to its extensive value chain.

According to the Inter-American Institute for Cooperation on Agriculture (IICA), one way of visualizing the contribution of agriculture to development is by measuring forward linkages with other sectors of the economy. Forward linkages mean economic activity generated beyond the farm as products move along the supply chain to final consumers.

In the case of Jamaica, for every dollar generated on the farm, 55 cents goes directly to primary consumption, in a sense, missing opportunities along the supply chain to add more value. Only 16 cents per dollar goes to the processed food sector, 12 cents to hotels and restaurants while 9 cents per dollar is exported.

A similar exercise, IICA says can be done with backward linkages or the valued added generated in sectors that served as the source of inputs and services for agriculture (chemicals, transportation, financial sector etc.). For a developing country like Ghana looking to transform its economy on the back of an umbrella policy dubbed “Ghana Beyond Aid”, agriculture has been singled out as key.

It begs the question, how best could agriculture drive this especially against the backdrop of the continuous decline in its contribution to GDP in recent years? For some answers the Vaultz Magazine engaged Agricultural Economist, Edward Kareweh who doubles as the General Secretary of the General Agricultural Workers Union (GAWU) of the Trades Union Congress (TUC), Ghana.

AGRICULTURE AS A TOOL FOR  JOB CREATION

Agriculture in Ghana has over the years been undertaken mainly by rural folk as a subsistence activity rather than a commercial venture – despite being the backbone of the economy for years.

The sector has, thus, been unattractive to especially the educated youth who could apply their academic knowledge to boost productivity. The Agricultural Economist believes this trend could be reversed to help reduce the high unemployment levels in the country if government makes agriculture attractive as a business by way of policies.

“The young men and women are so intelligent and know what they want. You can’t force them into agriculture. Just ensure there is good market for agricultural produce whilst creating a conducive environment for people to venture into agriculture. Agriculture provides jobs for all including even the lowlevel labor force.

Ghana has a very young population that are largely unskilled. So to get jobs for such persons, agriculture is critical and that’s why agriculture remains important in all economies aside from providing raw materials, food etc.” he stated.

We are mismanaging our lands. The arable lands are reducing and falling in the hands of estate developers.

As in any other endeavor, human capital is critical in growing the sector – prompting calls for recruitment of more extension officers. Currently, the extension officer to farmer ratio is 1:1500 – compared with 1:500 standard by the Food and Agricultural Organization (FAO).

In a bid to bridge the gap, the current government in 2017 lifted the ban on employment of extension officers – recruiting approximately 3,000 more to support the Planting for Food and Jobs programme.

AGRICULTURE FOR ECONOMIC TRANSFORMATION

According to Mr. Kareweh, for a developing country like Ghana also seeking to put its economy on a higher pedestal, the role of agriculture is non-negotiable. “Even in developed economies like Europe and America still spend billions to subsidize agriculture because they deem it critical.

For a developing economy, agriculture is almost everything because it provides not only employment but also the raw materials for industries. Agriculture is therefore critical because, if you spend 1 dollar in agriculture, the proportional return is far higher than spending it in other sectors of the economy,” he revealed.

He therefore wants government to exploit this potential by first establishing a broader national economic development plan which clearly spells out the role of agriculture. “Because Ghana is already largely an agrarian economy, we should use agriculture as the foundation of development.

Other developing countries that are largely oil producing countries may want to use oil. Even though Ghana is now also an oil producing country, our comparative advantage is in agriculture and not oil because we have the natural factors like climate and good soils we can leverage,” he explained.

Mr. Kareweh however insists, this is still insufficient. “Let me give you the present statistics. According to the ministry itself, over 80% of the about 3000 existing extension officers have just about 3 years to go on retirement. The new recruitments are therefore certainly not a bad start but still not enough.

If you look at the magnitude of the problem, then, it’s just a drop in the ocean,” he stated. “Also, these new-recruits are not actually officers as they were picked from the Youth Employment Agency (YEA) and so may not be able to play the role properly because of lack of experience and motivation as they don’t have the same conditions of service like the real extension officers.

It’s also like a stop gap measure for the Planting for Food and Jobs transition – not fully integrated into the ministry” he revealed. “Again, we have to rethink agriculture all together. Without seeking to suggest that other sectors like health and education do not deserve the treatment that government is giving them today, it only points to the fact that government’s attention is more on those sectors than on agriculture.

For instance, nurses are not only seen as professionals but allowances for their undergraduates have also been restored. We have just a few agricultural institutions in this country with a small student population yet without any such subsidies or allowances.

Also, graduates from agricultural institutions have no automatic employment unlike their counterparts in the education and health sectors. But if you see the agricultural sector as the backbone of the economy, it will reflect in the policy direction because if you go and employ YEA recruits and give them a package that is not good enough, then you certainly are not encouraging them to go into agriculture,” he added.

Land is another factor critical for increased agricultural productivity. Mr. Kawereh is worried some recent economic developments are negatively affecting land availability for agricultural production which requires immediate policy intervention.

“We are mismanaging our lands. The arable lands are reducing and falling in the hands of estate developers. Now, it is difficult to get a stretch of a thousand hectares of land without a house or two in between. For example drive on the Cape Coast stretch and see.

Yes, we need houses to live in but it’s not every land that we should use for estate development. The soil fertility is not the same, so we should, as a country differentiate between lands for agricultural purposes and that for estate development.

In the next 10 years if there are no lands but fantastic policies, what are you going to do? Are you going to grow the crops in the space? Mr. Kareweh questioned. The GAWU General Secretary also lamented how small scale mining is also gradually taking over farmlands and dreads the threat it poses to agriculture. “It is a very serious situation.

The cost of even reclaiming the land is so huge that we should have even been using that money to create jobs. Cocoa lands are also even being sold for mining. The way forward is to sustain the anti-galamsey campaign while enhancing legislation with more punitive measures.

It is also a multifaceted area which requires a concerted approach to effectively address,” he emphasized.

AGRICULTURE’S CONTRIBUTION TO GDP

Notwithstanding its economic potential, Agriculture has been declining in the last few years – consequently losing to the services sector its position, as the highest contributor to the country’s GDP.

The Agricultural Economist however describes this as expected – explaining that, once an economy develops, agriculture’s contribution to GDP is also anticipated to decrease for industry to take over and spearhead economic growth.

According to him, agriculture losing its status as the highest contributor to GDP should therefore not necessarily be of concern as opposed to what caused it. “Unfortunately the decline has not been because we are now processing more or industry is growing.

When you have the forward and backward linkages well integrated, agriculture will decline and even offload its labour force to industry which will invariably then grow. So, you have that organic relationship which is good. For a resource-rich country like Ghana, this should have been the normal trajectory compared with another country not endowed with resources and therefore can allow the services sectors to lead growth.

So in our case it’s an abnormality and need to try and correct it,” he explained. He blames the anomaly on reduced investment in agriculture and promotion of imports. “Banking, insurance and other financial services are offering their loans and services to importers rather than producers because of the decline in local manufacturing.

The warehouses that have historically stored products from the domestic factories have been sold out and turned into churches as witnessed at North Kaneshie here in Accra. The remaining few too no longer house domestic goods but imported ones. It tells you that we are not producing to fill them.

This is not by accident. The 1980 Economic Recovery Programme and the 1990 Structural Adjustment Programme which were hailed by the World Bank and others fundamentally made us liberalize the economy to cause these,” he averred. He however disagrees with suggestions that the services sector over-taking agriculture in terms of contribution to the GDP disproves the pivotal role agriculture has been hailed to play in economies.

“This gives impetuous to advocates of the services sector to call for more investments in that sector at the expense of agric. But the difference here is that, the growth in the services sector hasn’t created the type and number of jobs required.

The movement from the rural to urban areas and the social vices witnessed in our cities today are all because these people have come to look for jobs. So the argument is that, take the jobs to them where they are. That is what agriculture can do but services doesn’t necessarily because it is concentrated in urban areas,” he emphasized.

The Agricultural Economist maintains, Ghana thus has no option but to still prioritize agriculture as the foundation of the economy. “As things stand now, we have no choice than to look at agriculture as backbone of the economy and that is why government’s focus on agriculture is commendable. The only option for us today, is to use agriculture to build industry and stabilize our economy,” he noted.

NEED FOR A PARADIGM SHIFT

Successive governments have over the years rolled out several policies to boost the agriculture sector. Many industry watchers however believe even though some of the policies have yielded positive results they have yet to make the desired economic impact.

Despite implementation of such policies over the years, agriculture continues to decline in terms of its contribution to GDP – which the services sector currently leads. This, many industry watchers believe is only a reflection of the lack of consistent well-coordinated policies and investments for the agriculture sector.

According to the General Secretary of GAWU, the longstanding woes of the sector are as a result of not only the lack of adequate policies but the failure to implement existing policies to the letter. “The policies as they stand are very good, the implementation is what Ghana needs to work on for the desired results.

So, we need an attitudinal change in how we also develop and implement the policies – which has largely been at the corridors of public officials. We need to also look for experts who can contribute significantly to policy development” he advised. “We also need to improve on policy governance and coordination so that people can own and integrate the policies in their lives rather than feel they have been imposed on them.

That is, the policies over the period have been largely top-down driven – prepared by government and imposed on the actors. But policy makers must consider the farmers as well because they know their system, challenges and priorities better” he added.

PLANTING FOR FOOD AND JOBS POLICY – A CASE IN POINT

The Planting for Food and Job Campaign is a five (5) year policy introduced by the current government to turn around the declining fortunes of the agriculture sector. Launched in April 2017, the policy involves an investment of 125 million Canadian dollars in improved seeds and extension services for farmers of five (5) main crops including maize, rice, sorghum, soybeans and vegetables.

According to the Minister for Food and Agriculture, Dr. Owusu Afriyie Akoto, the programme in its first year of implementation produced a total crop value of GH¢1.2 billion whilst creating a total of 745,000 jobs, mainly in the rural economy.

This, he attributed to the use of labour, improved seeds and fertilisers combined with increased extension service delivery in the production of an additional 485,000 MT of maize; 179,000 MT of rice; and 45,200 MT of vegetables. The initiative at its initial stage of implementation however had its fair share of challenges like farmers clashing with government over the repayment terms for the subsidized inputs.

A number of stakeholder groups like the Institute of Statistical, Social and Economic Research (ISSER) and the Peasant Farmers Association of Ghana (P-FAG) also expressed dismay over the lack of stakeholder engagement in the rollout among other concerns. Edward Kareweh says the implementation has been largely successful by far but not without the usual challenges associated with such policies.

According to him, the initiative may not yield the desired results unless the challenges are comprehensively addressed with a holistic policy framework. “You can’t use the Planting for Food and Jobs policy alone to transform the country’s agricultural sector.

The policy as it stands targets only the crop sub-sector at the expense of other sub-sectors. The good and important part however is that, it’s targeting the largest subsector which means it is going to reduce poverty. But that is not enough.

For instance, if you take cash crops like oil palm, cocoa and rubber, how would the programme boost their production? The relationship is not much,” he bemoaned.

THE WAY FORWARD

According to the Agricultural Economist, creating deliberate linkages between the Planting for Food and Jobs programme and livestock production is key.

“Such a link does not come automatically but must be deliberately created and nurtured. The policy does not have such deliberate linkages and that’s why while the Minister for Agriculture is saying that the programme has resulted in a bumper harvest, poultry producers are also crying that maize is not only scarce but expensive on the market.

If we’ve had a bumper harvest of maize, how come the price of the crop is going up instead of coming down,” he lamented. Mr. Kareweh insists market forces are largely accounting for this disparity and only targeted policies could address the situation. “It is all about demand and supply. In Ghana, we don’t have stable prices.

But such developments can be controlled with policy.” he said. He adds that such linkages when properly established would not only create a ready market for the crop farmers but also boost production in the other subsectors and ultimately help address some of the major constraints of agricultural production in Ghana.

“We must ensure that once we increase production, a part of it is deliberately allocated to other sub-sectors. For instance we should link the programme with the poultry industry so that they can tell the farmers what type and quantity of maize should be produced to prevent over production whereby it would go waste to affect the fortunes of the farmers,” he disclosed. “One of the major challenges with the agricultural sector is that, it’s difficult to predict the market; you don’t know who is producing what.

So we need to reorganize the agricultural sector in such a way that we can have data to say how much will be coming from which particular ecological zone and so on. We can then ascertain which market we are sending that produce. Because, remember agricultural produce are bulky and perishable so the market must be close to the producer in order to reduce postharvest losses which has been another bane of the sector’s growth as up to 35%, in some cases 60%, of produce go waste,” he said.

The General Secretary of GAWU however insists though welcoming, the Planting for Food and Jobs programme is not necessarily the panacea for the agricultural sector’s woes – adding that its sustainability too will depend on a number of factors. “Sustainability will come in a number of ways.

If government’s commitment to provide resources and on time continues into the future, then that part of sustainability is guaranteed. Beyond that, government will have to also look for other funding sources as the project expands.

For example, last year the project was only targeting 200,000 farmers and in 2018 it’s targeting 500,000 farmers and that means resource allocation will have to be more than double. So government will have to find other funding avenues to create that sustainability,” he advised.

INVESTMENT IN RESEARCH AND TECHNOLOGY

Edward Kareweh is of the view that Ghana is making steady progress in terms of adoption of technology in agriculture but more needs to be done to boost policy implementation. “You can see that we are beginning to accept the fact that technology is critical for the sector.

For instance, we’re now using the electronic systems to register and create database of farmers under the Planting for Food and Jobs programme” “Following implementation diligently to the end is not going to be done by human discretion alone.

Technology will make those given that responsibility efficient, ensure they don’t circumvent the system and also ensure the inputs are utilized the way they are supposed to be,” he noted.

Research is also key in finding for solutions to challenges that have bedeviled the sector for years. “Research is a continuous activity. What we have seen over the period is that we have not actually utilized the many agricultural research findings by the research institutions. For instance, they have developed many varieties of crops and so on but yet to be implemented,” he revealed.

AGRICULTURE AND “GHANA BEYOND AID”

The current government’s “Ghana Beyond Aid” agenda towards economic growth has made agriculture development even more crucial. Government has in this light reiterated its commitment to revolutionize agriculture by way of policies directly linked to agro processing. Mr. Kareweh describes the agenda as only a clarion call for massive development of the agriculture sector through stronger synergies between the government and the private sector.

“The agenda is crucial for economic development even though many still don’t know its parameters. Agriculture is mainly a private sector business with farmers as the main drivers. So once we’ve initiated a programme like the One-District, OneFactory which is to be largely private-sector driven, the factories could be given some tax exemptions, concessions and facilities to efficiently produce and compete with the imports” “Government must also help in the search for foreign markets for the domestic producers – that’s why it has diplomatic missions in other countries.

So, that burden is taken off the domestic producers before it unduly increases their costs and ends up shooting the price of their products up and making them uncompetitive against imported products”. He also impressed on government, the need to institute countervailing measures to deal with trade policy implementation undermining domestic production.

“Our trade policies are supposed to enhance domestic and industrial production. It is only when you cannot produce a particular commodity sufficiently or at all that you import. But if imports become the main source of supply when you have the potential to produce then it becomes a challenge” “If you talk about rice, there’s so much cheap imports in this country.

So, even if you increase local rice production you won’t get the market. If you produce rice in Ghana, it’s supposed to be cheaper but it becomes otherwise because you still need to mill it, bag it, process it and advertise it and all that is additional cost.

If you are not efficient in all these, you will be crowded out in the market because the cheap import come well packaged and also well-advertised. It’s not about just producing something that is good but also marketing around the world,” he concluded.

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Business Interview

AGI@60: A Persistent Private Sector Voice

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The AGI was established in 1958. Despite the country’s very young and unstable democracy, business leaders saw the need to have a stronger voice to represent their interest irrespective of who is in government.

As the adage goes: “Government has no business in running business”. This mean, businesses must focus on running business, creating jobs, paying taxes and sustaining economic growth. But to sustain business growth, businesses need a voice that cannot be suppressed.

Led by the iconic Dr Esther Ocloo, founder of Nkulenu Industries, the Association of Ghana Industries (AGI) was formed with only 10 local manufacturers with the initial name of Ghana Manufacturers Association. With time other manufacturers, including the multinationals, saw the essence of having a stronger production voice and within a couple of years, members soared.

In 1984, as though the membership was not enough, the association’s constitution was amended which opened to all registered companies engaged in manufacturing or the provision of services to the manufacturing sector and through associate memberships, other sectors including not-for-profit organisations have become members as well.

Such associate members include the Liquor Manufacturers’ Association of Ghana, Ghana Printers & Paper Converters’ Association, Furniture & Wood Products’ Association of Ghana, Ghana Timber Millers’ Organization, Advertising Association of Ghana, and others.

Today, the AGI now has over 1,500 members across over 20 sectors including advertising, agri-business, automotive & transportation services, beverages, business promotion & consultancy services, chemicals, construction, electricals & electronics, energy, exports, financial services, oil & gas, and food.

Others are hospitalities & tourism, information & communication technology, metals, building & construction products, pharmaceuticals & herbals, printing, stationery & packaging, rubber & plastics, toiletries & cosmetics, environmental and sanitation, garments, textiles and leather and wood processing.

With such a broad membership, the association has also increased its role in society beyond just the advocacy and advisory for policy and is now engaged in industrial sub-contracting and partnership, information gathering, analysis and dissemination, business plan preparation and development and trade promotion for members. Trade promotion, especially, has seen members, who hitherto would have struggled to enter particular markets are now operating on a global scale.

With the objective to contribute substantially to the growth and development of industries in Ghana and to create a supportive and competitive business climate, which will make Ghanaian companies internationally competitive, the AGI’s mission is to carry out proactive support services to the industrial sector with the view to contributing substantially to the growth and development of industry in Ghana.

Geographically, the AGI is physically represented all across the country with seven locations where members located in such areas report to the regional office and have their own sub groupings.

In an in-depth interview with Seth Twum-Akwaboah, Chief Executive Officer (CEO) of the AGI, issues such as relationship with government, industrial policy, local currency impact on businesses, power for operations, cost of credit, taxation, budget, trade, the AGI’s own Business Barometer and the future of the Association were extensively covered.

 

Relationship with Gov’t

Similar to any kind of relationship, Mr. Twum-Akwaboah, notes that there have been good and bad times. “The relationship with government has been good, but as every relationship it has challenges,” he says.

During the military regimes, he notes that, the AGI faced some of its most testing periods. While the AGI was pushing for and continues to push for a private sector led development, government was looking for state-led developments.

“At some point there was the tendency for the leadership of the association to be branded as anti-government. Most of the leaders of AGI were jailed or harassed by the military. Meanwhile all the AGI leaders wanted and continue to want is for the promotion of business at every point in time irrespective of who is leading the government,” he says.

Today, the AGI has become stronger for it and when it speaks through its regular statements, researches and the iconic Business Barometer, everyone listens. Since the commencement of the fourth republic, government has also recognised the significant role of the AGI in bringing in development to the country.

Significant roles played by the AGI now include making inputs in the national budget; by law and convention, the AGI is represented on several boards of public institutions, quasi government institutions and unions.

“If you want to influence policy, you do not wait till the end of year to make a statement. You need representation to influence policy at such levels. These are means of engaging. Due to our regional representatives, we engage policymakers such as regional ministers, district assemblies. There are some policies, at the local level, that have effect on businesses and industry,” he adds.

Despite the seeming strong power the AGI wields, Mr. Twum-Akwaboah, adds that not everything asked or requested of government is granted. Sometimes, he says, government blindsides the AGI with certain policies that could harm businesses especially in the areas of taxes, levies and laws.

“There are several government policies that have taken us by surprise and then we try to lobby for such policies to be reshaped to help businesses. We have such a regular working relationship with the government because it is needed to keep businesses growing,” he adds.

Budget Inputs

Touching on the AGI’s input on the annual and mid-year budget, Mr. Twum-Akwaboah, notes that the association presents inputs and afterwards holds a hearing with the finance ministry where individual AGI members speak about their views of the economy and what needs to be changed.

On the 2019 budget, the AGI presented a couple of inputs including the scrapping of the straight 5percent GETFund and NHIL on goods and services. “We thought its implementation was not the best and harmful to businesses because this is a cost happening across all levels of the value chain and has the potential to increase the cost of goods and services by as much as 20percent if the distribution chain is up to four,” he notes.

For big manufacturers with three distribution levels, he explains, the manufacturer will pass on the 5percent to the key distributor, who will now add another 5percent and move it to the wholesaler, who adds another 5percent to the retailer, who then adds 5percent to the consumer’s product.

“That is the cascading effect and will make the price of goods and services of local manufacturers very expensive,” he says, noting that for the importers, they just pay a flat rate of 3percent.

“For an agenda that seeks to promote local industries, this tax is inimical to local businesses. We engaged the minister and the tax policy unit with other stakeholders and we expected the 2019 budget to take it into consideration but it was not captured. We will continue to engage the minister,” he says.

But overall, the CEO of the AGI lauded the 2019 budget, describing it as “positive” but stressed that what matters is implementation. “A lot of the intentions are good including the making of US$1billion for industrial initiative, a stimulus package for struggling industries and industrial zones are good,” he says.

 

Industrial Policy Stutters

Government, in 2011, launched a comprehensive industrial policy to place industry at the centre of development.

The policy, which was started during President John Kufuor’s regime and completed when President Atta-Mills was in power, is a set of specific policy instruments and measures to be applied to increase access of the country’s manufacturing sector to competitive factors of production to enhance productivity, efficiency and competitiveness.

Key development objectives of the policy include expansion of productive employment in the manufacturing sector, promotion of agro-based industrial development and ensure spatial distribution of industries to achieve reduction in poverty and income inequalities. The implementation of the policy was expected to be done through an Industrial Sector Support Programme, which are time-bound interventions to speed up the rate of industrialization over a period of five-years.

The AGI, as the lead industry advocate, played a critical role in shaping the policy but since the launch of the policy nothing has come out of it and despite President Nana Akufo-Addo’s industrial agenda, led by the One District One Factory (1D1F) programme, the policy is still on the shelves.

When asked what is the current state of the policy, Mr. Twum-Akwaboah bluntly stated: “I do not think we have an industrial policy.” He notes that there was one, which was a good one, but implementation was poor and that led to the collapse of the policy.

To him, Ghana needs to incorporate the relevant aspects of the current government’s industrial agenda into the old policy and draw up a revised industrial policy and follow through. “Having a good policy and a plan is better than working on adhoc basis,” he says.

Does 1D1F fits into this policy?

He explains that what needs to be done for 1D1F to succeed is to allow the systems to work including using the 20percent of the District Assembly Common Fund, which is meant for district industrialization by law, to be used for its intended purpose.

“It was envisaged that, at the district level, you need industries to employ people and curtail rural-urban migration. That is why 20percent of the assembly’s common fund is dedicated to industrialization,” he says.

1D1F fits into the industrial policy because it envisaged the spreading of industries across the country and include locational tax incentives to push businesses into the other parts of the country and every location with specific raw materials. “That is an indication that we are encouraging industries,” he says.

But along the line, he notes, the AGI and businesses realized that such incentives were not enough due to the lack of markets, technology and infrastructure for businesses to thrive in such remote parts of the country.

1D1F requires patience

Asked about whether new members have joined the AGI as a result of 1D1F, Mr. Twum Akwaboah, advised that Ghanaians must be patient because 1D1F businesses will not just spring up overnight, especially when it is private-sector led.

Establishing an industry doesn’t happen overnight, especially sustainable private-sector led businesses. These businesses must be commercially viable, technically feasible and financially possible to get funding. To go through the process of acquiring technology, market assessment, right skills and have a proper corporate governance system does not happen overnight. The expectation that once you start, industries will spring overnight will not happen,” he says.

Secondly, he advised that one needs a very good funding arrangement to get the factories running, meanwhile, right from the beginning there was no funding for the programme.

To him, even though Finance Minister, Ken Ofori-Atta has made a pledge to mobilize US$1billion from various funding sources for small, medium and large scale enterprises to accelerate the industrial transformation agenda including the 1D1F programme, government should make a certain percentage for equity funding.

The AGI, he notes, tried to arrange funding to support the 1D1F, but he expects businesses interested in the venture to have some counterpart funding to attract investors. “We will love that the pace of the establishment of the 1D1F will be hastened so that we can all tell what is happening,” he adds.

 

The Business Barometer

One of the products of the AGI that any government is weary about is its Business Barometer. The Barometer is the true measure of business confidence in Ghana, spanning a period of over 11 years. It has consistently captured the views of 500 CEOs sampled from various sub-sectors of the Ghanaian economy.

Administered quarterly and largely through face-face interviews, the barometer touches several areas of economic activity across the 10 regions to ensure completeness of coverage. Assertions on the state of the business climate for the next quarter permit a ±5percent margin of error.

Often the Business Confidence index lies above or below the 100 base index with findings consistent with developments in the economy.

Starting as a Business Climate Survey, the survey was supported by the GIZ, a German development agency, as an annual report but when surveys were published which included key challenges faced by industry and businesses that were biting and needed quick interventions, the annual nature of it rendered it dud.

“We therefore converted it to a more frequent survey and allowed government and other stakeholders to quickly react to the needs of business,” he says, adding that it has helped a great deal in checking the policies being implemented by government in the short term.

 

The Thorny Issue of Power for Businesses

It is common knowledge that the AGI, for the best part of three decades, has been at the forefront of the campaign to not just reduce the cost of electricity or power for businesses, especially manufacturers to operate, but to overhaul the power sector to allow industries pay fairer prices which will allow them to compete especially against imports.

Earlier last year, government significantly reduced tariffs on electricity to as much as 25percent for big businesses but in the view of the AGI, the structure of the tariff regime is the problem not necessarily how much the reduction is.

Due to its squabbles with government over the cost of power, many believe the AGI is looking to run aground the power sector but Mr. Twum Akwaboah notes that that is not the case because power sector players such as the Volta River Authority (VRA), Electricity Company of Ghana (ECG) and Ghana Grid Company (GRIDCo) are all members of the association.

“How will we wish that our own members’ businesses collapse? We actually advocate for them as well. Power is a necessary input for production. What we have been asking for is simple: if you want Ghanaian industries to grow and be productive, they must have efficient power that can be given at competitive price,” he says.

The business principle of power

Apart from industry subsidizing residential users in Ghana, virtually the only country that still does this in the world, AGI’s main concern is the business principle of power being pursued by government which is killing industries.

“An instance is a company in Tema, with one metre, that pays GH¢3million in electricity bills per month. This business does not need a step down transformer because of the high volume of consumption and also does not need a lot of cables and poles to access power. To earn the same amount of GH¢3million from residential users, you need a whole community with several step down transformers, kilometres of cables and poles, hundreds of metres, and more manpower, all of which come at a cost.

That means it costs the service provider more to earn GH¢3million from residential communities than in industry for the same quantity or voltage of power. Also, the bigger the spread, the more leakages or waste occur and you are at a higher risk of illegal connections and other vices. Yet, the business, where the cost of service is cheaper, is paying more than residence where the cost of service is higher,” he says.

Ghana’s cost of producing power is too high

Another challenge the AGI has, when it comes to power, is the cost per kilowatt hour. In highly industrialised economies such as China and India, the cost per kilowatt hour hovers between 3 to 6cents but in the case of Ghana, it is near 20cents per kilowatt hour.

To Mr. Twum-Akwaboah, the Ghanaian industry cannot compete globally if it pays nearly four times the price in China and India, which are major industrial hubs. “It is important that we find ways and means to drive down the cost of electricity. We need to work hard, government and industry, because everybody is suffering when the price of electricity is high,” he adds.

‘Dumsor’

Touching briefly on the effect of the three-year power rationing, popularly called ‘dumsor’, he described its impact on industry as “devastating”.

To avert another power rationing and sustainably provide cheaper power for homes and businesses, he explains that what is needed is planning. “There is an eight-year cycle where the hydro source becomes inadequate and so you plan to get other sources in. unfortunately we did not plan in advance and that is what happened. In trying to solve it too, we signed countless Independent Power Purchasing (IPP) agreements that are not good for us.”

With the population growing, which is leading to sophisticated demands, the need for more energy is growing and so with efficient planning and regular investment in the sector, supply can stay ahead of demand so that Ghana will no longer experience the energy crisis we experienced between 2013 and 2015.

Renewables is the way forward

The AGI believes that with the advancement of technology in renewables, businesses and homes as well as government should aggressively consider the renewable option. “A few years ago it was very expensive to look into renewables but today the cost per production is getting cheaper and so government’s move in that direction is highly encouraged.”

With environmental protection in the face of climate change on the minds of the AGI, what the association wants to see is a flexible regulatory environment that will encourage a lot of private sector players into the space. “If you have a system that encourages the initial investment, then we can immensely benefit from renewables.”

 

Cost of credit, AGI’s bank and EXIM

With key macroeconomic indicators such as inflation, policy rate and Treasury Bill rate falling, AGI believes this should quickly translate into lower lending rates so that businesses can comfortably borrow and expand. “We welcome the consistent fall and we hope it continues to fall. Much as we want lending rates to fall quickly, we appreciate the gradual drops.”

The AGI, about four years ago, was pushing for the establishment of its own bank but not a word has been heard for the past year and a half. To Mr. Twum-Akwaboah, the establishment of the bank looked very good at the time it was being suggested but the economic climate and regulation makes it slightly challenging to run the bank in a manner that will be different from others.

“We wanted to create a scheme that will solve a major problem by providing medium to long term capital for industry. A lot of the banks today are not providing that, not even NIB and ADB, the development banks. With a universal banking license, you will have no choice but go by certain standards and that will make you no different from the others,” he says.

The AGI has repurposed the institution and has set up a fund, registered with the Securities and Exchange Commission (SEC) that can draw capital from government, development finance institutions and banks, and then AGI members can access this fund at much lower rates on medium to long term basis.

The ultimate aim, he explains, is to grow the fund to a level that AGI can secure a specialized license from the Bank of Ghana to operate as a specialized development bank.

Touching on the impact of recently established EXIM Bank, he notes that the AGI is very happy about its establishment but cautioned the business community to have patience for the institution since it is still early days yet.

“EXIM needs bigger capital and just the money coming from Import Levy is not enough. The whole idea of establishing an EXIM Bank is good because it can leverage its balance sheet to draw in capital from other institutions including other EXIM banks across the globe and create a bigger portfolio of funds and those moves do not happen in a day. We are monitoring and we can only be cautiously optimistic.”

 

Taxes and China’s US$2bn package

As businesses, paying taxes is unavoidable as taxes go a long way to develop economies and so with that the AGI wholeheartedly backs the government in pushing everyone to pay taxes. But AGI’s challenge is the implementation of some tax policies, especially the tax stamp, the frequent changing of the tax regime and the introduction of some new taxes.

The AGI, according to its CEO, has complained to government about some businesses that avoid taxes through under-invoicing and under-valuation and that led to the creation of a task force to monitor movements at the ports.

On the controversial tax stamp policy, which was welcomed by the AGI, the views of local manufacturers were not taken into account. The stamps, in the current format, will slow down high speed lines, especially for big beverage manufacturers such as Accra Breweries Ltd, Kasapreko, Cocacola, and Guinness Ghana Breweries Ltd.

But at the end, government and businesses have reached a compromise and now importers and local manufacturers are affixing the stamps and the Ghana Revenue Authority (GRA) is monitoring the situation aggressively. The textiles sector is the latest to start affixing the stamps, which is highly welcomed by players.

On the ECOWAS Common External Tariff, the AGI is still working on a comprehensive study to identify benefits and challenges but Mr. Twum-Akwaboah believes that being part of a common market is good for local businesses since the ECOWAS region is bigger than Ghana. “We just have to monitor how it is positively or negatively affecting our businesses.”

China’s US$2bn

The AGI truly secured a US$2billion credit facility with the China National Building Materials Company (CNBM) and so far several businesses have benefited. The whole idea, the AGI notes, is to use this to support the 1D1F.

The arrangement is such that businesses do not get direct financing but request for equipment when setting up factories and then repayment can be done till up to 10 years. The only challenges were guarantees from banks or government backing it with a sovereign guarantee but government is not prepared to do that.

So far, EXIM Bank and a few other banks have guaranteed projects for about 10 companies and construction is underway for some of the factories.

 

Future of AGI

For 60 years, AGI has become a stronger institution but the future is bigger and broader than one can imagine. Starting as a manufacturers association, it has moved beyond to encapsulate businesses. “As long as we continue to promote industry then AGI has a future but if we kill industry then there is no future for AGI. It is as simple as that.”

To Mr. Twum-Akwaboah, the current government has an eye for industry and a look at the 2019 budget leans heavily towards industry and initiatives such as 1D1F are industry focused and then there is the Ministry of Trade’s 10-point agenda. “As long as government itself has industry at heart, then AGI can only be smiling into the future and our core interest is to see members’ businesses grow.”

Therefore, the AGI will not relent in its efforts to engage with government to formulate business-friendly policies to see businesses grow. So far, the trend, he notes, is that global actions such as the ECOWAS Common Tariff and the Continental Free Trade Agreement are signs that the future looks promising for Ghana’s businesses.

“I am very positive that the future looks good but we need to advocate for the right policies and we need to have good entrepreneurs that are forward-thinking, committed and dedicated to doing businesses in a transparent manner,” he says.

 

Advice to members

To the members of AGI, over 1,500 of them including small, medium and large businesses, the association’s CEO believes that internally, implementing best corporate governance systems, good management style, recruiting the right talent, making sure efficiency is key and developing financial modules to survive during times of crisis, and prudent resource management will see businesses grow.

As the business grows, Mr. Twum-Akwaboah notes that there is the need for professional engagement. He further stresses “business leaders should not shy away from bringing in such help to develop and sustain their businesses. To go beyond generations, succession planning is key”.

For external factors such as inflation, interest rates, policies from government are not in members’ domain and so they should not be bothered about such actions. “Leave that to the association to handle.”

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