Ghana Public Disclosure Authorized a Report Prepared by the Industrial Mission to Ghana October 25, 1974

William F. Steel Report No. 465a-GH RM K-5003 Ph. 676-1928 World Bank, 1818 H, NW TO\VlA/nrrdSc rPffircint CZc.lf-RPolinrian Washington, DC 20433

The Rolie of IAvIdI1UIdLLUriII in Ghana Public Disclosure Authorized A Report Prepared by The industrial Mission to Ghana October 25, 1974

Not for Pubiic Use Public Disclosure Authorized Public Disclosure Authorized

Document of the International Bank for Reconstruction and Development

Public Disclosure Authorized International Development Association

This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. Currency Equivalents

01 U.S. $0.87

U.S in _z f - 4 The Industrial Mission to Ghana was composed of the following members:

Keith Marsden, Chief of Mission

Fateh M. Chaudhri, Economist

Alfredo D. Gutierrez, Economist

Walter H. Oettinger, Industrial Engineer (UNIDO)

William F. Steel, Economist (Consultant).

TOWARDS EFFICIENT SELF-RELIANCE THE ROLE OF MANUFACTURING IN GHANA

Table of Contents Page

Preface

Summary of Findings and Conclusions i - Policy Recommendations iv - Institutional Proposals vi - Investment Opportunities viii - International Aid viii

I. Manufacturing Industry's Contribution to the Ghanaian Economy - In Broad Perspective 1

A. Industrial Development Strategy and Policies 1 B. Share of Manufacturing in GDP 2 C. Share of Total Employment 3 D. Personal Incomes 4 E. Share of Government Revenues 4 F. Foreign Exchange Earnings and Savings 5 G. Investment 6 H. Inter-Sectoral Linkages 8 I. Future Policy Directions 9

II. The Structure of the Manufacturing Sector in Ghana 10

A. Introduction 10 B. Growth Performance 1962-70 11 C. Structure of Manufacturing Sector 11 D. Employment 16 E. Cost Structure in Manufacturing 19 F. Regional Distribution 25 G. Structure by Ownershin and Nationalitv 29 H. Small-Scale Industry 34

III. Efficiency of Ghanaian Industry 41

A. Domestic Resource Cost of Foreign Exchange Saved or Farned L2 B. Profitability in the Manufacturing Sector 44 1. Pimic 1irnternrises (GTT.THOGn) 2. Other Enterprises 46 C. Canacitv Utilization L8 D. Performance of Ghanaian Manufacturing Comnared with Other African Countries 50 Page

IV. Natural Resources and Material Supplies to Industry 53

A. Introduction 53 B. T.arAd Agricul'+ural Raw aeil 1. Cereals 55

2 . Meato U .d 3. Fish 60 4. DalX y A1roducts 5. Sugar and Sugar Products 62 u * AJ.-LL)-LC d.ILU L!00A 1tIL.LO..i UJ.L0L a.I1' IJ.L.L ILo. .ALU U 7. Vegetables, Fruits and Other Tree Crops ard Soft' r iks 66 8. Rubber 68 9. T obacco 70 10. Leather 70

12. Cocoa and Cocoa Products 72 13. Overall Agricultural D-eveloppment Otrategy 14 C. Forest Products 78 D. Mineral Reso-urces anid rOiuucts 81 E. Conclusions 90

V. Foreign Exchange 91

A. Foreign Exchange Budgeting and Licensing Systems 92 B. Export Promotion 95 1. Ghana Exports and the EEC 96 2. Export Difficulties 96 3. Export Incentives 97 4. Institutional Arrangements 99 vI. Capital Constraints 101

A. Impact of Fiscal Policies on Industry 101 1. Company Tax 101 2. Excise Taxes and Local Duty 102 3. Sales Taxes 103 4. Import Duties 103 5. Conclusion on Fiscal Policies Affecting Industry 105 B. Overall Trends in Commercial Banks Loans to the Manufacturing Sector 105 C. Financial Instituticns and the Manufacturing Sector 106 1. Bank of Ghana (BG) 106 2. Ghana Commercial Bank (GCB) 112 3. The National Investment Bank (NIB) 117 D. The Capital Investments Board (CIB) 126 ITTTMn-owr 135 A. ~ ~139 A. -a.,ning, Institution 145 B. Managerial Rewards and Sanctions 146

D. Social Characteristics of the Ghanaian 153 V-4 - 153 FactoV.Ly WorkerV. 154 E. Wage and Salary Structure and Costs 154 F. LJ.~JJLWUM.powerin Pi.nl-iL,U

ANN1ErX i Food and Beverage Industries 1 A. Overall Trends 1 B. Material Inputs 5 C. Capital Intensity

ANNEX 2 Cotton Textile Industry 1

ANNEX 3 Wood Products Industry 1 A. Ghana!s Timber Resources 2 B. Timber Marketing and Production Controls 2 C. Structure of the Wood Products Industry 3 D. Characteristics of the Major Sub-Sectors 3 1. Sawmilling and Plymilling A 2. Furniture Manufacturing 4 E. Management Structure in the ihdustry 6 F. Conclusions and Recommendations

ANNEX 4 Building Materials and Metal Products 1 A. Cement Manufacture B. Cement Products 2 C. Low-Cost Construction Research D. Metalworking Industries (including engineering) 4 1. Construction Steel (Manufacture and Use) 6 E. Agricultural Equipment 6 F. Small Implements U G. Pots and Pans 9 H. Aluminum Products (excluding pots and pans) I. Electrical Goods 1 J. Vehicle Assembly K. Rehabilitation-of Heavy Equipment 13

ANNEX 5 The Structure of Employment in Small-Scale Manufacturing and Repairs in Accra, Ghana A. Introduction: Summary and Conclusions 1 1. Main Findings 2 2. Recommendations 2 B. Data: Sample Survey of Small Businesses in Accra Page

C. Small Business Employment by Sector and Industry 3 D. Distribution of Firms and Employment by Industry E. Distribution of Firms and Employment by Size Category 9 F. Problems of Operating Small Businesses 12 G. Policies to Help Overcome Problems 14 1. Manufacturers, Associations 1) 2. Credit Facilities 16 H. Appendix Tables 18

ANNEX 6 Infrastructure Facilities Available to Industry 1 A. Road Transport 1 B. Railway 3 C. Electricity 4 D. Water o E. Construction 10 1. Public Construction Industry 10 2. Private Construction Companies 11

ANNEX 7 Imported Inputs as a Proportion of Total Materials in Various Manufacturing Activities in 1966 1

ANNEX 8 Ghana's Investment Policy 1 1. First Schedule: Projects Which Are to be Jointly Owned by Ghanaians and Foreigners 1 2. Second Schedule: Full Ghanaian Ownership 2 Preface

i. This report presents the findings of a World Bank industrial sector mission which visited Ghana between October 15 and November 10, i973. It analyzes data made available to the mission from official sources as well as information obtained during interviews with officials of government departments, research and training institutions and aid organizations, and the managers of some 70 manufacturing enterprises. It also draws upon previous studies, published and unpublished, relevant to an overall assessment of the situation and prospects of industry in Ghana. ii. The main aim of the report is to provide guidance on the policies, programs, investment opportunities and institutional arrangements which will enhance industry's contribution to Ghana's development goals. iii. Chapter I gives a broad perspective on industry's role in the Ghanaian economy, highlighting trends in output, employment, personal incomes, share of GDP, foreign exchange earnings, investment, government revenue and inter-sectoral linkages. iv. Changes in its structure, by product group, type of ownership, and regional distribution are reviewed in Chapter II. v. Chapter III examines some indicators of the efficiency of Ghanaian industry in meeting the government's priorities and objectives. vi. The next four chapters study in more detail the resource constraints which have affected the size, rate of growth and efficiency of the industrial sector and suggest ways in which these contrants could be eased. Chapter IV deals with natural resources and raw material supplies; chapter V with foreign exchange; Chapter VI with capital; and Chapter VII with manpower. Selected aspects of specific sub-sectors are discussed in Annexes 1-8.

SUMMARY OF FINDINGS AND CONCLUSIONS i. At first glance, manufacturing has been one of the most healthy and dynamic sectors in Ghana. Gross output from larger enterprises (30 or more employees) nearly tripled in constant prices between 1962 and 1970. Value added grew by 13% per annum on the average. Employment practically doubled. Labor productivity, expressed in value added per employee, reached almost US$3,000 in current prices in 1970. The share of large-scale manufacturing in GDP went up from 3.8% in 1962 to 6.3% in 1970. ii. These figures reflect real progress in certain areas. Considering the lack of previous experience, the rapid growth of large-scale industry represents a considerable achievement in terms of skill acquisition and occupational mobility on the part of the 56,000 Ghanaians engaged in this sector. Ghanaians have increasingly taken over managerial and technical posts from expatriates. Good standards of quality and design have been attained in such products as textiles. furniture and beverages. iii. Closer scrutiny, however, reveals that the present government. which took office early in 1972, inherited an industrial structure and policy framework which had some serious weaknesses. These deficiencies, which reduced industry's effective contribution to the government's development obiectives. may be listed as follows:

(a) Low valtie adAed at internatinna1 nrices. High tariffs {effective rates of protection above 100% were common), quantitative import controls, and restr1pt.. tnmestir competition have resulted in inflated output figures. Revalued at international prices, ar: 1ue :added would be Rsustatimallyr less

(b) qma ll fe,rva4. Aexcangea,snar4gsa .anan a. 4"..A-t- 4a 4 mport intensive. Eighty percent of materials inputs and almost all the equipmint coma farn,m a Three-quarters of a sample of enterprises were shown to be "inefficient" savers nf f^Voa4ryeg exchange, ^. * t-ha4 -r . A ' "ae4r pea dvol allr of foreign exchange saved would have been too high to allow tham toen cm a .protected against 4m.i-e everai, ti-h a m -. - 8 a-- -..rs.&-O , - - a 50% devaluation. Under utilization of capacity due to foreign exchange con.straents has been a m.ajor c aue.

(c\L~ Fe.wL~ UPfLAdome...st-i L.A.%- 14i--a.JL4.r..0=a0 Ir~L&AtL&0T1s. . LL LLOSUha UWLPLL=dort .~~~little to~ .. i-4ate output and incomes in other sectors. Consumption goods pre- dL.MI-n ate . T."J.'ese were im port=reprooduucing rathLler thanL i..FL.pot substituting, using the same design and material specifications and' terchrIol1ogites as0 ovqers-eas marLu'Lacturers. Eroduction. o' indigenous consumer products and intermediates based upon local materia-Is had bUeen [Iarupered'fby; (i s UvCr-vaLueu currency; (2) lower duties on inputs than on final products; (3) price controls making industrial crops unattractive to Ghanaian farmers; and (4) western-oriented consumer tastes, particularly among the educated, higher income groups.

(d) Few jobs created. The unemployment situation is serious in Ghana. Large-scale industry has contributed very little to its solution. Factor price distortions (duty-free imports

of machinery, interest rates of 6-10%) ! prestige considerations, extensive financing through suppliers' credits, and the licensing resource allocation system have resulted in a pronounced bias towards capital-intensive technology. The sector took 10% of total capital formation but provided iobs for only 1-1/2% of the labor force. The employment figure would be considerably less if controls exercised by the Ministry of Labor and Social Welfare did not make it extremelv r7iffitnilt fnr PntPrnr4lqP to relpaqp qitrnisu labor.

(e) Unbalanced regional development. Industrial growth has been concentrated in t-he Greater Acrra area l-withnover S0T of value added but less than 10% of the population. Attempts to .Qito lsi-rcp nlntf-- in riirnl nrenas failpei hPev.seQP o.f difficulties in organizing supplies and distribution.

(f) Ne&ligible export promotion. The inward-oriented indus- tr-iHlz4tion policies have blunted tih scopke for -. 4ing Ghana's comparative advantages (e.g., low wages, tropical m-aterials) for expandir.g exports of m-an.ufacture-s. Ex_lu-' ding cocoa butter (which is a special case), exports of manufactures w-nounted to less than 2% of gross manufacturing output and just over 1% of total exports. Little practical action LlaU 'een talken to encourage interAfrican trde (though substantial smuggling does take place).

(g) Low levels of efficiency in the public sector. State

enrterprL ses were favored UurE Ug Ltle N'KrumLaUhi regre. LL e'ir share of total manufacturing output by larger firms reached 42% in 1967. Tney have proved to De less profitable than private enterprises because: (1) their initial capacity was often too large in relation to the market and availability of material and skill inputs; (2) low capacity utilization has increased costs and squeezed margins; and (3) salary rates compare unfavorably, making it difficult to attract and hold the most able managers and skilled workers. In addition, there has been an absence of managerial and employee incentives related to performance.

(i) Inadequate repair and maintenance capacity. Too much machinery and equipment has been lying idle, in all sectors, because of insufficient attention to maintenance and inadequate repair capacity and experience in the engineering industry. (i) SamL-z-s caleLLindus try nreglected.t ranufactu-ving e-ntLe rprJiscs with less than 30 employees have been largely ignored, if not discriminated against, in development policies. Yet it is an important and in some ways vigorous sector. It may provide employment, at least on a part-time basis, for over 400,000 persons compared with 56,000 in larger firms. Most are self-employed or working in ramily units. Their premises are generally the home, a shack or the open air. Tneir equipment is often rudimentary. All but a few are denied access to institutional credit. Management training and advisory services cover only the modern, factory-type enterprises. Imported materials and equipment are difficult to obtain. Despite these handicaps they show ingenuity in resource utilization. They are often making the real indigenous substitutes for imports by meeting basic consumer needs in ways which better reflect Ghana's resource endowment. iv. Many of these weaknesses have been recognized by the National Redemption Council (NRC) Government. Its freedom of action to tackle these problems has been circumscribed by political considerations and economic realities, as well as by the fact that it was not starting with a clean slate. Nevertheless, vigorous steps have been taken on a number of fronts. These include:

(1) simplification of the tariff structure by reducing the range and number of categories;

(2) substantially increased allocations (through the Budget and development banks) to agriculture, to increase the availability of domestic raw material inputs to industry;

(3) establishment of Regional Development Corporations to promote, inter alia, a wider diffusion of industry outside the major cities;

(4) introduction of 20% bonus to encourage the expansion and diversification of exports;

(5) formation of the Ghana Manpower Board to formulate plans and policies for the development, education, training and fuller utilization of Ghana's human resources;

(6) discouraging excessive capital labor substitution by introducing a license levy of 20% on imported machinery and allowing the Capital Investments Board to grant employment tax credits as an investment incentive.

(7) decision to establish the Small Scale Industries Develop- men;u BJ'oardlUtLU se-IC up organ zaion.LUIIs'iJ 'rU Uandd Upw-uppIX)gL a,, that will provide technical, manag-rial and financial as- sistancu Uo aidthiUle deurelopmiuJu oul s-uecI scable IndustUi-1Js. - iv -

v. The mission was unable to assess the impact of all these measures because of the paucity of data from official sources on the industrial sector during the past three years. Some improvement was evident at the factory level, but to some extent this reflected the easing of import restrictions made possible by higher cocoa prices. A more fundamental restructuring seems to be necessary in the longer term, if the Government's development goals are to be realized.

vi. It is the mission's view, however, that all these measures can be expected to enhance industry's role within the broad strategy chosen by Ghana--efficient self-reliance. The mission suRgests that they may be complemented in the following ways:

Policy Recommendations

Chapter IV - Natural Resources and Material Supplies to Industry

(1) Restrict backward integration into agriculture by industrial firms to nucleus farms and niantations which will act an demonMtration prn1p-ts for independent farmers. This investment should be accompanied by supportive extensi-on qsrv1res, guaranteed nrines and eexnnderd crpAi4t far4ilities fnor smallholders (para. 4.71).

(2) Concentrate on industrial crops in which Ghana possesses the greatest comparative advantage rather than atremnting tn hbecnme sef-cuiff4cien1.t in all raw material inputs to industry. Comparative advantage should be determined by thorough f-naCil4tv ast-,,4. of the C08atS an.d benefie of suggested programs for expanding or diversifying industrial crop production, using i-t-rn.ti 1 .& ^.k OI^ * A j&.&..^Jr--4-^, 0_.- .fl- *'J'Jnn *-.1n_. *'.J J *- -

Chapter V - Foreign Exchar.ge

(3) Pxvse `the i ---- t 1icer.sing syster, to 1 ------relisbule f-rwarl %I I %V.L 9LtL &.AJIAjJLL LL)LZA5 LLI. LUV a±±U.W AU"LJU LW±L.tU.±C L LW LU planning, reduce working capital requirements and eliminate hidden subsidies to inefficier.t~L prodJucers (par. 5.1).

(4) Further si.Lpl'ifLy ar.d unLify the ±rLL.port tax adIU le-vy strucLure to e'i-minate discrimination against firms using a higher proportion of domestic inputs (paras. 5.07 and 6.15-6.19).

(5) Negotiate reciprocal preferences with the European Economic Community (EEC) and neighboring African countries to encourage exports of manufactures and concentration of major investment projects in fields which have a wider market (paras. 4.103 and 5.19).

(6) Encourage export of goods with a high domestic value added by progressively reducing import duty drawbacks and relating the export bonus to different categories of products according to domestic production coefficients (paras. 5.25 and 5.26). Chapter VI - Capital Constraints

(7) Further consolidation of tax rates is necessary in order to spread the tax load more equitably. There should be less reliance on import duty rebates and capital incentives and more use of labor subsidies to encourage a more efficient use of resources (para. 6.19).

(8) Commercial banks particivating in the Credit Guarantee Scheme for small borrowers of the Bank of Ghana should be able to increase the spread between minimum and maximum lending rates. and be able to pass the insurance fee to the borrower in order to increase their volume of lending to small borrowers tinder the scheme (nara. 6.33).

(9) Commercial banks should be encouraged to move away from traditional lending policies based on the availability of adequate collateral and employ analysis of financial flows to de termine the earning nower of nroiects for loan purposes. Ghana Commercial Bank and the Standard Bank have already set un Development Finance Tlnits with the above intentons (para- 6.37)=

(10) The financial structure of Ghana cnntinues ton he segmented and to exhibit real interest rates which are too low with respect to factor usage anA whii-h entcoragre cannital-intensivae in stnmont Financialn reform is necessary in order to raise interest rates and mobilize domestic savings

(1 1) Thn rnto4#.l Ttsor-aoma"t t - -A4esould^a continue tot nloo 4---"#F4-tv \ sr-- -..- ^^^--- r - __-W-_- scheme by relying mostly on income tax holidays and excise duty exemptions, which -arere*lati4vely fre of thle factor price d istortior.s four.d ir.Acapi allowances and import duty exemptions. In addition, the employment tax credit should be emAploled to encourage labor-intensive proj4ects. Cait - Investments Board's incentives should be guided by the principle that the m.ount of thLe incentive shouldU bUe as smA.I.L. as possible Lto induce te in.vest ment, and that total inducements should not make the private rate of return exceed t social rate of retuL.A-LA (para. 6.53)

Chapter VTI! = Manpower (12)Evxe-rapt 'Lan.alan-o-wned, sm'all businesses from. th-e Selective AiJe-s I L £.AIII9: 7. LLd-4LaLJ Li~ JIU.L U A.A. LIL.L Li~ .. L LL..LV ZL.LJ.~L n Employment Tax to allow adequate time for them to develop indigenous skills andU Iw--[LLUw (parsL. 7 .07)

1,3I) Organ'ze conferences and training programs on techniques of "management by objectives" so that concrete targets of achievement can be set for industrial managers against wnich to measure tneir perLormance (para. 7.20).

(14) Provide an incentive to managers to implement improved management techniques by increasing the degree of competition in industry (internal and external), allowing tnem greater discretion in hiring and firing labor, and encouraging the use of piece-work incentive systems. To be effective this would need to be accompanied by complementary measures to remove the .materianiptcrtraint and to it.-m-oe th.e rate of employment ceto in the economy as a whole (paras. 7.21-7.31).

(15) Increase the wage differentials between unskilled and skilled labor to encourage wwre work-em to undertake craft, trainir.g progra 7.50)Ipra

t.J LX DrflL__tLa _ _1 _, W'JLfl._^ 4 L_.t U.fl^ LO C t.LJ..R L LLaJL . j,L_ L..~L 'Q O 5 6 _

I I) L-UL LLL > | Ly usL L=L.L LL i L.W *IICI j UU±JXUUWCiI. &iu &JL.-V U U V L so that the former can attract and retain equally competent personnel. HUwever, care should Ue t;ken [iot to accentuate thle exsting wide dUspar'ties between the rewards of the small minority with a university/professional

eUducatiLon and the incomUes oIf tIhe ases (pars. 7.J50.J1).

(17) Tne government should create a substantial pacKage proU6LL Lo Lraise the productivity and income of the great majority of industrial workers -who are engaged in small-scale industry. Tnis program should inelude expanded credit facilities, improved technology, advisory and training services, common facilities, better working conditions and formation of trade associations (paras. 7.54-7.58 and Annex 5).

Institutional Proposals

(1) Closer relationships should be established between the Building and Road Research Institute, which is doing interesting work in the field of alternative building materials (small brick plants, substitution of bauxite waste for cement), and the Centre de l'Habitat et du Logement in Togo (Annex 4, pages 3-4).

(2) A technical assistance unit should be created to provide a variety of services to the timber and wood products industry. This unit could be attached to the Ghana Timber Marketing Board and coordinate its activities with the Forest Products Research Institute (Annex 3, pages 10-11).

(3) The Export Promotion Company should be provided with sufficient staff and funds to help industrial clients plan and implement a marketing strategy for export. Ghana Chocolate Houses could be established abroad to create a favorable image for Ghanaian products (paras. 5.28 and 5.29).

(4) NIB should reduce its dependence on Government funds and become more responsible for mobilizing private domestic saving. To do so it would need to improve its profitability and introduce lending rates which reflect more adequately the opportunity costs of capital (para. 6.46).

(5) NIB should clearly establish and coordinate its activities in the agricultural sector with ADB so as to maximize the effective use of available resources. NIB's role in the agricultural sector should probably be limited to agricultural products which are subject to substantial further processing. Improved coordination with CIB is also necessary in terms of project identification, promotion, and financing (paras. 6.46 and 6.57). - vii -

(6) NIB should improve its project appraisal and approval procedures to increase its rate of loan utilization and continue efforts to solve the arrears situation. Moreover, NIB should explore the possibility of setting up an assistance program for small borrowers to make better use of the available Credit Guarantee Scheme (paras. 6.47 and 6.48).

(7) CIB should continue to take the initiative in achieving Government inter-agency cooperation with respect to the simplification of investment procedures and the promotion of investments, which although socially profitable offer low returns to private investors and thus require some incentives for their realization. A simpler and faster investment procedure is one of the essential elements of a sound investment climate (paras. 6.56 and 6.61).

(8) CIB should not attempt to become a financial institution by obtaining Government funds to help finanre nrniocts prepared by its Proiects Identi- fication Division. CIB and NIB must cooperate more closely to promote soctallv nrnfitabhip nrniper througQh the nronaratton of pre-feasibility reports tied to the joint availability of fiscal incentives and financial f…a'rItip (para.- 57)

(9) CIB shoulde.adersnee soon-n as hlp- ss nrnnopsed study concerned with the impact of its concessions in order to obtain feed-back on the offartQ nf ita nTornt.4ung t-h 0 psst 10 Vdnirc Thio XArrtRP can be effectively used to improve its project follow-up and inspection operations

(1) ,e funct-ion of 4ir.dutrial nrg4- -- 4--.g in r..^asheouldn ha st-rengrthened

* J ..L*. *LO LLtl XRS-L WO L -lOJ . ee L i ..ir. L …-_ by developing the syllabuses and expanding the courses organized by the

Qchoo00 -'~J. of".~. Business '~- L~~ fUKLLk..A-rln-istratilon L% . 0 LJ.JI a;L iLegonL JL1 andO-.I- b-ythu ng.et eeoet-J- - - and Productivity Institute (MDPI) (para. 7.20).

(11) Establish courses for work study practitioners at Polytechnics and

Lech,nicLLaLL CoUlCeges (para. .2U).

( IL) Expand thRe program in export ma-keting rurn by ,-LUPI (para. 7.20 .

(13)) 'trengthlen the capacity of Lflhe QfanafliIaipawer BDoarU Lo pLQ. mantpw-er development and employment promotion programs by providing adequate resources (and competitive salaries) to the Central Bureau of Statistics VWich will provide the vital data inputs to the planning process (para. 7.42).

(14) Establish a Small Industry Institute to act as a focal point for training, research and advisory activities on behalf of small firms (para. 7.56). - viii -

IvestLment OpportLuiti es

ne most promi'.sLi.g-0pport-LU1ies for expanding tne production ot industrial products and material inputs by new investment projects seems to be:

(1) Rice cultivation and processing (para. 4.15).

(2) Livestock breeding, fattening and rancning (para. 4.24).

(3) Sugar growing and refining (para. 4.39).

(4) Palm oil cultivation and milling (para. 4.45).

(5) Pulp and paper (para. 4.76).

(6) Conversion of bauxite into aluminum (para. 4.86).

(7) Clay bricks (paras. 4.94-4.96).

(8) Engineering workshops for the repair and rehabilitation of machinery (Annex 4).

International Aid

Foreign aid and investment would be welcome in all the above fields so long as it conforms to the guidelines laid down in the White Paper on Investment Policy. International technical assistance would be particularly helpful in drawing up and implementing:

(1) a package program for small-scale industry, and

(2) repair and rehabilitation of machinery. MANUFACTIUURING INDU'STRYK S CONLUKIBIUTION TO T.E GAAIAN ECONOi1 -- IN BROAD PERSPECTIVE

A. industrial Development Strategy and Policies

1.01 To most newly independent developing countries in the 1950s and 1960s, modernization and development seemed to be synonymous with industrialization. They were unwilling to perform the role assigned to them as colonies--providers of cheap primary products to the industrialized countries. Exports of primary commodities suffered from sluggish growth and adverse terms of trade. Only by increasing the domestic value added by the further processing of raw materials and agricultural produce could long-term economic growth be generated, it was argued. A dynamic modern industrial sector would employ and train an increasing number of people in new skills, and provide a flow of savings and re-investable capital to sustain growth on a continuous basis. A more stable and viable balance of payments position appeared to depend upon the replacement of imports by domestically manufactured products, which hopefully would also contribute to a diversification and expansion of exports.

1.02 Ghana, which gained its independence in 1957, was one of the first to formulate and implement this development strategy. In the late 1959s, it embarked upon an ambitious program which sought to transform a predominantly agrarian society into an industrialized economy in as short a time as possible.

1.03 Little attention was paid to the existing indigenous manufacturing activities, mostly carried out in small-scale cottage or artisan workshop enterprises. These were regarded as inefficient relics of the past. In order to force the pace of industrialization, medium and large factories equipped with the latest Western technology were set up from scratch. During the Nkrumah regime (1956-66) much of the investment was in state-owned enterprises, financed by suppliers credits and budget deficits. After the fall of the Nkrumah Government, more encouragement was given to private entrepreneurship (foreign and national) and to joint partnerships with the State providing a minority interest. The past two years has witnessed a renewed nationalist feeling. The principle of self-reliance and the doctrine of "capturing the commanding heights of the economy" have been translated into a White Paper on Investment Policy which snecifies areas reserved for State ownership, for joint state/foreign ownership, private Ghanaian/foreign ownershin. and full Ghanaian ownershin.

1.04 The nnlicv instruments uasped fnr t-he nrnmntinn nf industry have otherwise remained fairly consistent throughout the last 15 years. Successive governments have shown 1Ittle fAith 4 n the pr4ice mt-hani4am and the free inter- play of market forces for the efficient and equitable allocation of resources. -2-

Apart- from. a brief period of trade liberalization com-ine wiTthI a ms40ry devaluation of the cedi in December 1971, severe quantitative controls over ilmports have buttressed high ni lnal and effective rates of duty a.S protection against foreign competition. Foreign exchange for raw material and machinery irputs to- in.dust.y has beenr rationed by import licenses, according to pri-OrIi- tities and criteria fixed by Government planners rather than the capacity to pay. Internal clmpetitton has been regulated by building anvstment-nA 4 licenses. The prices of several industrial inputs and products were controlled by th.e State&a. Incent4lves offered to new indAus trlalists tenAded.- toA sbidlz the scarcest factor of production: capital. These included low-interest loans, duty-free m.ach lnery, accelerated deprecliatior. a"l.lowances as well as tax and duty exemptions.

1.05 How effective have these policies been in achieving the declared obJecti-ve? 'Let us LLrst oL aLL take a roadU perspective uy mL,easuring industry's impact on the whole economy in terms of its contribution to output, employment, incomes, foreign exchange earnings and savings, Govern-- ment revenue, investment and inter-sectoral linkages.

B. Share of Manufacturing in GDP

1.06' At first glance, manufacturing has been one of the most healthy and dynamic sectors in Ghana. Gross output from iarger enterprises increased nearly five-fold in current prices between 1962 and 1970. Even after allowiing for price changes, output more than tripied. Annual rates of growth in constant prices averaged 15%. Similarly, gross value added in manufacturing expanded by 13% per annum in constant prices during the same period.

1.07 In the absence of any constant price series for Gross Domestic Product (GDP) or Gross National Product (GNP), which use the same basis for deflation as the manufacturing sector gross output or value added, we are obliged to study the contribution of the manufacturing sector to GDP in current price terms. The share of manufacturing sector value added in GDP increased only slowly from 3.8 percent in 1962 to 6.3 percent in 1970. One would have expected a larger increase in this ratio considering the massive industrialization drive launched in the early 1960s. The results are even more disappointing if one realizes that the rest of the economy grew only slowly during this period. The figures may also show industry in an unduly favorable light compared to other sectors, because the high level of protection afforded to industry allowed inflated prices and operating margins. Revalued at international prices, value added in manufacturing would be substantially less as we will see in Chapter III.

1.08 The above data apply only to manufacturing enterprises with 30 or more persons engaged, as the Industrial Statistics Series published by the Central Statistical Bureau are confined to these larger firms. It has been estimated that small-scale industry might add 2-3 percentage points to the total of manufacturing's share, but this estimate may be subject to wide margins of error as no surveys of small firms have been conducted since 1962. -3-

C. Share of Total Employment

1.09 Employment in large-scale manufacturing almost doubled between 1962 and 1970, with an averaee erowth rate of 8.4 nercent per annum. Again these impressive figures tend to give a misleading impression if seen in isolation. The Reetor's contribution to employment creation remains slight. Only 1.6% of the estimated 3.46 million 1/ members of Ghana's labor force in 1970 nould find iobR in large-snale manufacturing. Tt haRs however. about 14% of recorded wage and salary employment in establishments covered bv the Annital labor atatistira- 7/

1.10 She unemploywment nit,,ntA-n isa ear4ous ir r-ha"r. An, estimated 8% of the labor is without work and many more would fall under any customary defi.nition. of urder.p1loe,t TTt 4s clear ehat large-s^ale rnufn4uai. had too small a starting base to solve this problem by itself. The issue to be -ex,.injA lsate in the report is *4.eh-. 4i-t impact could not b-e m.ae -- *~~.~- Sl~ULaLOL *fl~L*U~A. * W,LL LIUCI. ± L. 0 LZ±Iupt L. %.U %AJ. A JI.. U ,aj significantly greater in the future, if serious efforts were made to vary factor proportions ir inusr so that_ they bette _ rutcGara'rsorc -~.-1.JLJ9. J-'JJ. . LLL inL .LLALU"OLi.Ly ZOLD L.A&ZL. LU5AM7 UCLt..LL MILUOll ULIdUI 0 L 00 "JA .C~ endowment. For example, although the textiles and wearing apparel sub-sector whi-ch -is WAUL L A. usu M0UO0LJ.L' ly viewedV±W_ LA asO .LCUIlzbor L ±1intensivre LL0.L = acutdforU4.UULLU=U LUL 4t.LUIUZ$L.almost Vfl/.60X Li.of theLLA~ increase in employment during the period 1962-70, the investment per worker 190'as bee.. estimated lo be ,900. ,;l-e nill'*~IV _, Li IL0 Lu~L L..LULa L. U L LiU 0!0 71v. LLL~ tech.oogU,LLnLuLury UILUb~`-oen LJ.'orte.l Lt:L.L.Lt- manufacture has been capital intensive in the Ghanaian context. 3/ There seem.s little doubt that the labor-Absorbing capacity of large-scale industry has been restricted by various biases tending to encourage excessive capital- .Lauor substitution.

a 4 4 . ,. I.1 I i ne opposlte seems to De true or small-scale inaustry. ropulacion Census data, taken in conjunction with the Central Bureau of Statistics series for larger firms, indicates that there were some 205,000 engaged in small-scale manufacturing activities in 1960. Estimates obtained by using the CBS labor statistics data to move the Census bench-marks suggest that the number have reached more than 440,000 in 1969. 41 This would mean that almost one job in seven was found in small manufacturing establishments. But the productivity, income yields of many of these jobs seems to be low as a result of various forces we will examine later which tend to depress capital/labor proportions.

1/ See T. Merritt Brown, "Macroeconomic Data of Ghana," The Economic Bulletin of Ghana. Vol 2. No. 2. 1972. 2/ These figures cover only a portion of the total number of persons in the Ghanaian labor force. They do not include, for example, persons self- employed in agriculture. 3/ See page 210. 4/ See T. Merritt Brown, op. cit. -4-

D. Personal Incomes

1.12 The wage and salary bill of large-scale manufacturing rose from 0 7.2 million in 1962 to 0 20.4 million in 1970. Average income per person engaged declined at an average annual rate of 0.6% in real terms, however, because of the lag between wage and price increases. The industrial worker did not benefit from the growth of productivity which took place during this period (4.4 percent p.a. in constant prices).

1.13 Nevertheless, the average employee in manufacturing still remains better paid than those in most other sectors. In establishments with 10 or more persons in the private enterprise sector, average monthly earnings in manufacturing were 0 89.6 in December 1970 compared with 0 46.8 in the whole economy. Only commerce and transport were more remunerative. In public enterprises the manufacturing and all-sector figures were 0 62.2 and 0 51.7 respectively, being exceeded only by commerce (0 76.4).

1.14 Data on the total personal incomes of the economically active population are not available. Total private consumption expenditure has been estimated at 0 1,766 million in 1970 at current market prices. Wage and salary incomes from large-scale manufacturing were the source of only a small proportion of this expenditure, less than 1.2%. This figure, which is much less than manufacturing's contribution to GDP, may be explained by the low rate of return to labor as opposed to capital and entrepreneurship. Labor's share of value added declined from 30.4% in 1962 to 20.6% in 1970. Recipients of non-wage income have gained most from the industrial expansion that has occurred.

E. Share of Government Revenues

1.15 Not all forms of Government revenue can be traced back in official publications to the economic sector from which they originated. But by piecing together available evidence, we estimate that the total tax yield from domestic manufacturing industry was in the region of e 70-75 million in 1969-70. This total covers company income and profits tax, import duty on Industrial innut-; excise tax and local dutvy and sales tax. It constituted 21-12% of total central Government revenue and is comparable in value to about half the value added in manufacturino.

1.16 Tn relatinn to the other parAmsters we have revipewpd the tny burden on industry seems to be heavy. It has the effect of reducing the si7e of the rp-invpcth1P siirnplu that -niil.i hb ploughed back for future expansion; because profit margins are squeezed between higher prices of taxed isrices to^ the consumer. This appears to be borne out by the low yield of company income tax on profits which e to only 4.3 mlllion in 1969/70, i.4., 11/2% of manufacturing turnover, despite tax rates in the region of 50%. A further defect is that the incider.ce of tax varies considerably froru firm to f.UirUm depending upon the extent of the tax and duty holidays and exemptions granted as initial investment incentives by the Capital Investments Board. These are ex-ar.te concessio.s -Adare therefore not related to the ah4 I i to iths investments efficiently. They discriminate against firms which wish to expand by employing more llabor in con.junction with small increman.ts of canital.

~J%yO..U; lit- Uw U&~ . J UUZLYUL& VVLflf OU= J%Z~;&*.AM=L-~~ 1. 17 This heavy tax burden, on, industry might be Justified if it could be shown to be a form of forced savings and that the Government could utilize these investment funds more wisely than industry itself. The evidence on this is not encouraging. A rising proportion of Government revenue has been devoted to current expenditure on public ana social services rather than for capital investment purposes. Public savings which had grown in the first half of the 1960s, and by 1965 provided about 45% of the finance for thUe G7,U.vtLm=-nt investment program, subsequently declined; with an actual negative level in 1968 and a virtually zero level in 1970. 'T'his trend was accompanied by a serious decline in the proportion of gross fixed investment (public and private) to GDP from 20.3% in 1960 and 22.3% in 1965, to 12.9% in 1969.

1.18 The performance of public investment projects is equally disappointing. tMore than 50% of investment in the period 1960-66 was undertaken by the public sector. Many showed a low rate of return and others did not come to fruition. The net accumulated loss of the public corporations by mid-1966 has been estimated at about 16% of the initial investments. Many were partially financed by suppliers credits, on which outstanding debts of 4 290 million still remain as a millstone around Ghana's neck. An incremental capital/output ratio as high as 10:1 has been calculated for the period 1960-65. 1/ Some progress has been made subsequently, but several state enterprises are not yet on a profitable footing. The Ghana Industrial Holding Company's (GIHOC) dividend contribution to Government revenue was expected to yield e 1.5 million in 1972-73 from assets valued in the books at t 78 million in 1971.

F. Foreign Exchange Earnings and Savings

1.19 The term "import-substitution" is often used to describe the policies and objectives pursued in Ghana (and many other LDCs) in the past. This is really a misnomer. "Import-reproduction" would be a more accurate description. New large-scale factories have been set up to reproduce as near as possible facsimiles of the products previously imported. The same design and material specifications and technologies used by manufacturers abroad were copied. Even the brand name and packaging has sometimes been retained. There has been little attempt to find or promote real substitutes which would satisfy basic consumer needs in ways which would better suit Ghana's available resources.

1/ See Elliot J. Berg, "Structural Transformation Versus Gradualism: Recent Economic Development in Ghana and The Ivory Coast," Ghana and The Gold Coast, P. Foster and A.R. Zolberg; Editors (Chica2o. University of, Chicago Press, 1971). - 6-

1.20 Tne result is that manufacturing continues to incur a heavy trading deficit. An estimated 80% of inputs (raw materials, intermediates and machinery) are imported. Producers' materials (¢ 140.8 million) and producers' equipment (O 101.4 million) accounted for 51% of total imports in 1970. The bulk of these items was probably destined for industry.

1.21 One way of calculating the foreign exchange savings of the manufacturing sector would be to deduct the cost of imported inputs from the value of the final products, measured at international prices. 1/ There is evidence, reviewed in more detail in Chapter III, that the resulting figure would be substantially less than the value added total which appears in the official series. Furthermore, the assumption that manufactured imports would replace near identical domestic products, if the latter were not available, is not necessarily true. There are many indigenous substitutes made from different materials or with different product specifications which fulfill similar purposes (e.g, pito beer for lager beer; fufu and kenkey for wheat bread; woven reed baskets or pottery for metal containers, etc.). Some of these might become more attractive to consumers if the foreign exchange costs of imported products and materials reflected the true opportunity cost or scarcity value of foreign currency.

1.22 Foreign exchange earnings from exports of domestic manufacturers rose from e 18 million in 1964 to 0 35 million in 1969 and 0 73.1 million in 1972. 2/ Their share of total exports increased from 8% to 13% during this time. This is a spectacular expansion and appears on face value to represent a significant diversification of Ghana's exports so long dominated by cocoa beans, timber and minerals. However, a closer look reveals that more than 82% of manufactured exports in 1972 came from two items: cocoa butter and other cocoa-based intermediaries, and sawn timber. Both coumo- dities face relatively buoyant export markets in raw form, and would have earned nearly as much foreign exchange even if simple first-stage processing had not been carried out in Ghana. It is significant that neither of these items qualifies for the export bonus of 20% of gross value which is now provided for non-traditional exports.

G. Investment

1.23 Comprehensive series on capital investment in industry have not been published. The Central Bureau of Statistics data cover the period 1965-68 only. As they depend upon returns from operating enternrises; they may be confined to additions to and replacements of existing fixed assets, and omit initial investment in new nlant machinery and buildings whirh took place before the firms began production. In 1965, the recorded gross additions to fixed assets in manufactur'ng were only ¢ A.7 million, or 1.8% of the estimated gross domestic capital formation in the whole economy. These GBS data rr'hed na npnk In 1967 at K ?8.3 million a AA. share of tota investment.

1/ Repatriated profits and salaries accruing to foreigners should also be deducted. 2/ Exldn exports of alu.mnum ingots- de from imported materials. - 7 -

1.24 A fu11er ninture; though still incomnlete; of the relative magnitude of industrial investment may be obtained from data provided to the micsinn hv thp rAnitan1 Tnvestments Board (CIB) which annroves apnlicatinns for various concessions and incentives offered to investors in priority projects. Nearlv Al1 nf these nrnierts were in the mannffntnring sn^-tnr during the period in question. Table 1.01 compares these CIB approved wro4ects uith ea4sAtim at nf fntnl PAfitAll fnrmntinn frnm thp nntinnfal int'nm- statistics.

Table 1.01

Gross Domestic

rTUAJ.JJ f_l JLV4 A r_. *1J r_t 2 at.ta .a a LU . & C million ¢ million f(CurrentC1.L~LL pL.L.PprlIces),

1967 32.6 219

I YUOo JJ. . LLu 1969 24.6 259 i n,^ 4*i1 4 -%- It f IVIV IL. I JL.'4 1971 24.1 355

Total 1966-71 143.7 1,644

The two series cannot be related precisely, year by year, because of the time lag between approvai of tne project and tne actuai investment expenditure. However, over the whole six-year period, CIB approved projects represent 8.7% of gross domestic fixed capital formation in Ghana. If account was taken of investment which did not qualify for CIB concessions (which were granted to new enterprises or major extensions to existing firms), large-scale industry may well have absorbed some 10% of total available investment funds in Ghana in recent years. It also obtained more than 30% of total loans and advances (mostly for working capital) by commercial banks in 1971-72.

1.25 These are high proportions compared with its share of GDP and, even more, of employment (1.5%). The technology introduced to industry has been much more capital-intensive than in other sectors on the average. Incremental capital/labor ratios in excess of ¢ 7,000 in industry between 1966-71 contrast with a stock of fixed capital for the average employed person of 0 880 in 1969 1/ at current prices. This disparity is not uncommon among countries which have adopted a crash industrialization strategy. But it does not appear to be optimal. Nor is it inevitable, as shown by the more progressive and balanced increases in capital/labor ratios which took place in all economic sectors in the historical development of the now-industrialized countries. 2/

1/ See T. Merritt Brown, op. cit. 2/ See Simon Kuznets, Modern Economic Growth: Rate, Structure and Spread, (New Haven, Yale University Press, 1966). - 8 -

1.26 The -resent leve1lsa of a4n4viac a. foreign, capital said4 rovideA nylv enough investment funds to add 0 100 to the capital stock of the average member of the-han.a4an present labor force each year; ar.d this makes no allowance for depreciation or for the 70,000 newcomers to the labor force (t-4h, he to be equippe-d fro-. Scratch) resulti.gFfr pu1ati4oTnowth. 1.27 Tlhese severe capita" constraints .es. that

exercised when importing technology from capital-rich countries, if all sectors are to ben1efit fromu tecnnical progress and cap'al -ICu1CUmastlOn. Considerable technological adaptation to reflect differing factor proportLons .i the recipient country is called for generally. If exceptions to this r'ule are to be made in industry, they warrant greater justification on efficiency arid social welfare grounds thfarn hias been evicient in Ghana uritiL2L nuw.

H. Inter-Sectoral Linkages

4 flf A. e U 4 r I _ .. A r_ - * One argument wnicn 1s rrequent±y advance' to justlly a_ 8__t.ft^vihULoItUUS _ strategy of industrialization is that an advanced, large-scale manufacturing sector stimulates development elsewnere in the economy through backward and forward linkages. The Ghanaian experience does not offer convincing support.

1.29 Large-scale manufacturing's links with domestic agriculture are tenuous. An input-output table constructed for 96oo snows tnat out or a total output at producers' prices from agriculture (excluding cocoa) of ' 454 million, only K 14.8 million (3.3%) was purchased by manufacturing industry. 1/ These domestic agricultural inputs represented 13.7% of total materiai purchases by industry that year.

1.30 There is no evidence of any significant change in these proportions more recently. The umbilical cord through which life-sustaining materials are fed to large-scale industry has been firmly attached to overseas suppliers. The market outlet for Ghanaian farmers has been mostly limited to direct consumption or small-scale processing. This restricted demand from industry has largely cut the Ghanaian farmer off from an important and expanding segment of total demand represented by prepared and packaged foodstuffs, beverages, clothing and consumer durables which constitute a high proportion of the expenditure of the urban elite.

1.31 Other primary sectors have fared a little better. Manufacturing industry purchases are estimated to have taken 12.3% of forestry output, 28.6% of fishing output and 7.0% of mining and quarrying output in 1968.

1.32 Similarly, inputs from domestic manufacturing industry to these sectors have been small. Some fertilizers, pesticides and agricultural implements (hatchets) are made in Ghana, but from imported materials. Tractors and agricultural machinery are virtually all imported, as are mining and wood-cutting machines and larger fishing vessels.

1/ See M.S. Singal, Input-Output Table of Ghana - 1968, Accra, Central Bureau of Statistics, 1973. -9-

1.33 The employment and incomae generated in transport and services by local manufacturing are difficult to evaluate. In many cases local products have simply replaced imports without creating any additional demand on these sectors. Factory buildings may, however, have been responsible for a significant part of the construction sector's activity, although we have no data to substantiate this.

1.34 All in all, it seems that a negligible share of the output in the rest of the Ghanaian economy can be directly attributable to the existence of a large-scale manufacturing sector. Its performance in this respect certainly falls far short of the role in which it has been cast as the handmaiden of development. Clearly too much was expected of it in the relatively short span of time so far availab>'. Its contribution could be considerably enhanced by more appropriate policies. however.

I. Future Policy Directions

1.35 The present Government has recognized many of these deficiencies and has initiated action to remedy thenm This will be examined in more detail in the ensuing chapters of our report. Broadly sneaking; remedial action seems to be required on the following fronts:

(1) To encourage a greater efficiency in the use of scarce resources by fixing the nrfre of foreign exrhange (either directly through the official rate or indirectly through tariffs) And the intereet rate nn ran1itnl at- 1pe1v: ahibrh better reflect their opportunity costs and the rate of inflationn

(2) To provide a nmnpettlve stimluis to industry by nll w firms greater freedom in managerial and entrepreneurial decision-mnaking.

(3) To% e ncorvpage a fualcwr ut47zacfo.t-^ of eavlybnde land and natural resources and manpower by removing the

bifa-eq in LaWvor of 4SA.jpoteA materials anA cap4tal=inte..sive technology, and by programs which will enhance the quality ar.defficier.cy of ir:diOerous-A -- U-austsubstitutesv~~~~~~~~~~~~~~~~~~~~~~~~~~~~-F

() Ir.nthlose areas w.b.ere the1autho.ri-4i p.Fr=efeL=rL to allocate resources by administrative decisions rather than through

the market,LLL IUL~'ZL,LU lo streamlirneLLV.ULL.LLL LL±I-le UL.iLL1LLILtoperat'or.s of the tUUUILLL~L.LV~adm'inist8rati-ve machinery and to use cost/benefit analysis techniques in evalua.g-J- a t coUso aliLLULL.

(J) To enhance the contribution of small-scale units in industry and agriculture (provision of industrial raw materials) by appropriaLe tax anur lrlteresc rate policies ana aevelopment programs. - 10 -

CHAPTER II

THE STRUCTURE OF THE MANUFACTURING SECTOR IN GHANA

A. Introduction

2.01 During the 1962-71 period the large-scale manufacturing sector played a significant role in the evolution of the Ghanaian economy as numerous policy measures were undertaken to foster the development of industry. Industrialization was considered as one of the primary goals of economic development and independence, and new manufacturing activities were nurtured to become a permanent part of the industrial sector.. The discussion which follows describes and analyzes the characteristics and changes of the structure of the manufacturing sector in Ghana during the 1962-71 period, for which information is available.

2.02 The industrial statistics in Ghana are collected and published by the Central Bureau of Statistics (CBS) in its publication Industrial Statistics. The data refer only to the large-scale manufacturing industry which is defined as those establishments which employ 30 or more workers. Information on major indicators such as gross output, value added, employment, and wages and salaries paid are obtained by means of regular annual and quarterly surveys carried out by the Bureau. It should be noted that the available data cover only a portion of total manufacturing activity in Ghana since small-scale manufacturing activity is not documented. Also, other activities, such as the production of local raw gin (akpeteshie) and the repair of motor vehicles, are not covered due to the difficulty of obtaining reliable statistics. On the basis of the published information it is difficult to assess the accuracy and reliability of the industrial statistics. Some partial evidence suggests that caution must be exercised in emnploying the available figures. For examnle; it appears that the data for gross output and value added for the manufacture of tobacco products includes thp value of sa1es taxem which comprise a substantial Oro- portion of value added. Consequently the output figures for the tobacco sub-sertor are not ntrirtv rTvmnnrnhlp to that of nther sectnrs. 5im11ar1y in the case of petroleum products the output data refer to the value of the rompletpd induistrial er1yicDQ buit nnt to the ex-factorvy sales 'u'el,p of production, since the petroleum refinery only worked for others on their raw mn torina1

2.03 The classificatior.nemployed in the statit tahlea for the various manufacturing sub-sectors is the new 3-digit classification adopted i- 1970. The data for 1096-69 has been regrouped closely apossible to confirm with the new industrial classification. 1/ Output value figures are

1/ The estimated price indices for sub-sectoral classifications employed were calculated by W. F. Steel, using 2-digit price indices supplied by CBS for 1962-68 and the wholesale price index for 1969-71. The resulting indices have been identified as the "Steel price index" on the tables. - 11 -

expressed in constant 1961 prices employing estimated price indexes for each of the sub-sectoral classifications. The figures for 1971 are preliminary estimates based on quarterly statistics.

B. Growth Performance 1962-70

2.04 The output of the large-scale manufacturing sector in current prices increased from 0 71.4 million in 1962 to 0 324.5 million in 1970. A substantial part of this growth, however, is accounted for by upward price movements during the period. In terms of constant 1961 prices the real growth performance was more modest but nevertheless significant: from 0 61.9 million in 1962 to t 183.7 million in 1970 (see Table 2.01 and Graph 2.01). The average annual real rate of growth during these eight years was 14.6%. Year-to-year growth performances were not uniform. High growth rates were experienced in 1962-63 (24.4%) and 1968-69 (21.9%). On the other hand poor performances were observed in 1964-65 (4.3%), and preliminary estimates for 1971 indicate that the 1970-71 growth rate was also 4.3%. In general, output growth performance was better during the latter half of the period (17.2%) than during 1962-66 (11.9%).

2.05 The economic structure of Ghana underwent a substantial transformation in the composition of economic activity during the 1960s. This was partly the direct result of protectionist policies aimed at rapid industrialization via import substitution. In addition, however, the balance of payments difficulties during this period resulted in a wide variety of measures designed primarily to control the external balance. These control measures incorporated incentives which also affected the internal resource allocation and often reinforced protectionist policies. The shift in the composition of economic activity became evident in the late 1950s as the share of 'modern' activities such as manufacturing increased at the expense of traditional agriculture. Nevertheless, the importance of these activities was relatively small. For example, manufacturing and Government enterprises accounted for less than 4% of GDP in 1960. The distribution of economic activity continued to change during the 1960s as the importance of the traditional cocoa sector, mining, and the other two traditional export sectors, logging and sawmilling, declined while favored sectors such as manufacturing increased in relative importance.

C. Structure of Manufacturing Sector

2.06 The development of the manufacturing sector was not uniform since some activities were more easily fostered than others. In 1962 the composition of the manufacturing sector was dominated by the traditional sub-sector of wood products and by the basic import-substituting activities of beverages and tobacco (see Tables 2.01, 2.02 and Chart 2.01). Over the next eight years the composition of gross output changed as the rates of growth of the various sub-sectors differed considerably. By 1970, for example, the share of output of the wood products sub-sector had declined to 10.7% from 23.9% in 1962. On the other hand during the same period the output of textiles Table 2.01

Gross Output of Large Scale ManufactUring Sector by Ecoiomic Activity Subg-oups: 1962-1971 a/ (million t in constant prices using teel price iodex) 1962-70 Ave.

1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 nual growth Food 4.5 (7.2) 4.1 (5.3) 4.3 (5.1) 7.0 (7.9) 7.8 (8.0) 12.0 (10.') 13.5 (10.1) 16.3 (10.4) 18.8 (10.2) 19.3 (10.1) 19.7 Beverages 9.4 (15.2) 11.9 (15.4) 11.8 (13.9) 13.8 (15.6) 17.3 (L7.8) 14.0 (12.6) 1.6.5 (12.4) 17.5 (10.9) 23.0 (12.5) 23,4 (12.2) 11.B Tobacco 11.6 (18.8) 12.4 (16.1) 13.6 (16.1) 14.0 (15.9) 13.5 (13.9) 13.9 (12.6) 16.5 (12.4) 16.7 (10.3) 16.8 (9.1) 17.4 (9i.1) 4.7 Textiles &wearinig apparel 2.4 (3.9) 4.8 (6.2) 6.2 (7.3) 7.9 (c.9) 10.5 (10.7) 17.0 (15 .4) 26.9 (20.2) 37.7 (23,2) 43.7 (23.8) 41,2 (21.5) 43.7 Wood products 14.8 (23.9) 14.6 (18.9) 14.4 (17.0) 16.6 (I16.7) 14.6 (15.0) 16.6 (15.10) 1.5.4 (11.6) 20.1 (12.4) 19.6 (10.7) 18.0 (9.4) 3.65 Furniture 2.4 (3.8) 2.4 (3.1) 2.9 (3.4) 2.4 (0.7) 2.2 (2.2) 1.6 (1.5) 1.6 (1.2) 1.7 (1.0) 1.7 (0.9) 2.0 (1.0) 4.2 Pulp, paper & printing 2.5 (4.1) 4.3 (5.6) 3.4 (4.L) 3.7 (4.2) 5.9 (6.1) 7.4 (6.7) 8.4 (6.3) 10.8 (6.6) 11.8 (6.4) 14.0 (7.3) 21.3 Chemical products 4.5 (7.3) 7.8 (10.1) 10.5 (12.4) 7.7 (E.7) 9.8 (10.1) 10.8 (9.B) 11.8 (8.9) 14.8 (9.1) 15.4 (8.4) 15.9 (El.3) 16.7 Petroleum produclts c/ 1.7 (2.2) 3.3 (3.3) t3.1 (3.5) 3.1 (3.2) 3.6 (3.3) 3.6 (2.7) 3.7 (2.3) 3.8 (2.0) 4.6 (2.4) 11.3 Rubber products 0.5 (0.8) 0.5 (0.6) 1.2 (1.4) 1 5 (1.7) 0.2 (0.2) 0.2 (O.1) 0.2 (0.1) 0.8 (0,5) 4.9 (2.7) 6.2 ( 3.2) 33.2 Building materiaLs 0.9 (1.4) 1.1 (1.5) 0.9 (1.1) 1.1 (1.3) 2.3 (2.4) 2.2 (2. 0) 5.5 (4.1) 7.1 (4,4) 7.8 (4.2) 8.4 (4.4) 30.8 Metal manufacturing 6.0 (9.6) 6.9 (8.9) 7.4 (8.7) 5.4 (6.1) 5.7 (5.8) 6.0 (5.5) 6.1 (4.6) 7.4 (4.5) 7.3 (4.0) 8.3 (4.3) 2.I5 Electrical products - - - 0.5 (0.5) 1.0 (0.'9) 1.8 (1.4) 2.2 (1.4) 3.7 (2.0) 4,6 (2.4) 68.3 d/ Transportation equipment 2.0 (3.3) 3.8, (4.9) 3.3 (3..9) :t.i (3.5) 3.2 (3.3) 3.2 (2.9) 3.8 (2.9) 2.8 (1.7) 3.3 (1.8) 6.3 (' .3) 6.1 Miscellaneous maniufactuiringe 0.4 (0.6) 0.8 (1.1) 1.5 (I.B) 1.2 (1.4) 1.0 (1.0) 0.8 (0.8) 1.4 (1.1) 2.0 (1.2) 2.1 (1.2) 2.1 (1.1) 23.B

Total: 61.9 (100) 77.2 (100) 84.8 (100) 88.5 (lC10) 97.2 (100) 110.3 (1 (1010) 162.1 (100, 183.7 (100) 191.5 (100) 14.65

a/ Figures in pa,renthe-ses refer to the percentage distribution of gross output in any given year bi/ 1971 figures are pr-eliminary estimates based on quLarterly statistics C/ Figures reporcted refer tc value of industrial services done but not t:o the sales ex-factory value of production since petroleum refinery only did work for Dthers on their iraw materials. Growth rate refers to the 1963-70 period. d/ Growth rate refers to the 1966-70 period. e/ Miscellaneous manuf'acturing includes photographic and optical goods, jewellery, and plastic goods.

Source: Industrial Statistics, Central Bureau of Statistics, various issues.

Industrial Projects Department Table 2.02

'lalue Added of Large Scalc! Manufacturing Sector by Economic Activity 'ubgro tps: 1962-1971 a/ (million t in constant prLces using Steel price index)

1962-70 Average 1962 L963 1964 1965 1966 1967 _ 1968 1969 197'0 1971 - ArmLual Growth (7.) Food! 1.7 (4.9) 1.7 (3.9) 2.0 (43) 2.3 (T4.4) 2.1 (3.6) 3.0 (4.7) 4,0 (5.8) 6.2 (7.4) 8.0 (8.5) 7.2 (7.3) 21.0 Beverages 5.9 (16.8) 7.1 (16. 6) 7.2 (15.6) 8.7 (16.9) 12.3 (21.1) 10.3 (16.1) 12.2 (17.6) 13.3 (15.7) 16.2 (17.1) 16.2 (16.3) 13.4 Tobacco cl 9.1 (25.7) 10.0 (23.:)) 10.8 (23.4) 11.4 (22.1) 11.8 (20.2) 11.7 (18.3) 13.7 (19.8) 14.0 (16.5) 13.6 (,14.4) 14.0 (14.1) 5.2 Textiles & wearing appiirel 0.8 (2.3) 2.L (5.0) 2.4 (5.1) 3.1 (6.0) 4.7 (8.1) 9.5 (14.8) 12.8 (18.5) 13.5 (16.0) 17.0 (17.9) 17.4 (17.5) 45.9 Wood products 8.9 (25.2) 8.8 (20.4) 8.6 (18.7) 1.0.6 (20.6) 9.5 (16.1) 9.1 (14.2) 5.7 (8.1) 9.7 (11.4) 10.9 (11.5) 10.3 (10.3') 2.6 Furniture 1.5 (4.2) 1.4 (3. 3) 0.8 (1.7) 1.2 (2.4) 1.3 (2.2) 0.9 (1.4) 0.8 (1.2) 0.9 (1.0) 1.0 (1.0) 1.2 (1.2) -4.9 Pulp, paper and printing 1.6 (4.4) 2.9 (6.S)) 2.3 (5.0) 2.1 (4.1) 3.9 (6.6) 4.9 (7.7) 5.5 (8.0) 8.0 (9.4) 6.1 (6.4) 7.5 (7.5) 18.4 Chemrical products 2.3 (6.5) 3,2 (7.4) 4.3 (9.2) 3.7 (7.2) 4.6 (7.9) 4.4 (6.9) 4.3 (6.3) 6.0 (7.1) 5.7 (6.0) 5.3 (5.3) 12'.0 Petroleum products _ 1,6 (3.7) 3.0 (6.5) 2.5 (4.8) 2.6 (4.4) 3.3 (5.1) 3.0 (4.3) 3.4 (4.0) 3.5 (3.7) 4.4 (4.4) 12.0 Rubber products 0.3 (0.9) 0.4 (0.8) 0.5 (1.1) 0.9 (1.7) 0.2 (0.3) 0.1 (0.2) 0.1 (0.1) 0.6 (0.7) 2.9 (3.1) 4.0 (4.0) 31.9 Building materials 0.4 (1.3) 0.5 (1.2) 0.4 (0.9) 0.6 (1.2) 1.1 (1.9) 1.1 (1.7) 2.1 (3.1) 3.0 (3.6) 2.9 (3.0) 2.6 (2.6) 26.0 Metal manufacturing 1.8 (5.1) 1.13 (4.2) 2.3 (4.9) 1.9 (3.7) 2.3 (4.0) 2.5 (3.9) 2.2 (3.1) 2.7 (3.2) 3.0 (3.2) 2.8 (2.9) 6.6 Electrical products 0.2 (0.3) 0.4 (0.6) 0.7 (0.10) 0.9 (1.0) 1.5 (1.6) 2.4 (2.5) 65.4 Transportation equipment 0.8 (2.4) 1.0 (2.4) 1.0 (2.1) 1.7 (3.4) 1.4 (2.5) 2.3 (3.7) 1.6 (2.3) 1.1 (1.3) 1.1 (1.2) 2.8 (2.8) 3.8 Miscellaneous manufacturing 0.1 (0.3) 0.4 (1.0) 0.7 (1.6) 0.6 (1.2) 0.5 (0.9) 0.5 (0.7) 0.6 (0.9) 1.4 (1.6) 1.4 (1.4) 1.3 (1.3) 38.3 Iotal: 35.4 (100) 43.0 (100) 46.3 (100) 51.4 (100) 58.5 (100) 64.0 (100) 69.4 (100) 84.6 (100) 94.9 (100) 99.3 (100) 13.1

a/ Figures in parenthesis refer tc the percentage distribution of value added in any given year. b/ 1971 figures are preliminary estimates based on quzarterly statistics. c/ Value added figures for tobacco manufacturinig appear to include sales; taxes which comprise a substantial proportion of the figures shown in the table.

Source: Industrial Statistics, Central Bureau of Statistics, various issues.

Industrial Projects Department - 14 -

Graph 2.01

Gross Output and Value Added in the Larne Sralp Maniufactiurina Scptor (millinn t in 1961 nrir-es).

200 -

C,RO). nHTPUT 180 /

140 _ / ,20r /

-2 100 1L-VALUE ADDED

80~ ~ ~ ~ ~ ~ / ou _ wo.100

60 r00

20 V

1962 1963 1964 1965 1966 1967 1968 1969 1970 YEAR

World Bank -8578 - 15 -

Chart 2.01

COMPOSITION OF VALUE ADDED IN THE LARGE SCALE MANUFACTURING S'I. C JTOTRIJBY ECONOMIC ACTiViTY 1962 AND 1970

-h.' K

;' ' a , v -; , . | ., 5 |;% *474 ~ ~ 7. 12fl8) : \

A'. '- '

1962 1970

SECTORS

FOOD, BEVERAGES, AND TOBACCO

TEXTILES AND WEARING APPAREL

i.z.zl vVOOD PRODUCTS, FURNITURE, PULP, PAPER, AND PRINTING

t .HPCMIAL PTRiCIIfM ANr RUBBER PRODUCTS

| BUILDING MATERIALS AND MISCELLANEOUS MANUFACTURING

______METAL, ELECTRICAL PRODUCTS, AND TRANSPORTATION EQUIPMENT

Note: Value added share is overstated due to the inclusion of excise taxes in the value added figures.

World Bank-8582 - 16 -

and wearing apparel increased at an average annual rate of 43.7%. This impressive growth performance resulted in an increase in t'ne snare of total output of this activity from 3.9% to 23.8%. This figure represented the largest single contribution to total manufacturing output in 1970. Tne contrasting performance of these two sectors strongly highlights the results of an industrialization effort whicn favored new import-substituting activities at the expense of traditional sectors.

2.07 High average annual growth rates of output occurred in several other sub-sectors such as pulp, paper, and printing (21.3%); rubber products (33.2%); building materials (30.8%); electrical products (68.3%); and miscellaneous manufacturing (23.8%). As in the case of textiles and wearing apparel, all of these activities represented relatively new lines of manufacturing production in 1962. The share of total output of these sub-sectors increased from 6.9% in 1962 to 16.5% in 1970. The most important contributors to manufacturing output growth during the 1960s, however, were textiles and wearing apparel, food processing, and beverages, which together accounted for 57% of the absolute 1962-70 growth. Textiles and wearing apparel alone contributed 34%. Thus it can be seen that despite the fast growth in several manufacturing sub-sectors the main generators of output expansion were light industrial activities producing consumer goods.

2.08 Value added in current prices in the manufacturing sector expanded a bit slower than gross output during the period at an average annual rate of 13.1%. In the case of two manufacturing sub-sectors, the growth of value added exceeded the expansion of gross output and resulted in substantial increases in the ratio of value added to gross output between 1962 and 1970 (see Table 2.03). The absolute increase in this ratio amounted to 35.9% in metal manufacturing and, 143.5% in miscellaneous manufacturing. More modest increases occurred in food, beverages, tobacco, and textiles and wearing apparel. As can be seen from Table 3, however, this indicator experienced large year-to-year variability in all manufacturing activities.

D. Employment

2.09 Employment in the large-scale manufacturing sector increased from 29,298 in 1962 to 55,886 in 1970 (see Table 2.04). This increase represented an expansion in the large-scale manufacturing share of total registered employment from 8.2% to 14%. 1/ Total employment increased between 1962-70 at the rate of 1.4% per annum while manufacturing employment increased at 8.4%. Of the total 26,588 iobs created during 1962-70. 61.7% were created during the second half of the period, an average of 4,101 per year. During the early half of the period! the average rise in employment was 2.546 iobs per year. The smallest year-to-year increase in employment occurred in 1966-67 (1.9%) and the lareest in 1967-68 (16.9%).

1/ See footnote 2/ on page 4. Table 2.03

Value Added as a Proportion of Gross Output in the Large ScaLe Manufacturing Sector: 1'62-71

1962 1963; 1964 1965 1966 1967 1968 1969 1970 19,71 Food 39.0 40.4 46,.0 32.6 26.8 25.0 29.6 36.8 42.8 37.5 Beverageg 62.9 59. 9 61.0 62.9 71.4 74.0 74.0 75.5 70.6 6S9.2 Tobacco 78.1 86.0 79,.6 81.1 87.9 84.3 8:3.2 83.7 81.1 80.9 Textiles and wearing apparel 34.5 44. 8 38,.1 39.3 45.5 55.7 47.6 35.9 38.9 42.1 Wood products 60.2 60.0 60,.0 63.8 64.7 55.0 36.8 48.2 55.7 57'.1 Furniture 62.4 57.9 26.1 52.3 59.3 54.0 52.4 52.4 58.2 58.5 Pulp, paper and printing 62.3 67.9S 67.5 57.3 65.7 66.5 65.5 74.0 51.2 53.4 Chemical products 51.2 41.0 40.3 48.2 47.1 41.1 36.9 40.6 36.9 33.5 Petroleum products - 91. 9 92.0 80.9 83.4 89.5 82.6 91.9 92.8 94.6 Rubber products 63.6 78.6 42.2 58.0 68.0 63.0 67.3 67.9 59.3 64.3 1 Building materials 5iO.7 47.3 46.2 57.1 49.5 50.2 38.9 43.2 37.2 31.3 _ Metal manufacturing 30.4 26.4 30.7 35.6 40.9 41.5 35.0 36.8 41.3 34.4 Electrical products - - - - 42.8 38.2 39.0 39.3 41.3 52.4 Transportation equipment 41.2 27.6 29.2 55.6 45.3 72.3 42.0 38.7 34.8 43.9 Miscellaneous manuf'acturing 26.0 49.7 48.9 52.5 53.6 54.7 42.0 69.2 63.3 60.0 Total: 57.2 55.7 54.6 58.1 60.2 58.0 52.2 52.2 51.6 51.8 ai 1971 figures are preliminary estimates based on quarterly statistics. b/ Value added figures for tobaLcco manufacturing incLude sales taxes which comprise a substantial proportion of the values reported. Source: Tables 1 and 2

Industrial Projects Department Table 2.04

Total Employment of Large Scale Manufactring SSector by Economic Activity Subgroups: 1962-71 1962-70 Ave .Annua I

1962 _ 1963 1964 1965 1966 1967 1968 1969 1970 1971 grwth rate Food 2,019 (6.9) 2,1(03 (6.6) 1,946 (5.4) 2,443 (6.6) 2,818 (7.1) 3,452 (8.6) 3,552 (7.6) 3,827 (7.5) 4,203 (7.5) 4,947 (8.4) 9.6 Beverages 1,427 (4.9) 1 648 (5.2) 2,396 (6.7) 2,023 (5.4) 2,070 (5.2) 2,140 (5.3) 2,171 (4.6) 2,336 (4.6) 2,851 (S,1) 2,990 (5.1) 9.1 Tobacco 580 (2.0) 608 (1.9) 1,425 (4.0) 1,652 (4.4) 1,429 (3.6) 1,764 (4.4) 1,670 (71.6) 1,217 (2.4) 1,214 (2,2) 969 (1.7) 9.7 Textiles &wearing apparel 946 (3.2) 2,250 (7.1) 2,921 (8.1) 3,446 (9.2) 4,898 (12.4) 6,362 (15.8) 9,906 (21.1) 15,156 (29.8) 16,606 (29,7) 16,390 (27.9) 43.1 Wood products 14,411 :49.2) 12,843 (40.3) 13,309 (37.1) 13,409 (36.CI) 12,581 (71.9) 10,498 (26.1) 11,532 (24.5) 12,489 (24.5) 12,843 (23.0) 13,258 (22.6) -1.4 Furniture 2,557 (8.7) 2,839 (8.9) 3,383 (9.4) 3,101 (8.3) 3,064 (7.8) 1,741 (4.3) 1,755 (3.7) 1,534 (3.0) 1,662 (3.0) 1,832 (3.1) -5.2 Pulp, paper and printing 1,970 (6.7) 2,2(00 (6.9) 7,268 (6.3) 2,704 (7.-1) 3,220 (8.2) 3,668 (9.1) 4,072 (El.7) 4,215 (8.3) 4,064 (7.3) 4,437 (7.6) 9.5 Chemical products 945 (3.2) 1,8()8 (5.7) 1.814 (5.1) 1.836 (4.5) 1.972 (5.0) 1,962 (L.9) ?7397 (5 1) 2,372 (4.7) 7,733 ([.9) 2,842 (4.8) 14.2 Petroleum produlcts - 2:1 (0.7) 398 (1.1) 383 (1.0) 381 (1.0) 368 (0.9) 374 (0.8) 378 (0.7) 389 (0.7) 402 (0.7) 8.4 Rubber products 462 (1.6) 709 (2.2) 509 (1.4) 374 (1.0) 408 (1.0) 326 (0.8, 266 (0.6) 740 (1.5) 1,143 (2.0) 1,354 (2.3) 12.0 Building materials 658 (2.2) 760 (2.4) 825 (2.3) 1,028 (2.EI) 1,967 (5.0) 1,581 (3.9) 2,147 (4.6) 1,913 (3.8) 2,099 (3.8) 2,290 (3.9) 15.6 Metal mannlfacturing 1,118 (3.8) 1,239 (3.8) 1,661 (4.6) 1,853 (5. 0) 1,756 (4.4) 1,819 (4.5) 2,234 (4.8) 2,406 (4.7) 3,241 (5.8) 3,524 (6.0) 14.2 ElectricaL products - - - 142 (0.4) 207 (0.5) 380 (0.8) 417 (0.8) 698 (1.2) 950 (1.6) 48.6 Transportation equipmenit 2,087 (7.1) 2,297 (7.2) :2,162 (6.0) 2,233 (6.0) 2,303 (5.8) 3,758 (9.3) 3,898 (8.M3) 983 (1.9) 1,212 (2.2) 1,484 (2.5) -6.6 Miscellaneous manufacturing 89 (0.3) 279 (0.9) 437 (1.2) 330 (0.SI) 467 (1.2) 573 (1.4). 846 (1.8) 904 (1.8) 950 (1.7) 978 (1.7) 34.4 Total: 29,298 (100) 31,886 (100) 35,849 (100) 37,264 (100) 39,482 (100) 40,249 (100) 47,000 ((10) 50,885 (100) 55,8E86 (100) 58,648 (100) 8.4

a/ Figures in parentheses refer to the percentalge distribution of total emsployment in any given year. b/ 1971 figures are preliminary estimates based on quarterly statistics. Source: Industrial Statistics, Central Bureau of Statistics, various issues.

Inclustrial Projects Department 19

2.10 The mTiOr rontrihiitnr tn t-hp abhslnite- inerpeas in manitfartf-nring employment between 1962 and 1970 was the textiles and wearing apparel sub- sector whit-h ae-mi,nt-pd fnr 5R-9Z nf t-he inrrenas (ase rhavrt 2.09) The next two largest contributors, food and metal manufacturing, only contributed 8.2% andA Q n . -azpo fn-tiv1 vlu This 5cQa i t-ho rcas nf n.itt- uf-, _n1 ,,f-e.eomnl nI r …---- X o or- r-- ment expansion was heavily concentrated in the textiles and wearing apparel sub-sector. The annual rate of growth of - -pl t- in th4 s sector was 43.1%. Other sub-sectors which experienced significant output expansion also showed large average annual increases in employment such as : electrical products (48.6%), and miscellaneous manufacturing (34.4%).

2.11 On the basis of the previous value added and employment figures, it is posslule to obtaintu sI...indication of the.1 -eepu I ents 4n lzUbo pro= ductivity by using value added per worker as a rough measure of productivity. Tir4s 1L.LS.A r.easureLIC CL is± preferredJC.CA. . U toL. grossLLS outputL.UjU periL. work-erWI) as itLLLL elim.iratesLIA I . L.LL L-LAIle influence of the value of inputs from other sectors. The value added per workr-er r,.ieasure -W'LtI'ou- hoevr as i;cnrelc WUL rCLC .L~'LsILCt1UL notLIL.W.LLLUUL jJLU.LCLproblem.,s, LS, WUWVt1,CL b LL. 4.-iA.IL LCI.LCI.LL i.curceLi &LL;_UJL4L%;LO in the calculation of value added from gross output. The resulting figures suggest that UduriLng the per'LodU 'in quest'Loi labor productivity iLLLthIe Large- scale manufacturing sector increased at a modest rate of 4.4% per annum (see Table 2.05 and Graph 2.02). This is not a very encouraging performance given the young nature of many of the activities in the sector. Moreover, productivity growth during 1966-70 was smaller than during 1962-66. The experience of the various manufacturing sub-sectors with regards to this measure differs considerably; and, not only between sub-sectors, but also within sub-sectors in different years. This situation may merely reflect data inconsistencies such as in the case of rubber and tobacco. The exceedingly large figures for value added per worker in the tobacco sub-sector do not accurately reflect labor productivity, since sales taxes appear to have been included as part of value added which comprise a substantial proportion of the figures reported.

2.12 Some manufacturing sub-sectors have experienced relatively steady and significant productivity increases between 1962 and 1970. These sub- sectors were: electrical products (12.1% per annum); transportation equipment (11.3% per annum); food (10.5% per annum); building materials (9.1% p.a.); and pulp, paper, and printing (8.1% p.a.). Nevertheless, it should be noted that there exists substantial year-to-year variability in this indicator. Thus for example, sizeable decreases in labor productivity were experienced in transportation equipment in 1968; in food in 1966; in building materials in 1964; and in pulp, paper, and printing in 1970. Other sectors have shown poor productivity performances throughout the period. Chemical products and metal manufacturing have experienced average annual declines in value added per worker of 2.0% and 6.7%, respectively.

E. Cost Structure in Manufacturing

2.13 The limited nature of the available industrial statistics do not permit a proper analysis of the cost structure of the various manufacturing sub-sectors but some rough impression can be obtained from the published information. - 20 -

Chart 2.02

COMPOSITION OF EMPLOYMENT IN THE LARGE SCALE MANUFACTURING SECTOR BY/ ECOfNOMCt ATI'Tr Y '962 AkND 1970 D I LI,,'.JI'II.JIVIEL, I U VII I IX 1|1 1 1 :

1 962 1 970~~~~~~~~~~~~~~~~~~~~~~~~~~~~jq~7

SECTORS

FOOD, BEVERAGES, AND TOBACCO

| |TEXTILES AND WEARING APPAREL

\ WOOD PRODUCTS, FURNITURE, PULP, PAPER, AND PRINTING

..-,;, . BIDNMATERILS AND MISCER PRODUCTS

,'77\s' METAL, ELECTRICAL YRODUCTS, AND TRANSPORTATION EQUIPMENT

World Bank-8583 Talble 2.05

Value Adided per Worker in La,eScalle FLanufacturing Sector by Economic Activity SubgrDups: 1962-.71 (000 in constant prices using Steel price index) 19152-70 Ave. Annual 15162 1963 1964 1965 1966 1967 1968 1969 1970 1971 Growith Rate F'ood 0.86 0.79 1.02 0.94 0.74 0.87 1.12 1.63 1.91 1.46 1O0.57 BeveraLgeg 4.15 4.32 3.01 4.29 5.96S 4.82 5.63 5.70 5.70 5.41 4.0 Tobacco-/ 15.68 16.5 7.61 6.89 8.2'9 6.65 8.21 11.50 11.22 14.48 -4.1 Textiles and wearing appareal 0.88 0.95 0.81 0.90 0.96 1.49 1.30 0.89 1.02 1.06 1.9 Wood products 0.62 0.68 0.65 0.79 0.7.5 0.87 0.49 0.78 0.85 0.77 4.0 Furniture 0.58 0.50 0.23 0.40 0.42 0.50 0.48 0.57 0.59 0.63 0.2 Pulp, paper and printing 0.80 1.32 1.02 0.79 1.20 1.34 1.36 1.89 1.49 1.68 8.1 Chemical products 2.44 1.77 2.34 2.01 2.34 2.25 1.81 2.54 2.08 1.87 -2.0 Petroleum oroducts - 7.12 7.56 6.50 6.79 8.83 7.98 8.90 8.96 10 89 3.3 Rubber products 0.69 0.51 1.01 2.38 0.37 0.32 0.38 0.78 2.56 2.93 L7.8 Building materials 0.69 0.71 0.'51 0.62 0.58 0.70 0.99 1.60 1.38 1.15 9.1 Metal manufacturing 1.62 1.49 1.36 1.04 1.32 1.38 0.96 1.13 0.93 0.80 -6.7 Electrical products - - - - 1.40D 1.82 1.88 2.09 2.21 2.56 L2.1 Transportation equipment 0.40 0.46 0.45 0.78 0.63 0.662 0.41 1.09 0.94 1.86 L1.3 Miscellaneous manufacturing 1.14 1.51 1.68 1.92 1.09 0.80 0.72 1.50 1.43 1.28 2.8 Total: 1.21 1.35 1.29 1.38 1.48 1.59 1.48 1.66 1.70 1.69 4.4 a/ 1971 figures are preliminary estimates based on quarterly statistics. b/ Value added figures for tobacco manufacturing appear to include sales taxes which comprise a substantial proportion of the figures reported. Accorclingly the above measure of value added per worker does not accurately represent thea actual productivity situation in the tobacco sulbsector. Source: Tables 2 and 4

Industrial Projects Department - 22 -

Graph 2.02 Employment and Value Added per Worker in the Large Sacale MNanufacturing Sector: 11%2-70.

200 r EMPLOYMENT/

190 I

180 /

170

160

150 / VALUE ADDED PER WORKER d 140 I x z 130 / / 120I /-/ /

110L /

io WAGES AND 100 .\ SALARIES PER \ / \~~~~I WORKER

90 ./\ _

80h

70 I I I I I I 1962 1963 1964 1965 1966 1967 1968 1969 1970 YEAR

World Bank-8580 - 23 -

2.14 One of the salient features of the manufacturing sector of Ghana is its heavy dependence on imports for capital goods, spare parts, and raw materials in various stagps of nroresstng. In 1969, for examiple, the cost of imports of industrial raw materials amounted to roughly 35% of the gross value of industrial output. Bank of Ghana statistics for 1968 indicate that in 33 industries, which accounted for 43% of gross output of the manufacturing sector, the value of imported raw materials and components constituted 90% or more of the total value of materials used. In another 17 industries, whirh contributed 919 of groza output, imported raw ateri-als and- cOmpOnents cost from 50% to 89% of the total value of materials used. Together these industries accounited for 60% of imported IuateLals. Annex 7 further illustrates the heavy dependence of some manufacturing activities on imported materials. Under these circumstances, the eff'ciency of utilization of foreign exchange resources by the manufacturing sector is an important indicator of economic performance. A study of the ±ocal currency cost of domestic resources used to achieve foreign exchange savings, I/ based on a sample of about 50 industrial uni4ts and using 1968 data, 'indcates that only 10.4% of the sample firms could save a unit of foreign exchange by spending the equivalent amount in local cuLrrency on domestic resources at the official exchange rate of US$1 = 0 1.02. About 74% of the firms responsible for 67.3% of total output by the sample would rLot have been able to compete with imports even if the cedi had been devalued by 50% (US$1 = ¢ 1.53). Almost 24.0% of output was produced at a net loss in foreign exchange.

2.15 Value added as a proportion of gross output for the whole manufacturing sector increased from 57.2% in 1962 to 60.2% in 1966, but during the next four years the ratio declined to a value of 51.6% in 1970 (see Table 2.03). A similar pattern of increase during the early part of the period followed by decline in the latter half is found in seven sub-sectors which accounted for 71.6% of total value added in 1970 (beverages; tobacco; textiles and wearing apparel; wood products; pulp, paper, and printing; rubber products; and transportation of equipment). The highest ratios of value added to gross output in 1970 were in tobacco (81.1%) and petroleum products (92.8%), but these figures are suspect due to statistical inconsistencies. As previously mentioned, the value added figures in the case of tobacco include the value of sales taxes, while in the case of petroleum products the figures refer to the value of industrial services done for others on their raw materials. In the case of other sub-sectors the ratio ranged between 34.8% and 70.6%. The lowest ratios were in transportation equipment (34.8), chemical products (36.9), building materials (37.2), and textiles and wearing apparel (38.9). These figures reflect the low domestic value added of these sub-sectors which rely heavily on imported raw materials at an advanced staRe of processing. High ratios of value added in Ghanaian manufacturing are found in beverages (70.6%), miscellaneous manufacturing (63.3%), rubber products (59.3%), and

1/ See pages 46-48. The method employed in the study is the Bruno ratio. Table 2.06

Total Wa,ges as a Proportion of Value Added of Large Scale Manufacturing Sector: 1962- 71 (constant 1961 prices)

]L962 196:3 1964 1965 1966 1967 1.968 1969 1970 1971 a/ Food 35.4 36.9 31.3 28.6 34.l8 33.3 26.3 19.1 19.3 22.0 Bevrerages 11.4 12.1 12.9 8.5 5.7 9.1 8.6 7..9 7.3 6.7 Tobacco b/ 2.8 2.6 4.0 4.0 4.l8 6.5 5.5 5.0 4.3 4.3 Textiles and wearing apparel :31.3 33.0 36.3 :33.5 26,5 19.4 20.6 28.16 28.3 31.6 Wood products 57.4 52.0O 47.5 34.8 34.9 32.6 55.2 37.2 32.7 28.7 Furniture 61.1 70.5 - 65.7 58.3 62.6 49.0 48. 8 44.5 :35.6 Pulp, paper and printing 61.1 34.6 42.7 43.9 23.3 22.3 26.4 19.5 27.1 22.1 Chemical producits 155.0 23.10 20.5 18.9 15.4 19.4 25.2 18.1 22.1 22.9 t Pet:roleum products - 25.3 22'.3 23.6 23.2 24.8 28.0 26.4 25.5 [9.4 Rubber products 41.6 32.5 24.8 20.1 53.0 68.3 56.4 32.4 14.7 13.4 Building materials 42.3 39.7 49.2 :35.7 33.5 36.8 33.0 20.6 26.5 28.1 Metal manufacturing :31.0 37.0 34.0 38.9 29.4 31.0 39.9 39.1 46.1 50.8 Electrical products - - - - 17.15 16.0 1L8.5 19.2 20.5 16.3 Transportation equipment 83.4 j 65.6 69.4 :32.6 37.0 40.8 5'2.1 37.1 38.6 20.3 Miscellaneous manufacturing :31.7 24.9 17.2 21.5 37.1 50.8 46.2 18.8 21.0 20.4 Total: :30.4 27.7 26.8 22.1 19.5 23.0 22.0 20.2 20.6 19.9

a/ 1971 figures are preliminary estimates based on quarterly statistics. b/ Figures for tobacco are underestimates of actual values due to the incliusion of sales taxes as part of va Lue aLdded.

Source: Table 2 ancd Industrial Statistics, Central Bureau of Statistics, various issues.

Industrial Projiects Department - 25-

furniture (58.2%). During the 1962-70 period, the ratio of value added to gross output experienced large absolute increases in miscellaneous manufacturing (143.5%) and metal manufacturing (35.8%). On the other hand substantial decreases occurred in chemical products (27.9%) and building materials (26.6%).

2.16 The share of labor costs in value added in the manufacturing sector decreased from 30.4% in 1962, to 20.6% in 1970 (see Table 2.06 and Graph 2.03). These shares varied between sub-sectors and ranged from 7.3% in beverages to 46.1% in metal manufacturing in 1970. Furniture (44.5%) and transportation equipment (38.6%) also showed a high labor cost component. Sizeable absolute decreases in the labor share of value added occurred in rubber products (64.7%), pulp, paper, and printing (55.6%), and transportation equipment (53.7%). Tobacco, chemical products, and metal manufacturing experienced increases in their respective shares.

2.17 Total wages and salaries per workers in constant 1961 prices have declined at a rate of 0.6% per annum between 1962 and 1970 (see Table 2.07). This decline was not uniform, however, since a substantial increase of 26.7% in this indicator occurred in 1967, but since then the downward trend has resumed. Large increases in earnings per worker took place in almost all sub-sectors in that year, although the performance between 1962-70 was varied. Earnings per worker in the electrical products sub-sector increased at the rate of 16.5% per annum between 1966 and 1970. More moderate rates of increase occurred in Detroleum products (3.5Z); rubber nroducts (3.4X!; and chemical products (2.9%). On the other hand six sub-sectors (beverages, wood nrodtst; furniture, nutn nanper- and nrinting, mTetal manufarturing, and miscellaneous manufacturing) experienced annual rates of decline in Parninas npr workpr. Thp rnarc nf a1pl1nP wera lanroget in thp Acas nf furniture (3.7% per annum) and wood products (3.0% per annum). In 1970 the highest lnabr cnots per worker were in the petroleum products suh-sector. Wages and salaries per worker in this sub-sector were exceedingly high -- at 1past fnour-andi-a-half times higher than any other act-vity. This situation is explained by the very high earnings of non-production workers, which nacnconted fnr Lnz nf t^nl 4 nAuy employmnt 4n 197n Thp presenconf foreign technical personnel probably accounts for the high earnings level of -_ group. costs perperbovr orkr in. 1970 ir. other sb--sectors ranged from t 261 (furniture) to 4 487 (tobacco). The average for the entire manufacturing sector was ¢ 350. Th.e labor cos- ad p ctivi- yit-tion ir the manufacturing sector during the 1962-70 period is thus characterized by a reduction in4eea-r.ir.s pr orker, a_ declining share in the-labor com.ponentr of value added, and moderate gains in labor productivity.

F. Regional Distribution

2.18 The available information about the regional distribution of manufacturing activity irn Ghana does not perMit analysis at the sub-sectoral level. Accordingly, the following discussion refers to the entire large- scaile manufacturing sector. The shares of manuracturing sector output, value added, and employment reveal the extent to which manufacturing activity is

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Graph 2.03

Value Added in the Large Scale Manufacturing Sector 1962-71 and Share of Wages and Salaries in Value Added (million c)

180 F

*VALUE ADDED IN 760 r f CURRENT PRICES

/ 140 I ,~~~~~~~/ 120

F ,~~~~~~/

_ f -~~~~~~~~~~~~~~~VALUEADDED !N

I .i~~~. t6CF 60 L ~ /

20 VEAGES AND I,/'~Y'"'"_~''' . SALARIES

1962 1963 1964 1965 1966 1967 1968 1969 1970 YEAR

Wordct Bank-8579

Tables 2.07

Total Wages and Salaries per Worker in Large Scale Manufacturing Sector: 1962-71. (¢ in constant 1961 prices)

X 1962-70 Ave. Annual 1962 1963 1964 1965 1966 1967 1968 1969 19,70 19,71 - Growth Rate ('%) Food 306 292 318 267 257 290 295 31.0 369 322 2.4 Beverages 475 521 388 365 341 437 487 452 41.6 365 -1.6 Tobacco 440 426 307 273 394 431 454 577 487 623 1.3 Textiles and wearing apparel 274 314 294 30 1 255 290 266 255 290 335 0.7 Wood products 354 355 308 274 262 282 27,1 288 278 222 -3.0( Furniture 354 349 294 262 242 311 237 280 261 22'5 -3.7 Pulp, paper and printing 488 458 437 345 280 299 358 368 404 372 -2.:3 Chemical products 366 407 480 380 360 437 457 460 460 42:9 2.9 Petroleum products - 1,801 1,688 1,535 1,572 2,193 2,235 2,349 2,2183 2,1.L4 3.5 Rubber products 288 166 250 2 30 196 218 214 251 377 392 3.4 Building materials 292 280 252 222 193 258 326 32:9 365 323 2.3 Metal manufacturin,g 503 552 463 404 389 428 384 441 4:29 409 -2.0 Electrical products - - - - 24 6 290 347 400 453 4L8 16.5 Transportation equipment 336 300 311 253 233 254 2]L3 403 361 379 0.9 Miscellaneous manufacturing 360 376 288 412 403 40)8 3:31 282 300 26 2 -2.3 Total: 367 374 345 305 289 306 32:5 3:35 350 337 -0.65 a/ 1971 figures are preliminary estimates based on quarterly statistics. Source: Industrial Statistics, Central Bureau of Statistics, variouLs issues. Table 4

Industrial Projects Department Table 2.08

Returns to Non-Labor Factors of Production in Large Scale Ma%iufacturing Sector as a Proportion of Value Adlded: 1962-71 _

1962 1963 1964 1965 196f6 1967 196B 1969 197'0 1971 Food 64.6 63.1 68.7 71.4 65.2 66.7 73.7 80.9 80.7 78.0 Beverages 88.6 87.9 87.1 91.5 94.3 90.9 91.4 92.1 92.7 93.3 Tobacco b/ 97.2 97.4 96.0 96.0 95.2 93.5 94.5 95.0 95.7 95.7 Textiles and wearing apparel 68.7 67.0 63.7 66.5 73.5 80.6 79.4 71.4 71.7 68.4 Wood products 42.6 48.0 52.5 65.2 65.1 67.4 44.8 62.8 67,3 71.3 Furniture 38.9 29.5 - 34.3 41.7 37.4 51.0 51.2 55,5 64.4 Pulp, paper and printing 38.9 65.4 57.3 56.1 76.7 77.7 73.6 80.5 72,,9 77.9 Chemical products 85.0 77.0 79.5 81.1 84.6 80.6 74.8 81.9 77,.9 77.1 Petroleum products - 74.7 77.7 77.0 76.8 75.2 72.0 73.6 74,5 80.6 Rubber products 58.4 67.5 75.2 90.4 47.0 31.7 43.6 67.6 85,,3 86.6 Building mat:eriaLs 57.7 60.3 50.8 64.3 66.5 63.2 67.0 79.4 73,.5 71.9 cn Metal manufacturing 69.0 63.0 66.0 61.1 70.6 69.0 60.1 60.9 53,9 49.2 Electrical products - - - - 82.4 84.0 81.5 80.8 79.5 83.7 Transportation equipment 16.6 34.4 30.6 67.4 63.0 59.2 47.9 62.9 61.4 79.7 Miscellaneous manufacturing 68.3 75.1 82.8 78.5 62.9 49.2 53.8 81.2 79,0 79.6 Total: 69.6 72.3 73.2 77.9 80.5 77.0 78.0 79.8 79.4 80.1 a/ 1971 figures are preliminary estimates based onl quarterly statistics. b/ Value aclded figures for tobacco manufacturing include sales taxes which comprise a substantial proportion of the values reported. Source: Table 2 and estimates using total wages and salaries reported in lndustrial Statistics, Central Bureau ol' StaLtistics, various issues.

Industrial Projects Department - 2 9 -

concentrated in the Accra Capital District. In 1969 this region accounted for 51.8% of gross output, 49.5% of value added (see Table 2.09) ard 45.6% of total employment (see Table 2.10 and Chart 2.03), but its share of total population was only 9.9% in 1970. various facLors are probably responLbLeUi for the dominance of the Accra district in manufacturing activity. First, most of the output of the manufacturing sector is produced for the dormestic market, and, hence, location in the largest single high-money income market is important. Second, the proximity to the port of Tema and the network of transportation and communication facilities that radiate from Accra offer distinct locational advantages. Finally, location near Government bodies involved in granting import and investment licenses is crucial.

2.19 Relative to its share in the total population (9.0% in 1970), the Western Region also shows a significant concentration in manufacturing activities. Its respective shares of value added and employment were 27.5% and 20.2% in 1969. Tnis area, however, has experienced a decline in its value added and employment shares since 1966 (33.1% and 33.7% respectively). In the case of the Ashanti region, its contribution to manufacturing value added and employment (15.2% and 17.7% in 1969) is similar to its share in total population (17.3% in 1970). All other regions in the country show very small shares in manufacturing activity when compared to their representation of total population. The Central, Upper, and Northern Regions, for example, accounted for nearly 30% of total population in 1970 but only about 1% of manufacturing activity in 1969. Moreover, the absolute growth of the sector between 1966 and 1969 was concentrated in the Accra area which contributed 55% of the increase in value added and 63% of the increase in total employment.

G. Structure by Ownership and Nationality

2.20 Two other interesting features of the large-scale manufacturing sector in Ghana have been changes in the relative shares of output, value added and employment by ownership and nationality.

2.21 The shares of state-owned enterprises in gross output, value added and employment increased almost continuously while that of private enterprises declined up to 1967, and the reverse appears to be happening since then. Table 2.11, even though based on rather limited number of observations, shows quite clear trends in this respect. Also see Charts 2.04 & 2.05.

2.22 Another interesting feature has been the changing share of manufacturing sector output, value added and employment by nationality.

2.23 The share of gross output from purely Ghanaian-owned enterprises increased from 23% in 1964 to about 29% in 1967-68, while the share of non-Ghanaian enterprises declined rather sharply from 63% in 1964 to 45% by 1967. The share of 'mixedt (Ghanaiar and non-Ghanaian) enterprises in total output increased at a rapid pace from 14% in 1964, to 24% in 1967, and 36% in 1969. Similarly the share of value added and employees declined in non- Gnanaian enterprises but increased quite rapidly in 'mixed' enterprises throughout the period 1964-69.

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Table 2.09

Va'Lue Added of Large Scale Manuffacturing Siector by Geographical Region: 1964-69Y" (mTlTlionT7;r current prices)

Region 1 96)j 14965 1966 1967 1 968 1969

Western - 28.2 (33.1) 30.1 (30.7) 29.8 (25.95 38.5 (27.5)

Ceintrzal _ o.6 (0.7) 0.8 (0.8) 1.9 (1.7) 1.4 (1.0)

Accra CapiLtal District - 39.0 (45. 8) 50.4 (51 .5) 61 .3 (53 . 3) 69.2 (49 .5)

1astern _ 1.1 (1.3) 1.8 (1.8) 1.3 (1.1) 5.1 (3.6)

Volta ' 1.4 (1.O0)

Ashanti _ 15.0 (17.6) 13.2 (13.5) 19.4 (16.9) 21 .2 (15;.2)

Brong-Ahafo - 1.0 (1.2) 1.1 (1.1) 1.0 (0.9) 2.8 (2.0)

Northern _ 0.1 (0.1) 0.1 (0.1) 0.2 (0.1 )

Upper - 0.1 (0.1) C0.3 (0-3) 0.2 (0.2) 0.2 (0.1)

Total: 85.1 (100) 97.9 (100) 115.1 (100) 139.9 (100)

al' Figures in parenthleseis refer to t:he percentage distribution in any given year. Source: Industria:L Statistics, Central Bu:reau of Statistics, various issues.

Industrial Projects Department Tablie 2.10

TotaLl Employment in Large-Scale Manufacturing by Geographical Region: 1964-69 a/ (000 p7ersons)

Region -1964 1965 1 966 1967 1968 1969

Western - 13-3 (33.7) 13.1 (32.6) 12.8 (27.2) 10.3 (20.2)

Central - 0.4 (1-0) 0.4 (1.0) 0.6 (1.3) 1.6 (3.1)

Accra Capital District - - '6.o (40.5) '18.1 (45.0) 21.6 (46.0) 23.2 (45.6)

Eastern - '1.4 (3-5) 1.6 (4-0) 1.3 (2.8) 4.3 (8.4)

'Volta _ _ , 0.9 (1.8)

Ashanti - - 6.9 (17.5) 5.5 (13.7) 8.6 (18.3) 9.0 (17-7)

.Brong-Ahafo - - '1.2 (3-0) 1.2 (3.-0) 1.5 (3.2) 1.6 (3.1)

Northern - - (.1 (0-3) 0.1 (0.2) 0.1 (0.2) 0.2 (0.4)

'Upper - - 0.2 (0.5) 0.2 (0.5) 0.5 (1-.1) 0.2 (0.4)

Total: 39'.5 (100) 40.2 (100) 47.0 (100) 50.9 (1C00)

, Figures in parentheses refer to the percentage (distribution in any given year.

Source: Industrial Statistics, Central Bureau of Statistics, various issues.

Industrial ProJects Department - 33 -

(GEflI2oADUlPAI DI!TOIRITION OF VALUE ADDED AND EMPLOYMENT

. - r.l RI*s 9 -. . . ..--.. IN THE LARGE SCALE MANUFACTURING SECTOR IN 1969

456%39

VAL F AnDfED EMPLOYMENT

ACCRA CAPITAL DISTRICT

AShANTI

GENTRAL, EASTERN, AND VOLTA

BRONG AHAFO, NORTHERN, AND UPPER

VVorld Bank-8584 34

2.24 It is quite instructive to recall at this stage that during the second phase of manufacturing industries in Ghana -- i.e., 1967-70, compared to its first phase, 1962-66 -- gross output in real terms was rising faster (17% versus 12% per annum); employment was rising more rapidly (9% versus 7.7%); and wages and salaries were increasing much faster (15% per annum comDared to a decline of 3% per annum). Against these differential rates of growth, we have observed that during the second phase the weight of State enterDrises was reduced considerably; while the share of State/Private 'mixed' and Ghanaian/non-Ghanaian 'mixed' increased very markedly during the second phase (after 1966), as compared with the first phase (before 1967). It appears that some improvement in industrial sector indicators may be associated with changes in the structure of manufacturing sector by ownership and by nationality. Joint private and state enterprises, as well as joint Ghnnaian and non-Ghanaian enterprises, were perhaps more successful; because. in the first case, the binding force of management, marketing and raw material constrAints was mitifated through a combination of orivate sector manaepmnnt and easy access to import licenses; and, in the second case, the technical and management nprnohlmq were tackled nprhans morp satisfactnroly. H. Small-Scale Industrv

2.25 As noted above, the annual surveys of manufacturing industry conducted by the Central Bureau of Statistics cover only larger establishments, i.e.. those with 30 or more Dersons engaged. Our analysis so far has bean confined to that sector. In this section we will try to piece together the scranp of informatinn on small-scale industrv to get somei idea of its characteristics and relative importance.

2.26 The Population Census of 1960 provides a starting point. This gave a total employment in mniifat-tiring indulstrv of 233,947. As therv were only 29,298 engaged in larger establishments in 1962 (1960 data not available) according fto thle. rB Ir.dustrrial Stantistircs, this implies thst s.a-21-s-ale enterprises provided over 78% of total manufacturing employment at the beginning of the decade. The distribution byr sector is show in Table 2.12. The most important activity was the manufacture of textiles and wearing a^parel, caccounting for 40.9°S of tot%al- .L nufacturng emiploymuent. A- the expansion of the large-scale spinning and weaving industry had barely commenced in '960, 99,S. of the teextilee zr,d clothir.g1~-workers were engaged ir.smlal'l estabu- lishments. The bulk were tailors and dressmakers (75,011), but there were also 12,2)75Z handloom.weavers, and 6r,082 sh-oe and sar,dal mak-ers ar.d repairers.

2.27 ~Food£ILU m,anufacturingIaIU7LI.L pro-vrideudJIV.U-IIL workr- forjLJC 36,1162U (54/e)IJ.-4. ofLIi theEI manu-i% facturing labor force, with 94% employed in small establishments. More than nalf were producing Dakery products. A further 5,018 made traditional local foods like kenkey, akple and gari for sale in the market. Edible oil manufacture occupied 6,129.

2.28 Furniture and fixtures were another important branch of manufacturing dominated by small-scale industry, with 90% of the total numbers employed in this activity (27,041). Table 2.11

GHANA: MANUFACTURING SECTOR SHARES BY OWNERSHIP

Percent of Total 1962 1964 1966 1967 1968 1969

1. Gross Output 100.0 100.0 100.0 100.0 100.0

a) State Owned - 13.8 19.5 24.1 21.4 17.1

b) Joint Private/State - 7.4 10.6 17.5 18.5 19.5

c) Private and Co-op - 78.8 69.9 58.4 60.2 63.4

2. Value Added - 100.0 100.0 100.0 100.0 100.0

a) State Owned - 13f3 14)8 17.6 17.6 16.o

b) Joint Private/State - 7.9 13U4 11 6 17-Q 19Q7 c) Private and Co-on - 78.9 71.8 67.8 64.5 6J.5

3. No. Employees - 100.0 100.0 100.0 100.0 100.0

a) State Owned - 29.4 31.4 32.6 31.4 22.4

b) Joint Private/State - 3.2 4.8 7.6 6.2 7.6

c) Private and Co-op - 67.4 63.8 59.8 62.4 70.0

Source: Same as Table I - 36 -

Chart 2.04 Distribution of Value Added in the Large Scale Manuf3cturing Sector by Ownership 1964-69. (million 9 in constant 1961 prices)

90F

80 r

70 k

60 V U

2 0 1 1 1 1 * 1 I * 1 I I 14I II I I I I I I I I I

I 1II 1111.1 1.1 1.1 _. 1964 1965 1966 1967 1968 1969 Ownership: YEAR Joint Private/State

W State

Private and Cooperative World Bank-8585 - 37 -

unart 2.05 -Difatrihution of Emnloyment in the Large Scale Manufacturing Sector by Ownership 1964-69 ('000 workers)

55r I~~~~ u

450

40k

° ;30 I

1964 1965 1966 1967 i968 11969- Y EAR Ownership:

I Joint PrivateLState

C|State

Private and Cooperative -World Bank-8586 - 38 -

2.29 The metal manufactures and transportation equipment sectors combined accounted for 9% of industrial employment with over 85% in small establishments. A high proportion appear to have been engaged in repairing rather than manutacturing activities.

2.30 In 1962-63 the Central Bureau of Statistics undertook a National Industrial Census collecting data on type of economic activity, size of establishment, location, type of ownership, employment, wages and salaries, materials and fuels consumed, production and sales, fixed assets and depreciation. The Census was supposed to cover all establishments irrespective of size, but production data for small firms were collected on a sample basis and household manufacturing activities may have been under-represented.

2.31 The 1962 Census disclosed a total employment in manufacturing of 254,247 in 95,167 establishments. Only 23.7% of the persons engaged were wage and salary employees, the rest were self-employed or family workers. Of the total, 57% were in establishments with less than 5 persons engaged. Small-scale industry (establishments with fewer than 30 persons engaged) as a whole accounted for 82.3% of manufacturing employment.

2.32 Complete data on the output of smaller establishments have not been nublished, but estimates by the National Accounts Section of the CBS indicate a total value of production of 063.5 million and value added of 034.1 million in 1963. These compare with figures of ¢93.1 million and 052.4 million, respectively, for large-scale industry in the same year.

2.33 These figures suggest a wide disparity in productivity (value added) per worker between 0159 in a small industry and ¢2,169 in large industry. Substantial differences should be expected considering that the technology used in traditional, small-scale occuDations is usually primitive whereas large-scale industry in Ghana has been established on a capital- intensive basis, using current advanced-country technologies. Under-employment due to overcrowding of traditional occupations (affected by low labor- absorptive capacity of the modern sector and resulting urban unemployment), combined with a shift in the demand of the higher income groups towards more sophisticated products from abroad or the domestic large-scale sector, may also arrount for the low ouitniit- per workler in qr1All aetabliqhTnnt8. Doubts have also been raised about the reliability of the data.

2.34 More thorough investigation might answer these doubts and questions. tInfnrtiunntoly the Qartnr has. hobn ignorPe in nff4IcIal asu arovel o4n- 1906 This neglect is a further reflection of the preoccupation of policy-makers -ith large-sale industrialization,dspite the 1960-63 evidence of the importance of small manufacturing firms, as providers of jobs and incomes

for. a signif.icant proportion (Q70) of t taotal'.he numuber eployed tLh roughout the economy at that time. Thus we are unable to trace the evolution of the sector over t1he past decaude frorm official sources. ----oe - vy funded by the Social Science Research Council was carried out in Accra urlLng July-September 1UQ by DrL . Wi±lli4a. S- a consultant to the mission. - 39 -

Table 2.12

ESTIMATED SHARE OF SMALL-SCALE ENTERPRISES IN TOTAL MANUFACTURING FEIPLOYMENT BY SECTOR

TOTAL EMPLOYMENT ESTIMATED % IN 1960 CENSUS SMALL ESTABLISHMENTS

Food 36,162 94

Beverages 8,057 82

Tobacco 842 31

Textiles and Wearing 95,727 99 Apparel

Wood Products 14,688 2

Furniture and fixtures 27,041 90

Pulp, paper and printing 2,766 29

Chemical products 7,925 88

Leather products (excl. footwear) 302 100

Rubber products 495 6

Building materials 8.742 92

Metal manufacturing 7,928 86

Electrical products 742 100

TransDortation equipment 12,241 83

Miscellaneous manufacturing 10,289 99

Total manufacturing 233,947 78 - 40 -

His findings are reported in Annex 5. They show that the number of persons engagod in Tnn11-_pra1P mTanifacturing in Arrra is AnproximnlP1v enqial tn thp number in the large-scale sector. Since more than a third of Ghana's large- cf-ale ton indiist-risc nrparnnrPntrqtPA in Acra, hnwpu'r the-ratl-no of .mall- scale to large-scale employment probably still remains much higher throughout the rest of the country.

2.35 Te-tiles and ga-ments (4An ) fuii tuire and 4`4fixure-,a (7 nAT" food processing (9.2%), and metal manufacturers and repairs (28.2%) are the most impor.tan-t small-scale actIvItieS4it-er-ma ofemlynt Sg nificant excess capacity exists, due to difficulties in obtaining imported ,.aterial's andu spare parts, 1lack- of access to credit f-acillities for w.orking capital or inadequate demand (See Annex 5). Despite these constraints, prod.uctiUUL.LVit.LiL 1nsmal fi....s very m.ufch hL-1*U,hUerig thMan in thLe 19.6.3 est4-.a tes referred to above. In the 10-29 size gorup, an average value added per

workler of ¢2,632 was recorded, cor..pared wiLtLi ,91. i lrge-scL 'r.LdustLry in 1970.

2.36 These are some indications that this high productivity derives from a relatively heavy 'uvestmueut per -worker. in Accra small businesses, which may not be representative of small-scale industry in other parts of the country, particularly in rural areas and the smlaller towns. But these survey data do confirm that the small-scale sector remains an important source of goods and services, as well as a provider of Jobs and incomes. More attention should be accorded to it in the future, by statistical and economic analysts and planners as well as by banking, technical and educational institutions. All have tended to look down on the sector as being an inefficient legacy of the past rather than an indigenous resource base which could respond to the challenges of development, given the right kind of encouragement and opportunities. _ 41 _

CHAPTER III

EFFICIENCY OF GRANAIAN INDUSTRY

3.01 "Ghana's present economic policy is based on the principle of self-relfance and the doctrine of 'capturing the cou-nuanding heights of the economy.' This doctrine states that Ghanaians should have effective control over the significant a of the econor.y; those -W-hich exert considerable influence on the total economy of Ghana. The principle of self- reliance means t-at Ghanaians shPould as far as possible re'ly on their own human and material resources for the economic development of the country.

3.02 "These principles should not be interpreted to mean that Ghana can be self-sufficient. The Government does, and vwill continue to, encourage foreign investment in appropriate sectors of the Ghanaian economy. In doing so, however, the objective wiLl ue Lto ecourage thetype of mixed economy that will ensure maximum development and efficiency."

3.03 These are the opening two paragraphs in the Government's White Paper "Outline ol "Iana's Lnvestment Policy" issued in January 1973. The paper goes on to say that priority will be given to investment projects that facilitate:

(a) employ-mtent creation

(b) export promotion

(d) use of local raw materials

(e) regional dispersion of industries, and

(f) transfer of technology

3.04 These quotations indicate that the Government has set multiple objectives for its development policy which have social, political and economic elements. We have already reviewed some broad indicators showing the extent to which manufacturing industry has contributed to the goals of fuller employment, balanced regional development, Ghanaian ownership of the means of production, utilization of domestic raw materials and export promotion. We will now look at the overiding question of economic efficiency. It is understandable that Ghana would like to achieve greater equity and economic independence without sacrificing efficiency.

How efficient has Ghanaian industry been to date? This chapter will examine three indicators--(a) the domestic resource cost of foreign exchange saved or earned, (b) profitability, and (c) capacity utilization-- and then make some comparison with other African countries. - 42 -

A. Domestic Resource Cost of Foreign Exchange Saved or Earned (DRC)

3.05 The economic efficiency of firms as producers of import substitutes can be measured by the "domestic resource cost of foreign exchange saved (or earned)." This may be formulated as follows:1/

v 4 1. P. D R C= 'J

Pd. -fr -J Where Jij = total (direct plus indirect) input of good i per unit of output J, for domestic primary factor input 1....m, Pi = domestic (shadow) price of input i,

P'j = c.i.f. price of the final good (f.o.b. price if exportable)

fm+l,j = total foreign exchange input cost(including imported materials, capital and labor) per unit of output j.

3.06 The numerator represents the opportunity costs of all domestic resources involved in producing j and its inputs. The denominator is net foreign exchange gained per unit of production, taken as the difference between gross foreign exchange savings (or earnings, for exports) and foreign exchange costs involved directly in importing inputs into j or indirectly in the production of domestic inputs. This difference may also be interpreted as the industry's value added taken at world prices.

3.07 The ratios represent the rate at which domestic resources can be transformed into foreign exchange through activity i , and must be equal to or below the marginal value of foreign exchange to the economy for diver sion of additional resources into i to result in a net gain in national income. DRC also represents the exchange rate at which domestic value added could comnete with imnorts without nrotection.

3.f08 This fnrmula has been annliep to data for a samnle nf Ghanaian manufacturing firms covering the period 1967-68.1/ Capital consumption was computpd hv taking standard straight-line depreciation of asset8. The opportunity cost of capital was estimated at 15%. Labor was valued at market wages.

3.09 The results show that only 10.4% of the sample firms were efficient in tlhe sean that ther4 DrC wso b1eow the off4 4ca1 exchange rate l`TcSl= *.02 '-1'.*' -''- ' -' -*-'- --- ^ -.- '^- Is ok."Yj L WLx/ cedis). About 74.4% of the firms responsible for 67.3% of total output by the sam.ple would not ha-ve been able- to- compete wihU-pr vni tecd a been devalued by 50% (US$1.0 = 1.53 cedi). Almost 24.0% of output was pro- Auced. atL a net loss in forelgn exchange. 3.10 Thle fi:ndi3-ngs i:ndi4cate thatAduring this period, Ghana's industrializa- J* IJi.liL L .iIL Li . IUL L.aC L.Il L- U J-L L JL J.U-L UJ1LLd LIu L Ialz - tion policies were unsuccessful in establishing a structure and level of manufactur'ng output, -which coulUd effLic'ent'Ly reUuce foreign exchange requirements and stimulate growth of GNP.

1/ This method of estimating the domestic resource cost of foreign exchange is generally known as the Bruno ratio. - 43 - 3.11 The study examined several variables which might provide an explan- ation of this unhappy state of affairs. Inefficiency was shown to be posi- tively correlated with low levels of capacity utilization. The efficient firms (DRC :>'1.02 cedis to the dollar) had an average utilization of capacity of 50.3% compared with 34.8% for the inefficient firms (DRC > 1.53 cedis). DRC's were found to be high in final-stage assembly industries. Large size and high capital/labor ratios were statistically linked with high DRCs.

3.12 Estimates were made of the reduction in unit costs which would result if (1) output was raised to full capacity, and (2) capital costs were treated as sunk rather than variable costs of operating existing firms. Under these assumptions only 17.4% of the firms studied (iust 7.4% of potential output) would be producing at excessively high cost (DRC > 1.53 cedi). The median DRC would be 0.96 cedislS- as againSt 3.39 eedis/S in 1967-68. Expansion of output towards full capacity could thus have been achieved at relatively low cost, through more nrodcirtive utitli7atinn of suirnliis workers and of Veneral overhead expenses already incurred. Taking only variable costs other than canital, labor Alrpady cbmnlnuod andA, ovlrheads,AQ A of the firms onpratino at less than full capacity in 1967-68 could have expanded production at a DRr Iess than the offi44al exchange rate; ad only 8.17 at a DR higher than 1.53 cedis to the dollar.

3.13 These findings are relevant to the choice that might be faced by policy makers between: (1) closinginefficient4 factories dou.; and (9) ma more strenuous efforts to raise the level of capacity utilization, increasing the supply of scarce inputs by substitutrIng domestic for i4ported inputs and/or by generating additional market demand. The social costs and benefits of these two a the- remaining l4.e o- the factories skhuldbS_ A assessed in order to determine the appropriate course of action. Outstanding debts should be trUeatUed as "SukL cosLs for thIle purpoUse of Oth anCalysits. B. Profitability in the Manufacturing Sector

1. Public Enterprises (GIHOC)

3.14 The poor profit performance of the state-owned manufacturing enterprises is a well kno-L aspectt of GhdLana'[an iIuusLrla.Llzation efrorts. Tne initial major attempt to deal with this situation occurred in 1968 when the Ghana Industrial Holding Corporation (GIHOC) was created, to assume operational responsibility for a number of factories which had been set up in the early 1960s, and to reorganize them for operation on sound commercial lines. At the time of GIHOC's formation total debts amounted to approximately $49 million. Many of the factories were plagued by old and numerous problems, such ai lack of raw materials and working capital, excess capacity for the domestic market, improper geographical location, and lack of adequate managerial and tinancial controls. These problems have been discussed often in other Bank reports and in the economic literature on Ghana.

3.15 The success of GIHOC in managing its enterprises at an "operating surplus" cannot be completely ascertained due to the lack of information. The operating results for 1968 and 1969 (Table 3.01) indicate that during the first two years of GIHOC's existence about half of the divisions turned in a net operating surplus. The profits of cocoa (04.4 million), distilleries (9'1.5 million), fibre bags (00.7 million), and paper conversion (0.5) are largely attributable to monopoly or dominant status. The most unsatisfactory position was found in the sugar industry where the two factories at Komenda and Asutsuare were producing at less than 10 percent of their capacity largely because of inadequate supply of raw materials reaching the mills.

3.16 Some scant evidence suggests that some progress has been made in improving the operating surplus situation of the various divisions. It appears that the estimated position at the end of 1970 showed that only four divisions were still not Drofitable: Vegetable Oil Mills, Glass, Steelworks, and Sugar. The net loss of the Vegetable Oil Mills Division amounted to ¢0.2 million in 1970 and 1971. By mid-1971, all divisions excePt sugar were able to obtain credit from private banks, and had become independent of direct funds from the development budget. In an attempt to rehabilitate its sugar industry and put its future operations on a profitable basis, the Government established a commercial entity (Ghana Sugar Estates Ltd.) for which it negotiated an IDA credit in late 1972. Nevertheless problems still remained. The net profits of the Distilleries Division declined from 91.0 million in 1968 and ¢1.5 million in 1969, to 00.4 million in 1970 and 00.3 million in 1971. In the Boatyards Division. 1971 operations resulted in a lnss of MO.n2 miliio-in in contrast with an identical profit in 1969.

3.17 Many of the original problems inherited by GIHOC in the various divIsions still remain to some degree or rthor .Perhaps the easiest to correct may be that of the organizational structure and management of GIHOC. Table 3.01

OPiERATPtLaL rIESJiLJi (.J (110C COI;PAINIES

(Unit: No '000) 1968 1.969

Division Turnover Profit /1 Turnover Profit /1 (loss) (loss,'-

1. Cocoa Products 13,282 2,475 11,531 4,411.

2. ])istil2.crics and Camiiery 4,781 1,012 4,873 1,478

3. FJber B'ags 3,500 1,490 2,771 738

4. dpalp Conversion 1,764 317 2,083 510

5. EHlc-cjronLis 1,840 . 148 2,370 399

6. Boatyards 1,381 111 1,145 188

7. rainijs 1,41.3 2/41 1,361 172

8. Nc.t 1. 79% 102 263 59

9. Sugar 768 (1,552) 977 (1,647)

10. Textilc:, 2,402 ! 113) 1.100 ( 779)

11- Vnn 1,353 ( 327) 1-730 ( 459)

12. G]asI1 (l.>O 3) 66tl(2L.

I3; !ea-l r: luc 1 .4'i ( - 1O'c 5s2s24 ( P.t(

1'. P!lwrtn:lceutic.ll.s 58 ( 21) 13 ( .-.595'.

1(Ari,.-rt.:s ]'rick 57 ( 56 ( "

17./* tbeo s'Oil -ot (liIs ava lale

TcLal 36,110 /2 4,167 33,508 J2 ,927

Source: G.11O0C lUcd ofic,, Accra. i] 1iciore cdopreciit1ioa or 'Taxation.

12 Inc1l.uding H1eadquarter operations. - 46 -

Previous Bank reports have suggested the need for decentralization of operational and management re's-on'"bil-ites from h qfibi-ters to the managoement of the individual divisions. Although some steps have been taken in this direction, more individual management autonomy must be coupled with an appropriate management incentive system to permit the greatest chance of success. With respect to the other more basic n-d difficult problems, it would appear that there is a need to arrive at some resolution concerning the long-r_un -iab ,4ilit+y of some of these er.terprises a.-.d the possible rehabilita- '-'"5V5- 5.LS.LLJ. %JL 0%JUL~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Lit LLICOC CILLCI.. £O~~~~~~~~~~~~~~~~~~~~~~~~~~O. at....IL LLfl~~~~~~~~~~~~~~~~~I ptJOOAJ-LC -ha 5- ~~~~~~~~~~~~~~~~~~~IflOIJA-.tti l.a.L tion of others. GIHOC would probably welcome a comprehensive outside p r ogram witICh LLtLLUese objectives in miLndU A U,NF assiLstance prograL. seems to hnave floundered due to the lack of clear objectives and appropriate personnel. A recent 'U'L4-P revview m'ssion has suggested variLous measures to assist IHTI, including a comprehensive audit of the present financial situation and a management improvemuent program iLnvolviLng 2 man-uonths of expert=assistance. 3.18~ ~ThIMhs NR xrse concern -dth the profitablilit.y perform.ance of J * JJ) iti~e a'1'UIs expressed ? WI H L11 prL LU-.LL.L4.L LLLIdLL i public enterprises in its Economic Measures for 1973-74, and has decided to establish a body known as the Board of Government Business to analyze muaJor aspects of the policies and operations of all public corporations with a view to stepping up their profitability. This decision appear to be questlonable for it attempts to solve the operational difficulties of widely different state enterprises through a bureaucratic Dody, which wlll bue removed froru the actual management of individual enterprises and not directly responsible for thLeir performance. This agency may only add to the organ'zational and coordinating problems of public firms without effecting significant changes in profitability. More emphasis should be placed on the financial and managerial autonomy of individual corporations, but it is essential that some conclusions be reached about their long term viability.

2. Other Enterprises

3.19 The profitability situation in the rest of the manufacturing sector is not clear due to the incomplete nature of the available data. The available information refers to the assessable income of companies and self-employed persons for income tax pturposes reported by the Central Revenue Department (see Table I and 2). There are several difficulties in using these income figures as proxies for profitability. Assessable income appears to include some tax deductions which companies and self-employed persons are entitled to for income tax purposes. In addition, the income figures are absolute and do not give any indication, for example, of income or profits in relation to sales turnover. Moreover, as can be seen from the tables, there is substantial year-to-year variability in the number of units for which assessable income is reported. For example, in fiscal year,1968/ 6 9 there were 263 companies reporting assessable income and only 88 in 1969-70. Similarly, 1,102 self-employed persons are reported in 1968-69 and only 575 in 1969-70. This large variability is not easily explained but can be partially acounted for, perhaps by a combination of factors such as income tax evasion, administrative inefficiencies in reporting, and the absence of assessable income to report by 47

the units which are excluded from the data. Given these possible causes for non-reporting, it is clear that the assessable income figures reported represent only a Dartial and perhans misleading imnression of income in manufacturing. This is particularly the case if the excluded units incurred substantial losses in which case net income in the sectnr would be substantially lower. The viability in the number of units not reporting assessable income, in turn, could nogsibly result from the general situation of the manufacturino sector with its dependence on imported inputs, and the allocation of import licenses, rnnn:'itv 1inAPr-1it1i7.:t-i^nn :nnl r1oo fiYord nnrrtQ in rplatinn to tntnl rnotp. Given the existing labor regulations, for example, labor costs must practically be considered part of fixed costs.

3.20 The information in Table 3.02 shows that manufacturing Incom.e of companies in Ghana is quite variable not only in absolute terms, but also in relative terms where -.osessn ln in.-ome per un.it is taken into consideration. Moreover, this is the case regardless of whether the company was incorporated within or outsiAe of Ghar.a. In general Jtappar that-O assese - - -. per-- -- unit was larger in the case of companies incorporated outside of Ghana. This situation, ol course, Uoes not 'LmpLlymuchi ablout profLi.LLabiU..LiLy as it couJlAd Le the result of a size effect if foreign-incorporated companies are larger on tle average than Ghanaiar,-incorporated enterprbses.

3.21 The situationlof self-eQmployed pesonUs iL man1ufacturing prZeU1Lted in Table 3.03 is somewhat different, as the yearly number of Ghanaians with reported assessable income shows a rising trend untii 1969-70 when a sharp drop occurred. The absolute level of assessable income shows a similar pattern althougn assessed income per unit is quite variable from year to year. These figures yield tentative indications that more Ghanaian self-employed entrepreneurs are obtaining income from manufacturing activities, although annual income can be quite variable. Presumably this implies a satisfactory profit position on tne average. The situation of non-Ghanaian entrepreneurs, on the other hand, is more variable although assessed income per unit is higher than for Ghanaians, possibly indicating again a size of operation eftect. The number of non-Ghanaian self-employed with assessable income has increased since 1966/67 and showed no downturn in 1969/70 as was the case with all the other categories. - 48 -

Table 3.02

ASSESSABLE INCOlE OF MANUFACTURING COMPANIES BY COUNTRY OF INCORPORATION

Ghanaian Non-Ghanaian Total Year No. Income No. income No. Income (million ¢) (million ¢) (million t_

1961/62 34 .6 5 .1 39 .7 1962/63 6 .4 8 .3 14 .7 1963/64 164 6.4 58 5.1 222 11.5 1964/65 129 11.9 54 2.7 183 14.6 1965/66 138 7.6 46 4.4 184 12.0 1966/67 153 12.3 37 2.3 190 14.6 1967/68 83 4.1 20 1.6 103 5.7 1968/69 216 11.8 47 3.9 263 15.7 1969/70 80 8.1 8 1.5 88 9.6

Source: Central Revenue Department, Annual Report, various years.

Table 3.03

ASSESSABLE INCOME OF SELF-EMPLOYED PERSONS IN MANUFACTURING BY NATIONALITY

Ghanaian Non-Ghanaian Total Year No. Income No. Income No. Income (thousand ¢) (thousand ¢) (thousand ¢)

1961/62 38 84.8 20 164.7 58 249.5 1962/63 43 118.3 5 20.8 48 139.1 1963/64 174 295.7 89 702.2 263 997.9 1964/65 205 299.8 53 243.6 258 543.4 1965/66 207 298.0 43 137.4 250 435.4 1966/67 235 648.6 42 1,046.3 277 1,694.9 1967/68 357 895.5 87 295.9 444 1,191.4 1968/69 994 1,223.3 108 257.1 11f2 1,480.4 1969/70 410 756.2 165 384.9 575 1,141.1

Source: Central Revenue Department, Annual Report, various years.

C. Capacity Utilization

3.22 The existence of substantial capacity under-utilization has been a problematic chanrater4itjc of the -h1n-aian .anufacturing sector for some time. Suppliers credits and low tariffs on capital goods stimulated rapid expansion of m,.an.ufa^tug .a-tLc.6Ly bAutfLLoLre cbn L Lr.ictions and a small market size have prevented the efficient utilization of capacity. - 49 _

W.F. Steel has indicated that in 1967-68 those firms which could be considered "efficient" were operating only at 50% of total productive capacity, whereas the "inefficient" firms only slightly exceeded one-third utilization. 1/ Further evidence has recently been presented in a study by the Management Development and Productivity Institute which shows that capacity under-utilization continues to be a serious problem in Ghana, as indicated by the situation in the 10 industries analyzed for the period 1968-71. 2/ The statistical information was obtained from the Central Bureau of Statistics which has collected some information on actual and potential output of firms. The results of this study must be interpreted as a rough approximation, given the possible subjective elements involved in the assessment of potential output by firms and the tendency of the method employed to calculate industry- wide under-utilization rates to overstate the actual situation. Hence, the actual figures must be employed cautiously.

3.23 A summary of the findings is presented in Table 3.04. It can be observed that on the basis of actual shifts worked under-utilization is particularly serious in the manufacture of wearing apparel, glass and glass products, articles of pulp, paper, and paperboard, and aluminum.

Clearlyv such a situation has serious implications for canital and labor productivity, the cost of production per unit of output, and the nrofitabilitv and comnetitiveness of Ghanaian nianufacturino artivityv

1_24 The stuidv in auestion also yields some insightrs into the causesQ of this capacity under-utilization as viewed by the reporting firms. The most prevalent single cause noted was the shortage of raw materials which was a substantial factor in all manufacturing activities. This problem was particularly serio-4u in the case of wearing apparel, articles of pul pap and paperboard, glass and glass products, spinning and weaving of textiles, and processing of natural raw rubber. No informnation was available for the sugar industry or tobacco processing. In some cases lack of demand (furniture, aluminum ware) and lack of finance (wearing apparel, furnitue) were also seen as important obstacles in achieving a higher level of productive capacity, but these proble..s were not as peT-as4ve as the shortage of materials. of demand was partly due to poor pricing policies and low quality of products.

1/ W.F. Steel, "Import Substitution and Excess Capacity in Ghana," Oxford Economic Paper, Vol. 24, No. 2, July 1972.

2/ Report of the Research Project on Utilization of Industrial Capacity in Ghanaian Industry, Management Development Institute, 1973. - 50 -

3.25 The above discussion emphasizes the need to eliminate the severe raw materials constraint faced by many manufacturing activities in Ghana, which seriously reduces capacity utilization and affects the overall competi- tiveness of the sector. The solution to this problem necessitates the further improvement of import licensing allocations for foreign raw materials and spare parts, and also the increased production and better distribution of domestic materials.

D. Performance of Ghanaian Manufacturing Compared with Other African Countries

3.26 In view of the interest in closer economic association with other African countries, it would be valuable to compare relative levels of efficiency. A thorough study would require a detailed examination of the cost structure of specific products in several countries which was clearly outside the scone of this nresent mission. A research study of this nature has started recently within the World Bank, and it is hoped that Ghana will Darticinate in this exercise.

3 27 Tn the meanntime there are some broad indicators of comnarative performance which provide an overall perspective. These are given in Tahle 3=05. Value added per wnrker i-ss ui tontial1v higher in Ghana than in six of the seven other major African economies covered. And the seventh, Zambia, is a rather sRenral raqe herause of the dominance of exnatriates. This higher productivity allows the Ghanaian labor force to be better paid f-han their African rnitntprnrart - Average wages per person engaged were US$657 per annum in Ghana in 1970 compared with US$640 in Uganda, and US$532 in k nxry Forr 144 c,hor end - - tnor0ciil i ;n h;ohcr wn costs per unit of output, however. Wages and salaries as a proportion of value added were 50.2% in Egypt, 51.3% in. Kenya, and 42.5% in Uganda, compared with 23.4% in Ghana. Only in Nigeria was the percentage lower (18.1%).

3.28 Value added represented a higher proportion of gross output in Ghana (50* 3%) than in s-x out of tLie sevenrAt cou ntr ies AgainA th e-. ception was Zambia. This suggests a greater depth of production wIth less reliance on final assembly operations.

~~4¶~~~ jri._ tte ..29 Te Lrtlos are, UoL coUUr, ditLL yLL L1Ln.LUtnLceU by Lti level of protection, the degree of internal competition or monopoly, pricing policies and contro'ls exer'LLse'u bUy governLu-Len;, etc. So iLLrui concLus'Lons caLnot bue drawn from this evidence. But it does not provide support for the widespread 'Mpression that Gha-naian laDor proauctivity 15 LOU LOW U11U wages LOo LhighI Lo allow successful export promotion.

3.30 The ability of Ghanaian manufacturers to compete against other African producers in their own markets (and elsewhere) would clearly be strengthened if a long-term solution could be found to the material supply constraint, which has been the main cause of low capacity utilization and high capital costs per unit of output. Complementary action would also be desirable to negotiate the removal, on a reciprocal basis, of artifical barriers to trade and a possible realignment of exchange rates. 51

Table 3.04

AVERAGE CAPACITY UNDER-UTILIZATION IN SELECTED MANUFACTURING INDUSTRIES IN GHANA, 196b-71

Tndustrv Under-Utilization I On Actual Shift Working Basis

1. Cbigar -ndtj-+.r

2. ProoessIingc ovf ra __aco2

3P- Swi--ina ande_rin nf tex+.ies3

4I Mn-.,ifacture ofwearir nppr~el 42

5. Nar.faet-eTrlth,-'p, pape,pprb-d5

6. Furniture induxstAy 27

7 1 ~ ;-A-4- 0+4

.7. A . AAWLAr~ OL1 4% .. AU.0 .U.L 0.. A . . . IA .7

7 * rid-.uU.±dA. L~~LLL~ UV. w=V O . rawJ4`1U L u±derkJ.--UU

1O. Alwuinuxr,-warexf -. U- .- fl'-~ ct. 731?..'2 LA)1

So-urce Repor!t oLf thle ResearehrPoret on U UL-LLaL QOII fI iI I±±±edUapacLiL UU in Ghanaian Industry, Management Development and Productivity Institute, laubles V aiU VI. Table 3.05

COMPAR4TIVE INDICATORS OF MANUFACTURING ACTIVITY I]N VAFIOUS AFRIJCAN COUNTRIES

A B C D E F G H I Share of Val]ue Wages Per Gross Manufac- Value C as Added Wages and F as Person Total Per Cutput turing Add[ed Pearsorns Per Person Salaries % Engaged Popula- Capita US$ miI. in GDP US$ miL1. of A Engagdd UE;ngageUS'p mil. of it US$ tion US$

Kernya (1970) 1/ 237,5 4.2 67.3 28.2 655,3597 1035.4 34.6 51.3 532,3 11.2 1)414

Uganda (1969) 2/ 293.3 6.5 67.9 23.2 145,300 1508.9 28.8 42.4 64o.o 9.6 109

Nigieria (1969) 3/ 4145.3 3.8 203.2 45.6 103,680 1953.8 36.8 18.:L 353.8 53.7 99

Zamlbia (1969) 4/ 380.8 10.3 178.5 56.9 36,976 48214,3 55.95 31.3 1510.8 4.1 423

Zaire (1968) 5/ 778.8 8.0 116.7 15.0 88,0(0 1326.1 4L.4 35.5 470.5 19.9 88

Egypt (1968) 6/ 2373.6 10.0 637.6 26.9 551,3(0 1157.2 319.8 50.2 580.4 31.7 1814

Ethiopia (1969) :L/ 186.8 5.5 89.4 47. 9 49,000 182'4.5 24. 8 27.7 506.1 2-4.0 6 8

Ghana (1L970) 8/ 312.6 6.3 157. 4 50.3 55,711 2810.7 36.8 23.h4 657.1 8.6 293

SOURCE: IMF, InternLtional RLnance Statistics UN, The Growth of World Industry, 1971, Vo l. 1

1/ Covers establishments withl 50 or more persons engageid. 2/ "i " 10 It it 2,/ "It " 10 it if Covars all registered pub:Lic a.nd private enterprises. Covers enterprises operating cn a basis of modern accounting system. Covers establishments with 10 or more persons engaged.

/ " " 30 " "" "3

* Converted at official exchange rate. * GDP accounted by manuf actuaring. 5 -

CHAPTER IV

NATURAL RESOURCES AND MATERIAL SUPPLIES TO INDUSTRY

Introduction

4.01 A nation's level of income depends ultimately upon the quantity and quality of its physical, human and capital resources, and on the efficiency with which these resources are combined together and transformed into goods and services - either for direct domestic consumption and investment or to exchange for the products and services of other countries.

4.02 This chapter reviews the natural resource endowment of Ghana, i.e., its land, water, forestry and mineral wealth and climatic environment. It examines the constraints, on the sides of supply and demand, which have restricted a fuller utilization of these resources to provide raw material inputs for the manufacturing sector in Ghana. Available data do not permit comprehensive input/output relationships to be quantified. However, estimates have been made of the extent to which import substitution has taken place in various product groups, and the degree of dependence upon imported materials which still prevails. Ways of increasing the elasticity of the supply of and demand for Ghanaian raw materials are considered.

4.03 The mission did not have the time or expertise to deal with these questions exhaustively. But a greater involvement in primarv sector issues than is customary for industrial missions seemed to be required, in our judgement. by the particular circumstances of Ghana. Shortages of imported materials, stemming from endemic balance of payments difficulties, were known to be the maior cause of low capacity utilization and high costs in several industries. Higher cocoa prices might provide only temporary relief. The long-term growth of industry seemed likely to he severely constrained inless local materials could be substituted for imports. Policies designed to encourage efficiency in other areas (e.g. managerial and labor incentive6s) might he frustrated if this bottleneck remained.

4.04 Furthermore, the Government seemed committed to strengthening the linkages between the nrimary and seeondarv Qprtors, not only aS a measurp to stimulate economic growth and diffuse the benefits more widely in the rural areas; but also as nprt- of it-s nolitical ideology stressing greater independence and control over Ghana's own destiny. Financial institutions were being encournoed to% give high nrionityi to investment i indsctrial crop production. Further exploitation and industrial processing of forestry and mineral deposits (pulp and paper, limes tone and cement, bauxite and aluminim.)\ were the sectors in which the Government was most actively engaged in seeking international investment ard expertise. 4.05 In the analysis of individual product groups that follows, we have drawn upon survey reports and feasibility studies conducted in the agriculture, forestry and mining sectors. They show that ample scope for increasing the domestic content of Ghanaian industrial inputs exists in several fields.

4.06 There is, however, one strategic issue which should be raised at this point before the opportunities in specific sectors are examined. This is the question of how much diversification of Ghana's primary production to meet the wide-ranging needs of industry is desirable, taking account of limited capital and skill resources. The development of Ghana's agriculture may have been unduly dominated by a single export crop, cocoa, in the past. But to try to go to the other extreme of self-sufficiency would be just as unsound, even if it could be demonstrated that Ghana had the soil characteristics, land area and climatic conditions capable of producing all the industrial crops needed by Ghanaian manufacturers. Such diversification might result in a diffusion of scarce complementary resources so thinly on the ground that the end result would be higher cost, inferior quality inputs and greater instability of supplies, than occasioned by the present reliance on imports. There is clearly a need to restrict new developmental activities to fields in which Ghana has real comparative advantages, and continue to trade for those inputs which can be produced more efficiently elsewhere.

A. Land and Agricultural Raw Materials

4.07 Ghana is well endowed with fertile land and climatic conditions suitable for the cultivation of a wide range of tropical and temperate zone crops. The territory covers a total of 92,000 square miles, with a population density of 93 per square mile (1970). Only 10.8% of the land area waR under cultivation in 1970, 1/ yet the quality of the soil is generally good. In the forest zone (Ashanti region)- 6% of the area is in a Roil roun rated Pvet1llnt and 80% in soil groups rated good. For the interior savannah 1% is in the exorllent- gyrnning nnd 547. in the good grouping. For the reoatal Qava.nn.9, 68% is in the good grouping with certain qualifications. 2/

4.08 The low level of land utilization reflects traditional cultivation practices, involving rotation of a few -earswith anrnual crops followed I t - J7 LA aM...a. LLJrO -. ~W C~u uy many years of bush and natural grass. It is also affected by the hazards to health associated -ith proximity to rivers. But it indicates that the pressure of population on the land is much less intense in Ghana than in many

v U*L_J >E v w LtJptt* t .AJLflLLW LX |G O.

4.09 T-InJ. 56% o te cultivatel.1970 area was Uevotedu to tlle major casn crops, notably cocoa, but also including coffee, cola, rubber, tobacco, cotton and sugarcar.e. Cereals (rize, guLrea corn, millet, rice) whicn are mainly subsistence crops accounted for 23.6%. Root crops (groundnuts, cassava, yam) occupLed u11, oL the culti-vated land. 1/ Report on Ghana Sample Census of Agriculture 1970. Economic and Marketing Division, Ministry of Agriculture, Accra, March 1972. 2/ Agricultural Development in Ghana. General Report Drenared for the Ministry of Finance and Economic Planning by the Nathan Consortium for Sector Studies. Accra- 1970. 4-10 The mean avera2e rainfall varies from 30.0 inches in Accra and 37.5 inches in Bawku in the extreme northeast, to 86.6 inches in Esiama in the southwest.

4 11 DTespnite its underutilized nhvsical resources. Ghana's agricultu,ral output is insufficient to meet total demand. It has become increasingly depnendent uinnn imnnorts nartircilarlv for industrial crnns. The extent nf the shortfall in 1972 is shown in Tables 4.01 to 4.09.

1. Cereals

4.12 Out of a total domestic market for cereals worth an estimated e15O 4 mi 1o4 im represented 11ortsT Z4 Thes weron r-n-r--o- im thre crops-n wheat, malt and rice. Ghana remains self-sufficient in the traditional sub- ss tence cerealos, maitze, sorghum_ -A m411t which e large-ly processed in the home (hand pounding by mortar and pestle) or in small mills.

4.13 Output of the larger cereal processing and using industries (grain anLLU r'LceAl mills, bUreaud and flour confectiLonary and bDeer) reached an estim.ated 030 million in 1972. The bulk of their raw materials are imported. Climatic

_~~~~~~~~~~~~--X _ - _ _ _ _ _ o r_._1- D -t__wC.t_>^r b_n coUitUionsaUi enL o 'LaUoL raVULULe 'CoULtLLe groUW.LLLX, "U WLItIL UL IILLd LLI UILi1LLXl. DUL under the influence of urbanization, consumer tastes, particularly of the hk1igerL AA1CUI111 gLUUps, are gLdually bSW.LUciLIg aWay rLULil Lm LrdutiL.Lal staple foodstuffs made from maize, sorghum, millet and cassava (kenkey, akple, fufu, gari, pito); towards western convenience foods such as white bread, Duscuits and lager beer made from imported cereals. 1/ Technical possibilities exist for substituting maize and cassava for wneat riour to make bread, and maize and rice for malt in the manufacture of beer. Because of the scarcity and high price of wheat, some bakers have been using up to 20% maize flour, but have encountered some consumer resistance. Substitution has not yet occurred in beer production because, in the absence ot a marketable surplus, priority is given to the use of maize and rice for direct food consumption. The same reason has restricted the growth of output of animal foodstuffs on an organized basis, although cassava chips have become a significant export item (¢0.7 million in 1972).

4.14 The trade deficit on total cereals and cereal products amounted to 021.9 million (Table 4.01). The main factors holding back the growth of foodgrain production in Ghana seem to be as follows:

(a) Low yields associated with traditional cultivation practices and little fertilizer application. Upland rice yields are only 1,100 lbs of paddy per acre; for maize, 975 lbs; sorghum, 485 lbs; and millet 448 lbs.

1/ See J. Steckle Effects of Industrialization on Food Consumption Patterns - A Study of Two Ewe Villages (Legon, Institute of Statistical, Social and Economic Research, University of Ghana, 1972). TELble 4.01

CERhAL AND CEFREAL PRODUCT SUPPLIES (in ; .llio;7;F Estimated Direct Share Trade Ghanaian Output Imorts Ex)orts Domestic Supplies of Imports Balance 1970 Est. 1972 1972 1972 197'2 1972 19'72

Wfheat - - 13.0 a! _ 13 100% -13.0

Maizes n.a. 8C0 neg. - 80 neg.

Sorg)xum n. a. 29 - 29

Mizillest n .na. 16- - 16

]Rice n.a. 5.4 3.6 9 40% - 3.6

Mvialt & ops - - 2.8 2.83 100% - 2.8 'Yeast & Baking Powder - - 0.4 0.4 LO> -0.4 \ Grain Mill Products b/ (in.l. feedstuffs) 8.1 1C) 2.0 neg. 12 16.7, - 2.0

Bakery Products 4.6 5 5 0.1 5.6 21 - 0,1

Malt Liquors 20.9 2!5 nege - 25 neg.

'21.9 neg. -21. 9

NOTECS: a/ The external trade statistics show imports of 84,000 valued at 0 8.483 million, but an additional 44,0(O tons were iTrporlted under the Canadian Aid Program.

b/ Feedstuffs exports of 0 0.69 million are believed to be mostly cassava chips.

SOURCES: Externa:L Trade Statistis5, CBS Industrial Production Statistics, Foreign Agriculitural Service, U.S. Department of Agriculture, and IBRD estimates. - 57 -

(b) Inadequate transportation and distribution facilities reduce incentives to produce marketable surpluses in the more remote areas.

(d) Inefficient management of large-scale farms owned by the state or absentee landlords.

(e) Poor planning and insufficient repair and maintenance services make material and machinery inputs unavailable at the time required for land preparation, seeding and harvesting on the larger farms.

(f) 67.8% of agricultural holdings had less than 6 acres in 1970. 1/ Small holders have had very limited access to credit to enable them to buy improved materials and equipment.

4.15 Concerted action to deal with these problems has been suggested by a World Bank appraisal mission in the field of rice cultivation and processing. 2/ The package recommended includes construction of simple water control structures, rehabilitation of feeder roads, dissemination of improved farming practices to 4,000 farmers, provision of seasonal crop-production credit, research into varieties, agronomy and pest-control and improved rice mill management. A prolect costing US$22.7 million was expected to yield an incremental production of 30,000 tons of milled rice by 1979, and foreign exchange savings of US$5.0 million per annum.

2. Meat

4.16 Between 1961 and 1971; annual beef consumntion in Ghana fell from 24,500 tons to less than 17,000 tons. This represents a decline from 7.9 lbs to 4.3 lbs per canita. 3/ The constraints on imports caused by the foreign exchange scarcity and the failure to expand the national herd are the prime causes. More than half of beef ronsumed is now imnorted. Demand ig strong. however, and is evidenced by shortages of meat in the shops and rapidly rising Drices.

4.17 RBef Qtinnlipq Arp sQimn1PmPnt-Pt hv nriulfrv meat (nstfmated 6-500 tons in 1970), pork (2,000 tons), and sheep and goat meat (4,000 tons) mostly from snal 1-sca1e fn-meras Livstoan,ck accountsa fov only 5% of the value nf agricu1- tural production. The total value of meat and meat products consumption is 4 4 1 4 pat1~f-tAestm.aedto tr 1ne -hn thet-l-.t region,.i~i ,.. of-f ¢35V1V millionm 1,-.r i4n 107992a nt- piirvi-rnturn w1knIgmanlahlsl prices (see Table 4.02).

I/ rr S.-upleC en8LOus. of ^rLIcu£lture 1970 o' cit. See IBRD - Rice Development Project - Ghana. May, 1973 3/ Repor;L on1 tAppraisa±l of LivestocLK. Developrument ProLJeCt (.LBL7'7, NYov e,L-Lb.er 1973). 4.18 The low output of animal products reflects an inefficient usie of resources. Almost 70% of the country's 92,000 sq. miles consists of thinly populated savannah, which is substantially more iuxuriant than most of the rangeland found in the countries that traditionally supply Ghana with meat (Upper Volta, Mali, Niger). An IBRD appraisal mission has estimated that Ghana's natural pasture land could support three to four times more cattle than present numbers.

4.19 The inelasticity of domestic meat supplies can be attributed to several factors. First, only about 7% of the national cattle herd is rnanaged commercially. Traditional cattle owners seldom sell any but culled cows and frequently leave their cattle to be tended by hired Fulani herdsmen. This dependence upon the Fulani has delayed the development of animal husbandry which, as a result, is almost entirely divorced from crop farming. Many herds are kept for social purposes, and animals are killed for weddings, funerals and other social occasions. The offtake from the national herd is only 7% per year, less than a third of the offtake in industrialized countries. Most of the cattle are at least three years old before being slaughtered, arid then carcass quality is modest and the dressing percentage is not more than 50%.

4.20 Secondly, the standards of cattle management are generally poor. There are virtually no fenced or improved pastures and supplementary feeding is rarely provided. Nutrition, especially during the 4-6 month dry season, is deficient in both quantity and quality. As a consequence, productivity is low: typically in traditional herds the calf weaning rate is 40%, adult mortality is 5%, and it takes about 5 years for a steer to mature.

4.21 Thirdly, an important restraint on beef production in Ghana is the tsetse fly which, in varying degrees, infects most of the country. However, acute trvpanosomiasis is rare because most of the cattle are trvpano-tolerant and graze only in areas with little or no tsetse challenge.

4.22 Fourthly, although research in animal production, including cross- hreeding and nutr4tIon carried out in the iiniuerRirtiies and the Animal Research Institute of Ghana is of a high standard, the means for conveying new knowledge to cattlemen have not heen Pffpret4iup ntd cnnoaniipntly it- hna had 14-it-1t impact.

4.23 Fifthly, the small Ghanaian foodstuffs industry which is geared to 4 nol.tr. rr.r a no hao1*, bnen o,oague bn, shonrtag of , zeT _...nz . re- ments and the subsequent high prices of concentrate feed.

4.24 Corrective action proposed by the Bank appraisal mission consists of (a) the rehabilitation of two exlsting ranches and one ruaize farm, as breeding/ fattening ranches; (b) the improvement of some 50 privately owned herds, in.LLtially of abuout 10 hIead's eachll, LI areas surrounding the ranches. The owners would be provided with technical advice and finance for improved breed- Ing stock. Total project costs of US$3.6 miiion were expected to resuit in Table 4.02'

MEAT, FISH AND DAIRY PRODUCT SIPPLIES T7iF nTMi o-n)

Estimated Direct S]hare Trade Ghianaian Output Imports Ex22ortsL Domestic SplL-ies of Iimorts Balance 1970 Est. 1972 12972 1972 1972 1972

Livest,ock anid meat products 20-25 ' 25-30 7.6 neg. 35 22 - 7.6 b/ Fish 26.2 35-40 23.4 neg. 60 :39 -23.4

Milk neg. neg. 5.7 rLeg. 5.7 1O - 5.7

Milc products 1.2 9 1.9 neg. 10.9 17 - 1.9

38.6 reg -38.6

a/ Nathan Consorti=L Report: Agricultural Development in Ghana(Accra,, Robert Nathan Associates, 1970) b/ 1963 estimate by M. S. Singal and J. D. N. Nartey in Sources and Methods oi' Estimation of National Income at Current Prices in Ghana, (Accra, Central Bureau of Statistics, :L971)

SOURCES: See Table 4.01. - 60 -

fore'gn exchange savings of about US$0.75 ar a.ul ,but. its J.m4.purpos would be to serve as a pilot/demonstration project for the development of commerciLal cattLLe productionULLL Ghar.a.

3. Fish

4.25 Fish is a muuch more uiportant source of prote'in in the GhanaianL diet than meat. Supplies have also been more elastic. Total landings from internal waterways, coasta'l areas and the ueep sea increaSed from 64,0U0 tons in I197 to 148,000 in 1969. 1/ Official estimates for 1972 indicate a total supply of 25u,000 tons, a 39fo increase over 1971. 2/ Tnis expansion nas necessitated a heavy drain on foreign exchange, however. Imports have risen from 37,000 tons in 1966 3/ to 75,000 tons in 1972, 4/. at a cost of y23.4 million. This latter figure includes ¢11.4 million for tinned sardines and pilchards and other pre- served fish (see Table 4.02).

4.26 The increase in the demand for tinned fish is associated withl the process of industrialization. 5/ A 1970 study of eating patterns in two Ghanaian villages, one of which provided workers tor a textile tactory, revealed that only 15% of farmers used tinned fish and then only occasionally. Nearly half of the semi-skilled and skilled workers and 69% of the professional classes did so, however.

4.27 The most popular form of fish is smoked. All the farmers studied consumed smoked fish; 80% of farming households used it daily; compared with 23% of professionals. Dried fish is also more commonly bought than fresh or frozen fish, due to the lack of cold stores, refrigerated transport and domestic refrigerators.

4.28 Exports of fish (mostly shell-fish) are small, valued at 034,000 in 1972. Thus the trading deficit on this staple food item has reached more than 023 million. This is very large considering Ghana's 344 miles of coast- line, its 12 rivers with more than 100 miles in length and the Volta lake covering an area of 3,276 sq. miles. The Seven-Years Development Plan begun in 1964 set a target of self-sufficiency in fish by 1970.

4.29 According to the Government White Paper on Economic Policy 6/ published in 1972, the achievement of this goal has been frustrated by:

(a) inadequate on-shore cold storage facilities to accomodate excessive landings during the herring season (July-September);

1/ Statistical Handbook, 1969, Table 27. 2/ NRC. Economic Measures for Financial Year 1973-74, Ministry of Finance 30 APugut; 1973; page 20. 3/ E. Reusse, Ghana's Food Industries 1968. FAO, Accra, 1968. 4/ External1 Trade1 Statist4cs 5/ J. Steckle, Effects of Industrialization on Food Consumption Patterns, ou. cit. 6/ Outline of Government Economic Policy, June 1972, page 13. - 61 -

(b) th+-e ab-ser.ce of sufficient landir,g faci lities o)uts4deA T-mt relieve the congestion at Tema and to provide more immediate access to otLLLer parts ofJ thLCe cou.1try;

(c) the -'usence of adequate cold storage facilities at regional and district levels and supporting fleet of refrigerated vans for effective Uiseri'ution of fish to all parts of t,he country at reasonable prices;

(d) the absence of a modern fish processing plant or any efficient method of fish preservation e.g. smoking, salting, drying, etc. to accomodate to excessive fish landings during the year;

(e) lack of sufficient spare parts and trucking gears for the industry; and

(f) inadequate supply of trained Ghanaian personnel to man the various sizes of fishing boats in the country.

4.30 An additional factor which could be cited is the relatively slow growth in the number of Ghanaian owned fishing boats. Powered vessels increased from 311 in 1963 to 384 in 1969, of which 82 were over 100 feet. The number of motorized canoes doubled to 6,732 but other dug-out canoes declined slightly from 10,212 to 8,728.

4.31 The shortage of Ghananian managerial personnel experienced in running deep sea fishing operations is also an important factor in explaining the domestic supply gap currently being filled by long-range fishing vessels under foreign ownership.

4.32 The output of the fish processing industry in Ghana was valued at ¢1.8 million in 1970. This covers only activities in larger establishments (30 or more employees). The bulk of fish processing (drying, salting, smoking) is still carried out by specialized many traders living in the fishing villages using simple kilns. Only one organization is producing tinned fish and fish meal, the Tema Interlocking Food Complex. It is working well below capacity because the local prices of herrings and tin-plate are uncompetitive with imported tins, and the scarcity of suitable surplus fish over and above human consumption needs to be processed into animal feedstuffs.

4. Dairy Products

4.33 The Ghanaian dairy products industry is almost entirely dependent upon imported materials in the form of skimmed or dried milk. Imports of milk (tinned and powder) amounted to 05.7 million in 1972. Milk products, principally butter and cheese, added a further 91.9 million to the foreign exchange bill (see Table 4.02). - 62 -

4.34 Local production of milk products has expanded rapidly since 1970, as the result of the establishment of a joint venture between the Government and a multi-national corporation for the manufacture of reconstituted evaporated milk. The value of output in the industry may have reached ¢9 million in 1972. Some reduction of the overall trading deficit on this group of products (07.6 million) should take place, as local production of reconstituted evaporated milk takes over fully from imported tinned milk (¢2.4 million). Further inroads would depend upon the expansion of dairy cattle herds, which seems to be a long-term proiect.

5. Sugar and Sugar Proiects

4=35 Consumntion of sugar increased from about 33;000 tons in 1963 to 95,000 tons in 1970. Annual per capita consumption increased during the same nperind from 9=9 lbs to 2133 1bs in 1970 (eomnnrpd with Tworld npr canita ennQslmn- tion of 40.6 lbs). Most of Ghana's sugar requirements are met by imports. The average annnuanl nrnodurtion durina 1966-71 from the twno locrl ciinnr factori was only 4,000 tons.

4.36 Total supplies have declined since 1970 because of the foreign exchange scarcity. Import licensing restricted consumption in 1972 to an estimated essential level of 50,000 tons. Imports accounted for 90% at a cs tof ¢ 1A 9 m4lli4n

4.37 .An estimated 56% of 1970 sugar supplies were sold for household consumption through retailers, 25% went to manufacturers of sugar-using proJuc.t, and 1a9/f AiS;t,1o 11ers 4. J LLZ ¶JI IU -k vXlL Ca- ±L lV 1 U W

4.3-)( ~ output.L of:.uk cane and refined sugar in Ghana.LL has been well.LIThe belo-w its potential. Both factories have been working at a fraction of planned capacity (%. at sutsuare).'LT e mulin constraint6LLL e LU Lto V uta-LIben:

(a) Lack of expeiren1ced managerial and technical personnel, finance and policy direction from the central holding company GI'HOC resulting in frequent factory breakdowns, labor troubles, inadequate planning of supplies and poor financial accounting (estimated losses of ¢7 million had been accumulated by the end of 1971).

(b) Low cane yields, which have declined from 25 tons/acre in 1966 to 10 tons/acre at Asutsaure and from 29/tons/acre to 19 tons/acre at Komenda, due to poor cultivation practices, higher proportions of ratoon cane and the fact that only a part of available crop was harvested. (These figures compare with yield of 31 tons/acre with similar conditions elsewhere in Africa.)

(c) Low recovery of sugar from cane, ranging from 4-6% compared to a norm elsewhere of 9-10%. The main causes were factory inefficiency and intermittant cane supply. Table 4.103

SUGAR AND SUGAR PRODUCT SUPPLIES

-n(in 7milli.on7

Estimated Direct Share Trade Chanai an Cutplt Imports Exports Domestic SrrDplies of Imports Balance 1970 E;st. 197e' 15072 1972 1L972 1972 1972

Cane sugar 1.7 2.0 - - 2.0

'Refined sugars molasses and, 2'.0 2. 5 ]L. 2 - 16.7 85 -14.2

Alcohol and concentrates o.6 o..8 C).3 - 1.1 27 - 0.3 negligible Distilled spirits 8.0oa/ 10.l0 neg. - 10.0 neg. deficit

5 -1wt- -14-5

a/ Excluding production of akpeteshie = local alcoholic drink, 'by sam;all-scale producers. In 1970 aLn estimated 18,000 t~,1is of granulated sugar wern used for this purpose. See IBRD Report and Appraisal of Sugar Rehabilitation Projlect.

'SOURCES: See Table 4i.01. - 64 -

(d) An unsatisfactory credit policy operated by the Agricultural

Development Bank. TLO.S 1to 4 ¢ . .J L-4 l have been provided for sugar cane growers, but the rate of reimbursement I-as b-een low4. LLd. Uv L .LU . co.me £f1a.lmers L L&I LLaVh-ave b-eer.u L alloweALU.~I U L #_to U expanAJdU their initial holdings before they have proven their capacity

to ruar-Lage thLieiLr oriLginal LdInUULs. L inceLLL ML LADBha UbeLe financing up to 100% of total costs, many absentee landlords have no stake in their farF arid do not have enugh incentive to get the best results.

4.39 All of these deficiencies are remedial. A recent IDA credit is intended to advance the rehabilitation of the industry. A project costing US$24.8 million is expected to increase refined sugar production to 43,000 tons and alcohol production to 676,000 gallons in 19/79/I. Foreign exchange savings could amount to US$5.2 million annually.

6. Edible and Essential Oils and Oil Products

4.40 Ghana's production of fats and oils remains below domestic needs. imports of palm oil and tallow used for soap production amounted to 18,'00 tons valued at 04.9 million in 1972. Imports of other vegetable and animal oils, mostly for human consumption, totalled 914 tons costing 00.13 million (see Table 4.04).

4.41 Production estimates can only be approximate, however, because a substantial proportion of supplies come from wild growing trees. The 1970 Agricultural Census indicated that there were about 36,000 acres of oil palms planted on parastatal plantations or private holdings, 8,000 acres in mixed crop farming systems and a further 230,000 acres of wild palms on traditional small-holdings. An IBRD appraisal mission estimated a 1970 production of 133,800 tons of fruit bundles, yielding 20,300 tons of palm oil. About 19,000 tons of this were estimated to be used for direct household consumption, pressed at home or in traditional small-scale processing operations. Palm oil and palm fruit are commonly used for making soups and stews. The wholesale value of domestic palm oil production (at 1972 prices) would be 012 million.

4.42 Local production of groundnuts and copra in 1970 is estimated to be around 64,000 and 6,000 tons, respectively, at a total value of 017 million.

4.43 Exports of nuts and oils amounted to 01.5 million, mostly shea nuts and kolanuts. Imports in this product group were 06.4 million, giving an overall trading deficit of 04.9 million. Taking account of domestic/small- scale production of oil, imports are a relatively small percentage of total consumption.

4.44 The large-scale factory sector is import intensive, however. This may be because of the difficulty in obtaining bulk supplies of crude palm oil from many scattered producers and because the prices the factories can offer are not comDetitive with the level obtained for honm rconsumption, due to high overheads and low controlled prices of soap. Imported oil is cheapened by an over-valued exchange rate. Table 4.0h

EDIBLE ANID ESSENTIAIL OILS AND OIL PRODUCT SUPPLIES (in mii

Estimated Direct SLare Trade Chanaian Output Imports EXPOrts DDmestic Supplies of Imports Balance 1970 Est. 1972 1972 1972 1972 ]1972 19i2

Cil ';eeds, Nuts and Kernels 30 a/ 30-35 0.1 1.3 30-35 rteg. +l.,2

Vegetable andl AnimEL Oils amd Fats 3.0 b/ 4. 5.2 0.1 9.1 57 -501

Essential Oils n. a. 0.7 0.1 n. a. n. a. -0.6 c 'Caustic Soda - - 1.0 - - 100 -1.0

Sioaps ancd Toilet ( ) ( ) PrepaLrati-ons ( ) O.1 neg. ( ) -0.1 ( 15.7 20 ) ( 20.1 neg. ) Margarine ( ) 0.3 - ( -0.,3

7 .4 1.5 _ 5.9

NOTES:

a/ Including traditional production of oils.

b/ Production by larger industrial enterprises.

SOURCES: See Table i4.Ol. - 66 -

4.45 A project which would ensure larger domestic supplies of palm oil for further industrial procbsi±ng has been pLUpused-. _/ It would ilnvolve tne establishment of a 10,000-acre nucleus plantation, the provision of technical services and credit facilities to independent growers, the construction of a 20-ton/hour palm oil mill and the establishment of a fruit collection system. An industry developing a gross income or USzi.L million annually in a poor and relatively underdeveloped region of Ghana is anticipated from an investment of US$13.5 million.

7. Vegetables, Fruits and Other Tree Crops and Soft Drinks

4.46 Estimates for the supplies of vegetables and fruit are subject to Large margins of error but the figures do indicate (1) the relative importance of traditional root crops such as yams, coco-yams and cassava as a source of energy and real income for peasant farmers; (2) the small extent of industrial processing of local vegetables and fruit; and (3) the lack of success in penetrating export markets for this group of products (¢5.5 million) in sharp contrast to its African neighbors (e.g., Ivory Coast).

4.47 Little professional attention has been paid to improvement in the production of these crops (apart from limes as a result of the involvement of a multi-national export processor). Substantial investment in processing and canning facilities was made during the Nkrumah regime, but capacity far exceeded domestic demand potential. Plants for canning tomato puree and juice, pineapples and mangoes are currently idle. The varieties grown have low yields and lack the quality required for export. The plants are badly sited, away from the main sources of supply or markets.

4.48 Potential for increasing the output of all these crops exists, but an improvement in quality rather than quantity will be necessary to expand exports to the highly competitive markets in Europe. Perhaps the most effective means would be a joint venture with a well-known international supplier of canned fruit and vegetables who could set quality standards. invest in model plantations, provide demonstration/extension services to independent growers and possess the required marketing/distribution know-how and channels.

4.49 The domestic market for canned convenience foods is limited by the low level of disposible personal incomes and the ready availability of a variety of fresh vegetables and fruits throughout the year resulting from a favorable climate. The soft drinks industrv offers little scone for C(hnnninn agricultural producers at the moment because of the marketing domination by foreign brands made from imported concentrates-

1/ See IBRD, Appraisal of the Oil Palm Project, Ghana. May, 1973. Table 4.05

FRUIT, VEC3!TABIES kND SOFT DRINK SUPPLIES

Est.imated Share of Trade Cban.aan Output ora3l Eports Daestic S=Plies Imports BalaLnce ];2ZO Est. =1)7, 1972 1972 1272 i212 E2

Cassava 1L6.9 a/ 94 i/ - _ 94 - -

Cocoyams & yamns 188.4 a/ 349 f/ - 1.0 348 - +1.0

Plantain 1L8.6 a/ 32 f/ - neg. 32 - -

Citrus fruit 8.5 a/ 12 ;£/ - 12 -

Coffee 1L3.3 a/ ,20.2 f/ 0.2 c/ 3.4 c/ 17' 1% +3.2

Tea - - 0.2 - 0.2 100% -0.2

Pi.neapples- 2.1 a/ 3 fl - 3

Tomatoes ( ) o.4 b/ * ) -0014 (143.5 a/ 55.6 ) ( 56 1% ) Other fru~Lt aad ( ) ( ) vegetables ( ) 0.22 0.2 )

Canmn(e fruit ( ) neg. 0.95 e/ (-) ( 1.4 1.8 ) ( 0.9 - Canned ve;getalbles ( ) neg. neg. ( )

Soft drinks 4.5 5.6, 0.14 j/ neg. 6 .0 7% -0.14

1.4 5.'5 +41

a,/timate s for 196Ub Singal and Narvey, op.cit. Pi/Pree, pasta and concentrates. c/ Including coffee extract. ,/ Concentrates. e/ bbDstl;f liMe juice. ,;/ 1968 estimates revised according to price chamges and assumed constant per capita consumption. SOURCES: Seie Table 4.01. - 68 -

4.50 The main constraint on the output of the traditional starchy food- crops in the long run may be the relative inelasticity of demand. As incomes rise, there is likely to be some substitution of other forms of nutrients particularly those with a higher protein content. Even among the carbohydrates there is evidence of a preference for bread made from imported wheat over such cassava/plantain/yam based foods as fufu and gari among the urban middle classes. Cassava is difficult to store without fermentation taking place. tHowever, one manufacturer has succeeded in selling cassava flour and instant fufu in plastic bags as a convenience, easy-to-store foodstuff for the busy housewife. And the mammy bakers association announced recently plans to produce bread made from cassava as their contribution to the "feed yourself program." It remains to be seen whether a positive consumer response will be forthcoming on any significant scale.

4.51 The Droduction of aari is an important small-scale activity which is not recorded in the CBS production statistics. The cassava is traditionally hand-crated. the dough fermented in sacks. nressed under stones and roasted in small frying pans. There would seem to be scope for the developmemnt of a rural industrv nrnoresing anri on n sonmewhat 1nrger scale close to the source of supply and using simple equipment for the washing, peeling, grating, pressing, sieving and roasting operationsn An Pnginpering firm in Accra has developed a pilot plant for this purpose but neither the government nor private entre- nreneiirs have shown any intprest as yet.

8. Rubbepr

4.52 Ghana has been engaged in the development of rubber for many y ears and began exporting on a modest scale as early as 1880. The present state of development and future expansion plans are the direct result of a successful partnership between the Government of Ghana and the Firestone Tire and Rubber rlompan,y of AkroL, Oh1io4 In t - US.IT A TLIn 1967, the_ GJVer.z*nt ar.d ir ton entered into a joint partnership agreement to develop 20,000-acre rubber estates in the WNestLern R er,10in Uo '.-Llana, adCiU LoU Lbu.LU a miL[uen tlre and tu*e manufacturing plant at Bonsaso. Up to date, Firestone has invested a total a.1on of US$3,528,00Nnr the proec in `hch th'e Ghana Go-re-me-- holdsa amouniL Uk U.)9J ,J4.O ,UU'J _Ln tLL : LUjt:( L. Lni wL.LC LLL T~LaiL.L k7LVC:LL1UCL~L0L iiJJX a 55% interest in the estate and a 40% interest in the Tire plant, with Firestone takLFing thae remnaining shares.

4.53 Grlana Rvubber Estates now [ave over-- 24,00 ------lane LU rubber of which 3,600 acreas are in tapping. The Estates which will eventually be expanded to 40,000 acres comprise, at present, ten different plantations which are run by Ghanaian Estate Managers. There are more than 2,000 workers spread over the plantations and this number is expected to increase as the estates expand. To encourage increased rubber production in the private sector, Firestone undertakes to purchase all latex produced by local farmers. A total of about 2,000 lbs crude rubber per month is obtained from this source. Crude rubber from the Estates and private farmers is sent to the processing Ta1Dle 4.06

TOBACCO AND TOBACCO MANUFACTURETHS SUPPLIES

Estimated Share of Trade Slanai.an_llt I17ports Exports D30mestic Supplies Imports Balance 1970 Est. 1972 1972 1972 1972 1972 19'72

Leaf' tolbacco oL,O/ 5-. 1.4 neg. 6.LL 22p -1.4

Cigarettes and other manufactured tobacco 1.3.1l)/ 17.4 0.1 _ 17.'5 1% -0.1

1.5 nLeg. -1.5

a/ IBPRD estimates based upon CBS data on value of total maiterial inputs irnto tobacco manufacture, b/ 012.8 million- excise tax has been deducted from the CBS figure. - 70 -

plant where it is puririeC adII pressed InfLO I75 lDs bales Ifr uelivery Lo tne Tire Plant at Bonsaso. The tire plant itself at Bonsaso went into production in iMay 1969 and now produces over 7-1/2 million pounds weight of tires and tubes of various sizes per annum. This production meets about 70% of Ghana's requirements of tires and tubes for cars, trucks, buses, and tractors. Ex- pansion plans to increase the tire plant's production are well under way anid it is expected that output in 1973 alone will reach some 225,000 tires and more than 100,000 tubes. In addition, substantial quantities of tire retreading materials will also be produced.

9. Tobacco

4.54 Considerable progress towards self-sufficiency has been made in tobacco. Over 70% of leaf requirements and almost all cigarettes and other tobacco products supplies are produced locally (excluding smuggling)(see Table 4.06). Tobacco growing is the responsibility of the Ghana Tobacco Company Ltd. which has its own plantations and provides advisory and marketing services to independent growers. The total area under tobacco was 4,000 acres according to the 1970 Agricultural Census. This industry seems to be well organized and is an important source of Government revenue in the form of excise tax..

10. Leather

4.55 Over 150,000 animal hides and skins are available in Ghana each year after slaughtering for meat. Until recently most were exported undressed. But a tannery project financed by NIB commenced operations at Kumasi in 1973 and will help to reduce the import requirements of the leather goods and footwear industry which amounted to ¢1.1 million in 1972. The footwear industry is well developed although the GIHOC footwear division, the largest factory, suffers from excess capacity due to unrealistic forecasts of the market expansion at the time of project inception (early 1960s). New management has improved design and marketing and progress is being made towards turning it into a profitable operation.

11. Cotton and Other Vegetable Fibers

4.56 The textile and clothing industry lhas been one of the fastest growing sectors in Ghana over the past decade. In the process it has largely superseded imports of finished products. In 1972 domestic producers of woven cloth obtained 93% of the domestic market. Corresponsine figures for knitted goods and clothing were 98% and 96%, respectively. This growth, which was buttressed by high tariffs and quantitative imnnrt rpetrirti-nnq was based a1mnot entirply on imported materials. Local raw cotton production was estimated to provide only 37% of total rotrnn supplies- In 1970 the total area devoted to COttOnI was 2,000 acres spread over 2,200 holdings. Ghanaian output of other fibers stich as kenaf, suitablead r crdage nd fiber bag mann,ufacture, was also negligible. The total trading deficit in this group of products, including imports of textile mach4nery, was ¢37 .5 mil14on in 1972 (Table 4.08). Table L.07

HIDES SKINS, LEATEER_A;!D LEATHIx' P'ODUCT Sl?L.S3 mI,gnillion)

Estis.ated Share of Tr;kdc; Ghanaian Output Irmnorts Exports Domestic Suvlplies Imnorts Blaan ce 19?0 Fst. 1972 1972 192 192 1972 1972

Hides & skins n.a. / neg. 0.1 neg. neg. n.a. -0.1

Leather n.a. n.a. 1.1 n.,a. n.a. -1.1

Leather Footwear 2.3 3.0 0.1 3.1 2 -0.1

1._ _L -1.4

RUBBE.R AND RUDBRP. PRCGDUsCT SUPPLIES

Rubber n.a. n.a. 0.7 n.a. n.a. -0.7

Tyres & tubes 5.6 7.0 3.0 neg. 10.0 30 -3.0

Cther rubber products 2.7 .3.4 0.8 0.2 14.0 20 -0.6

4.5 0.2 -4.3

PLASTICS AND PLASTIC PRODUCTS

Eynthetic resins aLnd plastic mkaterials neg. neg. 3.1 neg. - 95-3.1

Plastic products 2.4 3.0 1.l nag. 4.1 30

4.4Li neg. -4[4 a/, 57 cat-le, 34,351 sh(6ep27T goats ands779'a d pig were -sa:E r TFe 7r'st c' the 5=nrs were oa exported undressed (1972 exports were 1415 cwts valued at 35,000 cedis). The rermairLder were tanned dcmestically. S'OUFCE: External Trade Statistics, CBS, Industrial Production Statistics and I]BRD estimates. - 72 -

4.57 As with other raw materials we have seen, Ghanaian soil and climatic conditions have shown to be favorable for the production of these crops. Yet little progress has been achieved in expanding domestic output. As inm- ports of cotton, cotton yarn and jute reached 015.3 million in 1972, potential foreign exchange savings in this field are substantial. But the obstacles should not be underestimated. Cotton growing in humid tropical countries invoves heavy costs for insect control. Too little work has been done in Ghana on variety selection and on cultural practices to permit planning a rapid increase with confidence. A relatively slow start might be compensated for by more rapid expansion at a subsequent stage. This should be borne in mind in the implementation of the Akrade/Alcosombo project which will eventually encompass 10,000 acres with an anticipated yield of 15 million pounds of raw cotton. Important by-products of expanded cotton cultivation will be cotton seed for edible oil and livestock feed.

4.58 Apart from the remnants of a hand weaving industry in the North, wool,textile production is negligible and imports are confined largely to light-weight worsted suitings.

4.59 The Bast Fiber Board is responsible for the search for effective iute substitutes and is planning a ten-year program to become self-sufficient. The GIHOC Fiber Bag Division ran its own experimental farm of 120 acres of kenaf, and buys small quantities from farmers. One problem is the lack of sufficient water and equipment for retting. Another is the need to offer a nrice to the farmers which is attractive in relation to the yield from alternative crops and yet remain competitive with imports. The world market nrifc fnr kenaf is c:irrpntiv (90-10fn nor t-n. (nTHOC nffers C350- i.e. Eh130. at the official exchange rate and stated that yields of one-half ton, i.e., ¢175, per acre were attainahle. This wouil sppem to rnTmnre favorahlv with some other crops, but not enough is known about production costs or yield uvriations to draw firm rconc-1luioins aboniit t-hp rplatiup ;attrartivenesPc nf kenaf to the farmer.

12. Cocoa and Cocoa Products

4.60 The Ghanaian economy has been dependent on cocoa for the last 60 J-ears and this dependency sh0ows little sign of declining. Cocoa is iUporta.tt to export earnings and to Government revenue; in both fields it makes the largest single contribution. It is the ma'or source of em.ployment -andl.ou _LOL - _L &_L .UU JJL A.. L £ ~L I LdJ UL Ji . &L.Uy1UILLLL. OCL&U J.ILLLAIUC for some 450,000 persons.

4.61 In 1911 cocoa exports earned 45% of all export earnings. By the 1 7 they[0s accouu;edu for 60-65,% or merchandise export tearniings. In 172/i they were responsible for 58%. The total trading surplus in cocoa and cocoa products (mainly cocoa butter) reached Y328.i miiiion in 1972 (Table 4.09).

4.62 In 1960, revenue from export duty on cocoa provided 18% or Government revenues. In 1971/72 the proportion was 25%. The 1973 figures for both export earnings and Government revenue are likely to show substantial rises because of the sharp increase in world cocoa prices. TaLble 4.o8

FIMES, TEXTILES AN,D CLOTHING SUPPLIE'S

InT~ milon)W± - _ _

Estimatedi Share of Trade Gtlanaian Output, Iiiports ExTorts Domestic Supplies Imports BaLance 1970 Est. 1972 1972 2972 1972 1972 1972'

Raw cotton n.a. a/ 0.2' a/ 7.3 - 7.5 97 -7.3

Jute and kenaf neg. neg. c/ 1.1 - L.1 98 -1.]L

Man-made f'ibres - - 0.1 - 0.1 100 -0.1

Cotton: yarn n..a. b/ n.a. b/ 6.9 rieg. n.a. b/ n.a. -6.9

S;ynthetic yarn n,.a. b/ n.a. bJ 3.6 _ n.a. b/ n.a. -3.6

Dyeing materials neg. neg., 3.5 - 3.5 98 -3.5

Textile anLd sewing machinery- - 8.1 - B.1 100 -8.1

Woven text,ile fabrics 62.6 b/ 80 b/ 6.3, 1.3 85 7 -5.0

Knitted goods :3.6 4.5 0.1 neg. 4.6 2 -0.1

Clothing 8.8 11 0.5: neg. 11.5 4 -0.5

Cordage and other vegetable fibre products 2.6 3 l.h 0.1 4-3 33 -1.3

38. , 1.4 -37.5

SOURCES: External Trade Statistics: Cr S, Inlustrial Production Statistics and IBRD estimates. NOTES:. a/ The Sample Agricultural Census 1L970 estimatecl total area, d.evoted to cotton to bet 2,000 acres. This is not likely to yield more than 200 tons valued at 200,000 cedisO. b/ lho breakdown between spinning and weaving is available. c/ 98% of the raw materials of the GITTOC fibre bag factory are imported. The facto* has started a 120 acre f'arm -rnr 1cenaf' which is exoected to vield 60 tons. - 74 -

4.63 The remarkable expansion of cocoa production and exports that began in the 1890s was the major factor responsible for the significant increase in per capita incomes in the period up to 1960. The growth of the cocoa industry was largely the result of the enterprise of Ghanaian smallholders who adopted an innovation that was profitable and well suited to the forest region of southern Ghana. As a result, Ghana realized a level of per capita GNP in 1960 which, with the exception of Gabon, was the highest of any country in tropical Africa.

4.64 The stagnation in income levels which was experienced in the ensuing decade can be attributed to the decline in cocoa prices, combined with the failure to diversify exports sufficiently, and the waste of resources resulting from over-ambitious and underutilized investment in industry and infrastructure. Nevertheless, this setback should not obscure an important lesson to be learned from the cocoa success story. The small-scale Ghanaian peasant farmer does not lack real entrepreneurial qualities, given the right kind of market and price incentives and access to appropriate complementary inputs.

13. Overall Agricultural Development Strategy

4.65 This lesson was generally ignored in the 1960s. Most of the investment in money and scarce skill resources in agriculture during this period went into large-scale mechanized farm units established by the State Farms Corporation, the Workers' Brigade, the United Ghana Farmers' Cooperative Council, and food processing and storage facilities. The Ministry of Agri- culture was subjected to a series of reorganizations which adversely affected morale and efficiency. The nrevious emnhasis on nrovitding supnorting servires to individual farmers was downgraded and the Ministry and other Governmental avencies bernme heavily involved in dire.t onpertions The traditional small- holder sector was badly neglected. There appears to be a close link bet:ween this neglect -and the growing deficits in mcst cash foodstuffs andother industrial crops.

4.66 The unsatisfactory performance on the large farms created by Govern- ment an.d , n 4 +.-o- unit4 -c p-a artl y the resuIt oof poo r rmanagemlnt an. the subordination of economic to political considerations. There are, however, d44iff inpruiba strategy thatepaie-lrecptl L L .LLU.LJ.i.utes A_ [JUL DUAA,CLL CagriculturalI J.L.LLU .L~ J. . Y 'L~LL jL~J.~"±L A. cuJ. pl 5 a. ~LCL,aL5 ~a.J.L. intensive units in an economy where around 60% of the total labor force is en Ag ' pr_om AntA A _ _AAA.J_A_. - I_ - . . -1- -- .-A_ -1 - -- _ *___- £ S enl6d~uU pL UUUIUJLadiLJ.y Lii d.,L u.LLULULC. ULVILL LLie UULII.LLXdLLL pobsLLiio VL dU, i- culture and the fact that non-farm employment did not absorb more than a small part of the annual additions Lo the labor force, such concentration on a ilarge-scale sub-sector conflicted with efforts to raise the productivity and incomes oiz the bulk olf the country's farm popuiation.

4.67 Some of the deficiencies of past agricuiturai development strategy and policies have been recognized by the authorities. Greater self-reliance in agricultural products, including industrial crops, is one of the principle aims of the present Government's White Paper, "Outline of Government Economic Policy" (Accra, 13 June 1972), The Paper lists the following measures which were to be initiated to achieve this goal: T.able- 4.C62

COCOA AND COCOA PRODUCT SUPPLIES TI-7-rllio-nTr -

Estimated Sihare of Trade Ghanaian Output Impor'ts Exports IDmestic Supplies Imports Balance 1970 Est. 1972 1972 1972 1972 19'72 1972

Cocoa beans 293.7 a/ 329.1, - 289.1 40.0 b/ - +2139.1

Cocoa butter, ( ) powder and cake ( ) neg. 39.0 ( ) neg. +39.0 ( 14.0 400.b/) ( 1.0 ) Chocolate anid other ( ) ( coco,a products ( ) neg. neg. ( ) neg. -

ne&, 328.,1 +328.1

NOTES:

a/ Total cocoa production valued at averagei export price for the year.

b/ Cocoa beans are suppl1ied to Ghanaian processing factories at a price be'Low the world market level.

SOURCES:

Gill and Duffus Cocoa Report and Cocoa Marketing Board: External Trade Statistics, and CBS, Industrial Production Statistics and IBRD estimates. - I'-' -

(a) "Re-organize and rationalize the operations of Food Production Corporation especially in the areas of organizational structure, finances and effective use of labor in direct production.

(b) "Re-organize the agricultural settlement scheme and place it under proper and effective management and create new settlement farms.

(d) "Develop and service the acquired lands by clearing, providing access roads, basic amenities and services such as water supply, and lease such farm land in viable units to prospective farmers. This will definitely offer that needed security of land tenure conducive to maximum agricultural development of the land by the farmers concerned.

(e) "Review the land tenure system in the country so as to free more land for farming purposes.

(f) "Mobilize resources on a nation-wide basis to provide supporting services to agriculture - irrigation facilities, feeder roads and bridges, water supply and rural health facilities. In this regard Government will work out a programme of enlisting school leavers into an agricultural national service scheme for a limited period.

(g) "Pursue an effective agricultural credit nolicv!

(i) exyitingc, f1inanrcil instit-ti1nnq will he reqniiredi t-n establish farm credit offices at regional and district levels to ensure availability1 f agric-ult-r-al fi npa to the farmer within reasonable distance;

(ii) relatively low interest rates will be accorded to all

(iii)agricultural credit 'stinthemsel establish large farms which may subsequently be sold in viable un i t s to farm-ers and fam-, 1aborears on creditrlbDasis.

(h) "Allocate a substant4al proprti-4o of the G-vern=nent develop..e..t budget to agricuiture and its supporting services. This will bke fpor reai i.-eves-tren- in land clearance, 'eveiopm,en-t ofL nurser.-es, u A .~J ±L V ~ L .I~L-LIL .LdUL L1L) UV±.JILL Lu kU tL supply of sufficient seeds, seedlings, and breeding stock to Larmeirisl cLcstrUctLorL oL UU-Lsrcit U1eUontLLrt'LLdL arUIdLi s ruua Productive Corporation farms and the provision of more irrigation - 77 -

facilities. Government's agricultural budget will no longer be preponderantly for the payment of wages and salaries to office workers.

(i) "Direct manufacturing enterprises using imported raw materials which can be produced locally, e.g., cotton, rubber, oil palm, coconut, kenaf, etc., must be actively involved in the production of these crops. Those who make efforts in this direction will be rewarded with more import licenses.

(j) "Guarantee minimum prices for all the selected food crops and agricultural raw materials listed in the Operation Feed Yourself Program.

(k) "Relate the construction of all new feeder roads in the country to the food crop nroduction zones outlined in the Operation Feed Yourself Program.

(l) "Construct simple food storage and warehousing facilities in the farmino di4tric-ts tn rnmnpement the present regional storage facilities.

(mn) "Ensure that the research findings on food processing and preservation coming out of the Food Resacrch TnctituiitP are n,ihllized throughout the country in anticipation of the increased food production expected from the Operation Feed Yourself Program=

("n IIt ronr t7kn tlio f -r4 1 t t-4 QO { - F-A -o,w Sno4na HnCth r-niin t-r

(o) "En.courage rural farim.ers to o tve societies to benefit from pooling of resources such as farm credit, machinery and equip..ent storage an' other facilites."

'. *' " .|tS*XLL LLAd L1I1 iL=LZ LLCLLUL[I[ uCO L1IM2C L11C1tVUL*%U R &LLI- '3LuV L U L to reduce the role of the Cehtral Government by assigning some of its develop- mentment ac-etivties LV 5 totmSC±±~~ speciLa'lized' b'oardus,ULS Tusl-U the[ULUU Cocoa an'dL nroAuceLUL Inspectior, Division of the Ministry of Agriculture has been absorbed by the Cocoa Miarket- ing whic[ now also-'ar, conItrols directly the Cocoa Research InstiLtute. An amount of 01.6 million was allocated in-the 1973-74 Budget to the Grains and Legumes, Bast Fibers, and Cotton Development Boards for the supply of improved seeds, fertilizers and pest control chemicals to farmers, and to providUe storage and marketing facilities to operate the minimum guarantdeed price system. It remains to be seen whether decentralization will significantly reduce bureaucratic inefficiency.

4.69 Perhaps the most important instrument being used to increase the involvement of private enterprises and managerial skills in agriculture is the encouragement of backward integration by manutacturing enterprises. Sub- stantial loans have been offered by the National Investment Bank and the - 78 -

Agricultural rDevelopmnt fBRan-L tn -nterpris - l-4i 1i4 to establish their o n. plantations to secure basic raw material requirements. Projects approved iLnc'udue invest" ent- 4- a dairy herd of 600 milking cows by a m1ilk processing plant (t1-5 million), and 10,000 acres of cotton and a ginery to prov:Lde

OU 1t LIIr1_4 . .IL _ L . A,i& 3. L4' A _X ILOLL At ct i'A_. .; . 0 n*r 0r 6Xl- e Inp&i t t requ i ---- > n-m of a- iiA;- -l 4 -* >- - w G mIlla-L&I-J nu <.| L CL \, tiP * AJ . 7- 111r 4IA..v4. kA xLVLL/ . Considerable pressure is being applied on industrial firms, including hints that th-e allocation ofc import Ilicenses wou'UUlteplend -upon tercoopterCation, to plough back their profits into agricultural activities.

4.70 This policy is not without its dangers. Scarce managerial experience nay be spread too thinly. Enterprises will have less f lexibility to select least-cost suppliers. The opportunities for expanding farm incomes more widely may be pre-empted by a relatively smail number of iarge units using expensive capital equipment; and the opportunities for Ghaniaian farmers to make the transition from subsistence to commerciai agricuiture would be restricted. The fact that for many years Ghana must reckon with a groiwing farm population and labor force suggests that, wherever feasibie, the expansion or farm output should be realized by policies and programs that enlarge the opportunities for productive employment in agricuiture. The need to transform the structure of the economy to promote self-sustaining economic growth also underscores the importance of an agricuiturai strategy that will maximize the positive growth, promoting interactions between agricultural development and the expansion of domestic manufacturing and other non-farm sectors on as broad a base as possible.

4.71 Perhaps the best solution would be to restrict direct industrial investment and managerial control in agriculture to nucleus farms, whose main purpose would be to stimulate increased production by independent farmers and to provide demonstration, seed distribution, buying, processing, grading and quality control facilities. To be effective this policy would need to be accompanied by greatly expanded credit facilities for small farmers. Out of 028.5 million loans approved by the ADB during 1972, only 6.8% were in small loans below 05,000 each. The total number of loan recipients was 1,340 out of 805,200 farm holders in Ghana. Agricultural support prices fixed by the Prices and Incomes Board may need further adjustment to provide adequate price incentives for the investment of small personal savings in agricultural diversification and improvement schemes as well as to discourage smuggling to neighboring countries where higher market prices prevail (e.g., for cocoa and rice).

C. Forest Products

4.72 Timber from local forests has been an important contributor to the economy of Ghana throughout its modern history. The natural forest zone of Ghana covers nearly 32,000 square miles, more than one-third of the cotntry's gross land area. Forests are principally in the southwest of the eountry and in the Ashanti area; where relatively high rainfall, high temperatures and generallv intensive sunshine combine to offer Qond rnnditinnA fnr t-mhor growth. Evergreen species occur in positions of the southwest where rainfall - 79 - is highest, but, in the main, hardwood varieties form the important bulk of the source. Over 300 species have been identified in Ghana but the total number entering into export trade is around 30. Of these, four are of major importance: Wawa, Utile, Sapele and Mahogany; these make up nearly 80% of total exports occuring in the form of logs.

4.73 The annual harvest of logs from the forests of Ghana has averaged 56 million cubic feet over the past decade, of which approximately 30% has come from the forest reserves under the control of the Forestry Department of the Ministry of Lands and Natural Resources. These forest reserves cover 19% of the total forested area and contain an estimated 13 billion cubic feet of timber.

4.74 These figures suggest that only a small fraction of Ghana's timber resources have been utilized as yet.

4.75 A distinction has to be made, however, between the various species with different characteristics and purposes. Primary species of malor economic importance, used mostly for furniture and fixtures have already been culled from nearly three-quarters of the natural forest zone area in Ghana, and the clearings converted to agriculture. It has been estimated that the remaining unreserved areas would be depleted within 10 years. For this reason; the Forestry Department initiated in 1971 a new 10-year plan aimed at the establishment of 272.500 acres (426 square miles) of forent plantations; as the first phase of a continuing scheme for perpetuated reforestation to keep balance with the nation's anticinated grnwth rate of timher-ronnclmin0 nrt-iuitiHP This O - -- _ --. _ ,, _ _ _-_- _ .- _ _- _ _-_-_-_ large-scale program involves establishment of selected, fast growing, high quality Aenries in imnderst-ocr1ed ares of the foreat reserves. More than 31,000 acres were successfully planted in the first two years of this progrma.

4.76 Most of the trees felled in Ghana are destined for export. The 1972 exports of logs totalled 26.4 mi14on cubic feet valued at m2.3illion. A further 8.8 million cubic feet were exported in the form of sawn timber, and obtained 021.2 million in foreign exchange. The forest products tributed 11.9% of total Ghanaian exports in 1972. Even after accounting for paper ardprnting im.p-rts,- this produt 6grou Lha a 5 I . UmiL.L±.LLL n LaU.LLLn surplus (Table 4.10).

4.77 Domestic consumption of manufactured wooden products is quite small. Output ofp the larger mar.ufacturers of wooden furr.'ture, "xtures and ot'ner- JL LLUE LIL-L&LCALk.La.U JL WuLL ALLL.LLL J. ILUL~ L ULL1IV wood products, minus exports of these items, amounted to only 01.2 million in 1972. The value of production by samnall-scale establis'nments is unknown but is unlikely to exceed this figure.

4.78 The main domestic use of wood is as a fuel. The residues from saw-milling operations as well as branches collected by farmers in the bush are used for this purpose. Further processing into charcoal is an important rural industry. M. S. Singal and j. D. N. Nartey estimated the total value of firewood and charcoal production at 044.3 million in 1968. Table .10 WOO), WO)OD PRODUUTS, PAPER AND PRINTING SUPPLIES Direct TIWn ¢miionT Estimated Share of Tradle Chanaian Output_ Imports Exports Domestic SuMplies Imports Balance 1970 Est. 32 1 9 71972 17972 _92 1972

Industrial Wood (logs and lumber) 31.9 3/ 67 t-/ 63. 7 3.3 - +63.7

Firewood 40.1 c/ 60 - 60

Charcoal 4.2 c/ 6 - 6

Pulp and Waste Paper - neg. neg. neg. neg.

Wood and Cork ( ) ( ) Manufacturer.3n.e.c. ( ) 0.2 3.1 ( ) +2. ( 2.6 40() ( 1.2 25% ) Wooden Fuwniture ( ( ) and Fixtures ( ) 0.1 neg. ( ) -.

Paper and paperboad - - 5.9 - 5.9 100% -5.9

Paper ik boaLrd products 7.8 10.0 3.3 0ol 13.2 25% -3.:2 o

Paper iworkLng machinery - 0.3 -L0% -003

Printing inics 0-.2 1-00% -0.2

Bookbinding and printing machinery - 1.4 - 1-00% -1.4

Printing and Publishing 7.8 l0.C) 309 neg. 13.9 28% -3.9

15.3 66.9 16 a7 Output of sawmill planning and other wood mills. Excludes rough logs. b/ Estuimate based upon exports of logs and lumber, plus wood for domlestic plrywood, fu.rture and fixtures manufacture. c/ Estimates for 1968 by Singal and Nartey, op. cit.

SOURCE: See Table 4.01. I 'fl nh .. 1 .anE n ~ ~ ~ ru±.Ler ut1i1_ZLton of Ghana's rorest resources, and greater UoLmestLc value added in its wood processing industries could be sought in the following airections;

(a) Increasing the percentage of sawn timber exports in place of logs. Major constraints have been the high percentage of waste in saw-mill operations, high costs resulting from single-shifts operations and insufficient seasoning kiln capacity.

(b) Expansion of plywood and veneer exports. The American market has hardly been tapped so far.; the high-quality standards demanded have acted as a deterrant.

(c) Promotion of knocked-down furniture exports. A joint foreign/Ghanaian private enterprise was set up in 1969 to manufacture furniture parts for shipment to and final assembly, finishing and upholstering in Europe. Results have been modest, hampered by an effective protection rate in the EEC of 11.5%.

(d) Processing of waste-wood products into fiber-board or particle board, a project costing 03.5 million, is presently under construction.

(e) Conversion of secondary wood species into pulp and paper. A feasibility study was undertaken on behalf of the National Investment Bank in 1970-71 by the Greenacres Consulting Corporation of Seattle, which concluded that a plant of 50,000-ton capacity to meet the domestic consumption needs would be technically and economically viable. The high capital cost involved (030.9 million) and the absence of a commercially proven plant processing the hard-wood species found in Ghana have deferred a decision until now, although the authorities remain keenly interested.

D. Mineral Resources and Products

4.80 Mining is a major economic activity in Ghana, with a value added of 040 million in 1969. Almost all the output is currently exported, but there are prospects of further processing in Ghana in a number of fields as we will see below.

4.81 Gold is the oldest and largest extractive industry, with an output averaging over 700,000 fine ounces in recent years. With rising world orices. exports earned over 050 million in 1972 (see Table 4.01). Gold occurs or is derived ultimately from Birimian rocks whinh cover about one-third of the land surface of Southern Ghana and Ashanti-Brong Ahato. Until the 1870s it was found m-otlv in heds of riuvrs nr noastal Annds, from where it wns panned. It is now mined from deep shafts in alluvium deposits or quartz rock. 02-o

4.82 Goldsmithing was traditionally an important village craft. It was concerned *ith the productlon o g,old an-e 1gl ornamen1tsA In addition the Ashanti made their gold weights whose value transcended the Durelly utilitarian purpose they se ed, for thley depited and preservedU scenes from all aspects of the daily life of the Ashanti. 1/ The craft has dieclined since th.e consolidation of gold ,mining into- tw+-grus Lonhro and the State Gold ,ining Corporation, processing bars for export. N everth'e'less, thCe 1960' Population Cesu regstre 7,49 god_.t,slvr 7.Ve LI vIJ' I tip J ..~L ~~ tL~ / ,9t U YU±LUML.L±LLLb, 'j±±.VUrL- smiths, and jewellers. Gold ornaments with traditional motives to hang on uracelets andU for ear'Lngs couldU bUecome an add'UULtLora.aL touriLst attractLL, particularly in view of their historical associations.

4.83 Diarnond mining is next in importance to gold. Exports in 1972 amounted to 3.2 million carats worth o18.5 million. The rirst major deposits were discovered in 1919 in the Birim valley, mostly in shallow gravels in the beds and flats and streams. Four large companies operating dredging and treat- ment plants, and a number of independent Ghanaians, are engaged in small- scale panning operations. The average carat size is small ana tne diamonds are sold almost entirely for industrial purposes. There, therefore, does not appear to be scope for labor-intensive cutting and polishing activities which have become an important source of employment and income in India and Israel, for example.

4.84 -Manganese mining commenced in 1916 from deposits in the Dagwin-Nsuta district of the Ashanti region. Numerous other deposits were discovered in subsequent years, but they were either too small to warrant the expense of working them or the grade was too low for export. The Dagwin-Nsuta deposits have been continuously worked since 1916, and high-grade ores are being rapidly exhausted. High world prices have made exploitation of some of the lower grade ores economic, but the long-term prospects indicate a decline in output. No industrial processing of manganese, which is an essential element in the manufacture of tough steel, is undertaken in Ghana. Further domestic utilization would depend upon the development of iron-ore deposits. Exports were valued at 010.1 million in 1972 (Table 4.11).

4.85 The first discovery of bauxite at Mpraeso dates back to 1914, Deposits have been found subsequently at altitudes of 1,500-2,500 ft in several locations, principally at Awaso, Kibi and Nyinahin. Mining began at Awaso in the Western Region during the Second World War on a concession managed by the British Aluminium Company Ltd. Exports reached 311,000 tons worth 92.7 million in 1972 (see Table 4.11). The deposits at Kibi and Nyinahin remain unexploited, although proven reserves are put at some 300 million tons.

4.86 With buoyant international prices and a small number of producing countries, the future of bauxite mining in Ghana looks promisinz. There are also good prospects of further processing. At present aluminium oxide is being imported for the smelting and re-export of aluminium ingots, using hydro-electric power from the Volta dam. The Government is actively engaged in discussions with the Kaiser Group of companies on the exploitation of the 1/ See lwamina B. Dickson A Historical Geography of Ghana (Cambridge, The University Press, 1969) Table 4.11

1EALS AND METAL PRODUCT SUPPLIES

Estirnatedi Share of' Trade Ghanaian Output Imports Exports Dome!Stic SUrplies Imports Balance 1970 Est. 1972 1972 1972 1972 15972 1972

Goldi 36.1 51 - 50.4 51 - -'50.14

Bawuite 2.5 2.7 - 2.7 rLeg. - + 2.7

Manganese ore 6.9 10.1 - 10.1 neg. - 10.1

Iron ore - - neg. - neg. -

Aluminium o.ide - - 25.9 - 25.9 100% .-25 .9

Non-ferous scrap n.a. 0.6 0.6 - - + 0.6

Iron and stesel scrapp, pig iron, and alloys - - o.6 - 0.6 100% - o.6 c

Iron and steel 2.6 3.0 7.8 0.1 10.7 73% - 7.7

Alurninhiiz n.a. 57.5 2.6 56.9 60.1 4% +54-,3

Other metals - - 2.9 neg. 2.9 1(0% 2.'3

MachLne:ry, other than electrical 0.3 00.4 49.1 3.0_! 46.5 99% -46.1

Electrical mach:inery and app:Liances 6.3 7.8 22.3 C0.1 30.0 74% -22.2

Transport equipment 8.3 10.1 32.9 neg. 43.0 '77% -32.9

Othter meatal manifac-tures bb/ 13.9 17.1 12.0 C).1 29.0 Li1% -11.9

155.9 124.0 -31 -9

a3/Mostly re-exports of foreign-made, earth-moving and construction machi.nery. Ib/Including miscellaneous. rranufacturled articles of metal. SOURCES: See Table 4.01. =84 -

Kibi/Nyinahin deposits for the production of bauxite and aluminium. The main constraint has been the large capital funds that would be required, not only to mine and process the bauxite on an internationally competitive scale, but 31so to finance the infrastructure; and especially new means of transport to tarry the large tonnage that would be involved in the operation of an alumina plant.

A4R7 Trnn-nrp qmPt1ng, forglng and blacksmithinp wpre well entahli1hpd crafts in 18th and 19th Century Ghana. Over extensive areas of the savannah s Iate-rite, conns-is tfing of fPrruiiini7Przd rnnrrrtlons. The fPrrugini7Ped nnduiil ,)4re colelcted from shallow pits sunk into the laterite and smelted in simple furnaces. 1/ These furnares grar4du211v di zppeared when imnnrted irron bar became more readily available, but blacksmithing remained an important craft, ianded down from father to son; and no settlement was considered complete ithout a caste of blacksmiths.

4.88 Today no iron-ore is being mined but there is renewed interest in L.h-e possibilhty. National In.vestmet, B-1a,n recently undertook a fe-sibl'Ut-y -tudy of an integrated iron and steel project to mine and process iron-ore leposits at Jponj.t,aansi in the rWestern Region into steel. The findings of this study were not available on the mission. As early as 1928, however, surveys buy the U,ic-aI Survey- "eprten had disovre signiican d-- L1I~ GleologU~LJLL~ ±~..aJ. a Ut-- V IJJCjJAJ. L. L L, UIA.OkLU VVL sut V 5 ~_Y IIZ-1 LI Lu ~U_O.LrL,I1LA. ±L dIL&LL t- posits of iron-ore in the Shiene-Tweleba area near the Togo frontier in .-astennia. It wasest' ated that 100 siliLcus.: At-i~ L~ L IL %,TVL_JI ai L L_ Wd,L U~lJ Lt1U LLticiL. lva milli-1on1.iI.±±ULI L.ULLS---- ofL i.± LJ5 ore_,re fi3bedded in qualzitic rocks, were available for open-cast mining. The ores Lontained an a-verage o0 43o iJron. i[naccessi'iLty LhIas hindered de-velopment.

. S~±tee' 's, however, being made frout scrap in a GIHOC company with a production valued at 02.6 million in 1970. A new project has been approved for a Loundry in Takoradi with an annual capacity of 2,000 tons, at a capiLta cost of 42.9 million. Imports of iron and steel bars, rods, angles, shapes, sections, plates, sheets etc., amounted to Y7.8 million in 1972.

4.90 The situation in the metal product industries is examined in Annex At this point, we note that import-substitution has advanced less far in metal products than most other categories of final products. imports ot machinery, transport equipment and other metal manufactures were 0116.3 million in 1972, compared with a domestic production estimated at 735.4 million. Exports of locally manufactured engineering products are negligible. (see Table 4.11).

4.91 Hopes of discovering viable oil reserves were first aroused at the end of the 19th Century, when oil seepages were discovered in the carboni- ferous rocks that disappear under the sea west of Sekondi in the Western Region. Boring tests at the time were disappointing, but explorations continued spasmodically and have been renewed at a greater intensity over the past decade. Eight international petroleum companies have been given leases for off-shore prospecting. The presence of oil deposits has been substantiated

1/ See Kwamina B. Dickson, op. cit. butno co -4asl...ra strike has yet- been .made. TE that sIholdAocr it would have a substantial impact on the Ghanaian economy. Oil imports cost 045.1 million ir.1972 (tseeTrab le 4.12). T. Ifthe i subCsequent four=fold 4ncrease in the price of imported crude oil were to be maintained, the substantial balance of~- jaO)'h'heO surpJ.lus, .-.ade possb.lU Li 197 by hlghler cocoa prices anA severe import restrictions, would quickly disappear.

4.92 The market for petro-chemical products is relatively small. Imports of syntIL-LetiLc and pLastiLc malerials ar,dl prodUucLs were vadLuedU at ¢4-+.4 Mi.i'.L.LUio in 1972. To these should be added part of the chemicals, pharmaceutical and fertilizer group 'ImpOrtS (see Table 4. 13) 0f ¢8.8 million, some of whlich are derived ultimately from oil. But until Ghanaian crude supplies are founiu, there seems little scope for a petroleum by-product industry based upon domestic inputs rather than the present imported compounds and materials.

4.93 Several deposits of limestone (mostly magnesium) have been found in different parts of Ghana since 1915. The most substantial appear to be at Nauli. Exploitation has been postponed largely because of their in- accessibility. Tunnel mining would be required. However, in view of the heavy cost of imported clinker (06.4 million in 1972 - Table 4.14), the Government remains keenly interested. The 1973-74 Budget Statement included the development of the Nauli deposits among a short list of basic industrial projects that would be seriously considered. Feasibility studies have been undertaken by an international consortium associated witlh a Lebanese business- mran domiciled in Ghana for many years, and a Chinese team has reviewed the situation. An alternative project involving Ghanaian participation in the development of more easily workable deposits in Togo may prove to be more attractive, however.

4.94 A further alternative, which would have the advantage of being more labor-intensive, would be the exploitation of Ghana's extensive clay deposits for the manufacture of bricks. Malleable clays suitable for extruded hollow- bricks are found at several points in the Accra plains. Good brick earth for making solid burnt-bricks, which require a well proportioned mixture of fine sand, silt and clay, are widely available. But there is only one brick and tile factory (GIHOC). Its operations have been restricted by the wear and tear of its plant which was first commissioned in 1953. Plans to rehabilitate this equipment have been delayed by the financial difficulties experienced by the parent organization.

4.95 A substantial subsitution of bricks for cement-based building materials seems to be hampered by several factors. Cement blocks have a high popularity among consumers. The 1960 Post-Enumeration Survey conducted by the Population Census Office showed that 95%O of rural houses were built with mud called "swish" or "atakpami," which is cheap and available locally, but has poor durability and is considered temporary and primitive. A survey of two villages conducted in 1971 by the Building and Road Research Institute 1/

1/ Y. Amefia Opeku. Housing in Rural Ghana: Occupations, Incomes and Preferences (Kumasi. Building Road Research Institute, June 1972) Table 4.12

PETROLEUM OIL AND OIL PRODUCI SUPPLIES

Estimated Share of T:rade Ghanaian Outp Innport s Exports Domestic SupLipes Imports Balance 1970 Est. 1972 1972 1972 19 72 1972 1972

Crade oil - - 34. 4 neg. 34.4 100% -34.4

Refined fuel oils n.a. a/ 43.o neg. 4. ) 39,O - + 4.0

Lubricating and other mineral oils and jelly - - 6.4 - 6.4 100% -6.4

Pi tch and bitumen - - 4.3 lOO1 - )4.3

45. IL 4 ( -o.

a/ The CBS Industrial Production Statistics give a fiLgure of 0 6.8 mLllion for the value added to imported crude petroleum by the Chana refinery.

'SOURCES: See Table 4.01 T able 4.13

CHEMICAIS, FHARMACEUTICAIS ]FERTILIZERS AND INSECTICIDE 'SUPPLIES (in 0 million

Estimated MLrect Share Trade Ghanaian Output Imports Excprts Dwnestic S )plies of :mports Balance 1970 Est. 1972 1972 1972 1]972 1972 122

Chemical Elemnents and Compounds 0.8 1.0 l1.4 IV 0.L4 15.0 9?6% -14.0

Fertilizers ( ) 0.2 - ( ) - 0.2 ( 4.3 IV 5.5 ) - ( 7.7 29% ) Pesticides ( ) 2.0 - ) - 2.0

Drugs and medicines 2.7 C/ 3.3 6.9 0.2 10.0 d/ 69% - 6.7

Chemnical ex- c plosives and products n.4.so 2.7 3.3 5.3 neg. 8.6 162% - 5.3

28.8 o).6 -28.2

=/ ulding aluminium oxide used for the manufacture of aluminium ingots. T5/ Bwsluding natural fertilizers of animal or vegebtable origini. c/ XLuding drugs imported in bulk axLd paLckaged for retail sale. F/ladaiy inflated tr double:-couLnting. See Note 3/ above. 'SOUICES: See Table 14.01. Table 14.14

CLA Y, CEMENT PAINTSI CEIWTICS AND GLA'SS SUTPPLIES -7In V77miiionrs7-

Estimated Share of Trade Ghanaian Output Imports Exports DomestiCLSU)Pli(5S Imports Balance 1970 Est. 1972 1972 197 2 1972 1972

L.ime and clinker - - 6.4 6.4 100% -6.4

Asbestos - - 0.6 o).6 100% -o.6

Cerwaic Glaze n.a. n.a. 0.1 neg. n.a. n.a. -0.1 Pigments, glazes and metallic oxides - - 0.5 0.5 100% -0.5 Glass and Glass Products 2.3 2.8 2.2 neg. 5.0 44% -2.2 Pottery and Cleramics - neg. 0.4 -- (.4 100% -0.4

Bricks a-nd tiles 0.4 0.5 0.9 *- L.4 64% -0.9 Cement and cement and asbestos proiducts 11.2 14.0 0.5 neg. 14.5 3% -0.5 Paints, varaishes and lacquers 2.0 2.5 0.9 neg. 3.4 26% -0.9

12.5 neg. -12.5

SOURCES: See Table 4.01. - An -

revealed that almost all houpe owners would prefer sandcrete blocks and would rather defer build±ng a new housae init until they could afford the additional cost. Only 2.6% stated that they would like to use burnt bricks. 0 iollow brcks m.ade by the G-IY O Brick and Tie Factorv are more expen,ive than sand/cement blocks. This can be attributed to (a) low levels of efficiency aL the factory, (b) Vhe pr.ce of emnt'controllled bhellow real cost, and (c) hiiglh transport cost for bricks from the single source of supply, coiupared withn the practice of A z-- An f 'ng c,k a

4.96 However, a study by the p.iding arnd Road 1Reearch Institute indicates that solid burnt-bricks could be manufactured more economically on a small scale in scattered locations in rural areas.-1/ They estimate that a plant employing 20 persons, with a capital investment of 035,000 would have a capacity of 500,000 bricks annually and be able to sell at 00.04 per brick. The main obstacles are the lack of knowl,edge.of brick-making and brick- laying techniques. Advisory and traintng seVvices in the field should become a key element in an enhanced rural industrialization program.

4.97 Another clay-based craft which deserves greater attention is potterv. This has been traditionally a female occupation. The 1960 Population Census enumerated 8,313 potters, of whom 8,074 were women. Their products are Drin- cipally cooking and storing vesseXp which are moulded without wheels. As their establishments are too small to be covered by the Central Bureau of Statistics Industrial, Surveys, nothtng Xs known about trends in production and employment. They have been subject to competition from imported ceramic products (q0.4 million in 1972) and locally manufactured metal containers. The introduction of gXlazing techniques', improved kiln design and some mechanical aids (wheels and pug-nmills) will probably be necessary if the traditional potters are to survive this cOmpetition,' Present development Dlans are confined to the erection of a modern ceramlc factory to make chinaware largely from imported clays. I

4.98 The domestic glass industry consists of the GIHOC Glass Factory. It makes glass bottles chiefly, using local sand but imported chemical components This factory lias been plagued by managerial and technical difficulties, and is not yet competitive in cost or quality with imports. The brewers, for example, complain of unduly high wa,stage rates due to breakage on the bott-ii. lines, traceable to an uneven 'thickness of the glass. The original capital investment in 1965 was 07.5 million, but it is presently working well helow its capacity of 57 ton,s per day. -Produqtion in 1970 was valued at 02.3 million with a labor force of 723. In 1972, imports of glass and -lassware were 02.2 million.

4.99 Residual mining activities include salt and stone quarrying. duction is larger establishments in this categerv amounted t 01.6 mtlo from 261 workers. Included is the Marble and Terrazo Tile Division of which manufactures flooring tiles an,d aravestones from local msterials

1/ N.S. Bawa. Manufacture of Burnt Clay Bricks in Wood Fired Clampi (Kumasi, Building and Road Research Institute, 1971). - 90 -

E. ConclusiOns

4. 1U it seems clear 'rom thle above review thbat.Ghana'sna LIural..sour, potential is a long way from geing.fully tapped, even with existing. capital and manipower constraints. Steps. have. .already beehl taken by-' the prdint Govern- ment to strengthen the.links,between Ghana s5primary and secondary sectors. These should be pursued vigorously. ..;OutsLanding prject prOpos&lb, whi.ch have the backing of thorough feasibility studies, should be given high priority in the investment portfolios of. thedevelopment banks.and the promotional activities of the Capital Investment Board.

4.101 Care needs to be exercised, however', to ensure that the drive for self-reliance does not reproduce some. of the, mistakes of the past in another guise. Backward integration by manufacturers may seem tobe the quickest way to secure raw material supplies... But excessive'reliance on this instrument could result in a-rigid dualistic structur'e in agriculture, with an "enclavel' plantation sector widely separated in'technology and cultivation practices from the small peasant farme,rs whose growth opportunities would be severely limited.

4.102 Equally, self-sufficiency should not be pursued at all costs. Some degree of specialization in, both commodities and manufactured products would yield economies of comparative,advantage. Comparative advantage should be determined by thorough feasibility studies of the cost and benefits of alternative courses of action. Similarly,,the viability.of existing investments should also be assessed. The temptation to try-to make good earlier industrial investment by pouring more money into large-scale agricultural schemes should sometimes be resisted. It might pay to. sell-off or scrap redundant canning capacity for example. Cutting losses in'this way would leave the path open for the development of small-scale rural industries, mak'ing the same or substitute products with more labor-intensive techniques and closer ties (through the efficient network of mammy,tr,aders) with the smaller farmers.

4.103 Similarly,..renewed efforts should be made to reach agreement with neighboring African countries for the jQoint expioitation of those'forest and mineral resources, which need large lumps of capital, sophisticated know- how and large markets, starting with the most economic deposits and locations irrespective of in which.countries they lie (e.g.. ceinent, iron and steel, pulp and paper). Preference should be_given to those national projects which involve simple processing operations requirin'g a.high labor and low capital content (e.g. clay bricks and pottery, furniture, wooden toys). - 91 -

CfTERLJ( V

FORFIGN EXCHANGE

5.01 The shortage of foreign exchange has been a major constraint on the growtlh and efficiency of the manufacturing sector in Ghana. We have seen how the dependence on imported materials and equinment has resulted in trading deficits in most product groups. This present chapter will examine two further aspects of the problem. First, how the foreign exchange is allocated to industrv through the import licensing system. Second, what is being done to generate increased foreign exchange earnings by the promotion of exDorts.

5.02 Before dealing with these topics, let us look at the overall balance of payments situation. Table 5.01 shows the evolution of imports and exports over the past decade.

Table 5.01 (in.¢ millions)

Imports Exports

1963 260.8 217.6 1964 243.2 229.3 1965 320.1 226.9 1966 251.2 191.4 1967 261.5 245.1 1968 314.0 338.8 1969 354.4 333.3 1970 419.0 467.4 1971 443.1 357.5 1972 393.3 564.4

5.03 Merchandise trading surpluses have been achieved only in three years, 1968, 1970 and 1972. Throughout the period there have been deficits on (1) non-factor services averaging-¢20-25 million p.a.; (2) investment income ranging from -420.5 in 1966 to an estimated -048 million in 1971; (3) transfer payments (i. e., remittances abroad by individuals employed in Ghana and payment of retirement compensation minus grants from abroad including technical assistance) averaging -¢5-6 million.

5.04 Thus a substantial overall deficit on current account was incurred tntil 1972. This has been offset by net canital inflows. But the exhaustion of foreign exchange reserves has only been prevented by the accumulation of substantial foreign debts snd the non-payment of arrears and interest due on loans, particularly suppliers credits. - 92 -

5.05 The situation improved greatly in 1972 and 1973 due to the buoyant. world markets for cocoa, timber, gold and bauxite combined with stringent import restraint. An estimated net increase in reserves of $69.4 million was gained in 1973. However, inflationary pressures throughout the world, including the general increase in commodity prices (particularly oil), may wipe out the advantage gained from the favorable movement in Ghana's terms of trade over the nast two years.

5-06 A more durable balance of navment surplus seems still to depend upon a fundamental restructuring of Ghana's trading relationship with the outside wnrld= This could be achieved by administrative controls and/or the use of the price mechanism (through the exchange rate or by import/export taxes and subsidies) to make Ghanaian products more attractive abroad and reduce the demand for imports.

5.07 The present Government has made changes in both areas. The tariff structure hn beevn cimnlified bv reducing the ranae from 95-sa to 20-50%. Import duties and sales taxes were merged. The primary aim was to facilitate effective conlection and stem tax evasion. Tmnort lirense levies have heen introduced, at rates ranging from 5% to 20%. These levies compensate for loss of revenue on luxurv items nreviouslv carrying a high rate of duty. They will also discourage importers from "over bidding" in their license applications, a nractire which made accurate nlannine of foreign exchange allocations very difficult in the past, as indicated below. A further unification of the import tax and levy structuiri wunild lead to grentPr effirienrv in t-he allnroatin and use of resources.

A. Foreign Exchange Budgeting and Licensing Systems

5.08 With the exception of a brief spell of import liberalization in 1970 a.nd 1971, -Wh.ena conrsiderable proportion of imports was put on Oplen Gener.al Licensing (OGL), Ghanalan authorities have been allocating the scarce foreign exchange fLor different uses in one for.,. or thne othler. ThLle ma.in vehicles for such an allocation system have been the minimum import programs.

5.09 The Bank of Ghana draws up the annual foreign exchange budget based on the expectedu advailab±li.L oA f toreignexchange 'roUlm thLe countryts own resources in a given year, plus committed aid less contractual and other payments. This budget indicates as residual the amount of foreign exchange available for a basic import program. Sometimes, additional foreign aid (over and above the firmly committed amounts) is added to th's basic sum; and, sometimes, a certain portion is precluded to be treated as a cushion against contingencies arising from certain shortages of strategic kind developing in the system. This becomes the basis on which the Ministry of Trade and Industry prepares an import licensing program to be administered by the Controller of Imports and Exports within the Ministry. - 93 -

5.10 The principal objectives of such a system are to ensure: (aj Both a minimum of essentialI consumer goodds and to restrLcEt luxury consumption imports;

(b) Allow an adequate level of raw materials and spare parts commensurate with greater utilization of existing productive capacity;

(c) Permit an adequate supply of capital goods needed to carry out a certain level of investment expenditure in the economy during the reference period.

5.11 There have been, and still are, many problems both in assessing the level of imports needed in each category and in adhering to priorities or an import program of a specific year. We do not need to go into the details of how import requirements (for consumption, intermediate and capital goods) are generally derived for purposes of allocating foreign exchange to different uses. Suffice it to say that actual imports in some categories in past years have diverged substantially from the level of imports envisaged in the import program. There may be several reasons for this divergence: (i) the licenses were not issued strictly according to the details of the import program:

(ii) licenses were in many cases issued for "'bulk requirements" of ministries, Government departments, universities or other institutions which dilute control on what is actually imported,

(iii) some of the licenses issues were not classified according to the specific customs numbers so that they were not readily comparable to amounts programmed for different import categories,

(iv) licenses in each year were issued for in excess of the import program of the year to provide a cover for the expected slippage factor, and

(v) an unknown amount of licenses issued in the previous year increases demand in the current or succeeding year. Even if we assume that import programs can be derived with perfect knowledge of what is needed or desired in the economy, all the above mentioned reasons make it hard to adhere to priorities or import program of a specific year. 5.12 Given the fact of over-valuation of the cedi (otherwise there would be no need for allocating Loreixgn exchange through the licensing system), those who get foreign exchange at the official rate in fact get a subsidy; while those who surrender foreign exchange at the oflficlda| rate to the Monetary Authority in fact pay a hiden tax. Import licensing policy, therefore, exercises a powerful influence on the composition of imports and domestic investment. By varying the relative shares of foreign exchange allocated to various categories of imports, the policy influences tne ievei ana composition of consumption, production and investments in the economy. By banning certain imports, it produces a monopolistic situation for those wno produce them at home.

5.13 Export promotion policy, to the extent it is effective, tends to reverse the allocative biases of the import licensing policy within the sphere it covers: it subsidizes exporters and therefore encourages investment and profitability in exportable lines.

5.14 Tariff policy which imposes higher duties on luxuries (on non-essential items) and lower duties on capital goods (on essential items), also influences the composition of imports and hence investment and profitability of import-- competing industries.

5.15 From the viewpoint of resource allocation, there are, therefore, a number of policy instruments, viz tariff policy, import licensing and exchange control policy and export--promotion policy in conjunction with investment incentive measures, which influence the relative profitability and determines the allocation biases of different policies. In order to ensure that these instruments are mutually consistent in promoting the socially and economically desirable industries, it is recommended that a comprehensive study of the allocative biases of these sub-policies be made; the hypothesis to be tested is that different elements of the commercial policy in Ghana promote the same set or sub-set of industries, as do other measures or incentives designed for the promotion of industrial investment.

5.16 In this report we could not undertake such a study because of lack of adequate data properly classified over time. The import licensing data according to functional classification such as consumer goods, raw material for consumer goods, capital goods and raw material for capital goods (on the basis of SITC scheme) are either not available or are generally merged with institutional classifications--such as commercial imports. industrial imports. GIHOC. GSC. universities or other Government department imports. A mass of raw data has to be reclassified and tabulated to get an insight into the working of import licensing policy. It is very likely that Ghana may continue the import licensing system for quite some time. The devaluation of 1971 is widely regarded as a failure, and the authorities feel that the highly differentiated tariff structure did not fulfill the obiective of allocating resources in ways whiCh reflected the Government's economic and social priorities. Hence there was partial revalua- tion of t-ho urwreny ri 1Q7972 Given the diqenchantment with the price mecha.- ism and preference for administrative controls, it would be desirable to pay more attention to the mechanics of the licensing system so that it may be operated with greater erficiency and ensure that it compiements other eiements of development policy.

5.17 The main objectives of the study wqould be to find ways of (1) making known sufficiently far in advance the magnitude of the import allocations to each enterprise to allow adequate forward planning and decision-making by management; (2) rer1ucinp the heavy financial burden (working capital) created by the need to take out letters of credit and pay license levies months before the imported materials can be processed and sold; and (3) ensuring that inefficient nroducers are not being subsidized by obtaining foreign exchange at a price below its real cost to the economv, at the expense of less favored producers who are too small to participate directly in the licensing system.

B. Export Promotion

5.18 Exports of manufactured goods in current prices increased by about 15% per annum during 1964-69, raising their level from ¢Ig million to 035 million. However, on the average, manufacturing sector exports from Ghana have been around 10% of total exnorts during most of the 1960s. Mforeover, 95% of manufactured goods exports consisted of products of only two commodities: cocoa and timpber. These two commodities even in raw form have recently experienced fairly buoyant international prices. Additional foreign exchange earnings from processed exports of these two commodities were, therefore, very small, while exports from the rest of the manufacturing sector constituted only a fraction of 1% of total exports. Such performance after more than a decade of massive industrialization is, indeed, very disappointing.

5.19 A principal oblective of industrial production in Ghana was to free the level and composition of consumption and production from foreign exchange constraint, and to achieve a substantial diversification in exports which had long been dependent on cocoa and other primary or extractive commodities. Since independence several successive regimes have pursued this obiective but with little success. In this section we shall try to highlight the obstacles which continue to impede progress and suezest areas where immediate policy decisions are needed. Before reviewing existing policies and institutions affecting export growth, we shall briefly discuss two areas in wihich Ghana's nosition would make a substantial difference to export performance in the long run. The two cases are: (i) disadvantages that Ghana exnorters face in the EEC- in comparison with the exporters of those Western African nations which receive EEG preferenre, and (ii) diffiru1t-ies of Pynorting Ghanaian goods to franrophonn nations in West Africa, where such exports are subject to higher duties than the frAneophoneationr EEG oountries. ./

1/ According to one study the effective rate of discrimination in the Ivory Cosadg- is 2Y --- - 1 - Dahome -96-

I. Ghana Exports and the EEC

5.20 Clhanaian authorities should be carefully assessing the pros and cons of join,r the EEC, particularly in light of the phasing out of the Commonwealth Preferences Scheme in 1975. In 1970, the enlarged EEC took about 50% of Ghana's exnorts. In the absence of any association, almost half of Ghana exports would have to face the Common External Tariff (CET) of the EEC. The Ghanai-an policy- makers have options to seek different types of associations with the EEC and trade relations with francophone countries. A comprehensive study should be undertaken by the Ministry of Trade to determine the extent of short^-term gains and long-term advantage, which association with the EEC would bring (e. g., avoidance of the 4% EEC duty on cocoa beans and a much higher duty on cocoa products and other manufactured goods such a veneer sheet, plywood, etc.); cominared with the disadvantages of costs resulting from the obligation to provide some reciprocal preferences for goods imported from the EEC and possibilities of increased denendence on Europe. Similarly. comorelhensive studies and negotiations are needed to have access to the markets of francoplhone nations..

2. ~SExoort Difficulties

5.21 Apart from these two areas in which economic factors and diplomatic manpiiuverbilitv wniild determine the ultimnate (hana position. and hence its capacity to export, there are other difficulties which will affect export per- fo-rmanre One set of nrnblems relates ton making fulll use of the nresent exnort base by removing obstacles to exporting, and the other is to create a much larger base through an expansion of industries capable of ge-erating exPortable surpluses of carefully selected products.

5.22 Currently available manufacturing sector exports from Ghana encounter several difficulties. In manv cases, cost com.pe L-tiveness of .n an is not ver-y favorablv, particularly, in those areas where a layger share of inputis,- -l,,edand 'A.es L vaLlue addedL is rathler sm.all' Efc4entI4. 4 production in most of those cases will call for further improvements in skill andU Iiaiage,ient capabilities. Honwever, lack of Jinput oiU oU,,es. sure is not necessarily the most difficult hurdle to cross for expanding exports. Sev- eral developing nations (e. g., 'Korea, Taiwan) whLose e-port gro,wth of mLanufactured goods lhas been outstanding, are not endowed with the most abundant raw material resourc(--s wIhich1 form thle basis of their vigorous export perfoirmance. Whtlat Lhey have done is to follow policies and practices coupled with carefully chosen incentives, whicn make it both easy and profitable to enter export marKets.

/ For example, manufacturing of footwear and apnarel, lether goods and paper products, chemicals, metal products and engineering goods, electrical appliances and transDort equipment, etc. 3. Export Incentives

5.23 One obvious obstacle in this regard is that prices of most of the Ghanaian exports are too high to be competitive in foreign markets at current exchange rates and, if competitive, the profit margin is so small that exporters find little incentive to take the extra trouble and commercial risk of exporting. A major step toward making Ghanaian goods more competitive has already been taken by authorization of a 20% bonus on cedi equivalent of foreign exchange earnings deposited in the Bank of Ghana, except for certain traditional exports. 1/ It is clear that under this scheme the bonus is paid on the gross value of exports. It is also understood that drawbacks (refund of duties paid on imported materials and components used in producing export products) will continue to operate.

5.24 In our judgement, the export incentive measures would not adequately achieve the desired effect--encouraging export of those products which maximize net foreign exchange earnings. This is illustrated by the following table. The calculations assume a 20% export bonus and a 20% drawback of duties on imported intermediate goods.

1/ The scheme, published in a decree on January 24, 1973 excludes from bonus entitlemernt the folloing ite:timber includirsan timber, cocoa and cocoa products, all minerals and primary metals other than diamonds bought from local- wir.ners. Table 5.202. GHANA,:; } NA Sl,-,Ic,OF THE CURR?3 EXPBO.T BONUE SCIE-E Expor t Export Incentciv.L Inc eritive Gro s s Gro s s Value Value Domuestic ! Total Minus InztrmUi.ate Inputs Value Gros8 Value- EXport Import Dutyt Export Inq)ort,5 Cate:gor:Les orted Domestic Added of Exorts BonuEi DrawbaLck Bonus % % m77 3T L=(l)+(2)+(3) (5) (6)=(l)x 0.2 (7)=(5) (6) -7-T--7/ TT)=7TJ4377

I 80 10 10 100 20 16 36 36 1180

II 70 15 15 100 20 14 34 34 113

III 60 20 20 100) 20 12 32 32 8o

IV 50 25 25 100 20 10 30 30 60

V 40 30 30 100 20 8 28 28 47 a

VI 30 35 35 100 20 6 26 26 37

a/, F.o.b. value. 5.25 Table 5.02 illustrates clearly that the present system of export incentives is no encouragement to exporters to economize on the use of imported inputs; in fact, exactly the reverse appears to be implied by the present arrangements. Tnose categories of exports which have higher import contents, also have higher export bonus benefits.

5.26 A more rational scheme should differentiate export bonus incentives according to the share of domestic component of exported goods--i. e., the higher the domestic component of exported goods, the higher the export incentive, either directly proportional or progressively increasing. A simple way to achieve this would be to progressively reduce import duty drawbacks, and to relate export bonus to different categories of export goods according to domestic production coefficients.

5.27 Table 5.03 given below, illustrates that if drawback on import duty is not allowed and export bonus is differentiated according to the share of imported components, then the use of a larger share of imported inputs would be discouraged and greater use of domestic resources would be rewarded.

Table 5.03

GHANA: Illustration of A New Export Bonus Scheme

Intermediate Domestic Gross Export Inputs Value Value of Export Incentive on Categories Imported Domestic Added Exports Bonus Value Added: % (1) (2) (3) 4 =1+2+3 (5) 6 = 5/4-1

I 80 10 10 100 5 25 II 70 15 15 100 10 33 III 60 20 20 100 20 50 IV 50 25 25 100 35 70 V 40 30 30 100 50 83 VI 30 35 35 100 60 86

4. Institutional Arrangements

5.28 Availability of the right kind of price incentives is not sufficient to improve export performance even though it is a necessary condition to achieve any measurable success in increasing non-traditional exports. Appropriate institutional arrangements to help exporters mobilize their efforts are equally important. Presently, the Export Promotion Company is contributing very little to this effort. It does not have access to adequate resources or fund of knowledge, as well as expertise, to render any useful service to small individual exporters of non-traditional manufactured goods. Even though it was established in 1969, its operations are still very limited. Since it is even now in the formative staaen of setting itself uip properlvy it wnold be deslrable to illustrate some areas in which it can do a useful job. Table 6.01

CONTRIB3UTION OF MANUFACTURING INDUSTRY TO COMPANY TAX REVNUE'S (in 0 millions)

1i564/65 1c965/66 15966/67 1967/68 1l968/69 1969/70 A_ B A. B A B A_ B A B A B

Agriculture, Forestry and Fishing 4.1 1.8 8.8 4.6 4 9 2.3 2.8 1.3 2.3 1.1 1.9 1.0

Mining, Quarrying 59.7 30.2 38.4 21.4 17.7 9.5 25.4 15.3 39.8 22.0 38.6 22.1

Manufacturing 12.c9 5.4 11.5; 5.3 L4.:L 7.6 5.1 2.4 15.:L 7.6 8.6 4.3

Construction 7. 2 3.6 9.3 5.3 11.2 6.3 19.8 7.4 6.6 3.4 4.5 2.3

Commnerce, l3anking C) and :Ensuizance 39.6 16.9 32.3 25.1 60.6 29.8 48.t 24.4 31.9 16.1 28.9 15.3

Transport 3.'5 1.6 5.( 2.4 8.1: 3.8 7.6 3.5 3.2 1.6 2.6 1.3

Miscellaneous Ser- vices andi Indus- tries 1.6 0.7 1.5 0.7 1.7 0.8 3.7 1.7 4.8 2.8 1.h 0.7

Total 128.8 60.2 126.8 64.7 118.3 60.2 113.1 56.1 103.6 54. 6 86.5 1h7.0

A = Chargeable incomea i.e. gross profits :Less depreciation, interest and other aLlow-ances

B - Tax charged.

Source: Annual Reports of the Central Revenue Department. - 102 -

6.04 It mav be questioned whethier these tax exemptions and allowances are effective in attracting additional Investment over and above the level determined by the overall nolitical and economic climate and market opportunities in each sector; and if so, whether gains justify the drawbacks of (1) reduced government revenue and (2) encotiragement of undulv canital-intensive investment.

6.05 A more recent breakdnwn by economic sectors is not available. but total revenue from company income tax show a decline in yield over the past three vears, from 047-0 million in Q169/70 to ¢32=5 million in 1972/73.

6 06 It is interesting to note the difference in the yield from the manufacturing and mining sectors. Mining paid more than five times the amount of comnany tax In 1q69/70 alth jhtsa geros o,utpuit was only 1R7 of mTnuifacturing'jsn As the rates of tax on chargeable income were much the same, this discrepancy sugg,ests tht mining is a much more profitable activity than manufacturing in Ghana. Profitability in manufacturing may have been adversely affected by a higher incidence of import duties excise and sales tax, hever.

607 Beginning in the 1972'/-73 fiania year, the decideANRC- thtfsar * t, ~5.&I LI.Unfl .LL U~~ S- , 4.f , 3 f_..=L LULXO yei NaL _ ,flC - I j - of the nolicy of self-reliance, public organizations should make a contribution to Cer.tral Gover.nm.ent revenues as a Udividen-- A it4s inet..ns A target+ of ~J5JV~ L ~.LLLL1LLL I~ VLL~~) d~a UL .LJILU IJ&L .5 S5 L V ~5 I.55fl-Cf L . 5 - 6 -. '. a 10% return on investments was set, but the profits earned in the public and join state/priV atCe minuf Ucturlin g pprOJeCtS dU.LU LLdo aC.LLow Lth.is target to be realized. Table 6.02 shows the amount due as the government's share of profits and thle artdicipated paynmetit b'y June U, 197I3

_t4 r _'- A Table D. u.

Anticipatea Amount Due Contribution

Kumasi Brewery ¢ 200,000 ¢ 72,000 Lever Bros, Ghana Ltd. 625,000 548,800 Ghana Aluminium Products 50,000 25,000 Ghana Pioneer Alum. Factory Ltd. 15,000 30,000 Ghana Textile Printing Co. 300,000 100,000

Crystal Oil uills Ltd. 3,000 --

Lew Match Factory 100,000 -- Chana Cement Works 225,000 Ghana Industrial Holding Corp. 1,500,000 1,500,000 Ghana Italian Petroleum Co. Ltd. 485,700 400,000

Total Public Manufacturing Sector f 3,503,000 f 2,675,800

These figures indicate a low/rate of return when measured against a book value of assets of GIHOC alone of 078 million (1971 estimate).

- 103 -

2. Excise Taxes and Local Du!y

6.08 Excise duty is levied on a variety of local manufacturers. Until 1969/70 the excise duty net covered 34 items at rates varying from 5% to 20% ad valorem, except for cigarettes with rates between 45% and 75%. Ten additional items were added in 1970/71. Battery-operated short-wave radios were removed in the 1973/74 Budget. In addition, a local duty on cocoa processed in Ghanaian factories is imposed.

6.09 The trend in revenues from this item is as follows: (in 0 millions) Estimate 1966/67 1967/68 1968/69 1969/70 1970/71 1971/72 1972/73

Excise and Local Duties 25.1 30.6 32.1 38.2 48.4 45.2 67.6

A high proportion of these revenues comes from three items. In 1968, cigarettes contributed 37%X beer 207%; and rocoa hutter 23X. Tn 1972173. the nronortions were 23.5%, 18.5%, and 18.5% respectively. Motor spirit added another 17.0%

6.10 CBS data on gross output of larger manufacturing enterprises excludes ePrici t2xes 1/ Nevertheles thleio taxes are paid by the manufacturer and are included in his price to the wholesaler/retailer/customer. They, therefore, constitute a direct contribution by the manufacturing sector to Central Govern- ment revenue.

3. Sales Taxes

6.11 Excisable items are also subject to sales tax varying between 5% and 7 1/2% . Until 1973, these taxes were levied on 4mports as well as local ma- u factures. Estimated receipts for 1972/73 were 010.9 million from imports and ¢20.1 m,lillon froma local pr oAucts. Thue 197 17 4- Buge` none -- tha mports 7'L'L L L~ ~J. %AU L~. i IL J II ./ / 't i)ULI~L~; CL1LJUULLUt:L LILIL L iIIUL. LS xwill no longer attract sales taxes.

4. Imort Duties

6.12 Rates of duty on industrial raw materials and equipment have been low, usually either 5% or a' valoreru. These rate pre dt"es 'xoe ~.L 4.L.LL=AL JI,. !I'WLI'. ~U V UL ILb1. LdL_b--- CUIiiPL------CU W.L Lit UU L.Le 0L1on HIWUL L"-U consumer goods ranging between 50% and 150Z during the 196n s.

1/ The data for tobacco industrv suezest that it has been included for this item. 6.13 Several large manufacturing firmns have been exempted from import duties for varying periods of time under the Capital Investment Act of 1963 or other dispensations. These include Ghana Cement Works (six years from 1959); State Footwear Corporation (Now part of GIHOC, two years from 1968); State Textile IIanufacturing Corporation (now part of GIT-TOC, six years from 1966); Associatedl Industries (Ghana) Ltd. (two years from 1967); Tema Thread Co. Ltd. (two years from 1967); Juapong Textiles Ltd. (five years from 1968); Union Carbide Ghana ltd. (three years from 1968); Amitex Printing Works (three years from 1968); Crocodile Matches (Ghana Ltd. (five years from 1968); and Volta Aluminium Company Ltd. (no time limit).

6.14 In 1968, 28% of imports were duty free. The total receiDts from import duties have read as follows:

(in Z millions) Estimate 1966/67 1967/68 1968/69 1969/70 1970/71 1971/72 1972/73

67.3 59.4 55.9 67.5 104.8 89.0 62.6

_Je have_ -en unable to Isolate duties on material and machinery innuts into manufacturing industry from the totals, but in view of the low rates on these ; temsT nnihthP ePxtPnsive exemntinnq_ the buirden on industrv is not likelv to have exceeded 020 million in 1972/73. This represents 5% of the estimated vl oiif mTnnuf.rtiiring indiustry output.

6.15 This tariff structure andnpolirc hn had four imn ortant conseuence. Firstly, establishment of industries for final assembly of semi-finished components has been encouraged. The industries produce low value added, particularly if measured at international prices (e. g., motor vehicle and radio assembly). Secondly, low or zero duties on raw materials combined wmith nan over-vl-al currency have discouraged backward linkages with Ghanaian agriculture. Close relationships of confidence built-up with overseas -- 1l4J t on the basis of quality and service as well as price, are difficult to break once the initial peri od. of duuty exe,,,ption expires. Thu0s 4ndusA-ry has re.ainedA h1ighl 4-. - --t intensive. Thirdly, the highly differentiated tariff structure provided an Mncenti.LL~LL.LV -e a-nddiU a-ndi opporunitPPU.L L.ULL.LLy forL-UL i-r.,orersLLLJLPU. L.L touL1 evadleV U dutyUU ty byU.Y mis~L,3,U=aL~LLJA.LLK, escribn;4,,ot L131)121 Lt_ as articles attracting lower taxes. Fourthly, a duty of only 5% on machinery has biased investment towards capital-intensivCe Ltec1L1Uology, iLdL)CICU LtLe utrve.Lop- ment of indigenous substitutes using a higher labor input, reduced the labor- absorption capacity of industry, and prevented the emergence of a machine-building sector in Ghana.

6.16 Some steps have been taken to tackle these problems over the past 2 or 3 years. Duties on some raw materials were raised', and iowered on finished products. The 1973/74 Budget simplified and narrowed the range of duties from the previous 5-150% to 20-50%A License fees introduced were calculated as a - 105 -

percentage of the value of the import license. Fees are levied at rates of 5%, 10%, 15%, 20%, and 30% according to commodity groups, with the higher levies being imposed on luxury products. The import duty on machinery (5%) has been abolished, but a license levy of 20% effectively raises the cost of imported equipment.

6.17 These are all moves in the right direction and will facilitate administration and control, as well as increase revenues. Nevertheless, the Govern- ment continues to rely largely on import licensing rather than tariffs as the princiDal means of restructuring imnorts to conform to its economic policy and to restrain imports generally.

5. Conclusion on Fiscal Policies Affecting Industry

6.18 The manufacturing sector is subject to a heavy burden of indirect taxes. Thil htirdln iq nnt Pnet,s1llv ahnrp,e hat-wpn fi rmcg, nnt- nn1v hpr.nitit nf witlp vari- ations in rates of tax from product to product but also because of the extensive 4 use of tax o?ramn#t-r,q no 4viw*m,vtinceniv. aa The resuilta,s4i t,hat the nvnfit- ability of some firms is severely squeezed whereas others are unduly feather- bedded. The exp8n.840, replacemen.t and irove.m2t o.f m f r4rg capclt has not, therefore, been closely related to the efficiency with which existing

cp ta eores L'ae l_e ut .* _A.IL z e '.v _v

6.19~ It+ is Adiffi-tcu It~o see hU-w -le -ax burden or. ir.dustry could be reAuceA S . A I. L U..LLL .L . .L L. L. IUA LALL L A U ULU 1). LLLUSJLL .U&L_ without a reduction in the public and social services which are being financed from.',Ute revenue. sle relat've burder. or, the cocoa 'aru.ter 'Ls greater still. LUlSLLL JA~L~LI~ L ±L.V LULU~L ieLLaLLIt L LL L.J.L.L.L More could be done, however, to spread the load more equitably, and to encourage greater efficiency, by a further simplification anda unification o' tax rates and by substituting labor subsidies for tax rebates and capital incentives as the main investment promotion instrument. Tnis last point will be uiscusseU more fully below.

B. Overall Trends in Commercial Bank Loans to the Manufacturing Sector

6.20 There has been an extremely rapid expansion of commercial bank loans and advances to the manufacturing sector in Ghana. In absolute terms, financing increased from 04-5 million in 1964-65 to about 080 million in 1971-72 (see Graph 2.04). Tnere was also a marked change in the portfolio composition or commercial banks in favor of financing of the manufacturing sector. The share of commercial bank loans to manufacturing increased from about 4% in 1964-65 to about 32% in 1971-72.

6.21 Table 6.03 illustrates the relative shares of commercial bank loans and advances to various sectors of the economy. - 106 -

6.22 Traditionally, the commercial banks in Ghana had their operations geared mainly to financing of commerce. During the eight-year period between 1964-72, however, commercial bank loans to commerce increased only slightly in excess of total loans, but loans to manufacturing sector increased at more than double the rate of growth of total loans. As a result, the share of loans to commerce in total loans increase at 2.6% per annum and the share of loans to manufacturing increased at 21.0% per annum; where-as the share of loans to construction and all other sectors declined at a rate of 11% per annum and 5.5% per annum, respectively. It is quite clear that large-scale manufacturing has attracted and continues to attract a major share of loanable capital of commercial banks in Ghana.

6.23 Another interesting feature of the manufacturing sector has been perhaps its deficiency in internally generated funds for working capital. There is no direct evidence of this phenomenon, but the fact that the ratio of commercial bank loans and advances to gross output or sales of the manufacturing sector increased rapidly, from 4% in 1964 to 24% in 1971, implies that the largescale manufacturing sector made increasing use of commercial bank loans.

6.24 In another section in this report (para. 2.21 and 2.24) we have stated that during the second phase of industrialization--1966 through 1972-- manufacturing enterprises in the private sector grew much more rapidly than manufacturing enterprises under the public sector. The commercial bank loans and advances also support this conclusion.

6=25 Figures in Table 6.04 show that commercial bank loans and advances to manufacturing enterprises in the public sector grew at an average annual rate of 27%_ and to enterprises in the nrivate sector at a rate of 377. Also; diring 1966-72, more than 70% of total commercial bank lons were absorbed by the private sector enternr4ses, whereas only about IOT was rhannel1 ed to PnteprnriQa in the public sector.

C. Financial Institutions and the Manufacturing Sector

1. Bank of Ghana (BG)

6.26 Until 1969 the Bank of Ghana had concerned itself almost entirely with th,eL&IA LItraditional %AL L. JLa.L 'Func.t4ons£-fftLLSl ofi a central.,.... bank,Lan, leaving.~ v deeo,mr-fiac-- VCLLjU U LU .LAUCL.CL A-fnto-S_U1UAL. L±ULI.Z to other financial institutions, such as the National Investment Bank (NIB) and thle ank-t AT'%U' . DrUas:: [s'ce ur u esuie *v3se 'mltiLLU.Uc±'gr cu |ltura XLrVEl evelpmentV4.JI1LLLGJLA. JJ J'JN Li~a .I U .LUedeu LU U'UecmeinvO.LLLvedV in the development of the industrial and agricultural sectors of the economy., in oruer to suppleent tLe available mediu. andU Long termi. credLt. A IDevelopment Finance Department (DFD) has been created within the Bank to offer leadership to the other financial iLstitut'lors of the country, toward a balanced growth or all sectors of the economy and to establish an effective link between finance and project development. A primary role of DFD is to ensure that small borrowers become more creditworthy, and that such credit fulfills the objective of economic growth. - 107 -

Table 6.03

GHANA: Loans and Advances by Commercial Banks

(in e million)

1964 1965 1968 1971 1972

1. Agriculture, Forestry and Fishing 8.4 12.0 3.8 14.3 16.0

2. Mining and Quarrying 1.7 1.9 2.2 7.8 1.8

3. Manufacturing 3.9 5.5 19.3 85.2 75.9

4. Construction 14.1 16.0 14.8 20.2 23.9

5. Electricity. Gas and Water 2.2 1.1 0.7 1.6 1.4

6. Commerce 15.3 31.5 22.7 77.8 77.5

7. Transport, Storage and Communication 0.6 1.3 1.6 8.2 11.6

8. Services 5.9 13.4 13.1 29.3 30.2

9. Miscellaneous 7.0 14.1 10.4 8.9 6.6

10. Cocoa Marketing 31.8 16.8 15.2 1.0 11.1

TOTATL 90.9 v13,6 103O.8 24h.h 256.1

Maqnifa±ttnl ng Shn-rA of Total Loans (%) 4.2 4.8 18.5 33.4 29.6

Manufacturing Loans as a < of lrnqs Out- put in Manufacturing 3.6 4.5 8.6 23.5 n.a.

SOTTPr'V:Bank of Ghana (1--t-ly E--J^ lz-"Ietinc T-hle 6.04

.Ii,.NA:S ,!w!w!l BnkTrl Loians to Private anri Publi c Sector Manufacturing Enterpri.ses, 1966-72

(Million ,)

PUBLIC PRIVATE TOTAL

1966 4.7 8.6 13.3

1968 8.8 10.5 19.3

1969 18.4 20.7 39.1

1970 11.8 4o.1 51.9

1971 19.7 65.5 85.2

1972 19.5 56.5 75.9

TOTAL (1966-1972) 82.9 201.9 284.8

GRO-JTH PR^ IE(1966-72) 27.00% 37.0% 34.0%

SOURCE: Bankc of Ghana, Quarterly Economic Bulletins - 30Q _

6.27 The operations of DFD are divided into three main activities: (1) institutional financing; (2) technical advisory unit; and (3) a Credit Guar- antee Scheme. Institutional financing involves making direct loans to ADB and NIB to increase their resources for the development of Agriculture and industry. By the end of 1972, the Bank of Ghana through DFD had made loans to ADB amounting to ¢22.9 million, of which 019.9 million was earmarked for various activities related to "Operation Feed Yourself" in 1972. Loans to NIB amounted to 033 million of which ¢20 million was granted in 1972. These loans, in 1972, substantially increased the lending capability of the two major development finance institutions in relation to their previous volume of lending. It should be noted, however, that despite the DFD's concern with small borrowers, these loans do not appear to have been specifically directed toward them. NIB, for example, does not make loans of less than ¢10.000 and ADB credit to small farmers in 1972 (03.S million) represented only 13% of total lending in that year. In addition to lending activities. BG holds eouitv participation in ADB (03.5 million out of a total of ¢18.4) and in NIB (¢1.5 million out of ¢12.1).

6.28 DFD through its technical advisory unit is engaged in the identification of new areas of investment and the nrepnaration of nreliminary feasibility studies. Feasible projects initiated with DFD are then promoted through negotiations with credit institutions. whiirh mav he granted credit for the purpose of financing the project. This unit is also responsible for supervising projects to ensure their sucress- and t-he proper utilizatiron of funds granted undpr t-he gtiaranteed loan scheme. The primary purpose of this technical unit is to fill a volid in the operations of commercial banks, which handle 95% of credit to smnll borrowers but who do not possess the machinery for undertaking project appraisals or' follow1rving them up. TLmitat;4sionc of manpower, hwneavneo hnaTo rcs-tr41ct tho actual operations of this unit.

6.29 Another important function of OFT) is the operation of the Credit Guarantee Scheme for s-maall borrowers. Th,e ob4ect4ve of this program. is to encourage financial institutions, in particular commercial banks, to be more li1beral in grantLin.g loans to smLall Ghanalar, entreprene;urs. This scheme basically provides an insurance cover to credit institutions against possible losses, whilh may occur as a result of defaull Iby -L-LIILb AIlI thre^ commercial banks in the country, ADB, and NIB are eligible to obtain guarantees ur.de r t hLis program. 1/ Th'le sche. ar.ed--I Ol-- roer enae J_n: UIL"JC LL. _JISdI I.LIC I-LICIIemieL J.L d.LMIU dL ZULII4.L. ULVILUWt:. b t-Lr,ZrL5 --U .LLL. a) extractive, processing or manufacturing enterprises or trans- portatior, or repairin.g a.d Stervicing, withLoriLginall .vilesLmenLt in plant and machinery not exceeding ¢100,000:

1/ The guarantee scheme is compulsory to all small enterprises regardless of whether the lending commercial bank is satisfied with the security pro-vided by the borrower. - 110 -

1)) agricultural onerations covering an acreage varying according to the nature of the cron cultivated, but in the aggregate, not exceeding 100 acres;

C) livestock and poultry farmina with caDital cost of the project not exceeding 5f5,000; and

d) trade with an annual sales volume of not more than ¢300,000. The usual guarantee covers 66-2/3% of the amount in default up to a maximum claim of 050,000 and the maximum period for which the guarantee mav be given is 10 years.1/ A guarantee fee of 1% of the amount guaranteed is charged to the credit institution and cannot be nassed on to the borrower. Advances under the scheme amounted to 06.1 million at the end of 1970, with the share of the five particinating hanks varying as follows:

Ghana Commercial Bank 65.3% Barclays Bank of Ghana Ltd. 25.7% Standard Bank of Chana Ltd. 4.4% NIB, 2.7% ADB 1.9%

Bv the end of June 1972. the Scheme had covered the extenslon of total credits of 021.5 million.

6.30 In addition to the heavy narticipation by GCB, there was a heavy concentration nf lendina for tradincg nttrnnqPq t.hih1 accniTnte-d for 75%! of total lending,wvhereas only about 8% was for industry. The breakdown of lending b sector can be ceen in the fnllnwincg table:

l 1/ 75%1A guararitee cover 'wasprovided until June 1/ Juointly by thne Govern- ment and BC to facilitate purchase of alien business by Ghanaians. A 1iu'i. scheme is rurnisnec to all banks in order to encourage lending for priority industrial and agricultural projects which are found to be viable hut cannot obtain coimmercial bnnk financing due to a lack of collateral or insufficient management exnertise. In this case a 3% guarantee fee is charged. - ill -

Table 6.05

Advances under the Guarantee Scheme by Sectors (1970)

N.1umber of Amount Percentage Sector Advances (million ¢) of total

Tradin,g 1,258 4.6 74.8 Manufacturing 65 .5 7.7 Farming 21 .1 2.2 Livestock 23 .1 1.8 Printing 12 .1 1.7 Transport 86 .5 8.1 Servicing 63 .2 3.5 Extractive Industry 2 -- .2

TOTAL 1,530 6.1 100.0

6.31 An appraisal by BC in 1970 stated clearly that: "The scheme did not go far enough to affect in any significant measure the development of industries and agriculture as, inspite of only a 33-1/3% risk, the coimmercial banks were still very cautious in their approach to these sectors which they regarded as very risky, largely because of inadequate management and technical experience of prospective borrowers". It appears that part of the commercial banks' reluctance to participate in the scheme on a greater scale is attributable to the fact that, despite the Government's guarantee, the risk of the unsecured portion of the loan and the higher administrative costs of relative small loans is not adequatelv compensated by the interest rates charged on these higher risk advances. Also, the scheme is not popular with the banks because they are recuired in case of default by the borroweer to make every effort to re- cover the loan, which can take a long time before applying to BG for payment of the -oarantee- Moreover.; BG does not want borrowers to be informed of the existence of the guarantee for fear that that default rates would increase. A previ_oiv, TBRD report 1/ RsuggestPd that In order to encouraee banks to increase their lending under the guarantee scheme would require: a) a largev snpread hp-tj PTn minimum and max8mT,m lending rates;

b) allow banks to pass on the insurance fee to the borrower.

1/ See IBRD, Current Economic Situation and Prospects of Ghana, March 9, 1972, Volume V, "Interest Rates and the 1.Jobilization of Private Savings." Part of the discussion in this and the following sections is based on this report. -11 -

2. Ghana Commercial Bank (GCB)

6.32 Government emphasis on the development of the priority sectors of the economy hiave resulted in a reorientation of the usual commercial banking activities of GCB (the Government is GCB's only shareholder). In 1969, credit policy was reviewed in this context and medium-term financing was introduced to meet the credit requirements of industrial enterprises and businessmen) whose financial needs extended over a longer period than is usually associated with normal commercial banking practices. The Development Finance Unit (DFU) of GCB was reorganized to meet these new objectives. In addition to processing new applications for medium-term loans, J)FU carries out detailed studies about the operations of customers, especially in the industrial and agricultural fields. Post-financing activities involving business managernent services are also available, to assist customers in running their enterprises on sound business principles.

6.33 GCGB, with the support of the Government, has continijed to explore ways in which its development role can be expanded. In October 1972, GCB succeeded in securinig amendments to the Decree establishing the Bank, which will nerm.r.t it to engage more fully in development financing and to participate directly in industrial undertakings by way of equity subscription,. The GCBPDecree of 1972 permits it to grant medium and long-term credit of up to 207 of savings deposits i.t holds. Further changes in the structure and operation of D.FIJ are envisioned, in order to permit it to adequately performu its expanded role. The proposed exnanded financial activities of GCB are potentiallv significant as it controlled about 55% of total assets of the commercial. banking systeml ln 1972; and hence it is the major commercial banking institution. in the country. By the middle of 1971, however, GCB had commit4ted ovpr 057 mllIon in short- term financing and only ¢7 million in medlium-term financinlg lo the iindustrial sector (including mining and construction), thus reflecting the traditional orientation of the past. In addition, over Oinmillion in credit facilitics had been granted..to_s.mall.borrowers- und.er the t o h .rantee Scheme of the Bank of Ghana for the establishment.and developmnent of entrirVfses, or -to increase production and efficiency in various small undertakings.

6.34 Table 6.06 shows a breakdown of conmmercial bank loans to the public and private sectors classified by end-use, Tu-irin thre 1 07_7f0 T,eried t1he relative total shares of loans going to the public and private sectors remaitled basically unchanged, with about 35.. and 65% respecti-PeIy. The combined shares of lending for commerce, services, and miscellaneous, most of the latter con- sisting of consumntion loans, accounted for nearly 5nfl o,f cotnmer3.cial bank lending. Lending for manufacturing increased more than three-fold between 1967 and 1970, and absorbed about 30% of total credit in 1970i The sectoral composition of lending to the manufacturing sector changed corsi.derably in 1970, when the private sector share increase2d to 77%. from 53% in the previous -year. Lending to agriculture, forestry and fishing also expanded rapidly, but its relative share of 7% in 197 is small rela tive to importance o thi stS in Ghana's economy. Table II-13

Cosmsercial Bank s - Loans and Advajnces to the Public and Private Sectors Classified by End-Use

(NO millioni

December 1967 - December 1968 Decemtber 1969 December 1970 Public Private Publ c Private Public Private Public Private Sector Sector Total Sector Sector Total Sector Sector Total Sector Sector Total

Agriculture, Forelstry, Fishing 0.3 2.9 3.2 o.6 3.2 3.8 2.3 7.7 10.0 3.6 8.0 11.6

Mining and Quarry:ing 0.4 o.8 1.2 1.2 1.0 2.2 3.0 1.4 4.4 2.6 . 9 4.5

Manufacturinig 5.7 9.8 15.5 8.8 10.5 19.3 18.4 20.7 39.1 :11.8 4C).1 51.9

Constructioni 5.3 7.2 12.5 5,4 9.3 14.7 7.4 10.3 17.7 2.5 13.8 16.3

Electricity, Gas and Water - 0.2 0.2 - 0.7 0.7 - 1.1 1.1 - 1.2 1.2

Commerce (excluding Cocoa Marketing) 10.1 16.5 26.6 3. 4 19.3 22.7 7.4 24.9 32.3 LB8.6 33.6 52.2

of which: (a) Imports (10.0) (7.71 (17.7) (3.3) (8.,o (11.3) (7.48 (10.3) (17.7) (17.5' (15.3) (32.8) H

(bl Exports - (3.8 (3.8 - (3.8) (3.8' - (4.2, (4.2) (0.1) (4.6) (4.7'

8 Transport, Storage and Comrnmunications 0.7 1.0 1.7 0.4 1.2 i.6 3.0 1.3 4.3 4.5 L. 6.3

Services 0.-) 13.7 i4.6 1.1 12.0 13.1 4.5 16,6 21.1 4.6 17.3 21.9

Miscellaneouas - 4.4 8.4 1.1 9.3 10.4 - 7.5 7.5 - 8.5 8.5

Total (exclujding Cocoa Marl-etinge 23.4 60.5 83.9 22.0 66,5 88.5 46.o 91.5 137.5 48.2 126.2 174.4

Cocoa Marketirig 15.6 - 15,6 15.1 0,,1 15.2 10.7 0.9 11.5 0.9 0D.1 0.9

Grand Total 3U.0 60.5 59.5 37.1 66,6 103.7 56.7 92.4 149.0 49.1 126.3 175.3

Share of Eq2h Sector (percent) 39.2 60.8 100.0 36.0 64,,o 100.0 38.0 62.0 LOO.0 28.0 72.0 10(.0

Source: Bxak of Ghana. 6.35 A comparison of the lending activity of the three commercial banks is presented in Tables 6.07 and 6.08. While (;CB accounted tor the largest share of commercial bank lending in each of the years since 1967, its relative share declined sharply with the expansion of the expatriate banks activity since 1967. During this period, the lending volume of Barclays Bank rose nearly three-fold and it increased seven times at the Standard Bank. The relative share of both expatriate banks amounted to 45% of total commercial bank lending by 1970. Wlile in 1970 the two expatriate banks were still very much engag.ed in providing finance for trading, which had been their traditional field of lending; there had been some great improvement in the relative share of loans going to manufacturing, particularly at the Standard Bank. As with the exnatriate banks, a large share of GCB lending is directed to commerce. JNevertheless, GCB lending to manufacturing increased substantially between 1967 and 1970.

6.36 A great part of the financing facilities provided by the commercial banks, however, is for short-term credit. These traditional banking practices are sl0To1v changing as evidenced by the establishment of Development Finance 1nits at CCB and the Standard Rank. As nreviously mentioned, the nurpose of these units is to engage in medium-term loans, narticularly for manufacturing and agriculture. o40reover, their activities will also entail assisting clients in the management of their business. A previous IBRD report indicated that, althouTh the banks' lending policies are changing gradually from traditional practices, there are strong indications that bankers at times are not fully aware of the real purpose to whichi their funds are ultimately directed. This situation arises because in evaluating loan apnlications, banks concern themselves more wTith the asset position of the borrower, his credit rating, and the tvpe of collateral he can offer than with the purpose of the loan. As a resuilt, commercial banks .do not usually nerform financial flows calculations in oroj ect evaluation. The financing of investments by commercial banks in Chana is, therefore contin.ent to a great extent upon the availability of adequate collateral rather than the future earning power of a project. Table II-14

Loans and Advances by Individual. Commercial Banks Classified by End-Use

(NO millionl

December 1967 December 1968 December 1969 December 1970 Ohana Chana Ghana Ghana C,smmerci al Barclays Standard CommercLal Barclays Standard Commercial Barclays Standard Commercial Barclays Standard Bank Bank Bank Barnk Bank Bark Bank Bank Bank Bank Barnk Bank

Agriculture, F,restry,Fishing 2.3 0.5 0.3 2.r, o. r 0,4 5.0 1.7 1.1 6.6 2.6 2.4 Mining aind Quarryinf 0.5 0.1 o.6 1.4 0.1 0.7 3.3 0.1 1.0 3.2 0.1 1.2 Manufacturing 11.6 3.0 0.9 14.') 2.0 2.4 25.) 5.0 8.2 26.8 9.2 15.9 Construction 10.1 1.9 0.4 13.1 1.0 o.6 14.) 1.3 1.4 11.2 2.7 2.4 El.ectricity, 'Gns and Water - 0.2 0.1 0.3 0.4 -0.4 o.6 - 0.5 0.7 - ComTanerce (excltuding cocoa 47 marketing) 18,1 6.1 2.3 .10.8 7.9 4,0 15.7 8.7 7.9 23.8 13.9 14.5 of which (a) ImnpBrt.s & Others (15.5) (5.it (1.31 2 9.0) (7.61 (2.3' (14.2) (8.5) ' 5.3) (22.6) (13.7) ( . S t 1 1 2 (b Exports (2.6f (0.21 (1.0) (1.91 (0.3t (1.7) (1.51 (0.21 (2.6 - (1.21 (0.2) (3.31 Transp-rr, Storage and Comituricatiorns 1.4 0.2 0.1 1.0 0.5 0.1 1.3 1.8 1.2 1.7 2.R 1.8 Services 14.2 0.3 0.1 12.4 0.5 0.2 19.) C'.9 0.3 18.6 1.2 2.1 Miscellainetus 6.3 0.6 1j J . . .1 J.5 4.9 1.1 1.6 3.3 3.1 2.1

Total 6,5.0 122, 5.' -. 3 14.3 9.9 )1.3 21.2 :22.7 15.7 36.4 42.4

Dverall 'T'tal 'i3.t 88.5 135.2 174.5

Source: Bank of (hana. Table TI-I5

L-oans and Advanices by Individual Banks Classified by End-Use

(in percernt'

December 1967 _ December 1968 Decembaer 1969 December 1970 '.h,Taner n=- a Ghana Commercial Barclays Standard Commercial Barclays Standard Commercial BarcleLys Standard Commercial Barclays Standard Bank Bank Bani Bank Barik BaLnk Bank Bank Banik Bank Bank Bank

Agricultuure, Fo restry, Fishinig 3.5 3.9 5.1 4.o 5.6 4.o 5.5 3.0 4,8 6.9 7.1 5.7 Mining and Qiar!yinw C.A O.58 10.2 2.2 0.7 7.1 3.6 O.'i 4.4 3.3 0.3 2.8 Manufacturing 17.3 23.3 15.3 23.2 14.0 24.2 28.4 23.6 36.1 28.0 25.3 Construction 37.5 15.5 14.7 6.8 20.4 7.0 6.1 16.3 6.i 6.2 11.7 7.4 5.7 Electricity, Gas &Water - 1. 6 1.7 0.5 2.8 .. o.4 2.8 - 0.5 1.9 - Commerce (excluding cocoa marketing) 27.8 47.3 39.0 16.8 55.2 40.4 16.9 41.0 34.9 24.9 38.2 34.2 of which (a' Tmports ard Others (23.81 (45.7' (22.1) (14.0o (53.11 (23.2) (L5.31 (4o.I) (23.3) (23.6) (37.7) (26.4) (b' Exports (4.o1 (1.61 (16.91 (2.8, (2.1) (17.2) 11.61 (0.9) (11.5' (1.31 (0.5) (7.81 I) Transport. Storage and Conmunications 2.2 1.6 1.7 1.6 3.5 1.0 1.4 3.5 5.3 1.8 7.7 4.E Services 21.r 2.3 1.7 19.3 3.5 2.0 21.8 4. ' 1.3 19.4 3.3 5.0c Miscellaneous 10.5 4.7 18.6 12.1 7.7 15.2 5.4 5.2 7.0 3.4 8.5 5.C. Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.() 100.0 100.0 100.0 100.0 Share of Each Bank in Per- cent of Total L.'ans and Advances 77.56 15.4 7.0 72.6 16.2 11.2 167.5 15.7 16.8 54.8 20.9 24.-3I

Source: Dank -,f ;hana - 117 -

3. The National Investment Bank (NIB) 1/

6.37 NIB is the main development finance institution in Ghana. It was established in 1963 as an autonomous joint state-private bank. Its fundamental role is to act as a catalyst in the development process. Accordingly, its objectives are basically: (a) to assist in the establishment of new enterprises and to facilitate the participation of external and internal capital; (b) to encourage Ghanaian business concerns; and (c) to identify emerging investment opportunities and bring together capital, capable management and technical exterpertise.

6.38 NIB operates in all sectors of the Ghanaian economy whether public or private, industry or agriculture. It is empowered to grant medium- and long-term loans, to purchase securities or interests in enterprises, to engage in guarantee activities and underwrite bonds and equity securities, and to conduct technical feasibilitv studies. The authorized share capital is ¢20 million of which 75% has been taken up by the Government and the remainder by the private sector. The paid-in equity capital is C2.06 of wqhich ¢1.5 million was invested by private investors and the rest by Government and the Bank of Ghana. The Bank may increase its share capital when necessary, and it can borrow up to 3 times its paid-up equity and reserve ftunds.

6.39 The lending activities of NIB are restricted to medium-and long-term loans between 3 and 25 years. The minimum size of a loan considered is ¢10,000, and the maximum is ¢1.0 million. The general Dolicy guidelines prohibit re financing of existing loans in an enterprise or undertaking the foreign exchange risks of its lending activities. Mloreover, the Bank is not permitted to acquire management control over any enterprise and will not finance more than 90% of total investment in a Drolect. 2/ NIB's policy, in taking eauitv participation in enterprises financed by it, is to underwrite ultimately the sale of these shares to Ghanaian investors. The loan terms and conditions are not rigid and depend upon the project risk and the cost to the Bank of its own funds.

6.40 A thorough evaluation of the performance of NIB as a source of funds for the manufacturing sector during the last decade is hindered by the limited nature of the available information. This information indicates that the rharactpristics of the early years of NIB operations reflected the eennomic environment in Ghana during 1963-66, wihen significant projects were taken up hv Gouvernmwent nr hv large exnatriate firms who did not neef NTR AqRiqt:nrpe

1/ A more extensive report on all phases of NIB operations is being prepared by the DFCs departm..ent of TRPf- 2/ Pri-o4- T-1-u 1Q71 ths4 f4eiiv-n ras 75V uti-t w.-asnc4,.renoase b,eau m sponsors.-_' - e - c rUs-- - -_ ---c-t sponsors of projects.could.not raise their 25% contribution. Hence, during the first four years of oDeration, total loans only amounted to roughlv 04.5 million. Nearly half of these loans (V2.1 million) were made in 1964, when a loan of ¢1.1 million was granted to a state enterprise for the establishment of a jute bag plant. Over 80% of these loans were granted to public enterprises, and roughly 30% were involved in either agriculture or fishing. The remainder were allocated to industry, construction, and transportation. Loans to the private sector were small, averaging 046,000, and only three were for more than ¢100,000 (tobacco rehandling, garment manufacture and vegetable farm). During this early period, NIB received a large number of applications but most of them were turned dowqn (96%) after the initial screening stage or appraisal. This situation reflected for the most part the low quality of the applications received. The rate of interest was 7-7.5% until 1965 and wqas subsequently increased to 8.5% for projects promoted by NIB. Effective rates on all loans are 1% higher, since a service charge of 1% is added to the interest rates.

6.41 NIB operations during the 1967-70 period reflected a deliberate change in lending policies to favor private and joint ventures in various sectoral activities, in accordance with general economic guidelines. This policy entailed intensive prolect preparation and promotional work bv the Bank staff, particularlv within the Development Service Institute. At the same time, however, there was a general improvement in the quality of loan proposals by Ghanaian entrepreneurs relative to the earlier period. The quantity of loan applications from Chanaians also increased substantially after 1968; and was strongly boosted by the Ghanaian Business Promotion Act of 1970, which reserved. specific industrial servine And commercial activities for domestin investors. Loan applications tripled between 1969 and 1970 when many Ghanaians sought financial assistance to buy exnatriate business. NTR was also active in collaborating with foreign institutions with regards to external loans, joint ventures, and staff teraining. For example- the Bank obtaineda loans amountin-g to Thf20 millon from Kreditanstalt fur .iederaufbau to finance the foreign e.xchange component of some projects; it entered into oint ventures wfith Ilestle's .oldngs Ltd. (reconntirut-r1 milk) and nJtiionCarbide Corp. (dry cell batteries); and several staff members received traiinjn in p--roect app rai-a1 -,A 4nd-uAstrial4j. 1 cvmrn t zanamenV at A rt.iur D. Little Inc. In addition NIB continued to encourage investments in food production and. ood processing, 4i keeping -tlonl prortifL- -a nd -.oiJes of impnort substitution ane maximurm use of local raw materials.

6.42 Total lending during the 1967-70 period amounted to roughly 014.1 rmLillion, althougzh the nature of the fu it d 4ublishedi-tut to determine if any guarantees or equity investments are included and its sectoral dlistrliution. it appears that private sector loans accounted fLor perhaps 80,' or riore of total 1967-70 volume, in sharp contrast with a similar figure for public financing in the previous period. Total cunmiulative financial assistance at the end of 1969 (025.6 million including loans, guarantees, and equity) was mainly distributed among food production and nrocessing (20'%'), fisning and shipping, (19%), housing (18%), and fiber bag manufacturing (18%). It can be noted that NIB's financial assistance has been spread among various economic activities and not concentrated in the industrial sector. - 119 -

6.43 The operations of the Bank during 1972 reflect a shift in lending activities toward agriculture and mining (see Table 6.09). This shift was primarily due to a ¢4.8 million loan for rubber and over 08.7 million loan for mining, using special credits advanced by the Bank of Ghana for these projects. Hence, 1972 total lending of 421.2 million was the largest volume in any single year since the Bank's creation, and represented an 83% increase over the previous year. The expanding operations of NIB, particularly in the area of agriculture, led to the establishment of three more regional branch offices at Ho, Takoradi, and Tamale, in addition to the existing one in Kumasi; in the hope of bringing the Bank in closer touch with the development requirements of the various regions. A forecast of operations for the period 1975-77 is presented in Table 6.10.

6.44 The manpower training aspects of the NIB are impressive. During the 10 years of the Bank's existence, 32 of its officers have been sponsored for various training courses abroad for periods ranging between 2 months and 3 years. In effect NIB appears to be a primary source of skilled financial managers in Ghana; many of its former senior officers have assumed top level positions in the Agricultural Development Bank, Ministry of Finance and Planning, Ghana Commercial Bank, National Finance and Merchant Bank, Post Office Savings Bank, and Bank for Housing and Construction.

6.45 The record of NIB operations during the last 10 years reveals that the institution's lending Dolicies have been adjusted periodically, to reflect the overall economic objectives and guidelines of national economic policy- makers during the various Deriods. This is not an unusual situation, given that NIB is the major development finance institution in the country and that it has rlone finanrial ties with the Government. NTB is in effert heavily dependent on Government resources for its funds. By the end of 1972, institutional loans tn NTI amount-ed to t43.6 million; of which the Government and the Bank of Ghana contributed 80%. The Bank's adaptability to changing economir rirrciirmnt,nrce and develonment ohiertives ii a definite ardvnantap in its favor, as it reflects management and operational flexibility. On the other hand- the Rank must maintain its autonomy to elericde the thriiqt and natuire of its investments so as to use its resources in the most efficient manner. Severnl issues in nartiriilnr are signifirant- First; as a nrevious Rank report has emphasized, NIB could have an important role as a financial inter- mediarv in mohiliz.ing nrivate domestir savings. Until this oncurs. it will be more difficult to develop the financial structure of the economy and to ensure that the haRic shortage of savings in the econonmv iR reflerted in policies. This is made difficult, of course, by the fact that NIB can presently obtain funds from the Government and BG at rnnressional rates of intFprpsi which are lower than those required to attract private savings for long term funds. Second, given the previous situation, it is imnortant that the interest rate policy of NIB reflect to the greatest extent possible the fact that capital is a scarce resource. Available evidence suagests that the Ghanaian nanitnl - 120 - Table 6.09 iib - Guwnr.ua ,ovve ui AAu ivl,Kes bv Sectors #/ piYlilion at ttie enc. of year)

1971 1972 Food prdciiitr n 1=3 (4.3) 1.7 (A3=3 Food processing 3.2 (lo.5) 4. 6 (8.9) MpTet nrodcicon. 1 (5.9) l=9-1n (7) industrial Raw Materials 0.9 (3.0) 5.6 (10.9) Fis h-i nt 009 (0!3. 0. 9 (1 7) Textiles 1.3 (4.3) 1.3 (2.5)

th-.b .- 1, -, -./ I* \% J\* / Leather Products 0.4 (1.3) 0.7 (1.L4) 'Wrood i 3 0 ('An 3.3 (A.\ PrinUin- 1.6 (5.3) 1.6 (3-1) Ph a ceu t i ca 1. 54.) 1° 37 It.a £ £na£L'S~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~7 \4.d\ 4*..iJ 1.7 \J.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I-J- Cerarnicw.arc 2.5 (8.2) 2.5 (4.8). M,t"l ; .1.1I .J.J" 50 . 1.4 iqlinin,:~~~~~~~~~~~~~~~~~~~~~~~_ - 8.8 X-711 Minin z(17-1n 1.2 85.8 (2.3))(30) Shippini> :nd Trar.Dortation 2.0 (6.6) 2.1 (4. ) Houlsi-n. Wand ^-nsrctc 3.4 (11.2) 3.5 I A TouriSs! 0. 7 (23!) Mi sce ane us- 0.7 (2.3) .3 (2.1)

.otal: 30.4 51 .o

a! Includels only lean co•mmitments. Figures in parenTheses refer to the ciu?lmulative percentage diistributioni. b/ Includes rice, rnaiza, citrus fruits, cotton, rubber, tobacco, etc.

Source: NIB, Annual Reports, 1 971 aiAd 1 972 - 121 -

Table 6.10

NATIONAL INVESTMENT BANK

FORECAST OF OPERATIONS 1973-1977

(AMOUNTS IN CEDIS '000)

APPROVAL S (CO!0ZFT1I,NF,TS) ACTUAL FORECASTS

1P72 tc Ami7. 1973 1974 1975 1976 1977 (a Ioans. Inlc it.tr-2' L~as U,04Ol 3,410 8.••0 •,690 6,830 8,203 9,840

Agricultural Loans 67,270 1,50 2,000 3,000 4,500 6,750 10,120

Joint Projec'. Loaris 3,59 500 600 720 870 ];7050

Tot:al Lcan 20,900 4,0J0 7,050- 9,290 12)050 15,820 1],3

(b) Eq.uItv_Investmrnnts 1,8'o 1.013 l,3L,O 1.6S0 2,020 2,12C ,,, Loa.ns .... -gu-ity ~ ^22.7) 9'222 U,3%2317()J 7,0 4,7 -17J70 s.^

Gaai'antees 860 1,510 2,010 2,210 2,300 2,670 2 LIW

DISi E3Uir'7.'0I7'T 3.

(a) Io.r:s ¢avilf tti ...... 5. T P O§.3- v A7 5, °<. 7707_0 011C~ 1Pr7n A 7-/ P

o;~~~~~~~~ 1;'C ', -~ '~ -t jC.;-),- t ¶j7io j { G.---(n n . t 4, jtow t

JoLit Prorct Ljoans 3.060 3.620 3.7270 L.ILo _ 90_ 710

Total Jpc ms 7,350 8,780 16 lku0 11,6•0 9,].6J 11,980 1' 2

(b) Titnrst-Tn .;ts 1,130 200 1,610 1,510 1,530 2,220 2, c =_:= = r.t-- co._ .r ng_

daf Liuts unc7Pldr -uarant:e3 - - _ = . -

Total 8,14O 8,93-0 1E. 010 13,160 11,010 lJ.,700 lf 2

SOURCE: NIB - 122 -

market is substantially segmented due to internal and external restrictive policies which have severed the links among the Darticipants in the domestic market and with foreign capital markets. 1/ Evidence of this problem is the lack of responsiveness of nominal rates to the degree of domestic inflation and to international developments. In effect many deposit rates were on the average negative, and few lending rates were much above zero in real terms during the period. The circumstances are easily conducive to major resource misallocations. Hence it is essential that NIB as a major source of funds, pursue an appropriate interest rate policy to allocate capital. In addition, such policy will most likely improve its financial performance (see Table 6.11 below for an indication of net profits during 1963-70).

Table 6.11

NIB - ,et Profits 1963-72

Year (¢ 000) As a ' of share capital

1963 33.4 0.5 1964 97.3 1.5 1965 111.9 1.7 1966 140.7 2.2 1967 161.1 2.3 1968 200.5 2.9 1969 251.3 3.1 1970 304.4 3.0 1971 414.6 3.7 1972 567.2 4.7 source: NIB, Annual Reports, 1963-72

1/ Sce J. Clark Leith, Exchange Control. Liberalization and Develonment: Chana, to oc published by north UHolla-Td for I. -.E. R., pp. 127-140 for a discussion of tNis issue. T3C1e 1:-l: 1;AI3N051 IS/ITESTlr BANK 1.5ANS _AJICTIONiEDA2E2 D1SE2RSED l3-1970

1963 . l'i 1965 1966 1967 1966 1969) 1970 L-ens anctio-ed Less Pea -r: lustry Agr iclture l _usts. Agriculture Icluctry Agriculture Tdust:z APr culture ndustry A,gricru1re ArdustryAriculture Indtry Agricullure Industry Agiulture

Private Sector 64100 - L65790 lr,olo i4i,54. 229.,tOL 'oASIS 314.1 5 711,.49 528,031 2,825,513 1,514,00- 5,146,324 2,199,336 10,264,470) 2,868,102 8 Public lect-r 1u7,504 750,900 1,922,-52 5 tl,00. 1,760,193 991,200 2,532,911 1,041,270 0,1L4, 721 1,031,000 2,381,339 1,og9,493 1,990,251 892,482 2,751,07? B92,4 2 251,571 750,000 2,159,130 6'2,'1 2,01,731 1,217,504 2,.61.617 ],357,395 2,559-50 1,553,031 5,209,652 2,613,487 7,136,575 1,091,318 13.015,5W' 3,'60,584 r

Ltsuc iudlhbursed

Pri-ate Sectcr - !07,5X , ',90 120,196 177, -9 116,173 201,957 475,L,30 361,540 936.224 532,061 1,620,805 1,524,283 'j,150,664 2,074,632 1 Publ-c Sector - 1,191,550 3-17,50 1,5.49,595 750,797 1,90., 35 750.0')0 I.55,3,75 62L,000 1.519,86L 848,629 1,656,515 798,629 :2,089,29() '798,628 - - 1,350,151 L57,71- ],9,i7-1 927,396 2,026,720 551,9' 2,'30,205 1,205,5LO 2.455,10P, 1.380,69D 3,277,320 2,322,911 7,239,951 2,973,260

ic-calfr.sts luoctst0cig 0^b.1-Octal 251.51 757,500 756,052 204,19 931,953 2 90,a e3L71,529 05,395 527.145 351,41 2,754,744 1.232,792 3,559,255 768,90 7 5,775,593 197,321

:ccel ;.blO,t-2 0.^01,504L.220 059 1,2luO,257 _ 3,957,551 1 628,162i657 ,6, 7 3 Saurce:. 50u IloutO ______6 .936

Source:. NIBI. - 124 -

Third, it will probably be useful for the NIB and the Agricultural Development Bank (ADB) to coordinate their respective spheres of activity within the agricultural sector to maximize the useful employment of the present organizal:ions, available funds, and skilled manpower. Tlis division of labor will hopefully limit unnecessary duplication of activities, and eliminate potential futur-e conflict of interests between the two organizations. The NIB's role in the agricultural sector should probably be ].imited to agricultural products whiich are subject to substantial further processing (i. e., rubber, kenaf, cotton, tobacco).

6=46 Another important issue of NIB Overations is its noor performance in disbursing loans. The inadequate efforts of NIB to increase its loan disburse- ments have already been me'nt:oned in previous Bank renorts, UndiRbursed loans amounted to about e5 million in 1969, anu reaclhed a record high of 010 million at the end of 1970 (see Tnble 6.12). These figures are substantrial: when compared to the new loans sanctioned of r2 million in 1969 and ¢4.5 million in 1970. This large build-up of ,ndi9.h,irsd loanm probably resuilts from} JTaqde1quate proiect appraisal and premature project approval. A related issue is the arrears situation in NIB. Arrears in princpnai and interPes npaxmPnts amounted to 97.0 million, in relation to a loan portfolio of 428 million outstanding as of August 30, 1973. About 68A/% Of the arrears are for o-ver a year 'e Table 613). The sectoral distribution indicates that 75% of t:he arrears are owned by industry and 56% by the private sector. This sQituation hasc resuillted1 from wpak nroiect sunervrision; the prevalent feeling among borrowers that there is no serious obligation to repay financial as4s deri4v, from. a (nv-ticrnmonrt eorganizatlon; andA management of projects. Management has already taken some steps to reduce the arrears anl this should im..pro ve NIB's profitabilly position, a s muot of- it.sL revenues come from its loan portfolio.

6.47 A significant gap in the finrancial activities of NIB is its failure to prov.Ide J _uc _s L'or th sm ll4 . .a..e : -- - L q%_ t- - -L _ __ _- ______to pruviuc LUIIUti LUJL L[Llt:: iI ita sL -;: Wa.JsL LLV 4- 4L .* AI.±lt VLVU-UJk! III$ U=-LL LttUUVLR1ZU in the past, and discussions took place with USAID in 1969 concerning the possibility of setting up a re-volving fiind for small loans (less than 0,000).0 Apparently nothing concrete resulted from these discussions. It is generally recognized that the involvement of NIB with small in-vestors would require special arrangements within NIB, but outside of their principal line of operation. This system is necessitated by the special advisory needs of this group, the higher risks associated with small borrowers, and the need for some type of guarantee scheme to cover defaults. The Credit Guarantee Scheme of the Bank of Ghana is of limited value because NIB does not consider loans of less than t10,000. Table 6.13

Sta: o-30 0 t3 3 1 9?3

eC4iXs C f)

Ul- to i3 Vr'?lth3a 3 vcon-;hYs to I Yoear Over 1Year _?_-S-~ , F - -z' r --'it;erest, Princ^ .oa' Interect Total; % By Sect-lor

3' . 'uo;4t 'Cy .3 0 -74L41 53b,?W1,b77- 36,3) 75

'.Al-gi1l.re 58 152 156 251 :3651 1,572 22

hthe, 9 16 24 16 36 57 15l 2 Tctal: 317 )..8 787 703 2.268 2,525 7',093 10)

137 0; z>>hi-D

'Rn.9:X ?: 2Q8S 7365 604 '?26 958 3,196i 56

u'hbl ic Scotor 19 41_ 51 lO4 1 ,32 1.567 3,126 t,14 Total: 317 L88 787 7,08 2,68 2,525 7,093 100

F,os-lal - it±o (fo- arre- rs oi' three ror3th3 and abo',o)

nr.d, stry 6 2 . 3p,,

lt!l..i E Qi1N e i 5 -

SOURCE: NFIB -126-

D * The Capital Imnestments Board (CIB)

6.48 The Capital Investments Board (CIB) was established in 1963 by the

UdpL LdJ A t I%tt1x1W - wl|otbLV v; .-ELII*~

6.49 the 1973 Decree outlines the functions which form the basis ot CIB operations. These functions are as follows: (1) to initiate and organize activities for the stimulation ot investments, (2) to grant approval ot benefits for the investments; (3) to maintain liaison between investors and Government authorities and to disseminate information about investments in Ghana; and (4) to obtain the necessary facilities and dispensations for the establishment or expansion of approved projects. The Decree also indicates the criteria which are to be used in analyzing the investments being considered for concessions. In general, the criteria correspond to the economic priorities which have been determined by the Government. Ilence, the investments under consideration must contribute to: (1) the developmernt of the productive capacity of the economy through the efficient utilization of its resources and economic potential;

(2) the full and efficient utilization and expansion of the productive capacity of existing enterprises;

(3) the efficient saving on imports, the increase of exports and the improvement of services which will assist the strengthening of the balance of payments position;

(4) the encouragement of a fair country-wide distribution of investments having in mind the need to develop the rural areas and to avoid undue concentration of investments in the urban areas; and

(5) a high level of emplovment and the imDartation of terhniral skills to Ghanaian citizens. - 127 -

6.50 CIB offers prospective investors a variety of safeguards and incentive schemes designed to enhance their investment outlook by improving the return on their projects in some way. The underlying rationale for providing concessions is to make lows yielding investments, which are nevertheless socially desirable, more attractive to the investor by permitting a rapid recovery of capital and a higher return. A variety ot incentives are available under CIB regulations: (1) an employment tax credit for a maximum ot 10 years in order to stimulate investment in labor-intensive industries;

(2) an income tax holidy for a maximum of 5 years;

(3) capital allowances in respect of buildings plant, machinery, structures etc., at rates additional to the rates provided under the Income lax Decree:

(4) deductions to chargeable income for capital expenditures on scientific research equal to 25% of such expenditures for a maximum of 4 years;

(5) exemptions up to 100% from import and customs duties and purchase tax for imported goods that are essential for the implementation and operation of the nroject;

(6) exemptions up to 100% from export, excise duties, and sales tax on goods produced by the approved project for a maximum of 10 years;

(7) deferment of payment of registration fees and stamp duty on capital;

(8) exemptions from property tax on buildings.

CIB can grant the above benefits in varying amounts and over varying periods but not so as to tend to the establishment of monopolies. iMoreover, safeguards are provided for foreign investors wqith respect to expropriation, compensation for nationalization, arbitration, and foreign transfer of profits.

6.51 During the early years of CIB operations. purely foreign private projects were responsible for a large number of investments approved for concessions. This wias due in great part to the fact that early promotional efforts were mostly directed towards the attraction of foreign investment capital into the country. Recent years, however, have shown a substantial increase in joint Ghanaian/foreign ventures reflecting the emphasis on Ghanaian involvement in the manufacturing sector. During the fiscal period 1969/70-1972/73, for example, the total value of joint Glhanaian/foreign investments granted concessions amnounted to ¢35.3 riillion, wzhile purely forei-,n investments iwere only 012.5 -llAlion (see Table 1). In addition, 100%r state investments obtaining - 128 -

concessions only armounted to 0S.5 million while joinit state/foreign investmient was ¢33.9S million (luring the same period. The industrial distribution of approved investments shows that rouc;hly 39,,' were in textile and garments, 22% in agri-- culture, food, and food products, and 14, in wood and furniture. 1972/73 operations, however. cl.earlv reflect t'hie self-reliance Policies as 47% of approved investments were in agrictulture, food and food products. Textiles and garments, on the other hand, only represented about 1%' of that fiscal vear total. The large volume of investments in the textiles and garment sectors entails some inefficient use of resources: since manv of these industries lose foreign ex-- change in the course of production due to the heavy dependence on imported raw materials- or save it at a large cost in domestic resources. Such a situation is clearly incompatible with the spirit of the general economic policies which CIB aimis to supportr.

C 59 Th1 h 1it 1cn.Tc t-rnct rlit-trihi,t-inn nf f-)p vrn1lm, nf invPcttmPnts Frnntorl concessions by tvne of concession and time period. It should be kept in mind that the same invest-ent is eli.-1ille to receive various types of concessions. It appears that incoTme tax holidays and imnport dcuty exemptions are the most widely used incentives. Excent for the year 1971/72, roughly q, f total investments were -ranted income tax holidays; and not including 1970/71, at t1 C,.7 -- th 4i v s tmets;.,A eel -V|oP;a?A, zedmx Vort dut F ;n e 1 .; -_ 1nf_ xCaaL kit /C {l. LII I SV v RLI C t Ck.XyV! k - L t L S1*0 .L JIA. incentive can be particularly pernicious for it may induce an unnecessary re-

.Lac l Ut Io Le.nL w mla teriaLAs 1.LS1 , -;Li.c'his co;nter=,roduct ' I ve in tCe1r.iCs of f5 o reinLL:tPn exchange savings and the development of domestic supplies. The caDital allowance

iLncentive hdas not bDeen used' ex)t ens -Lv e y,yaIitvel ar1d sldIliu 'Lo Lt-e enc L[oIuraL gedUL IrL it s effect is essentially to induce a substituition of canital for labor. In the past the abolition OL import duLy tAtiJj LLUIl l cII. ,W t a'L ai'L'loTar es, h as heen suggested to CIB, on the basis that these sclhemes carry wJith them an implicit and unfavorable blas i-n the choice of factor JOr L IlIons by WTorfse ninL existing market price distortions. Incomie tax allowances and excise dujtv exemnntions, o01 the other hand, are more neutral with respect to factor usage. `oreover, it is important to note that the employment tax credit has not been uised to encourage more labor-intensive industries. This situation is prohablv indicative of the inilerent bias towards capital-intensive projects found in Ghana, not only among entrepreneurs but also among Government agencies entrusted with implementing economic policies. If anything, the situation in a country like C,hana, wihere rmarket wages are generally above the onportunity cost of labor. calls for a wYage subsidy to induce the more widespread utilization of this factor at the expense of capital instead of the opposite. Finally, it should bhe noted fromn Table 6.14 that CIB apnears to be streamlining its incentive scheme by concentrating on fewqer concessions, as reflected bv 197?/73 operations. This policy shouldl be encouraged: for it is compatible w!ith thle basic incentive principles that the amount of the incentive should be as snmall as possible to induce the investnent, and that total indlucements should not make the private rate of return exceedl the social rate or return. - 129 - Table 6.14

Total Value of Investments Granted GIB Concessions hv Trh,istrv anri O( ernhin - 1(69/70 - 19!'2/i3 (million g)

iOq% 10O% 100% Joint Joint Industry/Ownership Ghanaian Foreign State State/Foreign Ghanaian/ Total Foreign _

Agriculture, Food and Food

Products 7.5 3.7 - 5.6 6.4 23.2

Textiles and Garments 2.6 6.7 - 18.8 i9.d 39.9

Footwear and leather products 0.1 0.4 1.0 - - 1.5

Wood and Furniture 0.8 1.5 - 2.4 9.4 14-1

Printing 1.2 - - 1.( - 2.9

Chemical, pharmaceutical and petroleu.m products 0.1 2 1.5 - 3=1 4.5

Non-metallic oroducts (glass and plastic) - 2.6 - 1.0 3.6

Metal 0.5 - 3.4 5.4 1.0 10.3

Electrical - - - 0.5 0.5

Transport Equipment - - - - 2.1 2.1

Total: 12.8 12.5 8.5 33.9 35.3 103.0

Source: Date provided by CIB - 130 -

6.53 A significant proportion of the total value of investment granted concessions dhrinrn 1969/70-1972/73 have heen projects of more than ¢1 million (49%), while projects of less than ¢0.5 million renresent a very small part of total ii;vestnients (7%') (see Table 6.15). In terms of actual nutmber of projects, ,owever. oach of the above categories inclu(led 25 approved nrojects, wnhilc invostrIPllts .)etween e0. 5 and ¢.0 million involved 29 nrojects. 'ever- tl-eles, .tie averigce size of investment granted concessions during the period in question l iSiear ¢1 .5 million, indicating that CIB has on tiie whole catered to large i;1vestors. 'ioreover, nearly a third of the large investments have been in textiles. This represents a nroblematic situation, since large investments in this im;ort-intensive activity are conducive to under-utilized capacity given the overall foreign exchange and raw materials constraints in the economy. It would appear that CIB should not encourage this type of activity further. b.54 Sii.ce mid-1971, CIB has em,lployed a discounted cash flow technique to evaluate projects for concessions. The discounting period used refers tco the entire life of the investment, and the rate of dliscount emnloyed is 157. In general, 1) a project is not recommended for concessions unless its social rather than its private return exceeds 15 . In cases where the return is between 10% and 15% concessions are granted if the project is labor-intensive, export-oriented, malces hueavy use of local raw r,aterials, or is sited in a depressed area. Moreover, the stated policy is that accelerated depreciation and import duty relief will be used infrequently, and more emphasis will be placed on the emiployment of income tax and excise tax holidays. CIB's 1972J73 operations (see Table 6.14) Renerallv reflect this policy, although import duty relief was still granted in nearly 90% of total value of investments. These guidelines are appropriate and should be encouraged. "o information is available on how the appraisal calculations relate to the actual type and length of concessions granted. Presumably, some bargaining takes place between CIB and the investors, as to what constitutes a satisfactory private rate of return and the incentives necessarv to achieve it. In all cases, CIB should be guided by the principle of -iving- the minimum amount of incentives necessary to in(luce the investor to undertake the socially profitable nroiect. These criteria minimize the potential loss of Government revenues and also the possibility of overdependence on financial concessions on the nart of investors. In any case, the use of social profitability rather than private profitability represents a significant improvement in CIB nroject analysis.

6.55 In 1971. the Pronerts Denartment of CIB was reoreanized in ordesr to solve some of the problems whichi had nagged the organization in achieving its obiectives. During its first few years of oneration, the Board was not able to serve the function of an investment center due to the numerous regulations dealin' wiTth investment proredures and the various other Government a(ninc1Ps involved. Also, CIB intitially took the view that project identification and preparation of feasibility reports were thle responsibilities of the Ministries of Economic Planning and Industries. These a,gencies, in turn, did not forward necessary information to CIB who, without adequate rim.anpower, could not nrenare feasibility reports or promote projects. So;me nrogress has been made with respect - 131 - Table-6.15

Value of Investments Granted CIB Concessions hV yneof Go^si n-adYa (million g)

uUb: _ i_/Year i_69 (U Du/ (I K-Ui ( ../ A(./ (/5

Incomen L&X 32.0 11.0 8.u i.7

Import Duty 36.0 5.L 24.0 15.2

Capital Allowance 5.3 5.5 - 2.0

Registration Fees 8.5 1X.8 -

Sales and Purchase Tax 8.5 - 3.4 -

Export Duty 9.8 2.1 5.2 -

Excise Duty 3.8 2.0 8.2 1.7

Transfer of Profits 0.5 - -

Property Tax- 2.0 1.5 -

Deductions for Research - 2.0 -

Total Value of Investments 37.8 13.1 35.1 17.0 Granted Concessions

Source: Data provided by CIB - 132 - Table 6.16 Value of Investments Granted CIB Concessions by Industry and Size of Investment: 1969/70 - 1972/73 (million r,)

Industry/Size Less than 0.1 0.1-0.5 0.5-1.0 1.0-5.0 More than 5.0

Agriculture, food and food products - 5.2 13.8

Textiles and Garmeents - 1.8 2.8 8.1 26.8

products 0.1 0.4 1.0 - -

Wood and furniture 0.1 0.9 0.8 3.9 8.5 - Printing - - - 2.9

Chemical, pharmaceutical anda petroleum products 0.1 1 1 25

"o .11 -L-. No-metallic produCt-s (glass and plastic) - 0.4 o.6 2.6

Metal 0.1 0.8 o.6 8.8

Electrical - o.6 0.5 _ - Transport equipment - 0.1 2.0 - Total: 0.4 6.2 14.6 42.6 35.3

Source: Data provided by CIB - 133 -

to inter-agency cooperation, as CIB has taken a more active role in consolidating investment procedures and codifying existing laws and regulations for the benefit of investors and public agencies alike. The IRC Govermnent hlas created an Inter- Ministerial coordinating Committee ch.arged with the responsibility of considering applications for new industrial Drojects. This Commrittee consists of represen- tatives of the various public agencies irvolved in this area. ITIBis ex.clu(Oed, however, anci should be included. T*-!cvr-rheless, it appears thiat coorr1ination problemas remain and that the functions of this Committee must be strengthened, so thlat a suitable division of labor and coordination of resources can he nchieved. CIB's scope of operations should be confined to socially Profitable projects which offer low returns to orivate investors, and thus require some incentives for their realization. U!ith respect to project analysis activity within CIB, the Projects Department consists of a Projects Identification and Preparation Division whose main tasl is to identify investment opportunities and to nrepare pre-feasibi]ity renorts to prospective investors- and a Projects Evaluation and Inspection Oivision, whose main responsibility is to followq-up the progress of approved projects for which benefits have been granted.

6.56 The Projects Identification Division has succeeded in identifying various projects and preparing pre-feasibility reports on them. thus eliminating the lack of projects available for promotional efforts which was an initial main obstacle of CIB operations. It anpears; horwever, that new obstacles have developed with regard to the promRotion of these projects. CIB currently has some 33 pre-feasibilitv renorts for whirh no adequate investors can he found. This situation is partly the result of the lack of finance facilities accompanying these proect Thisi situation, in turn, has made GIfTR omewhat anxious to obtain Government funds to promote their projects. Given the existence of NIL as the major development finance institution in the country, CIB should not be given a similar role. Instead, the situation calls for strengthening the cooperation between the two organizati2ns, in order to nromote prorects through the preparation of Dre-feasibility reports tied to the joint availability of fiscal incentives and financial facil4ties.

6.57 Project inspection. is an acti'vity which is an integral part of granting fiscal concessions, but which was ignored at CIB until 1971. The Proe+ TInspection Division's mi4n function 4s to analyze o,M,actua1 performances of approved projects compared to original Dlans, and whether the conditions ------1- T4. for * A P~4 inposed by CIB for the award of concessions are being fu.lfilled. T i- unit should also be concerned with the ultimate impact of concessions on operations and profits after the concessionary perioa. A comprehensive study dealing w4ith this latter issue has been considered but has not been realized. It should be undertaken, as soon as possiDle, to give CIB some feedback on its real effects during the first 10 years of operation.

6.58 The Inspection Division, since its conception, has been engaged in the follow-up of projects granted concessions by CIB during tne implementationL stage, during the concessionary period, and after the concessionary period. The - 13h] - limited available information indicates that there is generally a gap of close to a year between the aDnroval of incentives and the actual time of implementation. Several factors appear to be Involved, such as tardiness in the delivery of machinery and equipment, recruitment of foreiTnn staff, and delays in the issue of im1port licenses. Lack of apron,riate finances can be a ma,jor oostacle, particularly with unstable commodity prices which can seriously affect cost cLalcuaiosL T two iL tances, IJo,Jects ha(LdUnot been ir,iplemented 4 years afte.r their approval because the snonsors had been unahle to secure the necessary capital to purchase plant and equipment. T4.i.s sltuation poin-its to the need, already mentioned above, of improving the coordination of CIB and NIB operations.

6.59 Insnection of 24 establishiments during thle concessionary, period reveialed thiat about ('5J0, ere maklng good nr ogress and benefiting from the fiscal L-icentives. In some cases, however, inaccurate statistical datta providecd to CTP resulted in discrenancics 'between exnectod and actual nerformance. Several chronic problems of Ghanaian industrv were nresent, such as difficultv in obtain- in:, :)ank credit, inproner production plannint, inefficient management, and lack of raw materials. CIT feels many of these problems originate with improper management, and has recormended to managers the resources of the Managelement D)evelopment and Productivity Institute. In addition CIE should continue to stress its nroject followz-up and inspection to complement the fiscal incentive benefits.

6.60 The information regarding the experience of investments after the concessionary period is inconclusive, but it indicates thlat some project managers view incentives as a somewhat permanent financial cushion rather than as a temporary relief during the initial critical. stages of Drojects. Thlis might be partly the result of too many and too liberal fiscal incentives during the early years of CIB, which have resulted in overdependence on these schemes. Accordinglv, CIB incentives should be only large enough to induce the investment. Finallv it should be pointed out that fiscal incentives have onlv a limited impact on the volume of investmients, if prospective investors are weary of an investmenlt climate where innumerable agencies and Procedure must bhe satisfied at substantial opportunity costs. CIE should continue to talce the initiative in codifying. streamlining, and c!enerallv simplifying the investment (lecision in Ghana. GLAPTER TJTI

MANPOWER

7.01 Employment in large-scale manufacturing expanded from 29,248 in 1962 to 55,885 in 1970, an average rate of growth per annum of 8.4%. Pro- ductivity (value-added ner worker) grew by 4.4° p.a. dur-ng the same period Considering the paucity of prior industrial experience, these figures are imnressive evidence of the occupational mobility and skills absorptive capacity of the Ghanaian labor force.

7.02 Nevertheless, scarcity of manpower with specific technical and managerial skills has been a major constraint on the growth of output and efficiency of Ghanaian industry. An inventory of high-level manpower taken in 1960 1/ revealed relatively few Dersons with industrial qualifications or experience at the managerial, professional, technical or skilled-craftsmen levels. The survey also m-de projections of requirements by 1965, and compared them with the number of personnel undergoing training in each field. Serious shortfalls between supply and demand were anticipated in some occupations, as shown in Table 7.01.

7.03 Substantial efforts were made during the 1960s to fill these gaps, both through in-service training scheme.s and formal training in institutions in Ghana and abroad. These programs were successful in expanding substantially the sunnpv of Chanaian personnel with professional/technical know-how relevant to industry. But because of the rapid growth of industry, demand still outstrinnped domestic supply in some key occupations. Sor,.e o. these needs were filled through the hiring of expatriates, but vacancies remained. The degree of dependence upon foreigners in 1968 can be seen in Table 7.02.

7.04 The highest proportions of n.n-African personnel were founwd among technical managers (35.5%), chemical engineers (100%), mechanical engineers (42.7%), electrical engineers (22.7%), and managers (21.0%). Immigrants from other African countries were found in significant numbers among the skilled craftsmen; but contributed more than 10% of the total employment in only one occupational group, tailors, cutters, and upholsterers (17.3%). In fact, their share of the higher paid skilled Jobs in industry was well below their proportion in the population as a whole. The 1960 Population Census showed that 12.3% of the nopulation was non-Ghanaian, and of this percentage, 98% was African.

1/ Survey of High-Level Manpower in Ghana 1960. Published by Ministry of Information on behalf of the Manpower UTnit, Accra, 1961. - 136 - Table 7.01 SUPPLY OF HIGH-LEVEL AND SKILLED MANPOWER 1960 and PROJECTED 1965 REQU-RDNENS

Additional Personnel Number in Required Number March (industry % of in Category Occupational Group 1960 wastage) 1960 rraining

A. Administrative Managers - manufacturing, and Managerial construction and mining 881 229 26 68

B. Professional Electrical Engineers 84 142 134 48 nucha-Lca-1 Eng-neers 18 3 340 Chemical and Metallur- 17 'Ao 9

C. Sub-professional Draughtsmen 339 128 38 28 and technical Engineering and Science Technicians 1,262 674 53 536 Accountants 391 195 50 243

D. Craftsmen and Electricians 1,295 617 48 660 Foremen Electrical Fitters 111 95 86 230 Electrical Mechanics- Repairmen 113 109 96 23 Blacksmiths 644 158 25 16 Moulders and Core-

Fitters - Mechanics 455 94 21 148 Machine'-1 Tool -rars- 87 37 43 7 Fitters - Assemblers 2,398 847 35 838 Mechnni cs-Rnepai rmen 1,983 700 35 91) Welders 335 142 42 204

Sawyers 367 70 19 32 Carpenters and Joiners 7,854 3,163 40 486 Woodworkers, n.e.c. 335 56 17 14 Compositors and Printers 608 322 53 127

NOTE: Covers employment in establishments with 50 or more persons employed.

SOuuKCE: Survey oI Hign Levei Manpower in unana 19600. -ManpowerUnit, ACcra, 1961 - 137 - T31' 1g 7 f9 SUPPLY OF HIGH-LEVEL AND SKIlLED INDUSTRIAL MANPOWER

Current Employment (1968) Number of - Yorl=U 4&.-- U- =a-ce Occupation Title Total Other African Non-African 1968 A. ±ecnnicai Managers 4597 10U 1.63) 7J Managers 1, 298 34 272 68 B. Electrical Engineers 150 2 34 15 Chemical Engineers 3 3 Mechanical Engineers 293 125 Metallurgists 6 1 C. Draughtsmen 959 5 1 143 Technologists 300 1 4 108 Accountants 1,468 17 72 132 D. Stenographers, Typists 5,077 110 26 551 Accounts Clerks 4,620 92 18 469 Chemical Processors 75 4 1 _ Tailors, Cutters, Upholsterers 1,719 297 2 280 Shoemakers and leather goods makers 100 5 1 11 Cabinet Workers and related workers 1,959 72 31 88 Potters, glass and ceramics workers 58 6 - - Carpenters 4,882 423 - 90 Blacksmiths, tool makers and operators 4,243 186 141 225 Metal Smelters, Moulders and Platers 160 13 - 20 Fitters, Mechanics and Electricians 11,337 619 124 731

SOURCE: High Level and Skilled Manpower Survey in Chana - 1968 and Assessment of Manpower Situation (1971) - Manpower Division Development Planning Secretariat, Accra, December 1971 - 138 -

7.05 The number of non-Ghanaian personnel in industry has declined since 1968, partly as a result or the Aliens Cuonpiance Ord(er of 1969. TeCn- Bureau of Statistics labor statistics series show 3,004 non-Ghanaians employed in manufacturing on 31 December 1970 outt of a total of 52,785 (i.e. 7.4%). Non-Africans numbered 766 (1.5/). No breakdown is available by occupational group, but the sub-sectors with the highest proportions of Loreigners were non-metallic mineral products (33.3%), structural clay products (18.8%), bakery products (13.9%), furniture and fixtures (13.1%), anLd sawmill-planing and other woodmills (11.9%). Almost half of the non-Africans were found in three industries - textiles, sawmilling and repair of motor vehicles.

7.06 These figures register a decline in both aDsolute and relative terms over the position at the end of 1967, when the number of non-Ghanaians in manufacturing totalled 5,894 (14.3%). Non-Africans accounted for 718 (1.7%-).

7.07 The downward trend has probably continued since 1970. Nearly all the enterprises visited during the mission reported a smaller percentage of expatriate personnel than five years previously. To a larger extent, this is a healthy sign, reflecting the increasing capacity of Ghanaians to take over responsible positions after acquiring both professional training and and practical exnerience within industry. Considering the extent of foreign ownership in Ghanaian industry, x! the high percentage of Ghanaian employees reached at all occupational levels indicates the active cooperation of owners and management in furthering the Ghanaianization policies of successive Governments.

7.08 To reinforce this cooperation, the NPC introduced in July 1973 a Selective Alien Employment Tax Decree. Tbis imposes on emnloyers an annual tax of 05,(nOO for each non-Ghanaian in their employment. The decree excludes Government and statu1torv corporations from its scope, as well as farming, fishing, minin,g, oil prospecting, logging and sawmilling. The tax is payable in respect of persons emnloved in manufactnring' inidustry, where the establishment at whlich they are employed has been in existence for five or more years.

7.09 The tax will provide an additional financial inducement '/ for employers to strengthen their training and management development programs. There is a risk however that the pace of Chanaianization may be accelerated at the expense of efficiency. Industry needs snecialized technical know- how which cannot always be acquired within the srace of five years in a

1/ Out of 356 manufacturing enterprises in 1969, 156 were foreign owned and 62 had a substantial non-Ghanaian financial participation. Foreign-owned and mixed companies were responsible for 40.1% and 35.8% of gross output respectively.

incentive whenever they are not compensated by differences in prodictivity. AXveraage m.onthly earni,ngo of nn-nAfri4ans 4-n nacring 4ndAustr re e 01,171 in 1970 compared with ¢65 for Africans. - 139 -

country lacking deep-rooted industrial traditions. Large-scale industry may be able to absorb the tax levy on foreign specialists if they represent a very small proportion of the labor force. But the measure would be damag- ing to small-scale Ghanaian entrepreneurs who may rely on the expertise of an alien to keep their machinery running smoothly, and for technical trouble- shooting which requires extensive, specialized experience. A tax of ¢5,000 on top of the high salaries that have to be paid for scarce skills in Ghana could threaten the financial viability of small Ghanaian businesses before they have had time to stand on their own feet. It is recommended that small Ghanaian-owned businesses be exempted from this tax.

A. Training Institutions

7.10 Much of the credit for the improvement and diffusion of industrial skills which has occurred should go to the various training institutions set up with multilateral or bilateral aid support in recent years.

7.11 The principle national institution in the field of management is the Management Development and Productivity Institute (MDPI). This began life in 1964 as the National Productivity Centre. Its initial activities were restricted to the public sector and confined largely to training in general management subiects and work study. In 1965, the Centre was incorporated into a statutory corporation with a Board of Directors representing the Planning Commission, Employers Federation, Trade Union Congress and State Enterprises Secretariat, under the chairmanship of the Ministry of Labor. The scope of the institute was broadened in 1967 to cover industry generally, and the name changed to its present title. A request was made to the United Nations Develonment Proeramme for assistance in the establishment of MDPI. This project was approved by UNDP who designated the International Labour Organisation as the executing agency. The Plan of Oneraticn. signed in October 1967, provided for a UNDP contribuition of US$894,200 and a Government counternart rontrihition of UJS$747,303.

The snpeifir nhb1etivup noutlfnpd in thp Plan of Oneration were:

(a) to absorb, replave and epmand rhp wnrk of the National Produc- tivity Centre;

(b) to establish a management development and productivity institute to provide tralning in TnAnAement, respnrch and adeivsorv services in productivity to public and private enterprises and to other organizations in need of such assistance.

7.12 The activiti-s through whlch these activities were to bahied were:

(a) training courses, seminars and workshops for all levels of maagers, er,trepreneurs and supe.n-isorS, with Speci al reference to modern management practices and productivity techniques; - 1h0 -

L. L6 ua,,iJ.,nalit. J.L Il - -JIa. 0 O. . J LJ.d L b L i1iLe ment science and other fields relevant to productivity imporovemen.ts;

(c/ adU-V.Lce andU ass'As tLALnce to enterprLses on theLdeve'lopluient ol their managers - on organization problems and specific aspects

oL pro'LUUctL XV J Ly IUpJ U VLLttCLl L.

(u) research proJects to obtaln a bUetter unuerstanding or the causes impeding the improvement of productivity and growth or enterprises. Emphasis was to be placed upon consulting assignments to make better use of those resources in order to achieve viability and growth.

7.13 Tnese aims and activities have been pursued vigorously. Table 7.03 shows the number of courses and participants during the first phase of the project ending in 1972. over 5,000 managers and supervisors were trained during the period. Of all courses, 42% were short appreciation courses lasting up to 25 hours, designed to stimulate management interest in particular fields by explaining the value of management techniques and giving exaurples of their application. The duration of the majority of the courses was between 26 and 99 hours. They were designed to equip managers and functional specialists with basic tools used in specitic managerial areas. Sixty-five percent of the participants came from the government sector, including state industries, while 35% came from the private sector. As the counterpart staff at MDPI acquired experience and became better known to industry through its training program, an increasing nuiber of requests for consultancy assignments was received from enterprises. Up to the end of 1972, a tota'l of 89 consultancy assignments had been completed in the fields indicated in Table 7.04. More than half these assignments were in the manufacturing sector covering a wide range of industries. - 141 -

Table 7.03

SUMMARY OF COURSES BY M.D.P.I. 1968-71

Participants No. of Top/ Field Courses Total Senior Middle Supervisor Other

1. Industrial engiinopi nP na 79 I .?3 ??q_167 )_97 7

management 34 518 102 414 2 _

3. Personnel 2rim ni s-q tration 11 221 52 157 12 _

4. Financial ac Contivn+j-n office m.anagement 74 1,265 334 466 167 298

5 .Marketing L0 680 416 195 45 24

rOCYP AT 5,9 -I1,2o , 7,o4 396

Per cer.t 10 13 27 - e) E - Table 7.04

SUMMARY OF CONSULTANCY ASSIGNMENTS BY M.D.P.I.

Techniques No. Completed

Ob.jectives, policy, company reorganization 15

Profitability studies 9

Budgetary control 3

Accounting systems 6

Financial management 2

Cost studies I

Management audit and development 11

Office orzanization and methods h

Production enFineering (control. standards, layout. materials handling, stores control planning, inventonrie) 9

Feasihbility &1studies 41r--

Job eva-l,nati 1

Prever.tive .mainten-ance4

Parketing studlesn aEnd sae org Iaio,

P-vr~nn-,t +tr-i,rra -A-, -n - -A 0

Total 89

SOURCE: MDPI - 143 -

7.14 The Ghanaian Business Bureau is a division of MDPI set up to help small- and mAed4u.size rhanaia4n businese grow.and,rosper, and to help prospective entrepreneurs to start new businesses in the right way. Their activities are concentrated on suort period (121= Aays) courses onJ suLch. topics as "How to Start a Business," "Costing for Manufacturers," "How to Finance your Busi.ness," "WJTorkshop Management," 11w to) E-stabi4sh Cred. anAIt Tdse It Properly," "Basic Bookkeeping," "Profit Planning and Control" and "How to Sell Your ProAuct."1 Se,..lrars cover -le general ,mnage.ent i-t-l=. L'J.A..A1.LI. . JUL L . oJ i1Lt i 0 LJV0 L L -L. 1L0IMLLaCXr,LLU~LL4 ~J J1L1 I0 51 specific trades, e.g., carpentry, leather products, automobile reapairing, a.-,d talloring. LL%u La. ~L .L L

7.15 The MlDPT services have been well supported. and recei-ved by industry on the whole, but there was some feeling among the enterprises visited by th'1e mi1ss1oion thaL tile uourses were somietimes too general alntah eoretical. There was a need to translate general principles into specific practices -which differ from industry to industry according to the type of product, materials, and technology. The institute has been hampered by difficulties in recruiting senior nationai stafr with substantiai industriai experience, due to the overall scarcity of such personnel in Ghana and the fact that salary levels are not competitive with private industry.

7.16 tMPI staff have encountered a reluctance to delegate authority and a lack of involvement in the application of management techniques among top managers. The benefits of training courses for middle-managers have sometimes been lost on their return to their companies because of the indiffference of their superiors. Accounting systems are seldom designed to provide adequate control information to allow prompt decisions by top management.

7.17 United Nations participation in the institute has been extended into a second-phase project which will give particular emphasis to the training of the national staff and to in-plant consultancy work. Increased government support is evidenced by an enlarged budget and a reconstituted Board. Frequent Government statements calling for improvements in the efficiency of state enterprises and the policy of Ghanaianization of private industry have increased the demand for management training/advisory services; despite the introduction on January 1, 1973 of fees for MDPI's regular program (except for Ghanaian Business Bureau courses). Previously the institute had been maintained fully by Government subvention (and UNDP aid). Fees were introduced to bring it into line with the NRC policy of reducing the dependence of corporations on the national exchequer as part of the "self-reliance" objective.

7.18 MDPI activities in the management development field are complemented by the Ghana Institute of Management and Public Administration (GIMPA) which concentrates on residential courses for the civil services: the School of Business Administration at the University of Ghana at Legon (A B.Sc. Admin. course with an estimated output of 281 graduates between 1970-74); the University of Science and Technology at Kumasi (technological education); the various polytechnics (production engineering) and the Development Service - 114- Institute of the National Investment Bank wqhich provides advi.- t, iIst ciients and prospective borrowers. There are no private management const0tancy (as opposed to engineering consultancy) organizations operating ir.GN1-aa anl the single management association (the Ghana Advanced Management Assoc'lti.ttc) is not involved in training.

7.19 At one stage there was some concern about possible overlap,il.ac between MDPI and GIMPA but a committee appointed by the Prime Mir,f.ster's Office in 1971, headed by Mr. A. L. Adu, found this fear to be unfr,unl.

7.20 The overall system of management development in Ghana has performed well during the short period its existnece. It might be reinforced in a variety of ways:

(1) Developing the syallabus for the third year course in industrial engineering at the School of Business Administration, with consideration given to the introduction of a special degree in industrial engineerlng if the demand warrants it.

(2) Rxnangion of the long-term (300 hour) course in industrial engineering at MDPI.

(3) Formation of a society of industrial enpineers.

(4) Establishment of courses for work-study practitioneirs at the Polvtpchnics and Tprhniral CGol1ege 1/

(5) TIr.uctni-ng tlhe onepat andA technnmique of "TnnneagDnnant- bny objectives" by holding conferences and seminars on this sub4ect- for topn managers.

r tW. V s 4- On of mor d i re ao-.ist.c.- biy rllJ.T -n tJC1 develCoV ment and implementation of effective management information system..s through convaltancy projects and in-plant training. (-7) x-par.s'ont of the program, in xotraktnXui. ,re research studies undertaken by the UNCTAD/GATT International Traue Centre as case materLal andl en'isting personnel from the multi-national organizations based in Ghana as lecturers.

(8) Wider diffusion of extension services for small-scale producers. Present programs are reaching only a small fraction of the artisan workshop sector. In particular the in-plant advice provided by the Kumasi Technological Institute tor small-scale industry deserves enhanced financial support from the Goverrnment.

1/ See Ghana Management Develonment and Productivitv! Terhniral Repnort on Industrial Engineering in Ghana, ILO, Geneva, December 1972. B. Managerial Rewards and Sanctions

7.21 Greater exposure to improved managerial techniques through training courses and consultancy services is probably an essential part of the efforts to raise levels of efficiency in Ghanaian industry. But it is not a sufficient condition. The managers' willingness to apply these techniques depends to a large extent on the structure of rewards and sanctions he faces.

7.22 Most of the 200 or so managers met during the mission seemed to be well-motivated, energetic, competent persons. The climate in which they operated was not always conducive to optimum efficiency however. A variety of forces and factors were found to discourage the implementation of cost- reducing, output maximizing techniques.

7.23 First, the existence of monopolistic or oligopolistic conditions in several manufacturing sectors, buttressed by severe import control or high tariff protection, allowed profits to be made without strenous efforts on the part of management or workers.

7.24 Second, controls exercised by the Mlinistrv of Labor and Social Services made it almost impossible for enterprises to lay-off surplus labor except for serious misdemeanors. There was thus little incentive to introduce management techniques which were designed primarily to reduce labor input in labor-scarce economies.

7.25 Third. a malor constraint on output in some industries has been the scarcity of foreign exchange to buy imported raw materials. It has been the principle cause of low capacity utilization revealed by a recent MDPI study. Some managers have felt that there was no point in seeking to raise output per man-hour or machine-hour; if that wprp simnlv to rpesult in raw material supplies running out earlier and leaving both men and machines idle (but still beino npid) for a longer period.

7.26 Fnurth, the rryAd i,ifo,n hare generally been opposed to the intrn- duction of piece-rate incentive systems which would link rewards more closely to effort.

7.27 Fifth, rigid hierarchical structures tend to dampen individual initiatives at the middle/junior management levels.

7.28 Sixth, lower levels of efficiency in public enterprises may be associated w. h lower saOlary levels.

7.29 Average m,onthily earnir.gs of Africar,s were ¢03 ntepbi ~ ILILLI.y LLL J. LI"L .J.PV ~Le~ U * ±L L.LM FUU.L.LI.. authority manufacturing enterprises in 1970, compared with 067.19 in private enterprises. TFhis salary difee,;a ,-.d_.as i;_ eairfo rvae r.lS_ toJ. ~ J.LL.L~a s U.LLCLLL. LICZ I1Ut LL CdOLML LUL ±VdLZ L.LLat to attract top grade personnel. - l46 -

7.30 Seventh, although most companies pay year-end bonuses of 2 to 4 weeks salary to their managers, they are rarely related to their performance in reducing costs or increasing the profitability of the operations under their control.

7.31 In this environment, it is not surprising that some of the techniques being taught so assidiously in management development programs are applied with somewhat less enthusiasm at the enterprise level. Increased industrial efficiency in the future would seem to depend upon action being taken by the Government to:

(1) make raw material inputs more readily available to those enterprises which can use them efficiently. This would require expanding exports to make foreign exchange available for critical imports of materials and/or programs for expanding the supply of domestic materials;

(2) increase competition between firms, either by reducing the degree of protection against imports or by granting additional manufacturing licenses in monopolistic industries;

(3) expand employment opportunities by fiscal and monetary policies (e.g., employment tax credit, hiRher interest rates) which encourage the choice of more labor-intensive technologies throughout the country so that enterprises can be given greater freedom in the hiring and firing of personnel without running into conflict with the social oblective of fuller emnlovment;

(4) nrovide greater market opnortunfties and technical inpunt tn the small-scale sector which economizes on scarce managerial and canita1 resnorces and relies more nn innatP entrepreneurial abilities (as demonstrated by the cocoa-farmer).

Vocational TraininA

7.32 There are three types of vocational and technical training institutions in G,h-an,a: (W% PolytechnictA - -Ac, Takoratdi andA wm.ai)4 . ( 1cL.Ljcd Institutes (Koforidua, Asuansi, Kikam, Kpandu, Ho, Sunyami and Tamale; (iii) Training Centers and Spec4ia' Training Sccools (A ccra Techr,iLca'l rai.H Center, Tema Textile Training Centers, Tarkwa School of Mines).

7.33 These cover various levels and types of skill leading mainly to C,ty and Guilds of London ILsti-Lte certiLicates. The totai number or training places available in 1972 was 4,350.

7.34 The National Vocational Training Act of 1970 gave the National Vocational Training Institute the responsibility to coordinate at the national level all aspects of vocational training including apprenticeship. This Institute had been set up in 1968 with JNT-1)P/ILO support. Its main functions are: 147 -

(a) to organizeapprenticeship, in-plant t-rining and training programs for industrial and clerical workers, and training

purpose;

(b) to provide for vocational guidance and career development

in indt1-1ar17

(d) to initiate a continuing study of the country's manpower requirements at the skilled worker level; and

(e) to establish and maintain technical and cultural relations with intrnatina4 l orng-nizations and other institutions engaged in activities connected with vocational training.

7.35 Particular attention has been paid to the establishment of in-plant trairning programs. Thi w.a, in respon.se to c-44-4------expressed- I--mpl--by- about the lack of practical knowledge shown by the graduates of technical training institutes. By the m4iddle of 1973, the National Vocational ITnsttute had helped to set up programs covering 1,600 apprentices and the upgrading of 2,700 workers. Tv7o hundred lnstructors taking part in these in-plant programs have been trained.

7.36 The Institute is guided in these activities by the National !;r.nrvnf- ,sanh-I ('r,,,na--1 t.,hnc:s msmhsorhli ,SQI A,-T.,n f,r.m o,mnl orsor, 4-.-A,o ,.,.4 -,,- and training institutions. Specialized Advisory Committees have been formed for the buIlding, printing, metal, automobile, electrical, dressAmaking and tailoring trades.

7.37 Good progress is being made in establishing Apprenticeship Standards for various trades, adapted to Ghanaian needs, and in standardizing trade- testing procedures. Other activities include the development of training mnateralals and sylclabue snid occpto-nal nanlysias An int-er.ntio.anl n,+.riasr on training for non-farm rural occupations will be provided by UNDP/ILO in 1974 to assist the Goverinrment in establishing training facilities in rural areas.

7.38 Formal, institutionalized training still plays an important role. Perhaps the mnot sccssful ndertaking in t-h fiold is4 t-he Acera Tech.nical Training Center which was set-up by the Government in 1966 in collaboration with CannAinn Tec-hni-al A4A ATTr nffove three. t-ya of courses.

(1) "blockt"~r reles~ase couirses" in y.yh li-h the part-icipa,nrts m,st behc. sponsored by their employers who agree to release them for blocks of 11 weeks in four successive years; - 148 - Craph I Accra InduBtrial Institute - Course Particination

PERSONS

|I rJven.Ing Classes 7/

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I

I 1 InBlock Release Courses /

.1 ' Kv

t1 II

ti I fi/ i _// / sTe-eI __ np r aI l il tours 7-e-nen

, ~~ j A- s1 C.o7u.... s77 s- r

SOURCE: Accra Technical Training Center - -L49'l 19-

(2) pre-employment courses in radio and television reDair (2 years) and office machine servicing (1 year); and

(3) up-grading courses (11 weeks) for foremen employed in Governmental agencies.

7.39 In addition, evening courses (25 sessions. 2 sessions of 2 hours per week) are available to tradesmen who must have at least a middle-school leaving certificate and 3 years' work experience, "to imnrove their skill and knowledge."

Courses are offered in the following fields:

Automobile repair Auto mechanics Carpentry and Joinery Electrical construction Diesel engine repair MIasonry construction Plumbing Radio and television Refrigeration and air conditioning Welding

At the end of October 1973, a total of 12,293 students attended ATTC courses: of these; 55% took courses requiring day-time attendance. As indicated in Graph 1 there has been a fall-off in attendance over the nast thlree years. This i8 attributed by the Centre staff to the increasina reluctance of employers to allow their employees to attend block-release courses, because a numTber of partirinants left tn inin- omnpetitiue firms shortly aftpr graduation in response to higher wages offerecd. The trend might also reflect the shift in emphasis to in-plant trsining promnoted by thle .national Vocational Training Institute and the National. Apprenticeshin Council.

7.40 In the main, the courses offered by technical and vocational training ins in Lha c on t .A.kSL.b a trades. Machine operatorslin the more specialized branches of industry are generally taught their skills on the ,ob. Tn the- textile industry, .ow-ever employers have had the valuable assistance of the Tema Textile Centre which hIas een supportedI---by* Jz.4aparLLA tchnical Tid. TIh I,I a substantial con= tribution to the smooth acquisition of skills in one of the most dynamic sectors ofL thLe Ghcanalican eC-Cor l,y. (F- ll- rLet in the text'.le an1 --rmient secLuLUL LLL~~~ ~IL~~LAdJUit * 1\I_1.L UYpUyiLC £1 LEI1 LI -ALt±-CuLLL ~,dlIllI industry expanded by 43%° per annum on the average between 1962-70).

7.41 Table 7.05 shows the trend in the Central Government's exDen- uiLure on tekchinical adIU VVCiALiUIld eUucaiLLn over tilue DatL VtvL yeIars. The figures do not include the cost of in-plant trainin- programs operated by the 'National Vocational1 Training Institute, wnicn comes out of tne buagec of the IMinistry of Labor. The expansion of this program may account for the drop in the '-Ministry of Education's budgeted outiay in 1972/73. Table 7.OU'

CENTRAL GOVERNMENT EXPENDITURE ON TECHINICAL AND VOCATIONAL FdUCA'TiON AND ITS SHARE OF TOTAL EXPENDITURE ON EDUCATION ANID RESEARCLH (0OOjs)

Actuals Actuals Actuals Actuals Estimates Estimates Estimates A77C7T 7171 -- T- -19687/b W T 196970 _ 1970771--7T 197 /72 rT-1972773T

Development, 555 14*.3jL/ 632 9.7a/ 406 10.5a/1,186 9.9 1,663 12.1 2,039 16.3 1,200 23.1 Expenditure

Recurrent 1,1.10 1.? 1,131 1.7 1,455 1.9 1,672 2.1 2,000 2.3 2,54C 3.7 2,297 2.9 Expenditure

0 st iniatecd expendi.tures.

Source: The Annual Estimates, Budget Divilsion, Ministzy of' Financeb 7.42 The NRC Government continues to attach particular importance to the development and coordination of Ghana's manpower resources. A Decree issued in April 1973 1/ defined its manpower policy and laid-down the new responsibilities of the Ghana Manpower Board. Its principle aims are:

(a) Maximum and efficient utilization of the nation's manpower and avoidance of wastage of skills and training by purposeful direction, guidance. and accurate placement of trained and skilled members of the labor force.

(b) Periodic review of the national system of education and training schemes with a view to their effective adaptation to changing manpower requirements.

(c) Emphasis on building a flexible and dynamic labor force with skills which are adantable to occunational shifts, technological changes and industrial growth.

(d) Increased emphasis on the development of agricultural skills, spnainalyv In Aarit-t,ltiirsi eduncationn bettpr t'ehnniral gunnort for farmers and rural communities, and the provision of qunalifiedi agrie-uilturral snpcialist

(p) EmnmhAnis nn hiilAin& thnos alillQ whiclh a hnba4s-tn the Aduelon- ment of the country, such skills as management at all levels, sunr?vininn and foremansh±p, professio.al and sub-professional occupations, and middle level mechanical skills and know-how which are interchangeable between occupations and ind,--tries.

to growth of the labor force, the scale of employment, the .-ate of unemployment zr,d thLe budn -4 eerdny

The Board i4s ch.ai4- r edA. b y tShe tDoU-issioner-Plr--- - fo ic .r.ir.g and consists of members representing the principle ministries and agencies which have

v co~j~JLl~ .LUJ.J. L.Lr J.L .L_co I LU LLU'aLA L=OWJULL=X,CML1LIW-L ao mL&L* UjL u In the implementation of the manpower policy of Ghana, the Board has been assignedAh fol-0k frctos

and training and the effective utilization of all the human resources iLn a.Jl sectors of the natlo,nal ecJLy ;

(b)Lo re-VA. W and'U evaLuat-e the mar.power aspectLs of n.atlonal econ.omlc plans and the main priorities for providing the needed supply o'L maupowerW,

1/ Ghana Manpower Board Decree, 1973, NRCD 171. - 152 -

(c) ladiseo andi ev2ualttei plnsr fo-r the rdevelnTopmnt- of 'nvnt '."Al system of education and training xwith the object of mneetirng the manpower and -- plo-,ent needs and achiev.in- the ob4p-,pI-¾T0 of national development;

(d) evolve suitable plans to develop and maintain full information or. the emC.ploym.ent status of university graAuates fromL.botu Ghanaian and foreign universities and in co-operation with the

d.ppLI.JL iL 1LC >6II5W1L%t> UCV LOC d1It cIL.J K pi O-VL III *VJ 40oULB LL .LL productive employment, together with suitable plans for the receptiLon, trar,sportationalL ardaccommoation of all graLd-uates returning from overseas;

(e) undertake periodic assessments of the manpower resources and requirements o tile country ann] IiOSter tne Uevelopment of regular statistical services for this purpose;

(f) develop plans and propose suitable programs for vocational guidance;

(g) develop plans and programs to promote, expedite and co-ordinate the production of needed skills through actual employment experience and work-related training within employing establ-ish- ments and in co-operative programs which link formal schooling with work experience;

(h) develop, and ensure the implementation by appropriate bodies, of plans, programs and projects designed to reduce unemployment and check the causes thereof;

(i) initiate policies, plans and programs for periodic assessment of the manpower resources and requirements of the country in consultation with and utilizing services of the Central Bureau of Statistics and other appropriate agencies;

(j) maintain continuous and close contact with emnloying authorities and agencies concerned with manpower problems, particularly with the Public Services Commission, Ministry responsible for Education, the Universities, the Scholarships Secretariat, Ministries responsible for Labor, Social Welfare, Youth, Rural Development, Agriculture, Industries, Trade, Ghana Employers' Association, Chamber ^f Commerce, the Trades Union Congress. institutions concerned with management training and vocational training, and other affected agencies;

(k) review from time to time the nolicv of the Government on population and migration and advise on appropriate action - 153 -

as well as on measures to be taken to ensure the fullest development and utilization of the human resources of the country and to co-ordinate population activities in the country generally.

These are wide-ranging responsibilities. A prerequisite of effective implementation is strengthening of the data collection, analysis and publications capacity of the Central Bureau of Statistics. The functioning of the CBS is now actively under review, and its manpower division has secured the services of two UNDP/ILO advisers. A lot will also depend upon the successful outcome of the recently announced reorganization of the central economic planning function into a separate planning agency with a full-time Commissioner.

D. Social Characteristics of the Ghanaian Factorv Worker

7.43 Several sociological studies of the Ghanaian industrial labor force have been made. 1/ They enable a broad profile to be drawn.

7.44 The average factory worker is predominantly male. Only 7.2% of those emnlnved in manifnrtirinrT in 1970 were female Ghanaian women have a long tradition of working to support themselves, but mainly as traders. The princinpl indusqtrial1 occurpations nopen to them are as bakers ande seamtn.1re.Qsse Factory jobs are not as attractive to women as self-employment because of the reguIinr houirs demanndoed and the lackt of dany nursrgo4cies fo-r c-h-iel-ran.

7.45 Factory workes ten-d to be mir ant-.In 19 less than one 4n five had grown up in the place in which he Tras working. Half of the migrants had made only one move, from home to their place of work. 'Nearly half of the urban workers had grown up in villages and nearly three-quarters had crossed regional boundarles to fi,-.d work. ~JLL14.~ J..L,.U L L..t 1.0 .L ±LLU WO 6

7.46 Occupation andskill Jle-vel COL reLaL; U1osel-Y with educatio,,al bach- ground. Three-fifths of the unskilled workers had no schooling. The unskilled tended to clange jobs more frequently. Large numbers of youI g m,en are willing to leave home and risk unemployment, or endure the effects for 1 - 1Js~I- -t- - -_ L--' .long periods, because Lhey place a LghI value onL wage e1uploy-t-rL .t.lL1UUghI industrial xwage levels are not high, and have declined in real terms over the last decade, they oftie represent an opportunLity U1 LMPrUV±Iir l'-v'Lg standards, beyond the village level. Young men have no standing at home, an-.d urban wages represent a chance for independence.

7.47 iMIany workers nave dirficulty in adjusting to the reguiar time- keeping required in factory emp~loyment. Skilled workers tend to dislike piece-work systems, partly because they wish to conserve their energy on their regular jobs so that they can work on their farms or at other enterprises in the evenings, since food or earnings trom these make an appreciable contribution to their standard of living in the city. It has been suggested that higher wages might increase productivity by eliminating this need.

1/ See particularly Margaret Peil, The Ghanaian Factory Worker, Cambridge TTniversitu Press, 1972. - 154 -

7.48 The reaction of Ghanaian workers to their supervisors is eenerallv positive, though they sometimes find the relationship too impersonal, and resent instructions which conflict with the values instilled in their traditional upbringing. Greater attention to the selection and training of foremen is likely to yield dividends in higher productivity.

7.49 Glose ties are mafntained with the worker's family even when separated. Nearly three-quarters of industrial workers send money home and also vi44sit their relatives frenuently.. taking gjifts with them-. These *fini-nm transfers help to reduce urban/rural inequalities. Caldwell estimated in

1969 that 10 mTillion leaves Acrra earh vear in this9wtv 1/

E TJn pnA Sa:ary l Sjtructure andi Costs

7.50 The followino table will cgrive ain indication nf the wage and salr rates prevailing in November 1973:

Table 7.06

Legal minimum wage 00.88 per day Unskilled labor ¢-1.0no to 1.15q per A-ay Semi-skilled labor 01.35 to 2.20 per day

taSk.l.led l&aborj ¢2.0 tot 'J4 3.00J perday~ Factory supervision 0200 per month Y.oung grad uatle engineer or accountant 0270 per month fI_lrdaging director of a state enterprise 0665 per month

Expatriate technicial ILanaLLteL Y. I ±UI,. - 1,500 per montn

Two points can be noted. First, the rewards to education are high in the Ghanaian context. A young graduate in a managerial position may receive ten times the income of the unskilled laborer. It is not surprising that the demand for a university education has boomed: but is this disparity justified by real differences in productivity or relative scarcity in a society which seeks greater equity? Secondly, in contrast, it might be questioned whether the earning differentials between unskilled, semi-skilled and skilled craftsmen are sufficiently wide to encourage the additional effort (including high-school training and long apprenticeships) to acquire greater skills?

7.51 More comprehensive data, giving the distribution of the African employees between different wage categories are available for 1970. Table 7.07 shows that nearly half of the African workers in manufacturing were daily-paid, and 63% of these received less than one cedi per day. Among the salaried staff, only 10.6% earned more than ¢100 per month. Average earnings in private firms were significantly higher than in the public sector (067.19 compared with ¢60.32). The differential may have widened over the

,- aw - - f Rbo e Movement to rcmana's Towns, Australian National University Press, Canberra, 1969. - 155 - Table 7.07

DISTRIBUTION OF AFRICAN EMPLOYEES BY RATE OF WAGE OR SALARY 12/31/70 - MANUFACTURING SECTOR

Private Enterprises Public EnterDrises All Sectors Daily Rated (%) T T5

Total 47.9 46.6 47.5 Under 70 p. 1.h 3.4 2o. 70 - 80 32.6 38.0 34.1 80 -90 16.8 46 13J 90 - 01.00 12.6 15.9 13.5 1.00 - L20 10c=4 1461.4 1.20 - 1.40 13.0 9.1 11.9 1,40 and over 13.5 14=3 13.8

Monthly Rated

Total 52.1 53.4 52.5 Under 020n00 2.3 1.2 2.0 20 - 25 7.2 4.3 6.4 25 - 30 12.4 12.5 12.5 30 - 35 12.1 10.4 11.6 35 - 40 ~~~~~~~~~14.7 16515c.2o 40 - 70 31.3 30.3 31.0 70 - 100 1,0.0 1. 10.7 100 - 250 7.8 10.1 8.5 2 0 - ,00 1.8 2 .0 1.8 400 and over 0.4 0.2 0.3

Ave-larage E4 1-15S 67 *.J12

'JL0urce; T -our Qei,i. 170, Centrasl Dureau of S stJ0s - 156 -

past three years, particularly in the more skilled ornupation8. Piblit enterprises are excluded from the provisions of the Selective Aliens Employ- ment Tax Decree. whereas comDetition amone nrivate firmn fnr exnsrienced Ghanaian manpower to replace expatriates has tended to drive up salary levels. A reti-t-inn in the differential between ptblir andrl nrivate sectonr alni- may be an essential part of the efforts to increase the efficiency of state enternrisp.Q Rutt care needs to he exerrised ton navoi a compe tl vspi.-al which drives up the earnings of managerial personnel out of all proportion to the wageC of t-he averag worker The ht gay ton cnt-rnl this m4ght be through the income tax system. At the moment, the tax structure is not ea"eciallu prgesie Poersona1 lnc-%vgomtax% naecoim.teA for or.y1w 5 of tot*al Government revenue in 1972-73. A salary of 014,500 p.a. carries an average t.axa S o r . There m- to be- a-cae for 4-r-s- the 4-.cierce of tax on the higher incomes on both revenue and equity grounds.

7.52 Average real wages in manufacturing declined by 0.6% per annum betweer. 1962=70, Aespit1e a growth -If productivity+ of 4*X -the1.. durr, same period. As a result, labor's share of value added fell from 30.4%

lni I7UL to 20.6% i./n 1970-(see Tables 2.05=2.07). Svr I1anJUUs 'or these trends can be put forward:

(1) Ghanalan trade unions have been weakly organized and

p.L. Li.cL.Ly subus er-LV-ie.e NkLrua.LL subloruinated LLLe TradUe Union Congress to the Convention People's Party so that

i'tLUecame an agentL Lor promL otLIL.LLJ- Go0VVe.LLI,mtent po.L.Lcy ratLLIte than worker demands. Apart from a brief period of

iLnuustXral uiIrests *Ln 1197E 0'u-, , sucesasiLve Gw verinments have maintained their controls. Strikes are illegal. Disputed wage claiLs are subJect to coUpulsory arbitration and agreements between employers and unions must be submitted to the Prices and Income Board for approval if they involve an increase in wages in excess of 2-1/2%.

(2) High levels of unemployment have discouraged workers from demanding pay increases. Job security and social security have been preferred goals, so long as real wages in industry remained higher than in alternative employment opportunities.

(3) High capital-intensity may account for the high share of non-labor income in value-added. Factors influencing the choice of capital-intensive technologies include abundant suppliers credit during the first half of the sixties, low or negative interest rates (taking into account inflation), and a pronounced bias in favor of large-scale operations and the latest techniques of production shared by politicians and industrialists. Unfortunately no comprehensive CBS data are available on the value of the capital stock in industry to check the validity of this hypothesis. But - 157 -

there are some partial indicators. Large-scale manufacturing's expenditure on fixed capital between 1966 and 1968 absorbed 8% of the estimated fixed capital accumulation in the economy as a whole during the period. As it provided only 1-1/2% at,the total employment, investment per worker in industry was substantially higher than in the rest of the economy. Further evidence is the high valued added per man, nearly 03.000 in current prices in 1970 compared with an estimated economy-wide average GDP per worker (including agriculture) of 9677 in 1969. 1/ EstimateR for individu,al indtntr{eR made by the Ritter Group, a German consulting firm which advised the Ministrv of Tndustrv from 1967-72 show fivrures of investment per worker in 1970 of 013,800 in food manufacturing (exeluding state enternrIses not in operation)!;3,700 in beverages; 08,900 in textiles; 06,200 in chemicals and chemical nrodurts;n 61n800 4n petroleum refi.ning; ¢3,900 in paper products; 015,700 in rubber products; and 04,600 in vehicle naa~ly.Ste2Q4sv ThesTrhnan Investment-4flwCanf-in "t data9fl!t- apply tot-1 f fixedasest{ 4- A oaaat-a ae book value or original cost. Revalued at replacement cost at 1970 prices, the flgures would be higher still. The only major sectors of large-scale industry with capital intensity per -ruer of less tha n,00 were woodd prWoducts (A-1nnn0); w.J.-_ -O JJ .faf J. L ' WC C L fA J LS UL. %Yl.S ~'WW' furniture (01,500) and printing (t1,500); according to the P4 -tterGroup studi-les. (4)Lolevels ofl plant utili4zat4on uavre resultCed ir.1,4- capital \ AZ- ~Cvt L i pL... SL.LUA L.CLI L A c A O~. Au Lu AA I Lr JL .O 5 (depreciation and interest) costs per unit of output. A samuple survey of 10 industrial sul-sectors conducted ly -le ~aLUj.L~~L LJ I%JL' .UUU - L L± kwU ~ L. UL LfL1U.,- LJ LLI. Research Division of the Management Development and Productivity Lnstitute reveadLeu a weLglltedU average level ofL capacity utilization (on a three-shift basis) of only 33% between

1'796- II. Protect'Lon 'LromU Lore'JgLi coUpet'tLLLoI Llas enbLeUdU some of these industries to pass their higher capital costs

on to the consimer 'Ln tlhIe fOr-UL of highLUer prices_I%, hL-LI rLLL.LaLt ing both value added and returns to capital figures.

(5) Labor has been compensated for declining real incomes by a

generous social suc-.UIrity sChle-ne 'introduted i'n 196J. Li e employer contributes 12-1/2% of the salary and the employee 5 . The bene-its iuciuue tree medical services, retirement pensions, invalidityl and survivor's benefits. In addition many employers provide weirare facilities, such as clinics, subsidized meals and housing, free transport and recreational

/ Derived from estimates for GDP given in One-Year Development Plan, Sept. 1970 and estimates of emnlvoment in T. Merritt Brown. "Macroeconomic Data of Ghana" in The Economic Bulletin of Ghana, Volume 2, 1972, No. 1. - 158 -

fPaciliti~4es. The cost of the compulsory social securit*y system and these voluntary benefits is equivalent to 30% of thewage1 bll or some employers in-Ler-ie-wedu.

F. Manpower in Small-Scale Manufacturing

7.53 The discuss'lon in th[iJs chapter so fLar hI'as applied rL-Uost'Ly Lo the 56,000 persons engaged in large-scale manufacturing. But we have seen that an estimated 440,000 are working in sumall-scale manufacturing establishments with less than 30 workers.

7.54 Information on the characteristics of this labor force is scanty. Skills are almost always acquired on the job. Most are self-employed, family members or apprentices (which is sometimes a euphemism for low-paid, unskilled labor). Earnings seem to be below tne iarge-scaie factory sector rates. Very small firms are excluded (de jure or de facto) from the provisions of the minimum wage legislation, the social security scheme, and other labor decrees affecting working conditions and labor relations. This legislation acts as a barrier and a disincentive to growth for individual enterprises.

7.55 Premises are generally an extension of the home, a wooden or corrugated metal shack or the open air. Working hours depend upon the pressure of demand, or lack of it. Underemployment seems to be widespread. Among the principle causes are shortage of materials and spare parts; slow rate of growth of demand for traditional products; ease of entry for new entrepreneurs (low capital requirements); overcrowding ensuing from limited number of employment opportunities in the large-scale sector; and lack of technological progress. Yet there is evidence of considerable ingenuit-: in making the most of their limited resources. They are providing basic products and services for the mass market (e.g. clothing, foodstuffs and cheap furniture), as well as for the higher income groups (e.g. automobile repair). There appears to be a strong case on social grounds - and probably also justifiable against narrow economic criteria - for a major devalopment program aimed at raising the skill, productivity and income levels of persons engaged in the small--scale sector; so that they share in and contribute more to the growth of industrial output in the future.

7.56 Elements of this program could include (1) an industry sector loan focussed on the material and equipment requirements of small firms; (2) mini- industrial and standard buildings to reduce congestion in the central markets and workshops in the major towns; (3) technical and financial assistance to technological research institut-'ns which are developing intermediate appropriate technology (e.g., by strengthening the program set up by ITDG of London in Kumasi); (4) expansion of the equipment hire-purchase program provided by the National Finance and Merchants Bank; (5) technical and financial assistance to the engineering industry to enhance its canaclrv to manufacture appropriate machinery for small firms; (6) formation of trade associations and craft guilds to provide common facilities, to disseminate .L Lormation, tLo organiLze traiLniLng andu derUionstration. prograL1s, and0to repres tL their members' interests on official consultative bodies; and (7) the esUta±LLIIUlt oL a S-UaL L1 du-tLy Ir.Ls t itute to act as a focaUL point for training, research and advisory activities on behalf of small firms.

7.57 A package program of this kind would attract more Ghanaian entrepreneurs into manufacturing. Entrepreneurial flair has been demonstrated by the Ghanaian cocoa farmer. They have shown considerable vigor in transport, trading and construction activities. 1/ But many nave been deterred from entering industry because policies have been strongly biased in favor of large-scale, corporate enterprises. Tne Gnanaian Business Promotion Office seems to have been largely ineffective because political loyalties have been foremost among its considerations in the selection of loan recipients; and it has concentrated on the acquisition of existing expatriate-owned businesses (e.g., bakeries), rather than promoting new enterprises or facilitating the growth of those Ghanaian entrepreneurs who have proved their competence the hard-way.

7.58 A follow-up mission by the World Bank to study the small-scale sector more throughly might assist the Government in drawing-up a concerted program of action.

1/ See Keith Hart, "Small-Scale Entrepreneurs in Ghana and Development Planning," The Journallof Development Studies, July 1970 and Peter C. Garlick, African Traders and Economic Development in Ghana (Oxford, Clarendon Press, 1971).

ANNEX 1 Page 1

FOOD AN) BEVERAGE INIIJSTRIES

A. Overall Trends

1. Food processing is one of the most important and vigorous sectors of large-scale manufacturing in Ghana. Cross output expanded at an average annual rate of 19.7% in constant prices between 1962 and 1970. Value added grew by 21.0% per annum. Its share of total manufacturing output went up from 7.2% to 10.1%. Employment increased by 9.6% per annum.

2. The production of beverages was rather less buoyant. Annual rates of growth of output, value added and emplovment of 11.8%. 13.4% and 9.1% respectively, were recorded. Nevertheless, these last two indicators were still. slightly above the industrv-wide averages. The share of beverages in total manufacturing output was 12.5% in 1970.

3. Table A1.01 shows the trend in gross output and value added in current nrices in the nriininal subh-setors be.tween 1966 a nd 1970. New large- scale manufacturing activities started dutring this period included dairy products, fish nrnrpssing, sugar refining and flour milling* The latter quickly assumed substantial proportions, being responsible for 11% of the total food/beverage output in 1970.

4. Taking these conventional measures of grow.th of performance, the food and beverage industry appears to lhave been highly successful. However, It is a nicrocos... of the whole of the manufacturing sector iln Ghana. It exhibits some of the same deficiencies we have examined in the main body of the report, i.e.:

(1 !tgh eper.dence on 4mport-s for raw m;aterlals. * ~ ULL £It- ~ L.L LU L~la C ~cI.L.

( H~iIgh capital intensity and i.nallpropriate techlo'lgy.

Let us analyze these problemrs in TiLore detail and consider wiat could be dlone at the plant and industry level to remedy them.

B. Material Inouts

5. One would expect food processing and beverage manufacturing to have stron,, links wiLt local agri culture. They tend to be among th'e first Ln- dustries to emerge in a predominantly agrarian society. They usually evolve from a specialization of10 thel milling, grinding, slaughtering, mixing, baking, cooking, brewing, fermenting, preserving and storing activities, formerly carried out in each household. The conversion of part-time hiousehold activities into full-time artisan production, and eventually into mechanized industrial process'ing, provides the housewife with time-saving convenience foodstuffs, and usually higher quality and lower costs resulting from specialized know-whow and experience and economies of scale. Table Al .01

FOOD AiND BEVIRsAL ifNDUSTRIES OUTPUI (in current prices)

1966 1970 ISIC Gross Value Gross Value Classi- Output Added Output Added Industry fication is million 0rmillion 0 million Z million

Slaughtering, Preparing and Preserving of Meat 3111 0.25 0.03 1.74 0.96

Manufacture of Dairy Products 3112 - - 1.21 0.49

Canning and Preserving of Fruits & Vegetables 3113 0.83 0.47 1.36 0.72

Processing of Fish, Crus- tacea and Similar Foods 3114 - - 1.82 1.72

Manufacture of Vegetable and Arimal Fats and Oil 3115 1.61 0.75 2.98 1.20

Manufacture of Grain Mill Products 3116 - - 8.13 3.4

Manufacture of Bakery Products 3117 2.40 1.14 4.60 1.90

Sugar Factories and Refineries 3118 - - 2.60 0.93

Manufacture of Cocoa, Chocolate Confectionery 3119 6.19 0.92 13.90 5.05

Distilling, Rectifying and Blending Spirits 3131 3.39 1.98 8.02 4.28

Manufacture of Malt Liquors 3133 15.24 11.98 20.42 16.17

Soft Drinks and Carbo- nated Waters 3134 2.86 1.37 4.50 3.17

TOTAL 32.77 18.6L 71.78 L0.03

SOURCE: Central Bureau of Statistics, Industrial Statistics MANEX w'age 3

6. Close proximity to raw material supplies and markets tends to give iLLU.lgerous' LooUd 'InustrLes a substantiaal coumparatieve advautage over 4ports because of high transport costs and perishability. Distinctive local tastes often provide adaea protection from foreign-made products.

7. Witn few exceptions, the large-scale food and beverage industries in Ghana do not conform to this pattern. They are dependent to a high degree on imported materials. Flour mills are devoted entirely to tne grinaing oL foreign wheat. Plant bread and biscuits are almost exclusively derived from imported grains, yeast, milk powder and added nutrients. Tne GIHOC meat slaughtering, butchering and packing factory relies upon imported cattle for 98% of its output. All the hops, malt, concentrates and yeast, and most of the sugar used by the large scale breweries, distilleries, and soft-drink manufacturers come from abroad. This is true of the milk powder used for tinned milk and much of the oil which goes into margarine. Even the fish canning factory at the Tema Food Complex has required sardines and mackerel from foreign-owned vessels, as well as imported tinplate and oils.

8. The only food industries which obtain most of these supplies from Ghanaian farmers are rice milling (although milled rice is still imported), fruit and vegetable canning (although imports of tomato purse are still large), and, of course, cocoa products.

9. In 1972, the trading deficits resulting from this dependence of imports were as follows: 1/

Cereals and cereal-based products -021.9 million

Meat, fish and dairy products -¢38.6 million

Sugar and sugar products -014.5 million

Edible oils -¢ 5.5 million

-¢80.5 million

This deficit of ¢80.5 million was partly offset by exports of canned vegetables and fruit (mostly lime juice) of i1.1 million and cocoa products of ¢39.0. This latter figure is somewhat misleading, however; because the beans are invoiced to the processing factories at a price below the world market rates. and a substantial proportion of this t39.0 million could have been obtained if the cocoa had been exported in bean form.

10. Several reasons can be given for this import dependence.! The large enterprises concerned;have not grown frnm small, cottage-industrv beginnings with direct roots in agriculture. Instead, they were established on a larve scale from sr.atchj wt-h the aim of satisfving consumer tastes and preferences which had been acquired from abroad. These tastes had been formed by brand-Iproduct advertising techniques used by importers

1/ See Tables 4.01-4.05 and 4.09. ANNEX I PLDage 4-

and the consumption behavior of the expatriate and foreign-educated elite.

ALLe easiest way to repLace =portS -W4L the least disturban.ce to consLmers seemed to be to copy the foreign product as closely as possible, keeping tne same materiLal andu dUesLgn specification.s a.dU processiLng tech.ology. In some cases (e.g., beer, biscuits, soft-drinks, milk products) local farmers could not readily meet these specifications. Bulk supplies, of a price and quality both producers and consumers were used to, could be found more easily in tne organized international -markets abroad.

li. Tne alternative patn involved introducing unfamiliar crops to Ghanaian farmers; extensive research to improve and adapt seeds to Ghanaian soil and climatic conditions; providing extension services to raise yields and quality; improving transport and distribution facilities; and offering prices sufficiently attractive to the farmer to justify the risks and efforts incurred. This was clearly the more arduous route to take.

12. The individual manufacturer was not encouraged to move in this direction by the fact that low import duties and an overvalued currency made imported materials appear to be cheaper than they really were compared with local substitutes. The high priority given to foodstuffs meant that import license constraints were not as severe as in some other sectors of industry. Industrial entrepreneurs were also reluctant to stretch unduly their limited managerial and capital resources by backward integration into agriculture. They preferred to retain the freedom to buy their materials from the least cost suppliers, rather than be committed to their own plantations.

13. Whatever the reasons, the end result was that Ghanaian food and beverage manufacture on the whole had few links with local agriculture. Thus the farmer was largely cut off from the rapidly expanding urban market in processed foodstuffs. While the majority of consumers continued to process raw materials themselves in their own homes, the loss of this potential market was not so important. But as economic development and urbanization seems to be associated inexorably with a switch to convenience, pre-cooked, and pre-packaged food products, the lack of such links poses a serious threat to the future well-being of the agricultural community. It will be necessary for the Ghanaian farmer to capture a substantial share of this industrial market if agricultural incomes are to be raised significantly in the long run. It is this fact which should be the foremost consideration of the policy-maker in Government; not Just the need to alleviate shortages resulting from foreign exchange constraints or the desire to raise the level of capacity utilization and hence efficiency of industrial enterprises.

14. What can be done to strengthen these linkages? Several steDs have been discussed in the main body of the report. Nucleus farms could be run by industrial enterprises for demonstration of imnrnved farming techniques and quality standards to independent farmers. This has begun with sugar and Tmight hp enntiniipd with oil palms; ground-nuts and cattle-hbreA- ing and raising. Agricultural extension services provided by the Ministry ANNEX 1 Page 5

UL AIgriLcu±Lture ar,dU IMaret'g BrDUsLU Lte LU Ute eApdedUU. SUppULL pLrCi should be set which provide adequate and stable rewards for the additional efforts and risks required ol the farnmer. Substantiaiiy increased agricultural credit for the acquisition of improved seeds, fertilizer and equipment is called for. The Fooa Research institute needs expanded resources and closer ties with food research programs being conducted in other countries. Import duties on raw materials should compensate for any over- valuation of the cedi which exists at the official rate and duty drawback reduced progressively. Consideration should be given to increasing the level of protection of indigenous agriculture beyond this point on an "vinfant industry" argument in selected fields.

15. Another approach is to try to shift the pattern of consumer demand in the future towards processed food products which are presently using a higher proportion of domestic inputs. There is a wide range of such indigenous products which are produced on a cottage-industry basis at the moment. 1/ Their principal markets are among the lower-income groups, however, which sets a low ceiling on price and quality which has hindered their further development. Higher prices of competing substitutes made by large-scale industry, which would come from raising import duties on raw materials and reducing tax rebates and other subsidies to that sector, should have some effect on consumer preferences. But the extent of the cross elasticity of demand for indigenous and "foreign" food products is not known. Social/cultural factors might make the demand for lager-type beer versus pito beer, for example, inelastic to the changes in relative prices which would ensue from such measures. In order to counter the effects of advertising pressure and elite group behavior on consumer tastes, it might be necessary to impose a "national development" tax on products based upon imported materials, and for the Government to spend the proceeds on a development program (technological research, product design and quality improvement, training, etc.) for the artisan/small factory sector producing indigenous substitutes.

16. A democratic government must always ponder over any decision which interferes with the free exercise of consumer sovereignty. All countries do so, however, to one degree or another whenever they have varying tax rates differentiated by products., In pursuing a strategy of efficient self-reliance. the Ghanaian Government may,need to use fiscal measures to restore consumer loyalty for Ghanaian products.

C. CaDital Intensitv

17. The Ritter Groun studies give a total book value of investment in the food industry of ¢55.1 million in 1970. This represented 24% of total invpstment in mannifarttirina lindniqtrv_ Roth fi'mirec exrtilldp the rtanital expenditure on state-owned enterprises which were not operating. These were concentratepd inithe. fonod ecrtnr (canning, oil nres6 ng; fish meal)_ 18. Nevertheless, even, ignoring these idle plants, the sector exhibits a high-capital intensity and a low-capital productivity. Investment per

1 e.g., kenkey, akple, fufu, gari, pito. ANNEX 1 Page 6

worker was 013,800 compared with an average for all economic activities of ¢880 and 04,700 for the whole of manufacturing. This investment yielded a capital/output (value added) coefficient of 2.8 compared with 1.4 for manufacturing as a whole.

19. The picture in beverage manufacturing appears to be better with 03,700 investment per worker. But this figure may be low because most of the enterprises concerned had been set up several years previously and their original assets had been fully depreciated in the books. The capital/ output coefficient is correspondingly low at 0.5.

20. Several explanations can be offered for the food industry figures. The latest technologies involve continuous flow production techniques which require little manpower. Electronic controls often replace human skills at the operative level. Conveyors reduce manual handling of materials between operations.

21. Various biases have favored the selection of the most advanced technology rather than production techniques which would better suit Ghanaian conditions. Some of the public sector food factories were provided with liberal suppliers credits with long repayment periods. The suppliers risks were often assumed by the aid guarantee proRrams of the donor states. There was, therefore, an incentive to supply and demand the most expensive equipment.

22. During the Nkrumah regime in particular the authorities and exnatriate advisors shared a belief that innovative technologv would allow Ghana to "catch-up" with the industrialized states more rapidly. Hence millions of c-pdis were invested in imaginative but unproven nrocesses (eg. the cocoa silos) which proved to be costly white elephants.

23. Some the larger food manufacturers were set up with foreign capital and management (e.g. Unilever, Nestle?. The mnst nobvious thing to do was to acquire the technology with which they were most familiar, i.e., what was used in their parent organizations in Europe. The labor legislatlon and industrial relations climate in Ghana encouraged them to minimize the problems inv%,olve4ninaAo 4n .ntann$-4nra-I,- v.n1 ads-nsna,iAaaar4,4 al e, a lare1 tar laborshrfto force. Ca-ital^r4n costsnt were lowered by generous depreciation allowances against taxes, duty-free 4 4 mport- of .machir4.er .- A lw n-terest rates. A..om-.ti- -ortroldevices were less liable to human errors. Hygiene was also an important factor in thIe Aesilre to redluce manua'l Ihandlling of food products to a minim=m.

24. Trechn,olog-ical choices male 'or these reasons are r.ot readl" re= d. -t L. ~LLL LU± ±.J . L.1Al L.aUx ~ u .ILA.1L LL~Li a . A. %~ .L versible in existing factories even though experience has shown that they are n oLt o p;,JLmmU1 'Ln GharaianI L LcLir. L;L. L CI I L Lt Would Ub UdeLsUaLe, LAVW=VVZ. , to take steps to counterbalance these inherent biases when plans for diversifying and expanding the food industry are being dra-w-n-up. These measures might include:

(1) Provision of technical and financial assistance to Ghanaian firms like Agricultural Engineers Ltd. (see Annex 4) and ANEX 1 Page 7

Dehydrated Food Products Ltd., which have demonstrated an indigenous design capacity.

(2) A critical review by the Capital Investments Board of new project proposals which require a heavy investment per worker; employment tax credits could be offered as the main financial incentive to foreign investors.

(3) A rigorous scrutiny by the board of GIHOC and the Tema Food Complex Corporation of proposals to reactivate idle or underutilized capacity in ways which would require substantial additional capital investment (e.g. to introduce a fully automatic filling and closing line for meat canning, and to convert the cocoa silos into grain storage by building an overhead conveyor from the docks).

(4) A package program of aid to small-scale food producers.

(5) A nationally sponsored advertising and public relations campaign to restore consumers' pride and confidence in indigenous foodstuffs (the sponsorship of Ghanaian sports teams need not be left to expatriate firms).

(6) Closer collaboration between the Food Research Institute and similar institutions in other developing countries with a similar set of problems, constraints and obiectives to Ghana's. ANNEX 2 Paste 1

COTTON TEXTILE INDUSTRY 1/

1. The cotton textiles is one of the earliest and perhaps the most well-established industry in the manufacturing sector of the Ghanaian economy. In terms of grnss nut-nut and value added- the cotton textiles and wearing apparel industry occupies a leading position in the industrial structure of the country= Tts share of value ndded in the manufacturing sector inereased from about 2% in 1962 to about 18% in 1970, showing a growth rate of over 45% per annim-, rnmnnrad to a growth rate of about I3% of the manufarturina Rector as a whole. Whereas in 1962, the cotton textiles industry ranked seventh amnng fIfteen industrIatl arnonup in trms nf 4t-Q shAre of vatte added in the manufacturing sector, by 1970 it had moved up to the top rank-followed by beverages, tobacco, wood products arnd food processing industries. Similarly, its share in gross output in the manufacturing sector increased from 4% in 1962 to 24% in 1970. Again this share exceeded by a considerable mnrgin the share of any other among the fifteen industrial groups. The following table 4 summaori tone dhan efr f A44FferAnt 4iAnu str4 9i -ouns

Tablec I

(!NUA?TA UTATTTE AnfED OF nT'IF,P1PT ITunyfcTrTAT _Pn1TrPcZ IN THE MANUFACTURING SECTOR (percent and ra=nkr-s)j

1~LiAL. J~. IL L DI

(Percent) (Rank) (Percent) (Rank)

1. Food 4.9 6 8.5 5 ', n .If 0 Ii 2. Deverages 16.0 17.1- I7-1 2 3. Tobacco 25.7 1 14.4 3 4. Textiles 2.3 9 17.9 1 5. Wood products 25.2 2 11.5 4 6. Furniture 4.2 7 1.0 9 7. Chemical products 6.5 4 6.0 6 8. Metal manufacturing 5.1 5 3.2 7 9. Transportation equipment 2.4 8 1.2 8

2 . By any criteria, Ghana's cotton textile industry has shown a remarkable growth over the 1960s. In 1970, the industry employed about 8,500 workers or about 19% of the total labor force in the manufacturing sector compared to only 550 workers in 1964, which accounted for only 2% of the labor force. Similarly, the wages and salaries earned by the textile workers amounted to almost 07 million (18% of the wage bill of the manufacturing sector) in 1970 compared to only tO.3 million in 1964.

1/ Employing 30 or more workers. ArNN 2 Page 2

3. Such rapid growth in the textile industry was possible not only because of a buoyant demand for textiles in the country but also as a result of heavy tariff protection and Government investment policies.

4. Our factory visits to most of the leading textile manufacturers, printing mills and garment makers (which account for a predominant share of total output in the textile industry) yielded the following interesting facts and information, which throw some light on the present problems and future prospects of the industry.

5. Unlike other industrial groups, most of.the textile firms have been operating at reasonably high capacity (determined on two-shift basis). Overall and sectional capacity utilization rates for 1973 appear to be as follows:&_

(i) spinning > 100%

(ii) weaving 70-80%

(iii) printing 65-75%

(iv) overall 75-80%

6. Even though the cotton textile industry in Ghana has progressed rathp-r rpmArkahlv And han nnpArAtd At A rplAtivelv hioh liel nf capcn,4ti utilization, at this stage of development it still faces a number of problems which mut- be tnreklel tn have reasonnable groth and efficiency in future.

7. The industry's Import dependence is very high compared to gross 4 vfluea of nrnA.nt.4nn It not orly nort8 .11 til .-k -- A.… but also such basic raw materials as cotton, cotton thread and fabrics as weL-a1 Aye .-A chmcll.V_ S-41A__ +-4A 4~ U_A AA- U___ U&., S.4o Ma.LS..UA.C_ J.-VA. a XLWA LJ.ML l L a=D O.LOV U:CXL Ut:F=UU.LU6 Un the services not only of managers but also of section supervisors and other tect.'ricilans.LLLJLLaA. . A.I.CD.TLack IJLof0 r---LCW UW3L.&LCLAJ.0-aera8 %LUVL.LULL,c;o,de uyCU ILUuf----om-rdceias UU~M±LaJ.5J) trOM domestic sources of supply at economic prices and foreign exchange diffi- cuLt'Des W.L.L. JaUpede the iLLUULy' Cprogres LL LfLULt . A sUUbstL1ajn iL- crease in the cost of cotton and cotton yarn from other countries - almost Jv&o JLL iIJ - WJ.J. Udei.JUJLtly make LL incrueasingy dificult ror many textile mills to operate not only because they might not get adequate Loreig. excha.'ge allocation. for 'imuUports,but alsu uecause Lte Goverunent continues to control prices of finished products to keep the cost down for generai public.

8. Tne GovernmenL has already taken steps to estaDlisn tne Cotton Development Company (Jointly sponsored by NIB, ADB Textile Mills) for production of couton in Gnana, Dut tne policy question is which of the methods is appropriate for production of cotton: plantation type production (perhaps using substantial imported machinery by state/mills) or production by individual farmers. While for large-scale farming, acquisition of land and ANNEX 2 Page 3

capital intensity may be a nroblem (nrodutiton may be achieved relatively quickly but at a high foreign exchange cost), for smaller scale farming by individual farmers the relevant nroblems are the sninnlv of seeds. fertilizer, extension service, credit and irrigation facilities. There is also a question of relat-ivelv set-ure mipply fre-m plantatl0n-tynpe operations and somewhat less predictable supply from a larger number of smaller farmers. In addition, a larop d4sperninn nf Ponnnomip and scninl hbnpfits to smaller farmers must also be considered to reach any decision on the mode of production. However, even if a larger plantation-type production is preferred for supply and timing reasons, it would seem appropriate to start it on a nucleus basis with maximum facilities for surrounding farmers to partIcipate. It is quite important that the minimum purchasing price for cotton must be attractive 4 -n-.-n'e n-A hldA hvsslenara sonable A __ t _ F4 "4*cnnt 4 nfl nr -A_ t**ttSbfl* tL*~v L*t1J.A fl* - O*-V_S~ * _ * _ - - _. so that the farmers find it a profitable and attractive operation. The current proAducer price of ¢*0.10 per lb- is to b-e reconsidered ir the- light- ofrcn J.~'.~ .L~ JL. PM. iw~Jj ~ VJL .L LU Uv L L.LO.A~. ~UJ.n theI l g Mt' - international price developments. Some mills in Ghana have been paying Uo 80=85J perL LU of cotton i.L 193.

7. * LU-L L0tL LeImUL LrIILa eb LSUCw Wi l LIIe L LtlI lU LcoUtL LtALx tC .=LLUUbLL y which has developed behind high tariff walls, should not be opened up to j_ace sobUe competitio. fromu abDroadu so thatitL L5isUrceu LU ±IIpLUVt 'LLb efficiency. Currently fabric imports are subject to 50% import duty and 20% iUport levy and more Limportantly quantiLtaLLve restrictions are operative, which allow local textile mills to have almost complete monopoly. Even though the textile mills cannot exploit this monopolistic situation because of Government control on product prices, the whole tariff and pricing situation has become so confused and distorted that it has to be re-worked on an industry basis rather than on a firm-by-firm basis as it is done now. As cotton production develops at home, the import duty of 10% on cotton may be increased to give some infant-industry-type protection to cotton cultivators (reducing when the infant grows), but import duty on imported fabrics may be lowered to achieve some improvement in efficiency through competitive forces. There are good reasons to initiate this process. Ghana does not seem to have any shortages of skilled and semi-skilled laborers in the textile industry; skilled laborers are generally available at a monthly wage rate of US$42-52 and semi-skilled at US$30-40; which seems very competitive with many other countries at a similar stage of development. Most of the firms have been able to reduce the number of expatriate managers and supervisors and have replaced them with qualified Ghanaians. Most of the machinery and equipment selected and installed is quite simple in technology, economic in cost and efficient in operation, which is also suitable to Ghanaian skill capabilities. All these factors should make it possible for Ghana to acquire competitive strength, particularly when it has its own sources of cotton supply at economic prices. Once it is linked backward to ginning of domestically produced cotton, the industry will become broad in structure because it is already integrated forward through the finished product.

10. We were also interested in knowing why exports of textiles from Ghana are minimal. According to our investigations expansion appears to be handicapped for several factors. ANNEX 2 Page 4

11. First of all, the textile induistry was intended to be import-substituting and that task has yet to be accomplished. This does not mean that exports cannot develop simultaneously. 11owever, there are several factors which inhibit this development. Relatively heavy dependence on imported inputs and a less efficient labor force make cost calculations unfavorable to Ghanaian exporters. Because of imbalance and lopsidedness in different segments of the industry, there is still considerable under-utilized capacity. Once improvement takes place in capacity utilization, the unit cost is likely to go down. If simultaneously the local prices are decontrolled and allowed to go up it would give somewhat higher profits to firms which could then sell abroad and controlled even at cost. Given high tariff rates, controlled prices of textiles in Ghana and the existing exchange rate it is much more profitable to undertake unofficial trade with neighboring African countries. No estimates are available but a considerable amount of textiles go out of the country unrecorded.

12. In Western European or North American markets there may be substantial demand for African-type prints but there are several other difficulties besides cost and quality. The USA quota for Ghana is only about 1/2 million yards which is equivalent to only 4 davs production of a large textile mill in Ghana. Competition from other experienced exporters -- Japan, Hong Kong. India, Pakistan, Korea and Holland --is severe and most of the firms reported that the Government's export bonus scheme and duty draw-back arrangements are quite cumbersome. There are also difficulties in securing shipping space regularly because only few ships call on Tema for lack of outgoing cargo. Also, the shipping rates are unfavorable - e.g. Ghana-USA rate is reported to be hieher than Hong Kong-USA rate even thniigh Ghana-USA distance is smaller. ANNEX 3 Page 1

W00D PRODUCTS INIDJUSTRY _/

A. Ghana's Timber Resource

1. Timber from local forests has been an important contributor to the economy of Ghana throughout its modern history. The natural forest zone of Ghana covers nearly 32,000 square miles more than one-third of the country's gross land area. Forests are principally in the southwest of the country and in the Ashanti area, where relatively high rainfall, high temperatures of generally intensive sunshine combine to offer good conditions for timber growth. Evergreen species occur in positions of the southwest where rainfall is highest, but, in the main, hardwood varieties form the important bulk of the source. Over 300 species have been identified in Ghana; but the total number entering into export trade is around 30. Of these, four are of major importance: W4awa, Utile, Sapele and Mahogany, these make up nearly 80% of total exports occuring in the form of logs.

2. Presently on the order of 10% of Ghana's foreign earnings derive from forest products, and the forest resource ranks second only to cocoa as a contributor to the national economy. The total employment effect is estimated to amount to more than 55,000 jobs (direct and associated).

3. Of the 31,760 square miles of high forest occuring in the natural zone, nearly three-quarters has already been fully exploited for timber and converted to agriculture. Something over 6,000 square miles (19%) are protected in forest reserves, leaving some 2,200 square miles (about 7%) as unreserved high forest. Both reserved and unreserved areas are presently subject to timber extraction. It is estimated that unreserved portions will be depleted within approximately 10 years.

4. Conservation, management and development of the resource are the responsibility of the Ghana Forestry Department of the Ministry of Lands and Mineral Resources. In 1971 the DeDartment initiated a new ten-year plan aimed at establishment of 272,500 acres (426 square miles) of forest plantations, as the first phase of a continuing scheme for perpetuated reforestation to keep balance with the nation's anticipated growth rate of timber- consuming activities (including such nresently non-existing activities as pulp for paper production, narticle-board and fiber-board). This large-scale nroeram involves establishment nf selerted- fast Qrowlng- high-nqualitu species in under-stocked areas of the forest reserves. More than 31,000 acres were successfu llv nlanted in the first twJo vears of this nrogram

1/ This annex is based on a contribution by Mr. Lincoln H. Randall, Senior Industrial Development Field Adviser, UNIDO. ANNEX 3 Page 2

B. Timber Marketing and Production Controls

5. Overall responsibility for marketing timber resources is vested wi S,th theUG ar.-U- ClmberwrketIOL iC r.g 5 B J fl,+.jthe a te t . Ta .rad. Its main functions since inception in 1961 have been:

- to approve all exports made by timber agents;

- to license such agents;

- to grant loans to Ghanaian producers and exporters;

- to ensure efficient running of the industry, consulting with railways, harbors and shipping agencies on matters of common concern. More recently the Government, through the Board, has extended its control througn acquisition of 55% equity holdings in several of Ghana's largest, formerly expatriate-owned timber companies.

6. In September 1972, Ghana Timbers Ltd, was formed as a subsidiary of the Board, to deal directly in the production and export of timber products. The extent of this unit's impact in the trade cannot yet be fully assessed.

7. Since July 1973 no direct purchasing by agents from producers is permitted. It is hoped that as a result of this stipulation the Board will be able to exercise greater control over the marketing and production of timber, in particular through instituting controls to eliminate the reportedly prevalent malpractice of undervaluing of invoicing of exports.

C. Structure of the Wood Products Industry

8. There are about 86 firm engaged in wood products manufacturing in Ghana. (This exludes the 100 or so logging contractors who do not perform any manufacturing as such, but sell their whole logs either to local sawmills or to timber exporters). Of the 86 firms, 55 are engaged in sawmilling, 6 in plymilling, 23 in furniture manufacture, and one each in boat building and match manufacture. 1/ One firm formerly producing wood-wool/cement structural panels is now out of operation. l 9. Among sawmillers and plymillers, large firms with expatriate ownership involved are dominant. The five largest, four of which have an expatriate component of ownership, control nearly one-half of Ghana's timber concession areas, and (in 1969) produced nearly 60% of the value of output of the country's sawmilling/plymilling activity. Details of the make up of this sub-sector appear in Table I. The 1969 total output was valued at 030.48 million.

1/ Very small wayside furniture makers are excluded from this inventory; as are small boat builders. ANNEX 3 rage 2a

T A B L E I

Sawmills and Plymills in Ghana - Selected Data

Number of output 1969 Concessions Ownership Finns 1971 Value % Area % Multi- Expat. Gnanaian ¢m. qm. natnal. +Joint

Large Firms g 5 18.00 59.1 5180 46.0 3 1' 1

Medium Firms

- writ h cncIssionY 14 7I 23.2 28 21 1 7 6

- without " 7 1.90 6.2 - - - 7 -

- with concessions 16 1.41 4.7 756 6.7 - 3 13

-without " 19 2.07 6.8 - - - 13 6

TOrAL 61 30.48 100.0 8273 100.0 4 31 26

y/ Finm size categorization is :

Large : Over ¢1.0 m. annual output value Medium : 00.2 - 1.0 m. annual output value

a USAID report by Pearson/Page, Dec. 1972. ,%M4a1 3

10 Of the total 1970 output value of the furniturt sub-sector, 02.7 million, about ¢0.38 million or 14%, was generated in exp0triate-owned enterprises. The boat building and match manufacturing entetprises are both Ghanaian owned. Their 1970 values of output were approximately 00.8 million and 01.8 million, respectively.

There is at present no production of particle-board or fiber-board in Glianta, aithough one such factory is presently being undertaken as a Joint Ghanaian-expatriate prolect to be cited near the River Pra east of Kumasi, at an initial investment cost of ¢3.5 million.

12. Another type of wood industry presently non-existent in Ghana is manufacture of prefabricated wooden structures for use as houses. small schools. storage sheds and the like. One of the multinational firnms engaged in sawmilling and nlvwood manufaeture han indir ted intArpst in this field.

D. Chararteristirs nf the Mn4nor Subh-sectors

1 1 4 An impotfant influiin a f-ko a- "et .- 4 ?4ti n thelAii3 i a the quality of logs taken in. In general, logs destined for export are the prime quality, le-avI4ng a.Ita-y quality for sa-ill nprocessing . This factor appears to contribute significantly to prevalence of relatively low volume yield of sawn products per- unit of volume of logs taken. ir.

14. Ar.ot-1her Jfeatureis that capital equipment in th=e maJ.rLty of m.lls is of old vintage. Three effects result from this. Firstly, it is a further contril L-butor to th-J1-Me.LGw yield ratLes5 because tLhe hiLgh-speed sa-W.g methods employed characteristically take wider saw cuts. Secondly, maintenance costs are generally higgh. rnUally, it acts as a constraint on expansion of capacity utilization because extension of operating hours would lead to unmanageable degrees of ma-c'nery breakdown. MLany mills now operate only single shifts, a few full or partial second shifts. Obtainment of adequate quantities of spare parts is a constant problem, especially for smaller mills.

1J. Only two mills are known to utilize seasoning kilns to yield higher valued uniformly dried lumber. All others ship their product uncured or air Ur.Le.

16 rOff-cuts and mill wastes are under-utilized, mainly because of lack of downstream integrated enterprises such as particle board mills or joinery manufacturers wnich could find economic use1 for such materials.

17. In the years 1966-70 the sawn lumber out-put ot Ghana's mills ranged between 27 and 31 million cubic feet per year, 85-90% of which was exported mainly to the UK and European destinations. A requirement that 20% of each sawmill's output must be reserved for domestic sale was recently introduced by the GTMB, with a view to stimulating local consumption. While the long-term objective of this policy is undoubtedly valid, it is probable that some A1NMNEX :3

build-up of local inventories will occur in the early phase of its iMFnluienta-

1-lulUl. U Llf- u 18. Outut~ of the~ p-y-wouu industry~has~ gruwl s;dUil., frvmO v.-/ m-i...joi cubic feet in 1962 to 2.7 million in 1970. Value of output in 1970 has beeii estimated to be J.2 U-uLl'L'L 'Lr . Roughly three-quarteLrL of. LIIh V IV OULL-. was exported, mainly to the UK and European markets. Capacity utilization and technical efficiency in the industly are high; most ill's regularJy o"- - with a three-shift pattern of production. Relative to other elementb. z.e wood industries sector, plymilling is capital intensive.

19. Some large plywood manufacturers indicated interest in the posSi- bility of expanding their capacity, but this is keyed to a need for first being assured that they will be granted proportionately larger concession holdings.

20. There is no evident pattern of expectation of gaining acces. to significant new markets outside of the traditional ones in UK/Europe. bDit prospects for expansion in those areas are generally viewed optimi.lc_z`iUy. The high level of quality standards in US markets is said by somne to be a deterrant to the seeking of sales there, in present circumstances.

21. West African regional market prospects are not looked on as huLding promising significance. Sporadic sales to the region through local agents do occur but with no encouraging pattern of growth. Competition from Nigeria is mentioned as one factor inhibiting growth.

Furniture Manufacture

22. The wood furniture manufacturing industry became established in Ghana mainly through the impetus of import substitution supported by tariff protection and import restriction, most of the investment having taken place in the late 1950's and early 1960's. Output value of the indstry was 02.53 million in 1962 and increased only to 02.68 million by 1970 (current prices), with little significant fluctuation through the period.

23. Exports during those years were of no consequence but interest of existing producers in entering export markets began to materializ_ in the late 1960s. In 1969, one Ghanaian-expatriate firm established a major facility for producing exportable "knocked-down" furniture components, and t*-o existing producers modified their facilities (mainly by introducing kiln drvyii') t:o make finished furniture for exports. The value of industry exports z:*-<.ed tO.2 million in 1971 and is believed to have reached I0.4 milliun in -972.

24. The rate of canacitv utilization is low in the industrv- m&in)v ditp to an over-capacity of the industry as a whole in terms of the magnitude oE the domesti- market, which now aDnears to have stabilized at its pr.-, level. No manufacturer works more than a single shift, and for ma. pre- sen.t level of ourpnu,t is even below one-shift capacity- ANNEX 3 Page 5

25. Unit costs of production are relatively high, especially in manufacture for domestic markets. The main causes are under-utilization of capacity, high unit labor cost (often related to idleness of labor awaiting orders for production), high carrrying charges for saw lumber inventories undergoing air drying and for inventories of finished production, and high costs of imported inputs (principally fabrics and finishing laquers).

26. A common complaint, esDeciallv among medium-sized Droducers. is that they are losing sales to the apparently growing numbers of very small "wayside" furniture Droducers who sell largely to householders and small offices, in a generally unrecorded trade. Somewhat ironically, it is reported that many operators of such small furniture-making enterprises are former employees of the larger manufacturers who have lost their former jobs as a result of industry over-capancity.

27 nn thp nrdor nf 2,000 nerRons are emnloved in fturnitture mannfaertir- ing. It is characteristic that the number of skilled and semi-skilled is high, and the unsk1il1d low, in nlant-s whoep nrontiwion is nrimarilv for Anmztf-i, consumption: whereas a larger proportion of unskilled workers are engaged in the case of the one plarnt which produces largely kn"ocked-dow. furniture components of export. The export activity requires selection of machinery that 4 cn. -., out.n b.ul1, n..qua n 4tie f 4in4-4iv..id a nmCmpo e w., 4.441 -lose1 tolr W.a. 1.tb .. V-A VU L,AL iL LLo 9 a.x.._. *.F _.~. .8 V .Latfa Vl0 -..SJL.*jJF ... 1.0 L LL __ 0..8 1..J^JO -~ ances of fit, meaning that there is generally less reliance on skills of in-

V. Mnagement Structure inthI,dsr 12. LZL_,l~1 .!. LA. UL. LU L L.II J. LLUU LA .L

28. Ir.LLU thile*LLL IL -wv-rkrWUL NIJL of Plearsor.1 ~UIL an-d11U PCage -LiWIL1I'./(wherein k il1.LU J.1 duetLail'ed exA1UL iamln L.LUL±U Wasta made of the sawmilling and plymilling (and logging) firms in Ghana) it was re-vea'ledu LIaL LLICue L5LLr±DULJ.L1 ULfs.Laay paUh.e1nL5 dilorLg e2LpatLr.aLe au Ghanaian management and supervisory personnel was, annually, 00.77 million to expatriates and ¢0.52 million to Gnanaians in sawmilling; ana 0.333 million to expatriates and 00.28 million to Ghanaians in plymilling. The main concentration of expatriates is in large firms, smaller numbers in medium-sized, and very few in small mills. Data suggest that the number of Ghanaians at these levels are about equally divided between management and supervisory roles and, in total, exceed the number of expatriates by a factor of around 1.5 to 1. The total number of expatriates is estimated at around 160, virturaily all of these in management function. Similar figures on management/supervisory employment composition in furniture manufacture are not avaiiabie, but iimitea survey data suggests numerical proportions are similar to those in sawmilling and plymilling.

29. The effects of recent introauction of a Government regulation im- posing an annual surcharge of ¢5,000 for each expatriate employed cannot yet

1/ Annotated in Table I. ANNEX 3 rage 6 be discerned. It is likely, however, that this measure will result in more reductions of expatriate employment in sawmilling and furniture manufacture than in plymilling, as the former activities have lower rates of capacity utilization.

30. In general, on-the-job training is the most commonly observed means for upgrading Ghanaian management/supervisory candidates or promoters.

F. Conclusions and Recommendations

31. The nnintq where strengthening wnuld be benefirial to ChAan' wood products industry as observed in this survey are:

(a) Increased effective utilization of capacity, espcially in snwmillino and furnituire mnanufar-turee

(b) Increased use of wnod waste and nff-cuiits frnm awmi11 4n&g.

(d) More organized training and broadening of the special of …n.wlaeaasr..nnn4n"s in the industry, ar.d r.w Ghanaian entrants.

32. Desirable areas of achievement that could usefully be undertaken to reali4ze the above strer.gther.ing -vpulAd ir,lude- thfllwi-

(a) Tmrv.n of the.&in co,nversion rates saw.M.ling, --ir'.&y through installation of modern sawing equipment.

(b) Introduction of kiln seasoning in sawmilling.

(d) More concerted efforts toward establishment of industries downstream of sawmiiling. Among these:

- wood-wool cement structural components (aimed at revitalization of the existing plant at Takoradi).

- Prefabricated housing components.

- Fiber-Board.

(e) More impetus to development of export potential, especially of product lines that have high-value density and resultant relative transport cost advantages, that offer prospects for using more minor timber species, and that do not require ANN1 3 Page 7

large amounts of costly non-wood material inputs. Desir- abl e produuc I.L nesJo -w-uulinu

- expIans'Loui of pruuuct'Lo.L of ,1VLICkU-UVWi1 -LULLLLLULC, especially through converting the idle capacity of manufacturers now catering to domestic demana,

- joinery products and components (cabinets, door sections, etc.)

- toys, lampstands, decorative pieces, etc.

33. Increased application of development loans would be one important means to spur industrialists toward the lines of achievement identified above, in particular to upgrade sawmilling technology and re-equip furniture manufacturers for export orientation.

34. Another important means would be through expanded technical assistance covering product design, production training, machinery and equipment selection, testing of input materials and final products, in-plant extension service, a technical information clearing house, and an international marketing service. For maximum effectiveness these types of services would best be centralized in the form of a Technical Assistance Unit of the Ghana Timber Marketing Board, and could co-ordinate with the Forest Products Research Institute. The ready availability of such a grouping of services would serve to overcome many uncertainties which otherwise inhibit investors from entering such new fields. It would also help to ensure that the sphere of local knowledge of international activities in the wood products field would be continuously up-to-date, both as regards technology and marketing opportunities.

35. Finally, it might be found appropriate to provide additional incentive in the form of an increased export bonus for designated wood product export lines, especially those clearly evidencing high usage of Ghana's minor timber species. ANNEX 3 Page 8

List of References

1. "Ghana Timber Bulleting", Vol. I, No. 1 July 1973, by Ghana Timber Marketing Board.

2. "Timber Industry in Ghana", from Standard Bank Review, September 1973.

3. "Forest Industries Data for Africa - 1970/71". United Nations (ECA), September 1973.

4. "Furniture and Joinery Industries for Developing Countries", Parts I - 3. UNIDO Publication No. 10/108.

5. "Economic Efficienev and ComDarative AdvantaRe in Ghana's Wooden Furniture Manufacturing Industry", by John M. Page, July 1973 (USAID).

6. "Development Effects of Ghana's Forest Products Industry", by- SR= Pearsni, and J. M. Pase. December 1972 (USAID). ANr 4 Page 1

BUILDING MATERKLALS ANU METAL PRODUCTS

A. Cement Manufacture

1. The Ghana Government is majority owner of Ghana Cement lqorks, Ltd., which lhas two clinker grinding plants (Tema and Takoradi).

2. Ghana's annual cement requirements are approximately 500,000 tons. Grinding capacity at Tema is close to 250,000 tons; in Takoradi, 500,000 tons. As the market is mostly in the east of the country, the Tema mill runs near full capacity, while Takoradi supplies whatever is needed additionally. A transfer of some of the Takoradi equipment to Tema is under consideration, in order to reduce the need for road transport of the final product.

3. Negotiations are currently underway with one of the Persian Gulf states which, if successful, will result in the export of some of the cement and, hence, a more complete utilization of available grinding capacity.

4. The company, managed by the minority partner (norcem, which main- tains seven expatriate managers in Ghana) gives an excellent impression. The plants are evidently well run and the equipment properly maintained. The firm provides unusually good amenities for its employees (including a carefully composed main meal each day for every employee; and an efficient health service); and it appears financially successful to the extent that such success is within the control of management.

5. For many years. the use of the limestone deposits near Nauli (in the Western Region) for the manufacture of cement has been under discussion. A number of studies have been made concerning this possibility, including studies by Cekop (Poland), Gopa (Germany), CIB (Australia), and Norcem (Norway). The maiority of the studies undertaken to date concluded that exploitation of the Nauli deposits would not be financially sound; it would, in fact. even lead to an increase in the foreign exchange cost of the final product.

6. On the other haind, during the presence of the mission in Ghana, a Chinese team waR alsn vinitina; specificallv to discuss cement manufacture; that team's conclusion, reportedly, was that exploitation of the Nauli deposits wnilA hp a viqhlp iundertaking; the NationAl Tnvestment Bank is understood to be actively pursuing the matter.

7. At the same time it was learned that the Governments of Ghana and Toro are in contact concerning the nintn establishment nf a menpt plant in Togo; Norcem has tentatively agreed to participate in this venture, if and

Q. ThIe Cfollo0--ing dlata on cemient prices zre give for thprps of U. cod Li L U..L W.LL vlL FU. &F L'. record: AINIEX 44 Page 2

9. Until August 1973, the sales price of cement was controlled at 01.67 per metric hundredweight (= 50 kg)

10. Since then, the hafr icistrihiit-ors-' nrirc has been 02957- Uhlpoes-1 price, fob plant, is ¢2.65 (bulk) and 02.69 (bagged). Transport charges vary by location (e.g. ¢0.06 per bag sold at Accra).

t 1. "-e company -. On¢0.23 ?pa perr tof err.mrn, TMhi money 4s used in the subsidization of imported cement. Basic revenues to the company, therefore, amount to ¢2.34. per bag wichl the com.pa.ny consider- appropriate under the prevailing conditions.

12. Raw material (clinker) costs between US$23 and US$25 per ton, C&F r,lainaan port.

I J . at EUWt:L L L'CUceJC..yetsca L*e C Vl. a cement , saiLd0I UC Mu- C .ite suitaLC for many types of construction, will probably be coming on the market in the near future: 'Lt w.Ll contain an admUiLxture oU 2nY, to 3OD lateritLe.

B. Cement Products

14 L I |WO llCW p.§dLl1L:b l4V:: 4U.LLC L C>ltiIL1y UCCE L LLCaLCU UtlUCL NilL) ...... pUU¢UL- ship:

Fulgurit Asbestos Ghana Ltd. (makers of asbestos cement pipe); and

Pfeiffer Spun Concrete Products Ghana Ltd. (makers of spun and cast concrete pipes; also of concrete blocks and certain specialty items).

15. These two plants, modernly equipped and managed by personnel of the two German parent companies (Fulgurit and Pfeiffer respectively), run well. Fulgurit's output is currently below capacity, due to delays in the Accra- Tema Water Network project, which constitutes the market for the firm's product: however, it is believed that this difficulty will he resolved soon.

16. Another major company, African Cement Products, manufactures cement blocks and miscellaneous specialty items. Otherwise, cement block manufacture is largely undertaken by small, often cottage-type, enterprises having little or no mechanized equipment. One firm, which originally was meant to become a major manufacturer of cement blocks (Toff Ltd., Tema), appears to be unable to solve its equipment maintenance problems; and operates largely by manual methods and at a low level of output, while basically efficient mechanical mixing equipment is (and apparently has been for quite some time) idle.

17. According to Ghana's officially declared investment policy, the "manufacture of cement blocks for sale" may only be undertaken by firms having full Ghanaian ownership. It is not clear whether plans are underway ANNEX 4 Page 3 to either change policy in this respect, or to remove cement block manufacture by Pfeiffer and African Cement Products (both of which have partly foreign ownership) from the activities of these firms.

C. Low-Cost Construction Research

18. The Building and Road Research Institute (BRRI) located at Kumasi, has, as far as its activities in the field of building research are concerned, a history of more than 20 years. While its work ranges from architectural design to soil mechanics, the areas which are of particular interest in the context of this report are those which deal with an increased use of locally available building materials, particularly:

use of "sandcrete" and "landcrete" blocks; manufacture of clay products; and use of timber (especially the "secondary species").

The Institute's activities, even in these selected fields, are too numerous to be summarized here; the interested reader is referred to the many publications issued by BRRI.

19. One of the most active projects is currently the promotion of a series of cottage-type brick manufacturing plants throughout the country. Each would employ 20 people, require an investment of ¢35,000 and have a capacity of 500,000 bricks annually. As these plants are designed to use wood as fuel (plentiful in most of rural Ghana), product cost will be low and virtually without any foreign exchange component. Expected average sales price per brick is ¢0.04.

20. Other work concerns the use of lime to stabilize laterite; and the manufacture of bricks made from a laterite and lime mixture with subsequent autoclaving, possibly using solar energy. The use of activated silica, obviating the need for autoclaving; is also being investigated.

21. With regard to nement- the Institute is looking to India for ex- amples of clinker manufacture in small, vertical shaft kilns; such operations can be set un with a relatively low first nost (about ¢500.000 for a typical installation), and could largely be fueled with agricultural waste prod-u.^ts

22. Further, the s,lnhtit4on. ofnpnozzonl fnr cement (up to 4L%) is being investigated by a student in connection with his master's thesis. Pozzolanisawaste.productinthebauxie process, and. Ghana from the operationsiof the British Aluminium Company.

23. An interesting comment from one of the Institute's executives: fll a---- A ao .O4 see a 1us..e o. n4O .sow asa.n aCl..4..- able possibility, rather than just as a dream; and he is willing to save aru work Lor 'L. tLLL.LO IULLL bULLL, Ur'.Lrb uU1= UmJJL c.LLaLr.gs i.L this coun= try's social structure!" AN-NMX 4 Page 4

24. Ghana Government is providing generous amounts of local funds for the work of BRRI; however, lack of foreign exchange is at times hindering progress in projects which require expatriate help, or foreign equipment. A relatively minor amount of support relative to foreign exchange might produce considerable results.

25. It might also be desirable to urge a closer relationship between the Institute and the UNDP project "Centre de l'habitat et du logement", which exists on the outskirts of Lome: and which will eventually cover the entire West African region concerning the subject matter indicated by its name. At the present time, there appears to exist no organized contact between the two organizations, even though they obviously work on parallel lines of interest.

26. The Forest Products Research Institute (FPRI), located just next to the BRRI, while only peripherally concerned with building materials, is also doing some interesting work.

27. Methods have been developed, for use in Ghana, which protect wood against rot, termite damage and inflammability. The results of this work should help to combat the traditional objections (very prevalent in Ghana) against the use of wood in housing construction.

28. Another project concerns itself with the manufacture of plaster- clad building elements (2' x 4' x 4"), made from a cement-and-wood shavings composition, following ideas which are already being applied in Germany, Switzerland and Japan. A pilot plant exists in Takoradi; but it is currently inactive, due to reasons which are reportedly unrelated to the product itself.

D. Metalworking Industries (incl. Engineering)

Construction Steel (Manufacture and Use)

29. The Tema Steel Works (now a Division of GIHOC) was established in 1964. for the ournone of nrMuling, frnm garan availahlp in th entuntrvy cPr- tain small-size, mild steel rolled products.

30. The plant was designed to make reinforcing rods (not ribbed) in diameters from 31 to 1-1/2 Iches; gles upto 3x 3 x 3/8 lnch; and flats in a corresponding size range. Mill capacity was understood to be 30,000 tons per year.

31. Actual productio. has ne:er even come close to this figure even while the plant was operated by an expatriate firm under contract. Current compa. manaao.fynt f-ols at:ongly that actual planr. 4afaitis muc.h loer than the figure originally claimed for it. ANNEX '4 Page 5

32. At the present time, the plant produces at a rate of about 8,000 tons per year. Production is limited to reinforcing rods. Employment stands at 520.

33. The original cost of the plant was reportedly ¢3 million; current plans call for a "rehabilitation" in 1974 (which is to include the provision of additional melting capacity), at an estimated cost of 03.6 million.

34. There can be no question that much of the equipment is in very poor condition and hence in need of repair. Also, it may well be true that there is need for certain additional pieces of major equipment (including a new crane in the melting shop) to bring real plant capacity nearer to the one which was intended.

35. Certain questions remain, however, as to whether, after "rehabilitation", the plant will indeed function successfully. To a large extent the problems which have plagued, and are plaguing the Tema Steel Works are the same which have made many of the GIHOC enternrises (narticularly the large, complex ones) unsuccessful: Inability to attract and hold high-caliber personnel; lack of work discinline; overstaffing; and overly frequent changes in top management.

36. A problem peculiar to the Tema Steel Works should, however, be mentioned: If the nlant actually were to rearh its design caparitvy it will require an annual scrap input (iron and steel) of about 36,000 tons. It is questionable whether serap availahility in Ghana will he su,ff4rient to supply this quantity on a continuing basis. At the present time, the ex- nortation of neran fronm GThana ic poh4i4b-iA; and the Sf-ool .Wrnka n fill its needs at a Government regulated price of 025 per ton of steel, ¢15 per ton of cast iron. If scrap needs tobe partly filled by 4mports,4ere the average raw material cost would probably rise quite considerably.

37. One of the largest users of structural steel in Ghana is Dorman Long (Ghana) Ltd.A, owned Jointly 1b.. Gha Government ( /3) and the British Steel Corporation (2/3).

38. The firm, established in 1956, specializes in steel fabrications a-ainst special orders (sr.ue,t..ks,- trier,ferbot,hrca 6 _F__ - - ~ML~LMCP, LL.LCJ_JL&0 =LJLLYU.JCLa, -LCL.LLoWCL.L kilns, etc.).

39. It had, in 1972, albusiness volume of about 01.3 million, just ab-out- double the vob'ume of -!--yar earlier. ute rwh easo ~U~J~JIJ.L LL~ V.LULU1 IJJ L-rLL YML CtLL.LJML . EUL LLL-L rLUWLEL,, at a s'Low rate, is anticipated, parall'eling roughly that of industry as a whole. With _J_ _ _ . X 1 J _ _ ___ 1__ r w - _ e.- - ^_n - capacity utliz±atvGL±U1IL aL lsC5 Luan JUfo aLLer-Lax proilLS Ln ilIz were just 3-1/2% of turn-over, 8% of assets at book value. Reasons for the low level of acti-vity were given as due partly to tne generally depressed market for the company's products, partly to an inadequate allocation of essential raw materials. ANNEX 4 Page 6

40. Tne company ihas both skills and equipmIeLLt toLUo JUsL aDUUL anything in the field generallv termed "fabricated steel". It feels that the Ghana Government couid consideraDly advance the use of Ghanaian iabor in its field of specialization (and concurrently improve tax revenue) by not agree- ing too readily to the duty-free importation of pre-fabricated steel structures for major industrial and government projects.

E. Agricultural Equipment

41. In a country whose economy is to a large extent based on its agricultural production, agricultural equipment constitutes one of the prime necessities. Nevertheless, very few pieces of agricultural equipment are actually produced in Ghana. Only one company appears to Produce such equipment by what might - with some P,ood will - be calle(d industrial methods. 1/

42. This company was registered in 1966 and began operations in 1968. It was created, and continues to be owned bv an Indian, who has been in Ghana since the time of Independence. This gentlemen not only possesses impressive academic titles, but is evidently both a capable engineer and an intelligent business man.

43. The company, which employs about 200 workers, has a paid-up capital of about.0130,000; it works closely with one of the major machine manufacturers of India which includes the sunply of saleable products, technical advice, and the provision of machine tools on long-term credit.

44. Current (1972) turn-over is of the- order of ¢.75 million. Products are many types of machinery used in agriculture and in the processing of agricultural products (ploughs, harrows, planters, tillers, weeders, open andl tank trailers, ground nut threshers, rice threshers, maize shellors, sugar cane crushers, cassava graters, and smiliar eriuipment of low-to-medium complexity). In addition, the firm produces wheelbarrows, agricultural hand tools and a line of sheet metal goods.

45. The company exhibits great ingenuity in designing simple, but evidently effective equipment, using available raw materials (manv of which are, of course, of foreign origin, but largely bought on the local market) and ingeniously utilizing the limited range of productive equipment - including primitive casting facilities - on hand.

46. Despite all this, the company is reported to be in financial difficulties, said to be due largely to the fact that nrice rises for anriuiil- tural equipment are not, or only to a very limited extent, permitted, despite aisuhstantial increase over recent times in the costs of m2teriq1, and also labor. Further, company management feels that the Government is unduly

1/ Acynr-iitltiirnl Fninoprc- T.te., Accra. ANNEX 4 Page 7

hesitant to protect the struggling firm against competing imports (trailers are now protected; bu t negotiations on ploughs and harrows are still cotinni- ing).

47. The company started "from scratch" about six years ago. Despite the fact thata tnChe monthly payroll now wamounts to or,500.o e o, -eratonhas largely remained a "one-man--show", with only seven working foremen (of whom one is classi fied as "senifor")1 supporting thue top ,man. "Staff" cor.aists- of an internal combustion engine specialist from India, and a man working on "lpro ec ts "'/. A o~~~~ jJA.U~L.L IL. .. e L-y h -40 Bes'ies sel...rig to the larger tradLL Lghouse the cour.tr the firm regularly sells to the Ghana Supply Commission; also the two major devel- oprmenst banks (NIB and ADB) are customers on behalf of clients.

The total market in Ghana for equipment in the categories made by this firm is estimated at about 010 million. Local manufacture covers less than one-tenth thereof. This is regretabie and unnecessary. Obviously, one of the best opportunities for an indigenous industry in engineered products is in exactly the product line made by the company here under discussion. To be sure, some of its equipment may appear crude; but it is doubtlessly well adapted to the needs of the Ghanaian farmer, both as to technical details 2/ and as to maintainability. Further investigations should be made to determine how the firm could be built up to a modern, and considerably enlarged production facility3/.

50. Principal requirements would undoubtedly be the availability of additional management personnel, primarily in the area of production; and the increased availability of information on processes and equipment which have been found useful in other tropical environments.

1/ Some of these "projects" refer to small, locally manufactured plants offered for sale as tturn key projects" to local farmers, or groups of such. Plants have been designed for palm oil processing, sugar milling and cassava-gari manufacture, all on a small scale. 2/ For example, much of the agricultural equipment imported into Ghana. while well suited to its primary purpose, can only with difficulty, and often only under danger of severe damage; he transnorted to and from the fields where the equipment is used. This is due to the absence of good (or even anvl) roads, a condition which is generally not a consideration in the design of such equipment overseas. 3j The company reportedly has had quite a few inquiries concerning possible export sales into neighboring countries. While at the moment, under the existing circumstance, no attention is being paid to such inquiries, it should be recognized that an interesting export business could eventually develop. ANNEX 4 Page 8

51. Lack of capital is not, at this moment, a major constraint (with rapid growth, it could become problematic, though). The most urgent need relates to "technical assistance". It would seem that such assistance would partly fall into field of activities of UNIDO, partly into that of FAO (or comparable agencies of a bi-laterial nature). A closer look at this situation is recommended.

F. Small Implements

52. In addition to the larger-size equipment covered in the preceding section there exists in Ghana sizeable market for small tools, such as cutlasses, shovels, wheelbarrows, "headpans", etc. Two medium-size companies exist in these areas.

53. One firm 1/ has a very well equipped single-purpose plant for the manufacture of cutlasses. Annual plant capacity is 1.8 million units, actual production has usually been around the 75% level, except in 1971 when production dropped to 50%, due to lack of steel.

54. Import licenses have been a perennial problem ("either too little, or too late"). Now that the import license problem seems to have been largely resovled, the world-wide scarcity of steel causes difficulties. The selling price of matchets is rigidly controlled; and for some time the Government provided subsidies to the plant so that selling prices could be maintained. Of late. a price increase has been authorized.

55. The steel used in the manufacture of cutlasses is a simnle. unal- loyed material with a carbon content of 0.65%. Although the Tema Steel Works has never made steel of this type. there is no obvious reason whv it coniuld not do so, as both the electric furnaces and the rolling equipment should be -uitahle- Partfeularlv after the nlanned rehahilitqtinn nf tho qtaa1 Worlks it would seem that local manufacture of this steel should be envisaged. This wnuld bhe snpei21ly deirah1e alQn frem a nnn-nhvious reasons: The making of a simple "specialty steel" might eventually lead the Steel Works into the manufacture of more complex steels, wjhich are not only more remurerative than the more basic steels, but which also might offer considerable export potential throughout West Africa.

56. The second fir.m. here of interest 9/ was -rigi l s p or t -.5.~',.-' O t.tLCt~ A. .4 ~ ~ 00 _OC L A.LU L LC manufacture of a few simple items all of which require a relatively heavy (250 -on) press, namely wheelbarro-ws, heaApans, anA. several ty)es OL spades and shovels.

57. While the company does not appear to be in acute financial diffi- cultLes, its equipment is heavily underutilized (about 10 % of capacity),

1/ Crocodile Matchet, Ltd., Tema; owned by United Africa Co. (60%) and Ralph Martindale Ltd. (40%). 2/ M.B.S. Metals Ltd., Accra, a private firm with 75% Ghanaian, 25% LTeban.ese own.ership. ANNEX 4 Page 9

mostly due to market limitations within Glhana. Plant management is emnha- ticallv convinrcd that there exfst many opportunities for exports to neighboring countries V/, but it has not been successful in solving certain basic nroh7lemc One tnf -hese is the need fnr (nrohab1v rnther limited auantities of) additional working capital needed to pursue opportunities abroad; the other (at least as claimed bv the firmts management) is the unavailabilftv of clearly defined governmental guidelines relative to duty draw-backs, export bonuses, etc., which will appnlv

58. While these two firms may not be of overwhelming interest by themselves, the problems which have so far prevented them from becoming as effec- t4ve _as had evidntl been whe-oe -lin- uenre 4initianlly established, mayx be typical. If so, they may be holding back numberous other, generally si..ilar fir.s; anA they might act as deterrents to other potenti.al investors and therefore inhibit the country's industrialization.

C. Pots and Pans

59. Three companies manufacture housewares of the pots and pans type on n InUustriaL scale. £wu of thleise specia)LLzeLinL CaUIt1LiLUILtn , LtLhe othter iLn enameled steel ware.

60. The latter firm and the larger one of the two other firms were visited. Both of the firms seen had started out in 1960; and both nave expanded rapidly (current employment 660 and 175 respectively).

61. While the end-use of the products made by the two companies is essentially the same, customers are distinct. Aluminum ware is primarily sold in the more sophisticated urban centers, while enamel Tware (heavily decorated) appeals more to the rural populations, especially in the northern parts of the country.

62. Although neither of the two companies exports, each has found that a considerable portion (estimated about 30%) of its production tinds its way into the neighboring countries.

63. Demand for the companies' products in West Africa as a whole is felt to be 'practically unlimited'; production, however, has largely been determined by the availability of the basic raw material (steel sheet from Japan; aluminum circles from the Soviet Union).

64. It must be recognized that under the existing circumstance, legitimate export business may not be as readily available as the sales abroad of smuggled merchandise might indicate. Duty protection in the francophone countries surrounding Ghana is high; and, in addition, it seems that certain overseas countries enjoy preferential duty rates. Hence, goods legi- timately imported into these countries ex-Chana may have difficulty competing, even though the demand for smuggled goods is evidently very strong. 1/ Reportedly, tnere is only one simiiar press in all of West Africa (Liberia); and it is presumably not tooled for similar products. ANE4X 4 Page 10

65. While an immediate solution to this problem is not apparent, it would seem that efforts ought to be made to get the various countries in sub-Saharan Africa to work with each other. In the long run such cooperation could only benefit the entire region.

H. Aluminum Products (excluding Pots and Pans)

66. Very soon after Independence a firm for the manufacture of aluminum roofing was created as a joint enterprise having Ghana Government (40%) and a foreign aluminum producer as shareholders. Until very recently, the mentioned product (made from imported rolls of flat, sometimes embossed, material) constituted the totality of production. Now, however, the company has also increasingly moved into the manufacture of fabricated aluminum goods, from trays for frozen fish to boats made with aluminum hulls; and truck and trailer bodies made from aluminum.

67. Total aluminum imports into Ghana are around 6,000 ton/yr. Over half of that quantity is imported and processes by the firm are here under discussion. Newly constructed industrial buildings in Ghana are said to be built with corrugated aluminum roofs exclusively. Private houses, however, are often covered with galvanized steel or asbestos cement sheets, as these materials are somewhat cheaper, at least in first cost. Overall, the company estimates, its share of the total market is about 60%.

68. It is significant that the company uses only about 5-1/2% of its raw material in the manufacture of "sepcial products" (other than roofing sheets), but earns 16% of its revenue from them. These products, in distinction from roofing sheets, are highly labor intensive and require substantial manufacturing skills. The company is well aware of the sales (and profit) potential of the "special" products and expects to more than double its business volume in the next five years, with primary emphasis on the non- roofing lines.

69. The comnanv is currently exnorting about 2% of its roofing sheet output, but expects to increase its exports to 5% output in 1974, and hope- fullv bevond that in later vears. There is cutrrentlv no exnort of non- roofing products (even though demand would very likely exist), due to limited nroduntion canacitv in the 'tsperial" lines.

70. One peculiar problem was ennointered by the company: An etvrt shipment of roofing sheets sent to Togo by road (the border is less than 200 km from the plant) was held up atttwho f t Aadr Adue to u.- certainty by the Ghanaian border authorities as to the required export formalities. While export by ship follows well established routines, the procedure for export by truck appears either not fully established, or is not clear to the functionaries on the spot.

1. Th.ile com.pany m '.en*4onedhere, zs w-ll as the Jalu,ui LLJuseWaL flrmrU mentioned in the preceding section, consume substantial quantities of rolled alumi.n.LU sleetL. Page 11

72. In the 1960s, a project was under discussion to set up an aluminum rolling mill in Tema. The basic idea was that Valco's aluminum smelter would provide the necessary ingots (currently none of Valco's output remains in Ghana). The project was eventually drooped; but it is understood that this was not so much due to any insurmountable problems inherent in the project, but rather due to difficulties in getting all the interested parties (including Ghana Government) together for the necessary arrangements.

73. It is probably true that the size of the Ghanaian market itself (for rolled aluminum products) is quite limited, relative to what is usually considered minimum economic equipment size. However, in view of the fact that the starting material could presumably be obtained almost from "across the street" (Valco's plant is a stone's throw from the plants of the two major aluminum users) and considering that imported aluminum is evidently used in substantial quantities all over Tlest Africa, a closer look should perhaps be taken once again at the possibility of establishin2 an aluminum rolling facility.

74. When doing this, one might also consider the fact that in many instances the use of anv narticular material in a snesific anplication is a matter of choice; the choice generally falls upon that material which is func- tional1lv suit--ahle, and t-hpn most- Prnnomical Tt may wpl1 t-urn nut that- aluminum, if it were being produced locally, might have a price advantage over a number of other materials for which it would be substitutable. Thlis could include other metals, plastics and others.

I. Electrical Goods

75. While quite a number of firms concern themselves with consumer electronics (with activities rangin.g fro,, ervi.e and/or pu:re assembly to actual manufacture of some component parts), there seems to exist only one fi u*rWhich actually mnl.ufactureS a raLther wide ran.ge of industriala 4ight ing fixtures, street lamps, miscellaneous electric circuit components, switchl b0oards, etc. if 76. Th,1e com.pany curr'-n-ly em-iploys about 9" persons an' ,oroduces 'at I ~~~~~~A*1i~~~~~~LL LU liidL LU L .JIL± -LIL y I)UJ L 7 . .t[I L LU ~ this time, but not steadily) at a rate of about P.o,o00 per month. The marNeLs su .Lple by the LiLrm - WiLLC[h mLLLht lie termedLL LiJ4hting" ('street, industrial and residential') and "wiring supplies" (except wires) and :t~~~______1__ _ _n _Ir.__ _- *_^*_ww______'W-iLtchgeal lUo ligtinLLlg adlt luw-pQwer 2/ InsLal.lations -- are qui-te substantial. It would seem that the company has the technical talent, and to a very considerable extent also the skills and tne productive eauipment, to supply substantial portions of these markets. Unfortunately, the firm has never been quite abie to overcome ali tne hurdles which stand in tne xwav of an incipient undertaking in a rather complex industrial field.

1/ Alfa Manufacturing Ltd., founded in 1966 (closely related to the electrical contracting firm All Afra, which was founded 6 years earlier). 2/ These include installation working at up to 600 v, and using motors up to about 100 hp. ANNEX 4 Page 12

77. The company was founded by a man with exceptional entrepreneurial and technical talent; however, as the company grew, organizational and financial problems arose which could never be solved quite satisfactorily, due to the unavailability within the firm of truly quaiifiea specialists, and the simultaneous absence of outside assistance which had been anticipated when the firm was set up. 1/

78. It is believed that, building up on what already exists, this firm could, in a rather short span of time, be brought to a point where it could produce a considerable range of electrical goods for use both in the Ghanaian market, and perhaps in other West African countries.

79. What appears needed, primarily, is additional capability to set up organizational including, but not limited to financial, controls; and two or three highly experienced toolmakers (including at least one with supervisory experience) who can put the available production equipment (much of which is very well selected, and in good operating condition) to use.

80. Personnel of the required caliber is unavailable in'Ohana; its recruitment from abroad presents difficulties which are almost lipossible to overcome for a relatively small firm with no major connections to foreign sponsors. Moreover, while in a relatively short time such specialist personnel could most probably earn more than necessary for the company to make up for their salaries, the initial financial problems connected with bringing expatriates to Ghana and to pay them during their first year to two, are simply overwhelming.

81. It is felt here -- similarly as in another case discussed in this report referring to a manufacturer of agricultural equipment - that a relatively small effort at assistance could get this firm "over the hump" and make it a most useful building block in Ghana's industrialization. A closer look at this firm is recommended.

J. Vehicle Assembly

82. At least four companies are set up for the assembly of passenger cars 2/. One firm 3/, and possibly more, deal with the assembly of other vehicles.

83. One of the passenger car assembly plants was visited. The plant, which renortedlv cost 92 million to set un and whit-h iq qnperiffralnl tnnlpd

1/ This firm, which is 40% owned by NIB, was one of those which was initially helped along by specialists of the Development Service Institute. The comments made elsewhere in this report about the decline of the DSI are well illustrated by this company. 2/ Fattal, Mark Kofie, Auto Parts, Japan Motors, all at Accra.

3/ UAC Vehicle Assembly Plant, Tema. ANNEX 4 Page 13

for the assembly of certain models of a Japanese manufacturer's line, was shut down, due to the non-availability of materials. A few supervisory employees were present; the work force was furloughed (reportedly with full pay, as required by law).

84. The shipping in of kits of parts from overseas, and their subsequent assembly in small, and relatively inefficient decentralized plants in limited quantities, will hardly ever result in a lower actual cost of the vehicle at the point of sale. Depending upon incentives offered for the establishment of plants (principally to create employment), or possible differences in duty rates on fully assembled vs. partly assembled units, a difference in profitability may, however, result for the principals involved. The most important reason for the establishment of overseas assembly plants may well be the expectation that in times of import restrictions the importation of complete vehicles will be more severely curtailed than the importation of parts.

85. While demand in Ghana for vehicles assembled locally, just as for any vehicles at all, is, during the currently prevailing import restrictions, extremely heavy, import licenses are only very sparingly granted to the assemblers. For example, the plant which was visited received an allocation of ¢500,000, against an application for 012 million. There is no reason to think, though, that this is wrong. Import license allocations should indeed simply be based on the needs of the country for additional vehicles; the question as to whether the assemblers of vehicles should be given preference over other vehicle importers does (in view of the relatively few jobs created by the assembly operations) not seem of great relevance.

86. While on the subject of passenger vehicles, the following comment may not be out of place: The variety of cars in operation in Ghana is an extreme one; it ranges over lust about all makes available in the world, and it covers models from the simplest to the most luxurious. While the Gov- ernment has for quite some years tried to reduce the importation of luxury vehicles by applying a progressive duty rate, this evidently has not to a very significant degree reduced the number of cars on the road which are by no stretch of the imagination utility vehicles. To be sure, any Governmental rule for certain makes and against some others may be repugnant. However, effective restrictions applicable against the importation of certain classes of vehicles would without doubt be beneficial both from the foreign exchange. and the spare parts and service viewpoints. In some countries, import pro- hibitions of vehicles exceeding certain limits (cost: number of cvlinders; or engine displacement) seem to have leen quite effective. Perhaps Ghana should eive consideration to the vehicle'prnblem from thiR anale.

K. Rehabilitatinn of H-eawv RnniwTment A7_ Tha ~~nvrnMom nf "annva nnv-rt-z 4a n-n tak4r-h e-rm a irt at- almnat.2V% 87. The…problem …lchof "spare parts" is one comesu l discussion covering problems of life in Ghana in general, and of industry in particular. Page 14

88. Where the problem pertains to heavy equipment (here defined as agricultural machines, road building machinery, off-the-highway vehicles, and miscellaneous industrial production equipment) the down-stream effects of the "non-availablility" (non-usability due to defectiveness) can be extreme.

89. In the public sector, the main users of heavy equipment are the State Construction Corporation, the Public Works Department, the Ministry of Agriculture, the State Farms Corporation and, of course, the many state-owned industrial establishments.

90. These organizations (together with similar private firms, whose problems, however, appear less severe) own literally hundreds of currently inoperative pieces of heavy equipment which are fundamentally sound; but which are (and partly have been for yearsl) standing idle due to defects 1/.

91. If a way were found to repair these machines, put them back to work, and then keep them working, great quantities of now useless 'isunk capital cost" could be made useful again; and many projects of national import (in agriculture, road construction, industrial production, etc.) now in the doldrums, could be activated.

92. However, an improved availability of spare parts would only provide a very partial, and doubtlessly non-permanent solution to the basic problem which has existed as long as Ghana has had heavy equipment; and which may safely be expected to continue for many more years, unless it is tackled in a truly comprehensive manner.

93. It is felt that the problem requires an "institutional approach"; a corresponding suggestion fofllows:

94. There exists now at Accra 2/ at least three major workshops (owned by SCC. PWD. and Ministry of Agriculture respectively) which have the puroose of providing repair and maintenance service for the heavy equipment belonging to their principals. All of these workshops were inspected by a Mission member. None of them perform in a manner which could be considered satisfactory. In two of the shops, basically extremely valuable pieces of equipment (trucks, graders, tractors, bulldozers, trench differs, and so forth) stand around literallV by the dozens; gradua:llv deteriorating. The third shop gives a neat appearance, but evidently accomplishes little.

1/ For pxamnpln the Ministry nf Aagriulture has taken over the eauinment originally acquired by the (now defunet) Farmers' Council, including 450 60-hp crawle rractnrs, 150 90l-hp crawler tractors, 1200 wheeled tractors, 45 rice harvesters, and 15 grain processing machines, of which onl, a small fraction are in nprt4e connition. Much similar agricultural equipment belongs to the State Farms Corporation and is not ircluded in. t.hese firarees 2/ Other similar shops are said to exist outside Accra. ANNEX 4 Page 15

95. It is recommended that the buildings and other fixed assets of these three shops should become the nucleus of a technical assistance project having as objective the provision of an effective and efficient repair service for any heavy equipment in Ghana (including public as well as private), on a strictly commercial basis (which would in no way preclude the possibility of a Government corporation).

96. Operationally, the three principal activities would be:

rebuilding of internal combustion engines; manufacture (incl. foundry work) of special parts; welding, body work and assembly.

97. In the establishment of the facility, special attention should be paid to the setting up of an integrated job and cost control system; and one of the most important support activities would have to be an efficient, well- stocked parts warehouse, with smoothlv working controls. Further, an efficient purchasing section would be needed, having modern means of communications available and the possibility of place, and pay for, emergency parts orders to foreign suppliers directly from convertible currency bank accounts, without the need for specific authorization in individual instances.

98. Implementation of this idea would require technical assistance efforts by an agency like 7JNIDO. which would essentially consist of the assignment of a number of specialists (perhaps initially in an OPAS arrangement) for general management, purchasing. inventory control, shop supervision and training.

99. Investment requirements would be relatively mo(derate, due to the circumstance thst the build7ngs which are in existence would undoubtedly provide suitable accommodations for the project. Quite a few of the pro- durtion machines roiild 21so r1niihtlessly be iicused nnrl rpent-l-ty inst-alled administrative control equipment at the PWD warehouse might well be able to handle the financial and Inventory control needs

100. Invest-ment would be required for some additional workshop equipment, perhaps for some building modifications, and particularly for a malor inventory of snare parts, in addition to the costs of initial organi7ation of the facilit-y A_NNlEX 5 Page1

'T'TT' flmlT,rr',nr Tnfr Trn flflrTT rr T 1 (fli A T T flf AT 1 THEm S)irxUCltu' OF5. r;~rLt)1.'iE? 11:- ItkLI'; MANJFACTURING AND REPAIRS UT ACCRA, GHANA

A. Introduction: Summary and Conclusions

This annex analyzes the structure of employment in small-scale manufacturing and repair enterprises in Accra according to industry and size category of firm. This sector has generally been ignored in the formulation of policies to stimulate growth of modern sector output and employment, largely for lack of information, and also because 'modern' has been associated primarily with large-scale industry. Large-scale manufacturing output, value added and employment have achieved relatively rapid real growth throughout the 1960s (average annual growth of 10.6%, 8.0% and 10.5%1 respectively, thotugh some of it may be due to improved coverage). Nevertheless, it has not transformed the economy as rapidly as apparently was hoped at the beginning of the post-Independence industrialization drive, and it has in particular been unable to absorb labour fast enough to ease the pressure-on unemployment from high rates of rural-to-urban migration in search of wage employment. Atten- tion has therefore increasingly turned toward smaller enterprises as a nossi- ble source of more rapid labour absorption. This report uses results of a sample survey in Accra to analyze the relative size of the small-scale sector and its orientation toward 'modern' employment for wages as against self- employment or employment of family workers and apprentices only. Information is also provided on the industrial distribution of small-scale enterprises and on some of the problems inhibiting their expansion, with a view toward formulating policies to stimilate more rapid growth.

B. Main Findings

a. The number of persons engaged in small-scale manufacturing in Accra is approximately equal to the number in the large- scale sector. Since more than a third of Ghana's large-scale industries are concentrated in Accra, however, the ratio of small-scale to large-scale employment is probably much higher throughout the rest of the country.

b. Small manufacturing employment is predominantly in the clothing industry, which consists primarily of self-employed owners and apprentices.

C. Small repair employment is concentrated in vehicle repairs, which is the largest employer of wage workers among all manufacturing and repair industries.

d. Less than a fifth of small sector firms are 'modern' in the sense of employing at least one non-family member for wages, btut these firms arcount for almost half of total small-sca1e employment. ANNEX 5

e. Apprentices are the large aamnploe.nt ry ir.h4cat amo9 1- scale sector, followed closely by wage workers and self- t:IlllUyCU UWILL L ~.

u. RecoULMLLe-LaUUdtions

(a) A regular supply of rawL materials a.-,d spare. pjarts tU .>L manufacturing and repair establishments must be ensured if the sector is to grow adU utilize iLts subustantiLaL excess capacitLoy or bUothL prouuctiLor anU employment more effectively. In certain industries, such as printing, an association of manufacturers could purchase materials il bulk for ,ts m-em,bers, if officers in the Ministries were designated to ensure that they received import licenses, credit and similar assistance. It would probably be better to leave the actual ordering and distribution to the manufacturers themselves, rather than have the Government attempt to supply them. In industries wnere manufacturers' associations are not practical, however, efforts should be made to ensure that adequate allocation for the relevant materials is made to the larger importing firms.

(b) Lack of working capital and credit facilities is a severe constraint on the expansion of small businesses. Present loan schemes cover only the larger of the small businesses, and in practice concentrate on already- established businessmen. A program of small loans (less than j2-3,000) could be initiated with a relatively high interest rate (e.g., 15%) to cover the higher costs and risks of such loans. This program might best be carried out through the commercial banks, which are in a position to judge the credit-worthiness of their small business depositors, or through manufacturers' associations.

D. Data: Sample Survey of Small Businesses in Accra

The data are taken from a survey of small businesses conducted in Accra during July-September, 1973. A 10% random sample of Census Enumeration Areas was selected (57 out of 569). Enumerators attempted to interview all small businesses in each area. 'Small business' was defined as an enterprise employing less than 30 full-time wage workers, but involving at least some fixed capital investment, in the form of either a kiosk or tools. Petty traders and people operating just from a table or by the wayside were generally excluded. Activities carried out in-markets and in people's homes were recorded in a separate group, as they were likely to be under-enumerated; activities were recorded if they were readily visible or had a signboard, but many less visible 'informal' operations may have been missed.

Establishments were asked to give the number of employees in different employment categories, and to state the main problems of operating their business. Kiosks and people doing business in markets or in their houses were soon found to be almost exclusively self-employed; hence they were generally assumed to have only the owner working, and were not interviewed unless there seemed to be some additional workers. Firms which were closed were visited again at least one or two times before being recorded as 'closed' or 'no response'. A flW 5 Page 3

E. Small Business Employment by Sector and Industry

Estimates of total persons engaged in small, organized businesses in Accra are given in Table 1 for the sectors included in the survey. Manu- facturing is apparently the largest sector for employment in small businesses, with over 16,000. The estimates for manufacturing and repairs, for sales and for services are about 44-54% of crude projections of employment based on the 1960 Census list of detailed industries. The remainder should be accounted for principally by firms employing 30 or more, though small commercial activities carried out in the home would also be included in the difference, as they were generally not covered in this survey. The high apparent over- enumeration for food preparation, bars and hotels may be due partly to rapid growth of hotels and bars in recent years, and also to the inclusion in 'food preparation' of some activities which the Census classified as manufacturing.

The estimate that small-scale manufacturing accounts for approximately half of total manufacturing employment is borne out by a comparison of small-scale employment, based on the survey results, with recorded employment from the Central Bureau of Statistics. Industrial Statistics. Total persons engaged in small manufacturing (16,270) are 92.3% of the number employed in Accra firms ith 30 or more workers as of the last quarter of 1971. 1/ Small scale manufacturing accounts for 6.1% of Accra's 1970 labour force, large scale for 6.7%. 2/ The combined total accounts for 12.8% of the labor force - virtually identical to the 12.9% of Accra District's labor force found to be engaged in manufacturing in 1060.3/ The latter figure, however, includes repairs, so that the 1.6% of Accra's labor force engaged in small-scale repairs should be added to the 12.8%, plus whatever large-scale firms are not included in the manufacturing totals. Manufacturing and repairs combined account for approximately 15% of total labour force in Accra.

The distribution of small-scale employment across 2-digit industries may be compared to the industrial distribution of total manufacturing and large- scale manufacturing. The distribution of small-scale manufacturing emnlovment (Table 2, col. 4) is roughly similar to that for all manufacturing employment in Accra in 1960 (col. 5). The small-scale sector has somewhat

ij Recorded industrial employment for Accra is higher than the 17,621 figure given in Table 2, col. 4, because a number of firms with fewer than 30 employees are actually included in the official statistics (27.6% of firms with 5.6% of employment recorded for fourth quarter, 1971, were employing fewer than 30 workers). 7/ Ajr'-rn Ic triAeln tn 4n,-liiAo Mingna, Toschi LT.onn Adhimot%v nnA Anum nl since all were within the sample survey area. Labor force (employed -,,u une=lo-mOent iS 15 y.ear oldA sA ohma. f- -r4 he 1970 Population Census, Vol. II, p. xxvii. 3/ 1960 Population Census, Vol. IV, p. 27. Table 1 Page]4

ACCRA S;MALL BUSIlNESS SURVEY: TOTAL EMPLOYMT BY SECTORa

Total shop Total, including 1 Census, Smallascale Sector workers houses and kiosks projeacted share

famfacturing 14,920 16,270 3 41200 54 Repa-i-rs 5,800 5,890

Sales 5,270 9s460 2 1,5 00' 44 FoodL Preiparationl & Salee 3,100 3,500 166 Bares and Hotels 2,4350 2,400 Servicesi 3,460 3,550 7,300 49 ConlstrlctioZL services (draughtsmenL, surveyors,, etc.) 450 450 a.a. n.oa.

aReEulltes of 10% sample Eurvey heLve been mu.ltipliLed by 11D.= Includes kiosksI actualJLy int operation, and activities carried out in the home for commercial purposes,, if marked by a sigiboard or vLsibLe from the street. c1960 figures for Accra M icipaL Council multiplied timnes growth of total Accra population 196C-70g, ircreased by 30eo to bring Lt to 19'73 equivanlent. (1960 Population Cernsus of Ghana, Vol.IV, Tablees 3 sad 4). dE1merEtted employment asLa percentage of projected. Excluding petty trade. fPrincipally hairdressin.g, rmedical, pholtography, cinemaz and trvwel agencies. Domestic servi-es Inot included., Table 2

ACCRA SMIALL BUSDNESS SURVEY: MANUFACTUJRING AND RBP IRS ANNX SlMMURY OF A1U.USTED '4PL0YMEMiTa (2-digit level) Page 4a.

Repair workesrs: Pianufacturing workers: Accrai Large-scale MKrufactu1ring:lb FuLl-time % of Fpll-time !%of 1960 Census Acora only: Ghana equivalent totaj. equivalemt totall No.% Madustry (2-digit ISIC) (1) (2) (3) (4) (') (6,i (7) (8)

31 Food, beverages & tobacco nil nil 2,020 12.6 13.6 2,3357 13.3 14.8

32 Textiles, wearing apparel 470 8.1 8,41O 52.5 40.9 4,103 23.3 29.7 & leather

33 Wood products 30 0.5 1,495 9.3 17.4 1,272 7.2 26.0

34 Paper products, printing nil nil 1,545 9.6 7.9 3,701 21.0 7.3

35 Chemicals, rubber & plastic 120 2.1 735 4.5 1.1 2,291 13.0 84.8 products

36 Non-metallic mineral produelts nil nil 220 1.4 0.9 1 ,348 7.6 3.8

37 Basic metals nil nil nil nil 0.1 nil nil 1.2

3B Fabricated metal products 4i,965; 85.2 1,190 7.4 11.1 2,295 13,0 8.t

39 Miscellaneous 240 4.1 420 2.6 5.10 275 1.6 04,5 … Totalc 5,825 100.0 16,025 100.0 100.0 17,621 100.0 100.0

a Part-time workers are counted as half a worker. Family members and self-employed onmers are included. b1960 PopuLlation Census of Ghana, Tables 3 and 4.

1971 fourth quarter for Accra (firms employing over 30 only); 1970 anzmal for Ghana; from C.B.S Industrial S;tatistics.

DetaiLls uay fial 1to add to totals b,ecause oi rounding. ANNEX 5 Page 5 more engaged in textiles, etc., and less in wfood products. More than twice as many persons are employed in small-scale textiles, etc., as in the large- scale sector (cols. 3 and 6). The large-scale sector in Accra, however, has almost three times as many workers in the more modern, technologically- oriented industries 34-37. The distribution of small-scale employment is actually somewhat closer to the large-scale distribution for Ghana as a whole than for Accra alone (Table 2, col. 8, and Appendix Table A, cols. 11-14). The small-scale sector is again seen to have far greater concentration of both firms and employment in the wearing apparel industry, while the large- scale sector has relatively greater shares in wood products and basic textile products.

The employment figures in Table 2 are adjusted to give full-time equivalents by counting part-time workers as half. Repair employment, which is slightly over a third as large as total manufacturing employment, is heavily concentrated in the metal products industry, vehicle repair in particular accounts for 62.6% of total repair full-time equivalent employment, amounting to 16.7% of combined repair and manufacturing employment. Manufactur- ing employment is almost as heavily concentrated in textiles, wearing apparel and leather. The clothing industry alone accounts for 46.0% of manufacturing full-time equivalent employment, and 33.8% of the combined repair and manufacturing total. Thus manufacture of clothing and repair of vehicles account for approximately half of total employment and establishments enumerated in those two sectors. Food, beverages and tobacco, the next largest 2-digit industry, has less than half as many workers as metal product repairs and a quarter as many as manufacture of textiles, etc. Furthermore, none of its 4-dieit sub-industries is especially large. The next larzest 4-digit or 3-digit industries are printing, and furniture. These employ only 6.9% and 59%7 rpqorrtivulvy of nombined renair anl mnanufacturing emlnIovmPnt. and h.th have less than 10% of manufacturing w¢orkers (Anpendix Table A). IJe will examine the natture of emn1ovmPnf1mall-sc21e in Piah tind1trv in mnre detail focusing on the two dominant industries of clothing manufacturing and vehicle repair.

F. D4at-r-h,ist-4nn Af V;rmc nnA Fmnl^-umcnt bay Tnrldctr:

The relative tend,enc- of each ir.d,ustry to be oriented toward 'modern', larger-size production units as against less formally organized sellf=te.mplo;.,.ent .lay be -n-yA Tahle 3. F..Jfro. , bisOum h-v been grouped initially according to whether or not thev employ at least one non-non-f,.iy CUI.LL~ worlkerWL N L £LUCLful=t,. oUIJ awaea W~VI, ass.iO. ~IMtTh 'r,,oe.1:IIIL L etrLL£ i,LI which do employ wage wqorkers have been further divided into 'medium scale' (eminploying~11p~U.LLy, 10-)I U 4:: wagewc.5 wokesI)L-1 KeL _. Caiiu II--I29'sI!LLL. l tOCL"scale In kt:).LUY.LLLr,(e,uoing4 -I1 -y waewrkr)WCae %VVULN~I-_. J The remaining firms are classified either as 'traditional', if they employ apprenti-ces o family w -- or 1Lr. they O_ - s I appL~flL1ce UL L~iiLL± WLA KinL ~S U L J.fML Ur-I UdJ.L, IILIIt-V LLUILb_LL ut a S1in1gie person or are carried out in the home or a market stall rather than a separate business establishment. Table 3 LNNEX 5 ACCRKA SlL BUSIUOS SUR1ETs MANUFACTURIII ANID REPAiRS Page 6 .JgneWAY OF DISI3JTItN OF FIRJt IN EACH INMIJSTRY B3Y FIRM SIZE CATECGOH

(% of 2-digit industry's firm in each category4

Employing non- "Informatl" family wagre workers: "Traditional" (Ovzner only, "Medium" "Small" (some non-.vage market stalls Total % of (l-;29) (1-9) wurkers) & houses) Total mmlber total Industry (1) (2) (3) (4) (5) (6) (7)

XANUFACTURING 31 Food & beverages 3,1 18.6 20.6 57,.7 100.0 970 19.6 32 Textiles, , wearing apparel, etc. 2.5 3.5 37.5 56*5 100.0 2,83i0 57.3 33 Wood 0.0 9.71 45.2 45,.2 1D.O0 6:20 12.6 34 Paper, printing 15.8 73.7' 5.*3 5.3 100.0 190 3.9 35 Chemicals, plastics 100.0 0.0 0.0 0.0 1DO.O 40 0.8 36 Non-metallic minLeral prodlucts 44o4 44.4 11.1 0.0 100.0 90 1.8 36 Metal products 0.0 22.2 55.6 22.2 100.0 90 1.8 39 Miscellaneous 9.1 9.1 18.2 63.6 100.0 IlO 2.2 Total number of firms 2,20 550 1,630 2,540 4,940 100.0 % of total firms 4*5 L.L 33.0 51.4 100.0

REPAIRM 32 Tectile's, weaarirg apparel, shose, etc. 0.0 7.]. 21].4 71,.4 100.0 2BO 24.8 33 Wood 0.0 0.0 0.0 100.0 100.0 20 1.8 35i Chemical products (tyres) 0.0 0.0 50.0 50.0 100.0 60 5.3 38 Metal products & electrical (except 384 vehicles) 0.0 16.7 56.7 26.7 100.0 300 26.6 384 Vehielbs 6.7 46.7r 46t.7 0.0 100.0 300 26.6 39 Watcheei, other 0 aQ 'is 88.2 100.0 1 _15.O Total rumber of firms 20 220 410 480 1,1'30 100.0 % of total firms 1.8 19.5 36t.3 41.5 100.0

Detailsg may fail to add to totals because of rounding. ANNEX 5 Page 7

The earlier finding that wearing apparel (clothing) predominates among the small-scale rather than the large-scale industries is borne out even within the small-scale sector. Thus over half of manufacturing firms consist of seamstresses or tailors who do not employ any workers for wages. None of the other manufacturing industries is as heavily concentrated in the traditional and informal sectors. Food and beverages, the next largest industry, does have as large a share of owner-only operations (57.7%), but it has 21.7% in the modern sector. Wood products has less than 10% of its firms in the modern sector, though half of the remainder employ at least one non-wage worker. These three sectors (31-33) together with metal products (38) and miscellaneous (39) may be considered as predominantly traditional or informal in orientation, with 22% or less of their firms in the modern sector. Table 4 (cols. 3-4) shows that they account for 98.8% of all traditional manufacturing firms and 99.6% of the informal group. They constitute 93.5% of all small manufacturing firms in the survey.

Industries 34-36 are primarily in the modern sector, with 89% or more of their firms employing one or more full-time wage workers. These industries involve more highly processed materials and more sophisticated machinery and equipment than the others: printing, chemical and plastic products, and cement blocks. These industries, however, constitute only 6.5% of firms in the small business sample; on the other hand, they account for 23.6% of large-scale industrial firms employing 30 or more in 1970. Although this might suggest that modern-oriented Droduction plays relatively little role in the small business sector, these industries do account for 18.5% of all workers in the sample, which is quite close to the 19.9% of large-scale industrial employment in these industries in 1970. Furthermore, thev acceount for a third of non-fami1v fiil1-timp wage Pmn1ovmPnt in the small-scale sector, and thus represent an important modernizing influence w4thin the spetor. The gronwth of wage Amployment in smnall businesses mary -well depend on expanding the number of small firms producing modern industrial goods= Sin these industries are pressently dominated by the. ilarge policy needs to be directed towards ensuring that small firms can survive.

Although vehicle repair accounts for 63.0% of all repair workers, itcompise m oy .6J*r,t% of reai-4rZ.-. estabs'tL - The.-4i.plicatio that these firms are relatively large is verified in Table 4. Vehicle repair a LccountsforA allJ repair es-labl-isO l .entsem.ploying 1n or m[ore wage wo rMtrL s and 63.6% of those employing 1-9. Table 3 shows that 53.4% of vehicle reDair estab- is1m Lents er,,ploy full-tir.e .n-familly w-wrkers- fo ams vl on r C~LaJL~UILLIL CIZU±J- LULL.i no1141.Ly J. ILNCL ti LUL VJdg-~u: ,wit.L.Lu Toituij are in the informal purely self-employed sector. 'Wayside fitters' are in fact the largest em..ployers of wage workers in the smtiall manufacturing and repair sector in Accra, with 15.9% of the total (Appendix Tables A and B, col. 4). Even if apprentices are included, they are second oniv to tne ciotning industry, with 3,080 apprentice and wage xorkers as against 4,350. Table 4

ACCRA SMALL BUSINESS SURVEY: MANUTFACTURING A]ND REPAIRS AE. INISTRIAL DISTRIBUTION OP E'IRMS IN IECH SIZE CATEGORY

(% of tota]L firms in category)

Employing ncn- "TInformal" family wirage workers: "Traditional" (Owner only, Total "Medium" t"Small" (some non-irage market stalls mnumer % of (10-2I9) (1-9) workers; and houises) of f-irs total Industry (1(2) (3) (4: )'i 6)

MAINUFACTURING 31 Food & beverages 13.6 32.7 12.3 22,0 970 19.6 32 Textiles, wearing apparel, etc. 31.8 18.2 65.0 63.0 2,830 '57.3 33 Wood 0.0 109 17.2 11,0 620 12.6 34 Paper, printing 13.6 25.5 0.6 .4 1L90 3.9 35 Chemicals, plastics 18.2 0.0 0.0 0.0 400 0.8 36 Non-metallic mineral products 18.2 7.3 0.6 0.0 90 1.8 38 Metal products 0.0 3.6 3.1 0.8 90 1.8 39 MeEscellaneouis 4,6 18 _1.2 2,j8 11 2.2 Total 100.0 100.0 100.0 100.0 100.0 1otoal umOber of firrm3 220 55b0 1,630 2,540 4,940 of total firMI 4 5 li;.l 33.0 51*4 100.0 % of total employment 27.5 17.4 38.8 16.4 100.0 REPAIRS 32 Textiles, wearing apparel, etc. 0.0 9.1 14.6 41.7 280 24.8 33 Wood 0.0 0.,0 0.0 4.2 20 1.8 35 Chemical produclts (tyres) 0.0 0.,0 7.3 6.3 60 5.3 38 Mletal products & electrical (excerpt 384 vethicles) 0.0 22.7 41.5 16.7 300 26.6 384 Vehicles 100.0 63.,6 34.2 0.0 3300 26.6 39 Other .OO 4 -LI __JQ Total 100.0 100.0 10090 100.0 100.0 Toltal number of firms 20 220 410 48 1,130 of total firms 1.8 19.5 36.3 42.5 100.0 of total employment 8.8 39.,7 42.8 8.6 5,890

Details may fail to add to totals because of rounding. ANNVX 5 Page 9

Of the remaining repair establishments, 57.8% are in the informal sector, including all of the repair firms in that sector, and 32.5% have traditional employment patterns, constituting 65.8% of that group. The most important repair activities carried out primarily by self-employed persons working alone are shoe and watch repairs (industries 32 and 39). Only electrical repairs and welders (industry 38) have a substantial proportion (22.7%) with any wage employees.

G. Distribution of Firms and Employment by Size Category

Table 4 also provides additional information on the importance of each of the four categories of firm size and orientation for different tyDes of employment, as well as for total employment and number of firms. The 15.6% of manufacturing firms which are in the modern sector employ 44.9% of total persons engaged in manufacturing, while the 21.3% of repair firms emploving one or more wage wnrkers account for 48.5% of total emnlogment in repairing. The average firm size for all those enumerated is 3.3 for manu- facturina and 5=2 for renairs with an overall average of 3.7. It should be noted that because the size category definition is based only on the number of ful 1 -time wage mployees, the total number of employees (including apprentices, family members and part-time workers, as well as the owner) can be larger than would seem appropriate for a particular category. For example, repair establishments employing 1-9 wage workers have an average total employ-ent of 10.6 per fi (Table 5).

T.abIte 5: ATTPDAGEV TOTALAn RSPE R Rn7 SIZEt'A TEGORYM ~.aLJL~-' ivA~x.nALZ, .IAJ.tMl, %'AruXAx r rlx r±X' DI 3LLIJ, %kI1A'M I"WXI

\worL.eL= L L.LLILJ Medium Small Traditional Informal Total Seclor (1 ) ( 4 )J. 5

Manufacturing 20.1 5.2 3.9 1.0 3.3

Repairs 25.5 10.6 6.1 1.1a 5.2

Combined 20.8 6.7 4.3 1.0 3.7 a Some firms have several partners working together but no other workers.

More than two-thirds of modern sector wage employment in small sector manufacturing is in medium size firms, less than a third in small size firms; this pattern is reversed for repair establishments (Table 6). Thus policies aimed at expanding or regulating the wage labor force in the small business sector must focus on medium size manufacturing firms but small repair establishments (principally vehicle repair). Apprentices, however, are still engaged primarily in the traditional sector in both manufacturing (78.9%) and repairs (60.9%). The apprentice system is a ANNEX 5 Page 10

traditional method for obtaining labor at a very low financial cost, and is therefore very important to small businessmen with little working capital who wish to begin expanding their operation. In some cases; apnrentireq ran even be a source of income. Seamstresses and tailors occasionally charge a fee for taking on an annrentice; or at least receive a navment of up to 100 at the end of a formal apprenticeship agreement (usually about 3 years; longer for arnpenter antid uin to 5 or 6 vears for fitters). More generally, however, the master provides 'chop money' of about 20-30p per day, and often tltaes the anpprenti-e intn his home (eperiallvy carpenters, and to some extent tailors and seamstresses). Modern sector firms with several wage employees oftn rppie te term. 'apprntice' to relativelyu new. employees ur.dey'rgoing. on-the-job training. Apprentices in such establishments generally were paid ea wan 4" F-ha r,hn&Anf;-'_o fwf4hh 4FS n.. ^f th e 6J4e4-1 Kamrnthlyp *u .7 g i th n hbE_--od z of -15 Znone of -the _tr -adtIoVa formalities of chop money or payment at the end of the training. In some of the larger firms, the term 'ap_nttice' ay hawe been used to legiti.dze paying these new workers less than the legal minimum wage for the first six months or so. Apprentices constitute the largest type of employment.- (35.5%) in manufacturing and repairs combined. Family members are a much smaller proprtio.n ,f -total h*at- t-q1^r,,A,t s t41-.. tnA 4- a 4m41" patter. MBt Jj-J.VA W Li Lit.O.t _uy..__. , ... v y __ __. _.Lto a.L to apprentices. Indeed, young relatives are often taken in as apprentices

(if so, they w.-ere included as fam-4ly. membDers, .-. 4A 4in t-b.i s Apprentices and family workers are important in giving the small-scale business sector a cost a-dvantageoe over larg-escale enterprv4se, ich must generally pay the legal minimum wage.

The number of owners self-employed (6,390) is almost as large as thl-e num.ber ofL wage workmers (6,540)t anA of apprer.tices (7,860 engaged In L1L~~~ LJLLLUJILU~~~L W~~~JI.r..~~~L C %..Li J'./ ~ %i I ~WWJL'J L 5~L .L small manufacturing and repairs. Owners are, not surprisingly, distributed

iLn a s'i[liLar proportionL to theL1L UdListribUL.tLVLL ULo L.LLofir, exceptL LhatL Wall modern sector manufacturing establishments are sometimes managed by a hired worker wtit tre o-wner absent (especially in ULL ULJ.LLLrg). P arLL-tme workers are relatively unimportant (1.6% of total workers), and are engaged primarily in furniture and printing to take care of special orders, and in vehicle repair after working hours in a regular full-time job. Table 6 ACCRMSA:LL MSIUESS SURVXYtl: MANU1?ACMUG AID REPA3L9, Page 1 SU1NMRY OF DISTRIBUTICW OF WORIERS 13! ENPLOYTENT CAT3QMT AND FIRM SIZE (% of nguploymtent cateeory)

Fixls wiLth Wno "InrormOall fanily wage workersa "Tradit;ional" (Owner only; % of "Medium" "Small" (Some non-wats houes ,and total (10o29) (1-9) workers) marlet astalls) Total bumber workers Emsployment Cat6gory (1) (2) (5) (4.) (5) (6) (7)

A. MMMFACMINRI2 1. % of firms 4,5 11.1 33.0 51.5 100.0 4,940 2. Non-family full-time ware workers 69.,7 30.3 0.0 0.,0 100.0 5,290 32.5 3. Apprenitices 7-7 13.0 7389 0,4 100.0 4,840 29.7 4. Owners 4,3 8.3 35.6 51,,8 100.0 5,060 31.1 5. Non-family part-time 32.3 19.4 41.9 64,5 100.0 310 1.'3 6e Familyr (full- and part-time) 11.7 15.6, 72.7 0.0 100.0 _ 770 4 7. TIotal 27.5 17.4 38,8 16,4 100.0 16,270 100.0

B. REPAIRS 1. %;of iirms 1.8 19.5 36.3 42.5 100.0 1,040 2. Non-family full-tire wa4e vorkers 31.2 68.8 0.0 0.0 100.0 1,250 21.2 3. Apprentices 3.3 35.8 60.9 0.0 100.0 3,020 51.3 4. CvnerI3 2.3 19.5 39.8 38.3 100.0 1,330 22.6 0.8 5, * on-family part-tiuo 0.0 100.0 0.0 0.0 100.0 50 2 6. Family (full- and ;art-time .0 1a _2 S 9 100.0 _42 -AA 7. Total 8.8 39*7 42.8 8.6 100.0 5,890 100.0

SOrXTCE3 Adapted fromz Appendix, Tables A and B. A ET17 an.lirA J Page 12

H. Probiems of Operating Small Businesses

Firms were asked to state the most important problems preventing them from achieving higher levels of production; the results are summarized in Table 7. The most important problems given were the lack of raw materiais (especially for manufacturing) and spare parts (especially for repairs), and insufficient working capital (both sectors). Materials and parts were initially cited by the vast majority of firms, but on further questioning many admitted that the materials or parts actually were available, but that they had become too costly. High prices also were given as a reason for the lack of demand, or the failure of customers to bring more materials for processing (in the cases of corn and flour mills and dressmakers). Furthermore, many owners admitted that even if materials were readily available at reasonable prices, they could not afford to purchase a substantial quantity for stocks. The problem of finance was a serious problem to both large amd small firms in both manufacturing and repairs.

The lack of raw materials and parts seemed to be more important to the larger, modern establishments than to small one-person operations in manufacturing. This may be partly because of the predominance of mills and dressmaking among the latter, since these generally involve processing the customer's materials rather than purchasing materials for processing and sale as a finished product. Indeed, textile firms had a relatively low proportion complaining of materials (19%, Table 7, col. 6). The least concern about availability of materials wqas in the wood Products industry (col. 7). which utilizes local materials. Furniture-makers' main concern was generally to obtain enough capital to build a showroom and buy materials to build up a stock of goods ready for sale. At present. most carpenters must wait until they get an order and then use an advance payment to buy the materials needed.

T_ack of demand annears to be a more serious constraint for the bigger firms in the more modern industries (34-39) than for smaller firms and those in food; textiles or wood products. Rpecent inflationary trends in the absence of significant growth in income per capita may have limited the growth of the market for more sophisticated manufactured goods and led people to devote larger shares of their budgets to basic food and clothing. ACCA SMLUL BUILSS SWUYt MKAIACqTUNG AI RIPAIR Page 13 PFROMMS OF OP8RATING BUS] 9SSIS

(% of firmi responding in each ateagory)a

NamifactxiIng establisbmets Manufacturingt 2-digit Industry grou!pr Repair establishments: Modern sectort Tradit- Infor lbdenrt Iad- Iror- IWIE anu; lilal -all 2, 'X ZS22an 12£WL siLL 1aL WaL JL (;2) () (4k) (5) (6) (7') 1'8) (9) (lo) (11 ) (12) (1:5) (14)

LaCk Of: Raw materials 64% 63% 29% 21% 56% 31%; 1i9% 85% 69% 46% t% 691 Y t3% Sparerers 0 1'3 13 3^ 31 4 5 0 0 9 31 44 V7 34

igh prioes of materia 7 19 33 39 32 38 34 ;O 6 25 26 32 1'7 27 anda parts

Lack of woring capital 43 37 37 39 6 42 53 ;54 37 39 56 37 50 47 (mainly for buying materlals) La kof deand 43 22 25 9 19 12 24 1 38 22 0 12 1'7 8

k4if skilled labour 0 is 0 53 0 8 10 0 0 4 0 0 03 0l

Total number of finm 4 32 24 22 16 26 21 '13 16 92 16 16 is 38 reisponding

aPercentagea in each ooluMn may add to =mre than 100 bocause eome firms gave twoD ?ponsei. ANNEX 5 Page 14

I. Policies to Help Overcome Problems

It is apparent that greater availability of raw materials and spare parts would' assist small businesses in using their capacity more fully and productively. Small firms must depend on other, larger firms for their raw materials; only a few of the firms surveyed actually had their own import licences. In the case of printing, for example, small buiness owners often reported spending a great deal of time going round to the larger presses in search of materials. When there is a squeeze on materials due to foreign exchange unavailability or poor planning in licensing and ordering, the larger firms naturally tend to keep their materials for themselves. The inability of small businesses to obtain materials is likely to have an unfavorable effect on employment. When large firms experience a temporary material shortage, they generally retain their workers, both in response to Government pressure and to avoid costs of retraining new workers. Small firms, however, are usually unable to afford employing workers in the absence of materials for them to work on, and reduce their work force. Policies to ensure the steady supply of materials to the small-scale sector are important if that sector is to grow rapidly and absorb more workers. ANNEX 5 Page 15

1. M,ANT-rTPAPC'rTURERS1P ASSTCTIAN,S:

r-- apro.---- toward 4uprov4r,g the mvater-ias "an ars supply7 to small firms would be to form associations of manufacturers in each industry and arrangementsraake for ther. -o ordAer directly their me.mbers' rarts. There should be an official in the Mlinistry of Trade directly responsible for assistinqg Small businessmnen's associatior.s 'nrobtain-in-A 14ce;;nses for their necessary materials. Such an association and arrangement would probably not be very successful at first, because many small businemSien would avoid registering for fear of being taxed. If, however, such an association in fact proves successful in obtaining its members' requirements, other sr;iall business owners may decide that it is worth paying the tax in order to be assured of a steady supply of materials.

Printing and corn milling are two industries wnich could benefit from a businessmen's association with a liaison in the Ministries. Both involve simple materials (or grinding plates, for milling) which could be imported in bulk and supplied to the members. There are, however, other special problems in these two industries which might inhibit the success of such a policy. Both have a large number of establishment relative to the current demand for their services, and appear to be operating well under realistic capacity. Printing presses proliferated in Accra during the 1960s, parallel to and largely supported by the rapid expansion of the Government sector and its burgeoning paper work. Recently, however, the Government has ordered that all of its printing work must go to the Ghana Publishing Corpora- tion; many printers cited this as the source of their inability to expand and hire more workers. Since printing firms are the largest single employers of full-time manufacturing wage workers (Appendix Table A, col. 4), and since their employment varies directly with the level of their activity, relaxation of this official policy would appear desirable to assist small-scale manufacturing in absorbing more wage workers.

A corn mill owner's association would be beneficial primarily in easing the difficulty of operators outside the Accra area in obtaining grinding plates and other spare parts. It is not likely that it would have much direct impact on employment. There appears to be over-capacity in milling, at least in Accra, and one operator can handle any increase in a mill's business, short of a need for operating on shifts. Most mill owners complained of too many mills driving down their returns and preventing them from using the mill efficiently. Nevertheless, most also seemed interested in starting another mill if they could get the money. In this case, there is apparently a trade-off between lower prices to consumers resulting from competitors entering the industry and the loss in technical efficiency resulting from operation closer to the economically efficient minimum point of the average cost curve (but below technical capacity). ANNEX 5 Page 16i

An association of seamstresses and tailors would probably not have a great impact on that industry. Since tney generally do not suppiy tneir own materials, and since cloth is produced locally, their level of production is constrained more by the ability of their customers to afford new clothing than by problems of supply.

2. CREDIT FACILITIES:

The availability of credit and financing seems to be an essenttai ingredient for the small-scale manufacturing sector to expand. Although the recent lowering of the bank lending rate to 10% may have been aimed at stimulating investment, it is likely to favor unduly capital-intensive large-scale firms at the expense of small ones. With a relatively low profit margin on business loans, banks are going to lend only if they can avoid any risks of non-payment. They are not likely to lend to small businesses, whichi are less well established and have fewer assets to act as security. Even at the old rate, the small businesses interviewed were not obtaininig loans. Small Business Promotion loans tend to go to already established businessmen.

It would be a worthwhile experiment to design a loan program aimed specifically at small-size, high-risk manufacturing or repair establishments. Risk costs could be covered by charging a relatively high interest rate. Many owners indicated that they would be interested in borrowing even at a 15% annual rate of interest. Such a rate should be sufficient to offset losses due to non-payment. It would probably be desirable to allow the commercial banks to administer such a program, since thev know their customers and could select applicants partly on the basis of their past savings performance. Such a scheme might be put into effect automatically if banks are simply given the right to charge such an interest rate on loans less than some upper limit (e.g., i2-3,000).

Such a loan scheme would be of particular benefit to industries such as furniture. Mlany carpenters said that they could improve their business a great deal and hire more workers if they could get even a few hundred cedis to build a showroom and buy materials so as to build up a stock of furniture ready for sale. Such financing is essential if the small informal and traditional operations are to grow into larger establishments pmnnloving workers for wages.

The nrohlem, hnwevpr iq tn dPui4P n mpthod of rnrrv4ino nia Ainnno scheme in a politically acceptable way and with maximum chance of successful repav,iment of loans. A titil interFet rate System might well run inry obnec- tions that large businesses are being unduly favored by a much lower interest than small businesses, even though the higher interest rate for small businesses, might be economically justifiable and necessary if they are actually to receive ar.y loans at all. One possible way arounA th..is oJU ection is to levy special charges on small loans to cover the higher costs of hand- l.ng themf. A .m.ore effective solution, however, might bIe to worI-N LIAL A1k'4'C.A P1 Page 17 manufacturers' associations or co-operatives of the sort suggested in the preceding section. Loans could ue adUe to tLeaassciation t t tne official rate of interest for relending to members at commercial rates. The Govern- ment would not then be responsible for tne terms of tne final loans. Sucn associations could also be the means for providing supporting technical and commerciai services along with the ioan, as well as for ensuring supplies of materials and parts. It is recommended that an industry be chosen for an experimental attempt to develop a manufacturers! association for the purpose of channeling loans, materials and assistance. Government commitment to providing import licenses and credit to such an association would create a strong incentive for small manufacturers to join. Technical and managerial assistance to the associations would also be necessary to ensure that it functions effectively and has the capability to administer loan and technical programs. If such an experiment is successful in one industry, it would pave the way for extension of the scheme to other industries, and eventually provide an institutional framework for reaching small enterprises through Government policy. Table $ ANNEX 5 Statistical Appendix

ACMAMRV SR= tri MIMSMFA RIM ~~~~~Pa8 e 18 aUsm goffQ DBy W R Ili Z=! :AU 5t E l

FuLltje workers Part-time Ownere TotaI Total Total Large-acals industry, Sall-large ohre No. of firrm: (non-family): nion-family Orners (inci. full all workers %tota:L %of differences: ,rrt %grand Appren- wage vrage (eaobs bouseg, tine b "hop 1 (iacl. employ.- total Emp1oyr m total tot;al tioee srorers irorkara only etca) worrs' workers hooea,etc.) mont fi mont FLrma industry (19.70 ISIC) (1) 2) (3) (4) (5) (6 (7) (8) (9) (10) (11) (12) (13) (14)

311 & 312 Food Killing (oorn. flour" 7.7 5.7 0.8 7.0 0.0 3.2 2.4 S.1 4.6 4.2 0.6 +5.6 re"d 3.6 f.9 0.0 A P.9 3.9 5.7 3.9 4.0 4.7 1.1 +3.6; other* (lmtehering, 2.5 ' 0,; 2.5 0.0 p.2 6.9 1.3 1.9 3.4 0.9 2 fisb smong, eto.) __ _

Total Pood 13.8 19.0 0.8 16m9 6.9 6.9 15.2 10.4 10.5 12.4 7.5 13.0 +4.91 +6.0

313 Beverages 0.5 0.6 0.0 0.6 0.0 0.5 0.6 0.4 0.4 0.4 5.1 3.2 -47 -2.6

321 Textile prodausb 0.8 0.6 0.0 0.0 0.0 0.8 0.6 0.0 0.2 0.2 20.1 6,.5 -19.51 -5.9 (incl. fieh nets) 322 Wearing apparel 52.1 54.0 73.2 15.5 3.4 53.3 54.7 42.6 44.3 45.5 6.3 9.,5 +39.2 443.5

323 Leather products 2.0 1.8 1.9 12.7 0.0 1.6 1.6 7.3 5.7 5.4 1.0 3.2 +4.4 -1.4

324 Pootwear 1.1 0.8 1.9 0.0 0.0 1.3 1.0 0.8 0.9 0.9 2.3 3.9 -1.4 -3.1

'5I31Pd'u est 2.0 L.6 0.4 0.4 0.0 3.7 3.0 0.5 1.3 1.2 23.0 15,,8 -21L.8 -14.2

332 Furniture 14.3 10.9 8.5 3.0 34.5 15.7 12.5 5.6 8.8 8.4 3.0 5.,1 +5.4 +5.8

341 Paper producte 0.3 0.2 0.tS 0.2 3,4 0.3 0.2 0.2 0.3 0.3 1.4 1,4 -0.9 -1.2

342 Printing 5.0 3.6 5.4 18.3 20.7 5.1 3.8 12.1 10.3 9.5 5.9 5J3 +3.6 -1.7

352 CheuicaL prodects 0.8 0.6 0.0 8.0 17.2 0.5 0.4 3.9 3.3 3.0 3.9 6,,0 -0.9 -5.4

356 Plastic producta C.3 0.2 0.0 4.2 0.0 1.1 0.8 5.0 4.6 4.2 1.2 1.9 +3.0 -1.7

369 Concrete blocks 1.4 1.Q0 0.0 3.0 13.8 1.1 0.8 1.5 1.6 1.5 2.5 4.4 -1.0 -3.4

381 Metal producta 2.8 2.4 5.2 13.0 0.0 3.2 2.8 1.0 7.3 6.9 4.4 7.0 +2.2 -4.6

382 Non-electr cal machinery 0.3 0.2 1.0 0.4 0.0 0.0 0.0 0.$ 0.5 0.5 0.2 0.,2 +0.' 0.0

390 Niacellemeous Jewellera, goldamithe 3.0 2.2 1.5 4.0 0.0 2.9 2.2 2.9 2.8 2.6 0.5 2.3 +2. 1 0.1

Total Total 100.0 10 00.. IC.00 000 100.0 100.0 100.0 100.0 16,270100.0 55,88688.3! 88..7431.0 h 11;7 11.3 Total umbor 3,650 4,940 4,820 5,290 290 3,750 5,060 10,7'00 14,920 16,,270 55,88 4'1 aIncludes mansufacturing activities carried out in people's house,j or yards or in tbhi Refere to 4-dieit groupa 5111 and 3114 only. The total of' 7.5% Includeme all market, if they were viaLble and oDmnarcial (rather than for purely household use), groups within 311. Such activities are under-enu erated to the extent that aome ma;y not have had r signboards or have been vriaible from the atreet. Details may fail tc add to totals becaLise of rounding. bIncludes faimily wcrkers l(vhether paid or unpaid). 1'The remainder of large-scale industrial employment ia in ILndustries 314 (2.2%); 351 &353-5 (3.0); 362 (1.3'0; 3'1 (1.2%); and 383-5 (3.5%). 01970, from Central Bureaen of Statistics recorded figuree for Ghana (not just Aecra), ostensibly for firma witlh 30 or, ure employeea (though actually includLing some firrms The remaining firmE1 are in industries 314 (0.9%); 351 & '553-5 (4.)O; currently eimploying fewfer than '30). 362 (0.7%); 371 (0.5%); and 383-5 (4.2%).

Small-scale share of employment (or finra) in that induetr min" th corresponding Numbe in the (10%) small-scale eample fLtiplLed by 10. large-scale share. Col. (13) (10) - (11). Col. (14) -(2) - (12). Table 1B A1EEX 5 StatiBtiCal. Appendix ACC'RA E1ALL BFUSINESS SRUVEY: RtEPAIRS Page 19 DISTRIBUTION OF WUOPKRS DN INDUSI'Y AND BY TYPE OF F4PLCnMENI'

Full-time workers Part-time Owners Total Total No. of. firms: (non-fanily'): non-family Owners (including a full- all Total workers tof % of % gra~~~~~~~~id a(inclutding~~i shop gtoalad Appren-' wage wage (shops houses, etc:.) time. 1) shop b hossltc.) a In.Ldusti (correspond.ing total total tices wor1kers workers only) workers workers houses, etc-) ISIC code) (1) (2) (3) (14) (5) (6) (7) (8) (9) (10) … 3212 Upholster- 2.9 2.7 1.0 0.0 0.0 2.4 2.3 0.7 1.0 1.0

3215 Fish nets 1.0 0.9 0.7 0.0 0.0 0.8 0.8 0.5 0.5 0.5

3242 Shoes 15.4 21.2 1.0 7.2 0.0 14.5 19.5 2.7 5.2 6.5

331 2 Boxes and furniture 1.9 1.8 3320 0.0 0.0 0.0 2.4 2.3 0.0 0.5 0.5

3551 Tyres 5.8 5.3 1.7 0.0 0.0 5.6 5.3 1.1 2.1 2.0 381 lVelding, mretal prodlucts 7.7 7.1 11.2 3.2 0.0 8.9 8.3 8.5 8.4 8.3 383 Electrical 20.2 19.5 16.2 3.2 0.0 18.6 18.0 13.3 1.4.1 14.1 3844- Vlehicles 28.8 26.5 67.5 83.2 100.0 32.3 30.1 71.8 64.0 63.0

390 Watches, miscellaneous 16.3 15.0 0.7 3.2 0.0 14.5 13.5 1.4 4.1 4.1 Total 100.0 100.0- 100.0 100.0 100.0 :L00.0 100.0 100.0 lCO.0 100.0

Total niumber 1.040 1)130 3,020 1.250 50 :1,24fl 1,330 4,430 5,800 5,890

See noltes to Table 3. TAB3LE C \ANNEX, 5 AkCCRPA SMALL BUSINESS SURVEY: MlANUFACURING ESTABLISHFMB(rS Statistical Appendix DMCSTRIRrW10N OF EMPLOYMENT BY S'iZE CATEGORY AND TYPE OF EPLAYYMENT Page 20 -______-______(% of anplo ym ent g r)up) Full-time workers Part-time No. of firms: (non-family): non-family Owners Totals, inclu(ding fami:ly workers % of % grand Wage 4age Grand total tot:al Apprentices 14rkers ;orkers Full--tim Part-time Total Total Categorr of Firms (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) Total nLnmber 3,650 4,940 4,820 5,290 :290 3,750 10,700 470 14,920 16,2pO Employiig full-tine Non-family wage workers: 10-29 6.0 4.5 7.7 69.7 34i.5 5.9 38.8 21.3 30.0 Z7.5 5-9 3.0 2.2 3.9 12.7 13.8 2.7 8.2 8.!5 6.8 6.3 1-4 12.0 8.9 9>.1 17.6 65.9 8.5 13.6 6.4 12.1 11.1 Totalb 21.1 15'.6 20.7 100.0 55.2 17.1 60.7 36.;2 48.9 44.9

Jther full-tinme workersC 40.6 30.0 79. 3 n.aL. 3.4 44..0 39.4 8.5 39.5 36.3 Part-tine workers only 4.1 35.0 n.a. n.a. 41.4 4..0 n.a. 55.3 2.8 2.5 Owner only 34.3 25t.3 n.a. n.a. n.a. 34.9 n.a. n.a. 8.8 8.1 Totalb 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Houses, kiosks 12.8 (12 ,9)d 4.2 Market stalls 13.4 (13.0) 4.1 Grand Trotalb 100.0 100.0 1LOO. C0

Eploymient as % of total employment:e 32.3 35.5 1.9 25.1 71.7 3.2 100.0 n.a. Employment as % of grand total employrrent: 29.7 32.5 1.9 31.1 65.8 2.9 n.a. 100.0 aBlawn Iup (figures from 10% sample have been multiplied by 10). bDetails may fail to add to totals because of rouiding. CIncluding fnamily paid and unpaid workers. dpercentage of grand total. eFll-time family p4id workers account for 1.51., uwipaid 2.4%, and part-time unpaid for 1.2t, totalling 5.1% foT family workers Full-tiTe fanmily paid workers account for 1.45%, unpaid 2.2%, and part-time unpaid for 1.12, totalling 4.7% for family workers. n.a. = not appl]icable. TABLE D ANNEX '5 ACCRA StIALL ]3USINESS SURYh Y: REPAIR E'ABISIHfTS S igicaL Appeendi D1STRIBUBiN OF! E1PLOI4EWNT BY SI.E CAEGO.RY AMD TYPE OF EEL(YNENr (% of employment group)

Full-time workers Part-itime No. of firms: (non-family): Non-family owners Totals, including family wor]cers: % of' grand Wage Wage GranLd totaLl total Apprentices Workers Workers Full-time Part-time Total TotaLl Category of F:irm (1) C2) (3) (4) (5) (6) (7) (8) (9) (10)

Total nuibera 1,040 1,130 3,020 1,250 50 1,240 4,430 130 5,800 5,890 BEploying full-ting Non-family wage workers: 1]0-29 1.9 1.83 3.3 :31.2 0.0 2.4 11.1 0.0 9.0 8.8 5-9 6.7 6.2 8.3'5 .37.6 20.0 7.3 16.3 7.7 14.1 13.9 1-4 -14.4 13.' 27.'i :31.2 80.0 13.7 29.16 30.8 26.2 25.,8 T'otalD 23.1 21.2 39.]1 100.0 100.0 23.4 56.9 38.5 49.3 48.6

Other full-time workersC 38.5 35.4 60.9 n.a. 0.0 40.3 43.1 38.5 42.4 41.8 Part-time workers only 1.0 0.9 n.a. n.a. 0.0 2.4 n.a. 23.1 1.0 1.,0 Owner only 37.5 34.5 n.a.. n.a. n.a. 33.9 n.a. n.a. 7.2 7.1 Tlotalb 1iooo l00.'0 100.0 100.0 100.0 100.0 100. 0 100.0

Houses, market stalls 8.0 (6-8)d 1,5

Grand. Totalb 100.0 100.0 100.0

eno as o o l e52.1 21.6 0.9 21.4 76.4 2.3 100.0 n.a. BTiloyment as % of grpnd total employment: 51.3'i 21.2 0.8 22.6 75.2 2.2 n.a. 100,0 a131Bwn up (figures from 10% sample have been multiplied by 10). bDetails may f,ail to ad.d to totals because of rounding. C. Including family paid and unpaid worker;. dPercentage of grand total. e Fulll-time family paid workers account for 1.0%, unpaiLd 1.7%, and part-time unpaid 1.4%, totalling 4.1% for family workcers.

n.a. = not applicable. Table E; ANNEX 5 Statistical Appendixc AVMA(E VAWUE ADDED AND OUTPUT PER 1WREI Page 22 ACCRA SAIPILE SURVEff ZD 1970 I3IUSTRIAL STATISTICS (cedis per fill-time equivalent worker)L

Valixe acld Re 2 - _r= oAYut Per n 3 , Output,/woi.er if Accra Sample Sur7eq: Accra Sa~mplae Surve,g Indfstr,y N7umbe r of workers lNimber of workears lfuiber of! workers (ISC code) 1-4 5-9 10-2' 'tats 1-4 5-9 10-2'9 Stats 1-4 5-9 10-2'

311.6 millinl n.a, n.a. n,a* 9,938 519 n.a. n.aa 23,489 1,01.1 t.ea n.a. 3117 Baking n.ea 6,0021 2,97:1 3,062 n.ea 13,091 6, 831 7,401 n.ea. 20,47l1 8,6:15 3134 Bottling n.a noa, 1,133 3,396 n.a. n.ae 3,130 4,820 nae. 1n.e. n.a. 3220 Clothing 349 94. 2,442 1,440 470 771 3,554 2,512 517 1,120 4,6137 3233 Travel bags n.a. n.a. 1,375 915 n.a. n.a. 3,227 2,125 n.a. :n.a. 7,941 3320 h.rniture 350 267 n.a. 915 847 406 n.ae., 1,572 3,31.2 3,406 n.a. 3420 Printing 2,159 1,48 3,990o 1,411 4,206 7,500 6,3i18 2,369 12, 11.9 7,500 9,575 369-2 Cement )4, 670 products .3,595 3699 nan n.a. noa. 4,200 n.ea 628 n.aa 2,414 n.a. 3,456 n.a. 3811 Metal I 1 7;7 3,4 9,087 3812 n.aO P[etalts i '036 4i 2,527 nea. 1,920 10,171 3 455 n.a.s l&ae 14,057 3822 P5achineY 3420 n.a. n.a, 2,018 7,200 a.a. n.a. 2,518 15,000C a.a. n,a. 3901 Jewelleiy n.a. 941 230 1,703 n.a. 3,429 7;7r; 2,L63 n.a. 4,800 2,000

Total, all firms 1,640 1,211 2,632 2,919 2,0151 3,064 5,374 5,806 5,604 5,001 8,202 As . of CIBS 56.25• 41.55 90-2Z I1OC.0O! 35.35 52. 8 92.65 10 O. 96.57 86.]86 141 . a th In the Accra sample, part-time rnd family employees and owners are counted as half to estimate the 'Null-time equivalentt. Total recorded employment is used for- the CBS indlustries (rhich generally employ very little part-time help). bror the Aecra sarple, value added is derived from gross output by subtracting the estimated materials component, renta aLnd costs repair (other coats, such as electricity and office expenses, were! not collected on the presumption that they would be relatively unim-portant in small firms). Value added for the CBS indusrties is net of all non--capital costs' cNurmber of workers used for c:Lassifying firms by size refern to full.-time non-family wage employees only. n.e. = not av7ilallle, Table F ANNEX 5

AVEIUrE VAMI. ADTDJ'D 3EAUE' nT oTrUOr IJA'7iES! SHAlRE TN VALUE ADDED Aiir\ COSTS Statisltical, Appendix A''RA SAIMLE StMNVEY AND 1970 INDUSTPIAL STATISTICS (f) Page 2:3

Value add2ed shre ina aLtPullPha Y_ies abajre in value ed Hazes i Accra Sample Survep: CBS Accra Sample Surve: CBS Accra Sample Survep Industry TNumber of workers Ind]IL Number of rorkers Indtl Number of workers (ISIC code) 1-4 5-9 10-29 Stats 1-4 5-9 10-29 Stats 1-4 5=9 10-29 d 3117 Baking n.a. 45 40 41 n.a. 11 31 15 n.a. 8 19

3134 Bottling n.a. n.a, 36 70 n.a, n.a. 36 16 n.a. n.a. 17

3220 Clothing 49 n.a. 46 57 3 1 n.a. 42 21 35 n.a., 28

3233 Travel bags n.a. n.ao 36 43 n.a. :n.a. 50 52 n.a. n.a. ,23

3320 Fulrniture 28 35; no,a. 58 46 48 n.a. 57 15 19 n.a.

3420 Pr7inting 50 19 61 60 44 76 47' 60 26 16 39

35,21 PaiLnts, lacquers n.a. n.a. 34 36 naE. n0.a. 29 18 n.a. n.a. 13

3811 Mebtal n.a. 59 4'i 39 n.a. 8 23d 31 n.a. 11 30 3812 products 73426

38,22 Macthinery 47 n.a. n,a. 80 17 n.a. n.a. 27 13 n.a,, .a.

Average, All firms repor±ing 45 34 44. 50 47 57 47 24 25 18 29 …L_ aVsalue added for thei Accra sample represents grOss outpat minus the estimated materials coiponEelt, minus rents and repairs. costs., Value added. for CBS industries is net of all non-capital costs. bCosts include vages, materials, rentsg and, repairs, "Number of workers used to classify firms by size refers to full-time non-family wrage employees only. dE rcluing one observation wiLth wages greaLtly in er:cess of computed value! added. n.a. = not available. Table C ANNEX 5 Statistical Appendix Page :24 UTILIZATIOINI OF PRODUCTIVE ANW.EMfPLOY'ENT CAPACIT'Y ACCR'AI SI'ALL IIAMMFA7UING SURVEY (%)

Present output as a °,of: Present employment as a % of: Maxinmzw with aximTum if a Kirauimlmif a laxinun if b present: workers no constraints no constrahi]ts loans available Niniber of wqage workers Number of wa Pe workers Nmiber of wage orkers Nurmber of wage workers Industry (ISIC) 1-4 5-9 10-29 1-4 5-9 10-29 1-4 5-9 10-29 1-4 59 10-29 3111 .Meat n.a. 44 n.a. n.a. 44 n,.a. n.a. 99 n.a. n.a. 99 n.a. 31:16 !Ailling 41 n.a. n.a. 36 n.a. n.a. 64 n.a. n.a. 54 n.a. n.a. 1 3117 3aking n.a. 71 86 n.a. 42 71 r.a. 67 87 n.a. 67 75 32:11 Kente weaving n.a. 61 n.a. n.a. 26 n.a. n.a. 42' n.a. n.a. 39 n,.a. 32,20 Clothing 54 75 64 52, 32 60 64 S2 67 44 52 62 3233 Travel baas n.a. n.a. 58 n.a. n.a. 24 n.a. n.a. 62 n.a. n.a. 52 3320 Furniture 51 5SC n.a. 30 n.a. n.a. 58 n.a. n.a. 92 73 n.a. 3419 Paper products 0 n.a. n.a. C0 n.a. n.a. 20 n.a. n.a. 20 n.a. n.,a. 3420 Printing 32 n.a. n.a. 24 50 56 62 SC) 67 59 50 61 3512 Pesticides, etc. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 50 n.a. n.a. 5O 3521 Paints & lacquer n.a. n.a. 44 n.a. n.a. 23- n.a. n.a. 62 n.a. n.a. 52 3560 Plastics n.a. n.a. 75 n.a. n.a. 40 n.a. n.a. 47 n.a. n.a. 47 369 Cement products n.a. 19 n.a. n.a. 8 nm.a. n.a. 24 n.a. n.a. 24 n.a. IL2 M-letal furniture, etc. n.a. n.a. 70 n.a. n.a. 40 n.a. n.a. 60 n.a. n.a. 60 382 ilachinery 17 n.a. n.a. 6 nma. n.a. 17 n.a. n.a. 17 n.a. n.a. 3901 Jewvellery n.a. 4C0 25 n.a. 33 14 n.a. 47 78 n.a. 28 64

Average, all fimns Si51 61 58 aNo constraints' mearns if as much -rawv materials and/or as many customers as desired were available (at current prices). Assumi-in, a loan is availahle for ecpanding the husiness. ANNEX 6 Page 1

INFRASTRUCTURE FACILITIES AVAILABLE TO INDUSTRY

A. Road Transport

As of 1969, Ghana had over 32,000 km of motorable roads, of which about 70% were classified as "all weather". 3300 km were bitumen-surfaced.

No reliable statistics are available on privately owned transport onerations: they are. without doubt substantial. Maintenance problems reportedly interfere to a serious degree with regularity of service.

Public transport, both for freight and for passengers, is provided by the State Transport Cornoration (STC). Principal depots are located at Accra, Kumasi, Takoradi, Ho, Tamale, and Bolgatanga; sub-depots exist at Wa, ISinyan and RonfnridnA_ All of these stations, with the exception of Koforidua, have maintenance workshops.

In addition to internal traffic, STC also covers an export route to UTpper Volta (primarilv for the trAnanort of 1000 tnns of salt monthlv); and a regular monthly run between Kumasi and Abidjan (Ivory Coast).

Rates:

General cargo: 0 0.065 per ton-mile for the 1st 100 miles; pJ. wn. Vy;WulWtJL __ _ * * WX-4 1 _9S 2 \.. _-StjAAfl*,8L *t4O v- .- * ODV& to increase rates to 0 0.085 and 0 0.08 respectively is 1e.-wrg .1

rassenger trar.sport on uuSes: Southern Ghana: ¢ 0.0125 per passenger mile NXorthern GhWnt-: VV.0 p/er passengerL m'le (Proposed rate increases to 0 0.0156 and 0 0.0172)

Passenger car rental (with driver): ¢ 20 for the first 20 miles, plus ¢ 0.40 per extra mile. Extra charge of e 2.50 per hour outside regular working times.

Despite the fact that STC has its own training scnooi ror operating and maintenance personnel, about half of the vehicle fleet is usually inoperative at any moment. "Lack of spare parts"! is generaily given as reason. 1/

1/ See comments on the spare parts problem elsewhere in this report. Annexc 6 Pagre 2

| ~~NATIONAL HIGHWAY SYSTEM (PLANNING)

1! 1 ! u~~'~P-P-ER!TVO LT A LEGEND

} t/ 2 > - , z ihp yOtG~~~~~ATN ....|, .. tKPO$EDPRIAtHl I I~~~~~~~~~~~~~~~~~~~~MM MAPmDSIOSCWV-

1 -+> \ -aF-4o*>L;< f i) T t_ |.HO SECR.tID .

X\'--*- 2 11 ^ ¢ [ Dgo<~~~~l b D i l I1

St t ° -- T------Z-X' -X-----rXk-~~W7 itB--irl 0 <&t tAA-- S>,

t_] Iz ~~~~~~~$-p O >\ X 0 f ) 4 :~~~~~~~J'AL 3CFit,,oJ /foStjt b4-

| / i § z AlEUt; Kwo,;b\^,rtlEtNAi

nb60 ,.,t/ | _ . s tlcb t _

>D- e < "*^-;,,,,,,, i ,o J t1 1 Ji ~~~~~~~7~ooA;tc Abcr||Aw _i L,Lu,l______j_. ZC __ _i___ } ~~~~~~~~.__...... _...._ ° - } } - ,

!sor- i~~~~~~~~~~A t--,tUtU Kbmn.> 7l A inod j \ r2 ¢ > N .

X1 7~ '~ ~ ~ ~ ~~~~~~~~~~jA~-Liw ...... v ...... ~ .l I tRj,>e . a hESK ---A! E--- --

- I Glh s 9- > 1

!| 'rE.i&er"1t N io ' sq !.q X N,, t KOFo -{

|'~~~~~~~~~~KA t' SCpALE: I z$,co fYororori__

i _scZ;...... *e 'P;CCST...... GVRML:Ni '.N

_, ¢ ,,,,w,; _ ' XKQ)NDI |;porekt NC_

Ll ----- lj---__l,,_a ~O~*--^vF,-t ¢J, = =_ =_ ===_S 0.___..._.______. ANNEX 6 Page 3

The five-year plan for the expansion of STC includes the acquisition of 100 buses, 145 trucks and 110 passengers cars; and the expansion of international service to cover Lome, Cotonou and Lagos.

The Corporation feels it ought to be relieved of at least some of the tax burden connected with the purchase of new equipment. For example, the standard (German) "Setra" bus costs ¢ 69,302 cif Ghana; purchase tax and import duties come to an additional ¢ 37,064.

B. Railway

The Ghana Railway system comprises three main lines, namely:

Eastern Line (Accra - Kumasi) 305 km Western Line (Takoradi - Kumasi; of which 30 km double track) 270 km Central Line (Huni Valley - Kotoku) 200 km

In addition, there exists 6 branch lines with a total of 180 km.

Track standard is 80 lb/yd rail, although some of the older and lighter (60 and 75 lb/yd) installations are still in use. Track gauge is 3' 6" (= 1067 mm).

Equipment on hand comprises:

Engines. 400 hp 12 500 hp 10 750 hp 33 1425 hp 17 1850 hp 16 Coaches 250 approx. Wagons/Vans 3500 approx. Cranes, Logging (5 & 7 to) 11 Dlieqsl (10 tnns 6 Steam (25 & rp to) 3 Trark buidiing RquIpment varinus

Passengers are carried in thexpress service is available on the main lines at extra charge. Average fare per passenger-mil is ¢0.041.

Freight rates are complex, distinguishing beween many classes of goods carried at different unit rates. An up-to-date comprehensive tariff was un-av-ail'able. 4 y.,ne~~,.nncud,,Xtn 1 1o L6 LrV,1CL..U. uc Ama.zor repai r Afac-tCiiLLt y- (inldg m,anufcuir -produc- oprtir ing about 150,000 timber sleepers annually) exists at Sekondi. Several eng'Lneer's stations"Lar-L`Ue located at important po'Lnts (Atccra, Kuma-si, Tarkwa, Takoradi). A?TWXY 6 Page 4

C. Ele-ctricipy-

LLL~~IJJ LL1 ~± 1. .L L.L4LL 1 C L L 7L IJ ZC J. LA& L . LIJ LILL IYoUst ofc the electricity genera-el ln ."an comes ei-,her Irom -le Volta Dam (administered by the Volta River Authority, VRA); or from 18

generatir.g statiOn.S- UWeUd by teL GhLa,-S .l±tiL LL.CL)Y % rLpULaL. LVLI.

Supp.ly 6L tb Ur LUFU1ILILUe uy LULULt uydUr-CJLLL.LC ±ULs1.LUL.LVLL;o at Kpong, hemang and Bui, providing an additional total capacity of 400 Mw.

In 1972, the Volta Dam station generated 3,321,230 Mwh (slightly below 50% of theoretical capacity); 2-1/2% of this quanti-ty was used for internal purposes, the remainder was sold.

The existing situation, to the extent that data could be obtained, .L 8Udagrammed here:

VOLTA DAM | | 8 Gencrating Stat' n 3 future hydro-el. InstaLled Capacity i belonging to I Installations 76 lw _ | Eectricity CorpIn 400 1'w

_-- , '-_ | |)-acity I !

jac.tuE1 flow f ! about 50 % of |Flow unknowTA Capacity

I i -WT

f t i j' |at-%0.97 p.Mwh

].Lect2,ncity Cel-poratio.. H|¢ ! |(Retail "Astribution)

Ii na4or us erc., 273 Mwh at ¢ 769 i,epr 1hkh. aver2,3Fe

'Valr, 22'6i ItMW at 13.93 n-7-- '¶ h ANNEX 6 Page 5

The VRA power network has the shape of a polygon, passing from Akosombo (dam location) to Tema, Accra, Sekondi, Prestea, Kumasi and back to Akosombo. Total line length is about 800 km, transmission is at 161 kv, distribution through 16 substations (see map overleaf).

User supply is at 240/415 v, 50 hs. The code of nractice is based on British standards.

Rates:

Electricity for lighting purposes (non-domestic)

Accra, Tema, Kumasi, Sekondi-Takoradi 0.092 per kwh elsewhere ¢ 0.10 per kwh

Domestic users (monthly basis)

Fixed charge i 0.60 plus, from 500 sq. ft. to 1000 sq. ft. ¢ 0.10 per 100 sq.ft. from 1000 sq.ft. to 3000 sa. ft. e 0.08 ner 100 sa.ft. Ir4M.3000 sq.ft. td 5000 sq. ft. 00.07 per 100 sq.ft. above '00O q.nft. 0=05 pern 100 sq.ft. plus, a consumption charge in Acer2, Tnqa, Kumnasi and Sekondi-Tak'i e 0.016 per kwh Palapwhavp ; n n9r% iEDtvk

Comm.ercial and industriAal power (monthly basis)

Fixed charge (¢ A.0n,.ni F" v.~ - ').'LV MLLUMI/ Up~ L.U 50 kva ¢ 1.00 per kva (*) plus, for the r.ext r150-ka to MA0pe v for the next 800 kva 0 0.60 per kva ~~1.~~~~ IAAA 'A A rf% abuove 1000 kV-a ¢.JOper kmva plus, a consumption charge i.4nAccra, Temi,a, M-- ras' ar,d Sekondi-Tak'i 00.016 per kwh e.lsewhlere U ~~~~~~~~~AA0.025V. Anc per k-wh1.-t.

ULLetereud dorestilc lightintg at smiia'll stat'Lons (with a permitted maximum of three lights) per 40 -waet bulb ¢ 0.45 per month per 60 watt bulb ¢ 0.60 per month

(*) In this section the term "kva" should be understood as meaning "per installed kva or bhp". ANNFX 6 Page 6

For very large consumers (like, for example, the Tema Steel Wiorks) The following tCariff applies:

A - -1 -_ -__ -_ _- .-, A_ -- -L _ _ 1__ - - -_- - -_ AInIIU

For the first 1500 units per kva per annum of the chargeable maximum demand,A- A ¢A uin u;~ I , per- -- unit;-- for the next 1500 units per kva per annum of the chargeable maximum demandi, ¢ U.001^5 per unit; for all units in excess of 3000 units per kva per annum of the cnargeabie annual maximum demand ¢ 0.008 per unit. Ane o PW7

ELECTRIclTY nrEVr-LPfi.?.lr'tJ' iw 30 30, zeZ- 30 0° 30' to

F 11-. _ v_C _ Z ~~~~~~~BAWKU, Wtir -fJE;G.l

4_ CLARS UP t J- +, LF A *FAOFSTATIONS s8S.!rOBOLGATANGA_1 I

3 . ~~~~~~~VOjTA.CRID WITH i- | [l l /| < | | | ) ~~~~~~~~~~~PRIMARYSTATIONS4 | -I Z 0)- F r } 1 - X X s ~~~~~~~~UNDELNED. X WA '.

I . 2 | w fr~~~~~~~~~~~SATIONSbNDEIZ . f_./ / , _~~~~,-s__ l ~~~~~CONSTRUICTION/

{,. OPONG~~~~~~TAMALE \

30-1--- [-- -1- F - II} 85 30,

I~ ~ ~ ~~~~ ~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.. I TAAE...... il. . .

.~~~~~~~~~~~~~~~~ , A30

I j I2 t aEo rN GA H A F O ; L - | EREKUM CHRA 'I...... C A% 1 Ib t '- I |:HCHRAIA

IE . ISUNYX@KSX1A -1Nl X 7

t~~ ~~~~~~~MMPNIAD-M-----I i SMAKS MMPNx ' f.sr }~~~~~~~~1 - -AtSto L- l1 7

30 FF-; E7SC CAE N T RT S~-1-- -13Z

I{ j I \ ANUMA8U IC J>%a I -c qAFl I ) § d:=g KOIvIENDAYc S,4gt ~~K D4 4 l l r~~SF WIW -QAOrJ5AStIfiW -T-A-- tX5 |~~~~~V j AKAI - 1 t4 DEA,,;a;t-O, 30~~~~~~~~~~~io iO 3-A Kc- . 1 ~1- ESE~~~~( I G,:I3040.S r k,r MBANK P (E, ,!N ANNEX 6 Page 8

D. Water

The supply of water to domestic, commercial and industrial users falls unAder the repnsblh1t nf t-h r.h-nnA Water :and q weriae Cornnrationn

Slightly over 1/1 of the to.tal pnnpIIlatior is cure.t served by the Corporation; within this group, about 1/4 receive water on their prmises. The remainder use public standpipes.

Of the urban populationr (persons livinrg in tow.s having at least 5000 inhabitants) only 7.4% are not served (1972).

Of the rural population, 88.1% are still without organized public water supply, rCaLnginr fro.g about 77% in rreater A a, 4to oler 96% irth Upper region.

Domestic consumers, to the extent that they have metered private co,ri-ect'Lons, pay X" 0.40V per 1000 gallons, -w'ith a Tnonllor.ly mini,11U-, chIarge of ¢ 2.00. Domestic users with unmetered private connections pay t 2.00 per LhUse" peL rIUtLLLLi; LtIU.s UsiLng pUUbLJ.. sLtdLLUpiLpes arLeL ChardLU ed I¢ .00. perL hLUse~ per month.

Non-domestic users pay e 0.90 per 1000 gallons for the first 500,000 monthny gallons, with certain reductioLns available to thle largst users.

urDan water Supply (millions of gals)

1 9 7 1 1 9 7 2

Production Consumption Production Consumption

Accra-Tema 12,734 8,227 12,868 8,364

Kumasi 2,070 1,449 2,341 1,639

Sekondi-Takoradi 1,213 849 1,312 918

Other 3,476 n.a. 3,551 n.a.

T o t a 1 19,493 20,072 ANNEX 6 Page 9

Areas specifically set aside for industrial development exist in Tema (particularly suited tor industries requiring proximity to a port and/or unusually large quantities of electric power); Accra (Ring Road West, and Ring Road East Industrial Areas); Sekondi-Takoradi and Kumasi.

The land as such is not an important cost factor. In most cases the site is leased for long periods, with the annual lease cost being determined largely by the cost of improvements installed by the leasing agency (roads, water, etc.). Appointments with the Tema Development Corporation (the agency responsible for the industrial sites in 'rema) were sought on two occasions, but could not be obtained.

Most new factory buildings are steel and concrete constructions, with aluminum roofs (*).

The cost of construction steel is rising ranidly on the world markets. The following costs were current in Ghana in November 1972:

Structural profiles 4 370 per ton, average Import 20% Sales tax 11-1/2% Port charges and transport 3%

Resulting price at site, approx. ¢ 510 per ton.

MIanufactured structture at site will come to about V 600 per ton, erected steel structure costs approximatelv ¢ 1100 per ton.

As a rule of thumb, it may be assumed that standard factory or warehouse construction, including installed utilities, will, on an average, cost about ¢ 12 per square foot (= anprox. Z 110 per sa.m.) (**)*

According to official sources, the annual. rate of cost increztse for construction is at the present time about 10%,. Discussions with builders, however, indicate that the rise is much faster, coming close to 307 Der annum.

(*j 7Ghana Aluminium Products is experimenting (with encouraging preliminarv results) with a two-layer combination of its standard corrugated aluminum sheets (arranged so as to produce a high moment of inertia of the cross- section); in an arched arrangement, free spans of over 20 m in width can be built at low cost.

(* d n nomparablefiuoure for residential construction:. 10 to 13 per Sq. ft., depending upon quality of construction. ANNEX 6 Page 10

r. Construction

1. Public Construction Industry

Public construction activity is now again divided between the Public VJorks Department (PWD) of the government, and the State Construction Corpora- tion (SCC), after the two organizations had temnorarily been merged into the Ghana National Construction Corporation (GN!CC).

Both organizations have severe problems and are not performing at levels considered satisfactorv by their respective managements.

PWD should be capable of performing work at an annual level of ¢ 25 million. Actual accomplishments amount to roughly half of this. Main causes are:

(a) enforced idleness, at anv one point in-time, of a substantial portion of the mechanical equipment, due to repair difficulties. The problem is usually defined as "lack of spare parts"; but this is felt to be too simplistic a statement (*). In addition to actual break-downs, the unavailability of tires results at times in the idleness of equipment which would otherwise be in good order; and

(b) unavailability of certain essential materials of foreign origin. (The complaint in this respect is that while the organization receives its budget from the Ministry of Finance, the Ministry of Trade will at times refuse the issuance of important licenses despite the fact that governmental funds have been allocated.)

SCC is also plagued by equipment repair problems. An even greater difficulty, for this Corporation, seems to be lack of capital. A studv by the Harvard Development Advisory Team which had been in Ghana for several years, recommended, a few years ago, an injection of ¢ 5 million of capital into the organization which had, from its inception, never been given any operating funds. These ¢ 5 million, however wqere never made available. Further. Ghana Government. xwhich commissions rouehlv two-thirdR nf thp Corporation's work (and the Corporation has no option to reject this work) is notnriosinly slow in naving its hills. As a result- the cnmmerei4al Twnrk undertaken by SCC must, to the extent possible, support government work; large sums are continuously owed to banks, at a current interest rate of 12-1/2% p.a. In 1972, with a business volume of 0 18 million and operating

at theoreticala (4 e. 4f acounts- r-cepiv,,table Tee ac tu 1 s ett .Ct.Oled of 5% of turn-over, SCC had to pay 0 8no,0oo in bank charges.

(*) See comments on the spare parts problem. elsewhere in t -hr ,t ANNEX 6 Page 11

At the same time, the Corporation is under pressure to fulfill demands for construction work at levels roughly one-third above those of a few years ago, in the face of increasing equipment problems (more and more machines become unusable due to old age and/or repair difficulties) and continually rising labor costs.

Efforts are being made to apply more labor-intensive work methods; however, this means reversing a well-established trend toward capital intensity; and few results have so far. been achieved.

Also opposing the increased use of labor is a considerable rise in the basic labor cost. The "cost of living allowance" of 0 0.25 per worker ner davy which has recently been decreed by government, increases unskilled labor cost by a very substantial amount.

One problem (now resolved) which has caused SCC to slip even deeper int, its nrnhlematir situation; was the unavailability of cement during much of 1972, with a simultaneous prohibition of laying off idle labor (about hnIf of the S(CC labor force of 12-000 becomes redundant in the absence of cement.)

An indication of the difficult situation of SCC is this fact: at the t4ime of the 'i4ssion.'s presence In G.hna, SCG had 0 58,00 .worth of new equipment lying in Tema harbor; but it was unable to arrange for release of the equimDent from storage, due to a lack of funds with which to pay the port charges.

2. Private Construction Companies

Many small, and quite a few large private construction firms exist in Ghrana. A discuss.lon -4JLLwWa tSop ,manage r of one o the largest fisL. L (employing 35 expatriates) indicates that the current boom in residential atLU .LIMLL. coLnstruLctioLL as4 L iLeU Lu a favorabul sitLaLtiV.nL forI mIoL ic L*LI builders. Complaints concern principally a shortage of certain materials, includir,ng±1U±UU±LL5 ~dLparticularly LLCU±L± ULLs.-L. LXIIn LLIMthe recenL CCItII pas;pastL thet11ie k;MRUJi~ t$LLULshrtg------L_e%t Ulof 1972 caused problems resulting in delays in the completion of work.

One of the noteworthy details relative to the supply problems in steel is the following. Several years ago, the production program of tne Tema Steel Works was much more comphrehensive than it is currently. It included at tne time larger and smaller sizes of reinforcing roads tnan now in production; also angles' (to 3 x 3 3/8 inch) and flats (up to about 3/8" thiclK ana about 3 wide) were made. In consequence, aii tnese sizes were placed on the "restricted" list for imports. The list has never been revised, with the resui unat certain steei sizes simply are unavailable in the country. ANNEX 7 Table 1 IPORlTED INPUTS AS A PORPORTION OF TOTAL MATERIALS IN VARIOUS MANUFACTURING ACTIVITIES - 1968

Econ-oc Grosssortd/ fl,Sported Activity Group _ tput materials Total materials Food: 20 2010 1,098,589 285,576 0.57 2031 965,302 57,817 0.16

2039 795,h01 275,466 0.66

2019 550,574 9,362 0.77

2054 1,967,204 - _

2055 82,948 5,235 0.10 2061 1,060,074 531,065 1.00

2062 1,856,861 444,373 0.56

2071 54,514 28,646 0.46

2082 14,1814,833 271,J038 0.32

2083 1406u1140 - -

1%1%1 0,1 r a 2089 227(L, 99,74i 0.73

2211 B everas 3s373s4-)I-)-4 VU)jUIJW83,8 0.4rOVL4f-I

2 131 79C,Q 1 470 °.g.

Tobacco 22 2201 2.1i ;181 9,320 0.01

2202 23.7L8.874 NAA N.^- Textiles 23 2311 16.017 4.166 i.oo

2312 4,690.862 N. A. N.A

2319 20,906,271 8,669,L81 0.90

2320 258,648 101,685 1.00

2391 19,750 2,036 0.94 - 2-

W.t-onoynTh Gross Imported Imported/ Activty Group output materials Total materials

Fbotwear &e App)arel 214 21411 14,p669,14314 6214,555 0.914 2430 10,006,476 604,096 0.98 2442 3,727,359 1,298,318 0.95 2443 1,228,072 36,057 0.69 2444 1,321,834 608,005 1.00 2449 674,253 272,497 1.00

2411 22,689,166 6,453,509 0.46

Wood & Cork 25 2512 1,408,806 353,765 0.70 2529 6,574 498 0.24 2591 5,243 _ _

Furniture 26 2601 1,853,768 380,708 0.33

2609 1,314 11 0.02

Paper Products 27 2720 6,168s208 2,781,896 0.99 Printing & Publishing 28 2801 6,706,514 1,248,292 0.89 Leather Products 29 2912 656o5>3 337,283 1 w

Rubber Products 30 3001 165,589 67,015 1.00

3002 77,696 808 0.59

Chemicals 31 3119 1s570,786 725,842 1.00 3121 326,230 -1,109 0.17

3122 879425 0.05

3123 847,o46 N.A. _

3125 500,575 223,515 0.43

3130 1,391,748 703,1467 0.93

(Cont.) Economic Gross Imported Imported/ Activity Group output Materials Total materials

Cbemicals 31 3191 10,831,290 6,216,333 0.88

3192 710,927 1529457 0.97 3193 1,524,718 561,998 0.92

3194 2,271,549 1s180,221 0.91

3195 640, 711 136,861 0.93

3197 559,807 330,208 1.00

3199 3.75,013 103,821 1.00

Petroleum 32 3290 6,376,549 452 ,161 1.00

Non-metalic minerals 33 3311 80p-1q 1 93Q920 0. 72 3321 1.h70.138 70r.65t; n= W)

3340 6.329.380 3.071.660 0.99

3392 1,198,301 522,931 0.8X

Basic metals 34 3419 1,076J939 255,455 0.72 Metal Products 35 3501 39296,227 2,102 ,719 0.99

3507 791,619 228J300 0.65

35uy 5,766,599 2,279,723 0.9a

Machinery 36 3609 56S605 N. A N. A.

ec-i' Apparatus 37 3701 192,991 176,109 1.00

3702 169,743 -

3793 2,345,842 1,O71,026 1.00

3709 246,029 184,485 1.00

( N Economic Gross Imported Imported/ Activity Group output materials Total materials Transport equipment 38 3811 1,l70,124 319,491 0.57 3820 1,090,907 N.A. N.A. 3830 5,327,791 3,269,298 0.96 Miscellaneous 39 3920 54,669 26,609 1.00

3949 142,975 - _ 3959 184,338 36,287 1.00 3990 2,0514,302 964,562 1.00

Sources Bank of ohana ANNEX 8 FIRST SCHtt'D ULE Page 1

PROJECTS WHIC-IT ARE TO BE JOINTLY OWNED BY Cl-IANTJANS AND FOREIGNERS

A. COMMERCIAL PROJECTS 1. Department storcs. 2. Distribution agencies for machiiies and technical equipment. 3. Distribution and se rvicing of inmotor vehicles and tractors, and spare parts thcrcof or othier similar objects. A IXlI,r.esale drn -!-;t;!tinn 5. Shipping. 6. Distribution of petroleum products and lubricants. 7. Casinos. 8. Clearing and forwarding agencies.

BK INDUSTRIAL PROJECTS (INCLUDING SERVICE INDUSTIUES). 1. Slaughtering, storage, processing and distributiont of meat. 2. Operation of ciniemas. 3. Motor worksshops. 4. Beer brewing. 5. Cosmetics and nerfumerv manufacture. 6. Furniture manufacture. 7. Manufacture of insecticides, pesticides, and fungicides. 8. Manufacture of bicycles and motor cycles. 9. Manufacture of czment. 10. Manufacture of matches. 11. Manufacture of metal containers. 12. Manufacture of paints, varnishes or other similar products. 13. Manufacture of suitcases, briefcases, portfolios, handbags, shopping bags, purses, wallets. 14. Manufacture of wire nails, washers, bolts, nuts, rivets and oflio,rnsr.r articles. 15. Paper conversion. 16. Printlng of books 17. Manufacture of jewellery and related articles. 18. Textile screen hand printing including dyeing. 19. Garments, mainufacturc of canidles. 20. Fish processing. 21. Manufacture of shoes. 22. Bi 1g and ottligLrdi o alcoholiC drinks. 23. Tyre retreading. 24. Estate development. C. AGPICULTUTRAL PROJECTS 1. Fish and shrimp trawling. 5 ANkEX SECOND SCHEDULE DPag 2 FULL GHANAIAN OWNERSHIP A. COMMERCIAL PROJECTS 1. Overseas business representation. 2, Operation of taxi service. 3.' The sale under lir-e-purchase contract of taxis or vehicles intended to be used in the oneration of a taxi service. 4. Produce brokerage. i c 5.A Advrtising agencsand publ relati-ns business 6. All aspects of pool bettinig business and lotteries. 7. Retail trade (except by or wihini a dcpartmental siore or super- market). 8. Estate agency. 9. Travel agency. B. INDUSTRIAL PROJECTS (INCLUDING SERVICE INDUSTRIES) 1. Bakery. 2. Printing (other than textile printing). 3. Operation of beauty saloons. 4 Manufactiure of rcment h1rokckfor qn1- 5. Laundry and dry-cleaning. IC. ACornmcerial tra-sportation bylad 7. Charcoal manufacture (other than activated charcoal). 8. Ordinary manufacture/tailoring of garments sucn as joromiu, shirts, blouses, ladies dresses, children's wear. C. AGRICULTURAL PROJECTS

I. A LiolLry aLl7aILuI.

GPCIA9/,5000/1173