Ghana: Selected Issues

International Monetary Fund

doi:10.5089/9781451814750.002.A005

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Ghana: Selected Issues

Author: International Monetary Fund

Publication Date:: 18 Feb 1999

eISBN:: 9781451814750

Language:: English

Keywords:: ISCR; CR; Ghana; rate; bank; Ghana's competitiveness; effective tariff rate; income tax; sales tax; tax rate; cocoa production; rate of return; Producer prices; Income and capital gains taxes; Excises; net profit

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This Selected Issues paper reviews public service reform in Ghana. The paper highlights that a range of public service reform initiatives have been undertaken in Ghana since the early 1980s. The public service in Ghana is composed of centrally managed agencies, ministries, subvented agencies, district assemblies, and state enterprises. The civil service, which covers the centrally managed agencies, ministries, and local government, accounts for only about 20 percent of total public sector employment as a result of the spin-off in the 1980s of the internal revenue, customs, education, and health services as subvented agencies.

Abstract

V. Trends in Cocoa World Markets and Options to Strengthen Ghana’s Competitive Position³⁴

A. Introduction

100. In the 1964/65 crop, season, Ghana’s cocoa production reached its peak at 581,000 metric tons. At that time, Ghana was the largest world producer of cocoa accounting for 38 percent of world production. Since then, Ghana’s cocoa production plummeted, bottoming in 1983/84 when production was only 160,000 metric tons and market share was 10 percent. From 1983/84 onwards, Ghana’s production began to recover, although in 1997/98 it was still two-thirds of its 1964/65 peak. This chapter summarizes world cocoa trends in the last decade, as well as the reforms being implemented by Ghana to modernize its cocoa sector and avoid a further erosion of its market share. The chapter focuses in particular on the similarities and differences with Côte d’Ivoire, Ghana’s neighbor and the largest world producer of cocoa. The paper concludes with a discussion of next steps and options, which the Ghana authorities will need to consider to ensure the long-run success of its cocoa industry.

B. Cocoa Trends in the Last Decade³⁵

101. During the 1987-97 decade, world cocoa production had a generally upward trend increasing on average by about 4 percent a year (Figure 13). Ghana’s production followed closely world trends, and therefore Ghana’s share of world production remained unchanged at 13 percent. The same is not true, however, of Ghana’s main competitors. Côte d’Ivoire, the world largest cocoa producer, saw its share of world production increase steadily from 21 percent in 1987 to 38 percent in 1997 (Figure 14 and Table 15). Indonesia, the fastest growing cocoa producer during the decade, expanded its production at an average annual rate of 21 percent, increasing its share of production from 2 percent in 1987 to 11 percent in 1997.

Table 15.

World Cocoa Production, 1987-1997

Source: FAO Yearbook; International Financial Statistics; and data provided by the Ghanaian and Ivoirien authorities.

^{^1/}The data is for the crop year beginning in the year reported at the top of each column.

^2/Includes stabilization margins.

Table 15.

World Cocoa Production, 1987-1997

			1987	1988	1989	1990	1991	1992	1993	1994	1995	1996	1997
			(In thousands of metric tons)
Production			2,044	2,452	2,460	2,511	2,347	2,373	2,506	2,538	2,962	2,978	2,918
	Côte d’Ivoire		427	849	725	781	747	697	804	809	1,120	1,254	1,119
	Ghana		268	247	300	284	243	312	240	309	404	323	370
	Indonesia		50	49	111	142	169	175	258	270	305	318	333
	Brazil		329	392	393	356	321	329	341	330	296	257	293
	Malaysia		190	227	225	247	230	220	220	177	131	120	120
			(In percent)
Share of world production			100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00
	Côte d’Ivoire		20.89	34.62	29.47	31.10	31.83	29.37	32.08	31.88	37.81	42.11	38.35
	Ghana		13.11	10.07	12.20	11.31	10.35	13.15	9.58	12.17	13.64	10.85	12.68
	Indonesia		2.45	2.00	4.51	5.66	7.20	7.37	10.30	10.64	10.30	10.68	11.41
	Brazil		16.10	15.99	15.98	14.18	13.68	13.86	13.61	13.00	9.99	8.63	10.04
	Malaysia		9.30	9.26	9.15	9.84	9.80	9.27	8.78	6.97	4.42	4.03	4.11
			(In kg per hectare)
World’s average yield			388	448	446	473	429	435	442	441	481	484	483
	Côte d’Ivoire		632	707	604	624	534	536	554	584	574	583	560
	Ghana		202	278	333	284	243	312	240	281	425	403	435
	Indonesia		806	700	818	896	920	925	861	833	919	957	1,074
	Brazil		507	559	595	536	481	449	464	473	402	376	404
	Malaysia		1,024	975	855	830	711	629	723	661	626	597	609
			(In U.S. cents per pound)
World prices
	Brazil		83.96	72.68	56.85	49.07	47.54	44.99	44.47	55.91	60.46	64.07	71.40
	London and New York		90.62	71.84	56.34	57.32	54.1	49.87	50.41	63.31	64.98	66.01	73.43
			(In U.S. dollar per metric ton)
Export price ^1/
	Côte d’Ivoire		2,177	2,008	1,800	978	965	1,099	1,400	1,395	1,301	1,250	1,387
	Ghana		2,102	1,490	1,309	1,290	1,237	1,000	950	1,238	1,522	1,374	1,473
			(In U.S. dollars per metric ton)
Producer price ^1/
	Côte d’Ivoire		1,339	1,282	1,308	717	740	722	430	609	631	572	763
	Ghana		699	634	584	625	542	432	317	561	739	668	799
			(In percent)
Distribution of f.o.b. export revenue ^1/
	Côte d’Ivoire		100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00
		Producers	61.49	63.84	72.64	73.37	76.63	65.70	30.70	43.62	48.47	45.71	55.00
		Marketing costs	26.53	23.35	13.48	12.55	21.03	20.34	33.73	22.66	20.05	20.74	18.36
		Taxes	11.98	12.82	13.88	14.09	2.34	13.96	35.57	33.72	31.48	33.54	26.64
	Ghana		100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00
		Producers	33.25	42.56	44.62	48.49	43.79	43.23	33.36	45.32	48.56	48.62	54.26
		Marketing costs	43.57	27.65	28.31	27.87	41.67	33.40	19.36	20.71	16.26	19.50	19.58
		Taxes	23.18	29.79	27.07	23.64	14.55	23.36	47.28	33.97	35.18	31.89	26.16

Source: FAO Yearbook; International Financial Statistics; and data provided by the Ghanaian and Ivoirien authorities.

^{^1/}The data is for the crop year beginning in the year reported at the top of each column.

^2/Includes stabilization margins.

Table 15.

World Cocoa Production, 1987-1997

			1987	1988	1989	1990	1991	1992	1993	1994	1995	1996	1997
			(In thousands of metric tons)
Production			2,044	2,452	2,460	2,511	2,347	2,373	2,506	2,538	2,962	2,978	2,918
	Côte d’Ivoire		427	849	725	781	747	697	804	809	1,120	1,254	1,119
	Ghana		268	247	300	284	243	312	240	309	404	323	370
	Indonesia		50	49	111	142	169	175	258	270	305	318	333
	Brazil		329	392	393	356	321	329	341	330	296	257	293
	Malaysia		190	227	225	247	230	220	220	177	131	120	120
			(In percent)
Share of world production			100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00
	Côte d’Ivoire		20.89	34.62	29.47	31.10	31.83	29.37	32.08	31.88	37.81	42.11	38.35
	Ghana		13.11	10.07	12.20	11.31	10.35	13.15	9.58	12.17	13.64	10.85	12.68
	Indonesia		2.45	2.00	4.51	5.66	7.20	7.37	10.30	10.64	10.30	10.68	11.41
	Brazil		16.10	15.99	15.98	14.18	13.68	13.86	13.61	13.00	9.99	8.63	10.04
	Malaysia		9.30	9.26	9.15	9.84	9.80	9.27	8.78	6.97	4.42	4.03	4.11
			(In kg per hectare)
World’s average yield			388	448	446	473	429	435	442	441	481	484	483
	Côte d’Ivoire		632	707	604	624	534	536	554	584	574	583	560
	Ghana		202	278	333	284	243	312	240	281	425	403	435
	Indonesia		806	700	818	896	920	925	861	833	919	957	1,074
	Brazil		507	559	595	536	481	449	464	473	402	376	404
	Malaysia		1,024	975	855	830	711	629	723	661	626	597	609
			(In U.S. cents per pound)
World prices
	Brazil		83.96	72.68	56.85	49.07	47.54	44.99	44.47	55.91	60.46	64.07	71.40
	London and New York		90.62	71.84	56.34	57.32	54.1	49.87	50.41	63.31	64.98	66.01	73.43
			(In U.S. dollar per metric ton)
Export price ^1/
	Côte d’Ivoire		2,177	2,008	1,800	978	965	1,099	1,400	1,395	1,301	1,250	1,387
	Ghana		2,102	1,490	1,309	1,290	1,237	1,000	950	1,238	1,522	1,374	1,473
			(In U.S. dollars per metric ton)
Producer price ^1/
	Côte d’Ivoire		1,339	1,282	1,308	717	740	722	430	609	631	572	763
	Ghana		699	634	584	625	542	432	317	561	739	668	799
			(In percent)
Distribution of f.o.b. export revenue ^1/
	Côte d’Ivoire		100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00
		Producers	61.49	63.84	72.64	73.37	76.63	65.70	30.70	43.62	48.47	45.71	55.00
		Marketing costs	26.53	23.35	13.48	12.55	21.03	20.34	33.73	22.66	20.05	20.74	18.36
		Taxes	11.98	12.82	13.88	14.09	2.34	13.96	35.57	33.72	31.48	33.54	26.64
	Ghana		100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00
		Producers	33.25	42.56	44.62	48.49	43.79	43.23	33.36	45.32	48.56	48.62	54.26
		Marketing costs	43.57	27.65	28.31	27.87	41.67	33.40	19.36	20.71	16.26	19.50	19.58
		Taxes	23.18	29.79	27.07	23.64	14.55	23.36	47.28	33.97	35.18	31.89	26.16

Source: FAO Yearbook; International Financial Statistics; and data provided by the Ghanaian and Ivoirien authorities.

^{^1/}The data is for the crop year beginning in the year reported at the top of each column.

^2/Includes stabilization margins.

102. The rapid increase in the market shares of Côte d’Ivoire and Indonesia during 1987-97 is remarkable because international price developments were not particularly favorable during the period. World cocoa prices tend to have ten-year cycles with recent troughs taking place in the second year of each decade. Therefore, the first half of the 1987-97 decade was one of declining prices, while the second half benefited from increasing prices (Figure 15). In spite of the upward price trends since 1992, by 1997 world cocoa prices were still 15-19 percent below their levels in 1987. Clearly, factors other than world prices were playing an important role in sustaining the rapid expansion of the cocoa production in Côte d’Ivoire and Indonesia, while maintaining Ghana’s growth barely in line with world production.

103. While cocoa production has given rise to many econometric studies, it is not easy to identify precisely the factors behind the relative expansion in cocoa production during the last decade. Price effects, for example tend to affect production with long delays because of the time it takes for a cocoa tree to begin production. Moreover, a cocoa tree once it reaches maturity it will continue to produce even when given only minimal care. Comparative advantage in production is likely to play a role in making cocoa production more profitable in a country than in another. Data on cocoa yield per hectare show that during 1987-97 Indonesia and Côte d’Ivoire had yields per hectare that were on average 2 to 3 times higher than those in Ghana (Figure 13). These differences are explained mostly by the use of high yield hybrid varieties, but also by better husbandry.³⁶

104. However, higher yields are no guarantee of success in world cocoa markets and by themselves can not explain why the production in certain countries had grown faster than in others. Malaysia and Brazil have yields per hectare that are close to those in Indonesia and Côte d’Ivoire, respectively, but have lost significant market share during this decade (from 25 percent of world production in 1987 to 14 percent in 1997). The main problem in these countries seems to have been a profit squeeze resulting from declining cocoa prices and competition from alternative opportunities for the use of the factors of production, particularly labor, that had been employed in cocoa production. The outbreak of cocoa diseases also played a role in the decline of cocoa production in Brazil and Malaysia. Nevertheless, available evidence points to the importance of underlying economic incentives—such as production costs, domestic producer prices, and profitability of alternative crops—in determining production levels, albeit not necessarily in the short term.

105. Assuming that prices of cocoa are determined in world markets, and abstracting differences in quality, the nominal price paid to cocoa farmers depend mainly on marketing, extension services, financial costs, and taxes.³⁷ Data for 1995 indicate that different countries chose to distribute cocoa proceeds in markedly different ways among producer payments, marketing costs, and taxes (Table 16). The producer share in cocoa revenue is much lower in Côte d’Ivoire and Ghana than in any of the other producers listed below, all of which have more liberal cocoa marketing systems. Moreover, both marketing costs and taxes were higher in these two countries than in any of the other five countries. The next section compares production incentives, marketing arrangements and other production characteristics between Côte d’Ivoire and Ghana in more detail.

Table 16.

Distribution of Cocoa Export Proceeds, 1995

(in percent)

Source: Varangis and Schreiber (1996); and Fund staff estimates for Côte d’Ivoire and Ghana.

Table 16.

Distribution of Cocoa Export Proceeds, 1995

(in percent)

Country	Share of producer payments in export proceeds	Share of marketing and financial costs in export proceeds	Share of taxes in export proceeds
Brazil	72	10	17
Cameroon	75	10	15
Côte d’Ivoire	43	23	34
Ghana	45	21	34
Indonesia	78	12	10
Malaysia	91	9	0
Nigeria	88	12	0

Source: Varangis and Schreiber (1996); and Fund staff estimates for Côte d’Ivoire and Ghana.

Table 16.

Distribution of Cocoa Export Proceeds, 1995

(in percent)

Country	Share of producer payments in export proceeds	Share of marketing and financial costs in export proceeds	Share of taxes in export proceeds
Brazil	72	10	17
Cameroon	75	10	15
Côte d’Ivoire	43	23	34
Ghana	45	21	34
Indonesia	78	12	10
Malaysia	91	9	0
Nigeria	88	12	0

Source: Varangis and Schreiber (1996); and Fund staff estimates for Côte d’Ivoire and Ghana.

C. Comparisons with Côte d’Ivoire³⁸

106. Côte d’Ivoire and Ghana are neighboring countries, but have different marketing systems, although in both countries the government still has a predominant role in managing the system.

107. Côte d’Ivoire’s cocoa production increased at an average annual rate of 10 percent during 1987-97; while Ghana’s production increased at an average annual rate of only 3 percent only during the same period. As Figure 16 shows, marked changes in Côte d’Ivoire’s production took place in 1988 and in 1995 and explain much of the performance for the decade. The increase in 1988 seems to have its origins earlier in the eighties, when higher producer prices and government incentives convinced Ivoirien farmers to use higher yielding hybrid varieties. Output tended to stagnate in the first half of the nineties, as an overvalued exchange rate and sharply lower farmgate prices eroded producer incentives. The CFA devaluation and rising world prices for cocoa reinvigorated production in the 1995/96 season.

108. Ghana’s production fell dramatically in the seventies and the first half of the 1980s owing to excessive taxation, and misguided economic policies. For example, in the 1983/84 crop season, the share of taxes in cocoa export revenue was as high as 44 percent. From 1986 onward, however, Ghana’s production has had a steady, if unspectacular growth, helped by policy reforms aimed at restoring macroeconomic stability and farmers’ incentives (see Section D below).

109. Figure 17 compares export and producer prices between Côte d’Ivoire and Ghana during the period 1987/88-1997/98. The comparison is subject to some uncertainty because Côte d’Ivoire’s cocoa export proceeds were only available in CFA francs and their conversion to US dollars depends on the exchange rate used. For this study, it was assumed that ⅓ of the crop was exported in a calendar year and ⅔ in the next calendar year; the exchange rate used took this factor into consideration. Two main conclusions can be reached from these comparisons.

110. First, despite the premium that Ghana’s cocoa is supposed to command in world markets, the average price obtained by Côte d’Ivoire was often higher than that of Ghana in the last decade. This result is surprising, but may be the result of better timing of cocoa sales, or better ability to negotiate high prices owing to Côte d’Ivoire’s higher market share. It raises doubts about the cost-effectiveness of Ghana’s stringent quality controls, and about Ghana’s strategy to sell cocoa for delivery later in the crop season—assuming that this is done to fetch higher export prices.

111. Second, producer prices in Ghana have been consistently below those in Côte d’Ivoire during the 1987-95 period (Figure 17), despite the fact that Ghana’s cocoa normally fetches a premium in world cocoa markets on account of its higher quality.³⁹ Only since then has Ghana’s producer prices exceeded those in Côte d’Ivoire. It is worth mentioning, however, that even in recent years it is not clear that the higher producer prices translate into higher incentives to produce cocoa in Ghana than in Côte d’Ivoire. Costs of production are likely to be higher in Ghana than in Côte d’Ivoire, because Cocobod’s insistence on quality control forces farmers to invest more time in readying the crop for purchase. Further, Ghana may have been disadvantaged by the pattern of exporting cocoa in smaller batches later in the season with the result that higher storage costs have to be paid. Since yields are lower and quality controls stricter in Ghana, cocoa farmers there may still have lower profits per unit sold than in Côte d’Ivoire.

112. In a recent study, Aleš Bulíř (1998) showed that the cocoa production trends in Ghana can be reasonably explained by price incentives: the real international price for cocoa, the real producer price, and the smuggling incentive, which is measured by the differential between the Ghanaian and Ivoirien producer prices in US dollar terms (see Box 2). These results suggest that an important part of the explanation for relative production trends may be found in differences in real producer prices and, in the case of neighboring countries such as Ghana and Côte d’Ivoire, in relative producer prices.

Box 2.

Cocoa Production and Tax Revenues

From the early 1960s to the early 1980s, the officially recorded production of cocoa in Ghana declined by 60 percent Aleš Bulíř (1998) tests whether price incentives could explain this trend. He uses three variables to measure price incentives: the real international price, the real producer price, and the differential between Ghanaian and Ivoirien producer prices in US dollar terms (the smuggling incentive). He concludes that, while there is little evidence of domestic short-term substitution between cocoa and other crops, the real international price and the smuggling incentive contribute significantly to explain cocoa production in Ghana.

Other points made in the paper:

The taxation of cocoa producers in Ghana has been generally higher than in most other cocoa producing countries.
The producer-international price ratio has been generally below the levels in other producer countries; producer prices in Brazil and Malaysia and, up to 1993, in Cameroon and Côte d’Ivoire averaged 60-80 percent of international prices.
Bulíř concludes that lower producer prices will only temporarily boost government revenue. The revenue impact of lower producer prices dissipates completely after two years; after that, government revenue will decline from its initial level as supply continues to drop.
If the farmers’ share of international price stabilizes in 1996-2000 at 55 percent (compared with a baseline scenario in which the farmers’ share stabilizes at 50 percent), and assuming the smuggling incentive is zero, then, ceteris paribus, the supply of cocoa would rise to 440,000 metric tons in 2000 from 320,000 in 1995. As a result government revenue would increase by about 15 percent between 1996 and 2000. However, too high an increase in the producer price would not raise supply by much in the medium term and would be detrimental to government finances. For example, raising the farmers’ share to 65 percent would increase the annual supply only to about 460,000 metric tons, and government revenue would decline by 30 percent when compared with the baseline scenario.
The speed of adjustment to long-run price changes is high: more than one-third of the deviation from the long-term equilibrium in the previous year translates into the current supply decisions made by farmers.

Source: Bulíř (1998).

113. Since producer prices tend to be higher in Côte d’Ivoire than in Ghana, Ghanaian farmers have diverted some of their crop across the border to Côte d’Ivoire helping boost its neighbors’ production statistics. Bulíř (1998) estimated that smuggling may have reduced Ghana’s officially recorded supply of cocoa by as much as 40,000-60,000 metric tons, while similarly raising Côte d’Ivoire’s supply. Ghana’s reluctance to increase domestic producer prices is explained by its dependence on cocoa taxes for a significant share of fiscal revenue and the fact that the Cocobod would need to streamline its operations and shed personnel, if it were to reduce its marketing costs. Table 17 provides an overview of the key differences between the marketing arrangements used in Côte d’Ivoire and Ghana during 1987-97.

Table 17.

Cocoa Marketing Systems in Côte d’Ivoire and Ghana

Source: Varengis and Schreiber (1996), and IMF staff.

Table 17.

Cocoa Marketing Systems in Côte d’Ivoire and Ghana

Feature	Côte d’Ivoire	Ghana
Key agency	Caisse de Stabilization (CAISTAB)	Cocoa Board (Cocobod)
Type of marketing arrangement	Price stabilization fund	Marketing board
Harvest season	Major crop is in October-January. Most exports take place from November through February	Major crop is in October-March. Most exports take place during January-September. Stocks are held for longer periods than in Côte d’Ivoire, increasing costs.
Domestic purchase	Carried out by 700 licensed traders within a cost and price structure established by CAISTAB at the beginning of each crop year (including indicative producer prices).	Cocobod, through its subsidiary, the Produce Buying Company (PBC); since March 1992, private traders were also allowed to purchase the crop from farmers, but have to sell it to the Cocobod at a pre-agreed price. PBC purchased about 70 percent of the crop in 1996/97.
Domestic price determination	Government, through CAISTAB; uses a price/margin structure for each stage of the marketing chain (barème)	Government, based on recommendation by the Producer Price Review Committee, which consists of representatives from Cocobod, government, licensed buying companies and members of the farmers’ association.
Taxation	About 26.6 percent of cocoa revenue in 1997/98 (including stabilization margins).	About 26.2 percent of cocoa revenue in 1997/98
Marketing costs and margins	On average, 21.2 percent of cocoa revenue in 1987-97	On average, 27.1 percent of cocoa revenue in 1987-97
Producer prices	On average 57.9 percent of cocoa revenue in 1987-97. For 1997/98, producer prices were 55 percent of cocoa revenue.	On average 44.2 percent of cocoa revenue in 1987-97. For 1997/98, producer prices were 54.3 percent of cocoa revenue.
Stabilization fund	CAISTAB sets aside resources resulting from better-than-expected export revenue and use it to moderate domestic price declines in years of declining world prices.	Some stabilization could be achieved since the cocoa tax is the residual between the export revenue and all domestic costs. In practice, the main concern has been to stabilize fiscal revenue.
Exports	Five large and about 35 smaller licensed exporters; CAISTAB auctions off export rights daily using a computer-aided system; CAISTAB directly negotiates and sells up to 15 percent of the crop.	The Cocobod, through its subsidiary the Cocoa Marketing Company (CMC) negotiates and sells all exports of cocoa. CMC has modest operating costs and a good reputation in world markets. Cocoa exports are often sold forward.
Transport	CAISTAB used to apply a system of transport cost equalization under which transporters were reimbursed on a ton-kilometer basis. However, since the 1995/96 crop, CAISTAB no longer administers transport costs, which are paid by traders directly (the transport costs, as reflected in the barème, should on average cover the actual costs)	Done by PBC.
Quality control	CAISTAB is responsible for bean quality control at the export stage, but standards are less strict than in Ghana. Quality has tended to decline, as traders mix high- and low-quality beans so as to increase shipment volumes and revenues	Cocobod’s Quality Control Division is responsible for quality inspection, grading and fumigation both up-country and at the ports. It operates a thorough quality control and grading system that has successfully safeguarded the quality reputation of Ghana’s cocoa, albeit at a significant cost.
Financing	Traders are the main source of input financing to farmers. Large traders use their own funds, while smaller traders obtain funds from large exporters. Exporters rely on commercial banks for pre-export finance.	Crop and export financing is arranged through the Cocobod, which uses syndicated foreign loans.
Domestic processing	There is considerable domestic grinding capacity, currently of the order of about 250,000 tons per year. Domestic processors receive a subsidy of about CFAF 100/kg on beans they process to compensate for the use of low grade beans for domestic processing	In recent years, CMC sales to domestic processing plants have been around 70,000 tons per year, mostly from its mid-crop, but also from the main crop. These sales are made at a discount below the fob price, which is supposed to be the equivalent of CMC’s savings when compared with exported beans costs.

Source: Varengis and Schreiber (1996), and IMF staff.

Table 17.

Cocoa Marketing Systems in Côte d’Ivoire and Ghana

Feature	Côte d’Ivoire	Ghana
Key agency	Caisse de Stabilization (CAISTAB)	Cocoa Board (Cocobod)
Type of marketing arrangement	Price stabilization fund	Marketing board
Harvest season	Major crop is in October-January. Most exports take place from November through February	Major crop is in October-March. Most exports take place during January-September. Stocks are held for longer periods than in Côte d’Ivoire, increasing costs.
Domestic purchase	Carried out by 700 licensed traders within a cost and price structure established by CAISTAB at the beginning of each crop year (including indicative producer prices).	Cocobod, through its subsidiary, the Produce Buying Company (PBC); since March 1992, private traders were also allowed to purchase the crop from farmers, but have to sell it to the Cocobod at a pre-agreed price. PBC purchased about 70 percent of the crop in 1996/97.
Domestic price determination	Government, through CAISTAB; uses a price/margin structure for each stage of the marketing chain (barème)	Government, based on recommendation by the Producer Price Review Committee, which consists of representatives from Cocobod, government, licensed buying companies and members of the farmers’ association.
Taxation	About 26.6 percent of cocoa revenue in 1997/98 (including stabilization margins).	About 26.2 percent of cocoa revenue in 1997/98
Marketing costs and margins	On average, 21.2 percent of cocoa revenue in 1987-97	On average, 27.1 percent of cocoa revenue in 1987-97
Producer prices	On average 57.9 percent of cocoa revenue in 1987-97. For 1997/98, producer prices were 55 percent of cocoa revenue.	On average 44.2 percent of cocoa revenue in 1987-97. For 1997/98, producer prices were 54.3 percent of cocoa revenue.
Stabilization fund	CAISTAB sets aside resources resulting from better-than-expected export revenue and use it to moderate domestic price declines in years of declining world prices.	Some stabilization could be achieved since the cocoa tax is the residual between the export revenue and all domestic costs. In practice, the main concern has been to stabilize fiscal revenue.
Exports	Five large and about 35 smaller licensed exporters; CAISTAB auctions off export rights daily using a computer-aided system; CAISTAB directly negotiates and sells up to 15 percent of the crop.	The Cocobod, through its subsidiary the Cocoa Marketing Company (CMC) negotiates and sells all exports of cocoa. CMC has modest operating costs and a good reputation in world markets. Cocoa exports are often sold forward.
Transport	CAISTAB used to apply a system of transport cost equalization under which transporters were reimbursed on a ton-kilometer basis. However, since the 1995/96 crop, CAISTAB no longer administers transport costs, which are paid by traders directly (the transport costs, as reflected in the barème, should on average cover the actual costs)	Done by PBC.
Quality control	CAISTAB is responsible for bean quality control at the export stage, but standards are less strict than in Ghana. Quality has tended to decline, as traders mix high- and low-quality beans so as to increase shipment volumes and revenues	Cocobod’s Quality Control Division is responsible for quality inspection, grading and fumigation both up-country and at the ports. It operates a thorough quality control and grading system that has successfully safeguarded the quality reputation of Ghana’s cocoa, albeit at a significant cost.
Financing	Traders are the main source of input financing to farmers. Large traders use their own funds, while smaller traders obtain funds from large exporters. Exporters rely on commercial banks for pre-export finance.	Crop and export financing is arranged through the Cocobod, which uses syndicated foreign loans.
Domestic processing	There is considerable domestic grinding capacity, currently of the order of about 250,000 tons per year. Domestic processors receive a subsidy of about CFAF 100/kg on beans they process to compensate for the use of low grade beans for domestic processing	In recent years, CMC sales to domestic processing plants have been around 70,000 tons per year, mostly from its mid-crop, but also from the main crop. These sales are made at a discount below the fob price, which is supposed to be the equivalent of CMC’s savings when compared with exported beans costs.

Source: Varengis and Schreiber (1996), and IMF staff.

D. Ghana Cocoa Reforms, 1987-97

114. The government has pursued reforms since the mid-1980s to reverse the decline in cocoa production that reached its all-time low in 1983/84. To encourage recovery, cocoa producer prices were raised by about 185 percent between the 1983/84 and the 1990/91 crop years, while improvements were made in the availability of inputs and extension services. Real price increases were achieved through a steady rise in the share of the cocoa export price paid to producers, specifically, from 25 percent in the 1986/87 crop year to 56 percent in the 1998/99 crop year. Moreover, the Ghanaian authorities seem to be following closely developments in cocoa marketing across the border in Côte d’Ivoire and making sure that smuggling incentives are minimized. In fact, since 1994/95 crop season, the distribution of cocoa export revenue among producers receipts, marketing costs, and taxes has been almost exactly the same as in Côte d’Ivoire (Figure 18).

115. In order to achieve the targeted increase in the farmers’ share in cocoa revenue, the government had to take steps to upgrade the efficiency of the cocoa marketing and distribution system, including reductions in the operating costs of the Cocobod. In 1987, the staff of the Cocobod was reduced by nearly 12,000, in part by limiting its role in road haulage and construction and maintenance of cocoa feeder roads. By 1990, the share of haulage provided by the Cocobod was reduced to no more than 10 percent, with the private sector and railways increasing their participation. Simultaneously, the Cocobod embarked on a program to further reduce its staff during 1992-94, resulting in a reduction of its labor force by about 5,000. To further help reduce marketing costs—thereby allowing producers’ share of cocoa revenue to rise—the government in March 1992 permitted private traders to compete with the Produce Buying Company (PBC) in the purchasing of cocoa. Nevertheless, the PBC still accounts for about 70 percent of domestic crop purchases.

116. In 1995, in its request for the current three-year ESAF arrangement, the government signaled its intention to remove the Cocobod’s monopoly in cocoa exporting, while retaining its quality control function. A study was commissioned by the government and financed by the World Bank to examine the scope and pace of the cocoa sector reforms (LMC International (1996)). The study recommended a gradual approach to liberalization of cocoa marketing in Ghana. It proposed that the producers’ share in export revenue be increased to about 65 percent in two years by withdrawing the Cocobod and its subsidiaries from the domestic purchases of cocoa beans, and by transferring extension services from the Cocobod to the Ministry of Agriculture (and the absorption of these services into the budget). The report claimed that any effort to increase the producers’ share beyond 65 percent would require a reduction in cocoa taxes.⁴⁰ It recommended that Cocobod’s control of exports be maintained based on the perception that its removal might adversely affect quality control, reliability of deliveries, forward sales, and the predictability of export receipts and taxes.

117. The government has continued moving ahead cautiously toward greater liberalization of the cocoa sector while assessing its options to maintain the competitiveness of Ghana’s cocoa. It has agreed to increase the farmers’ share in the f.o.b. price of cocoa to 56 percent for the 1998/99 crop, to 58 percent for the 1999/2000 crop and to 60 percent for the 2000/01 crop. It has directed the Cocobod to prepare a two-year program of cost-cutting measures to support at least one half of the intended increase in the producers’ share. The PBC will be offered for sale early in 1999 in a manner designed to foster competition in the domestic cocoa purchasing market. The Government is also unifying the extension services of the Cocobod and the Ministry of Agriculture, although costs associated with the reorganization of these services, including retrenchment, remain an obstacle that the government hopes to resolve with World Bank assistance.

E. Next Steps and Conclusions

118. Ghana’s cocoa production is growing less than that of its close competitors. Moreover, Ghana remains significantly more dependent on cocoa for foreign exchange earnings and tax revenue than its competitors and, therefore, more vulnerable to errors in its cocoa sector strategy. These factors call for the government to carefully assess its options, design a strategy, and implement it forcefully. The government has indicated that it plans, with World Bank assistance, to conduct a major workshop on cocoa sector reforms in January 1999, with the objective of developing its strategy to deepen the cocoa sector reforms. The workshop will have work groups dealing with issues related to production, marketing, finance and infrastructure, and taxation and pricing.

119. Ghana’s competitors are continuing their reforms, making it crucial for Ghana to accelerate its own reforms so as to strengthen its competitive position. Building on the reforms undertaken since the early 1990s, Côte d’Ivoire will further liberalize cocoa marketing beginning in October 1999, with the aim of strengthening the role of the private sector and increasing producers’ income. The key elements of the reform schedule include the abolition of the indicative producer price, the elimination of the administrative price schedule (barème) and the stabilization system, and the liberalization of exports. These reforms are being supported by ongoing efforts to strengthen producer organizations and provide support to young farmers and women to ensure that these groups take full advantage of the liberalized system. The stabilization fond (CAISTAB) will be restructured and its mission will be limited to ensuring quality control, preparing statistics on production and exports, and monitoring marketing and stocks.

120. As LMC International Ltd (1996) states, “Given the weaknesses identified in Ghana’s current marketing arrangements, no sustainable argument for maintenance of status quo can be made.” There is therefore an urgent need for action in this area. Some tentative conclusions can already been drawn and could serve as a starting point for the deliberations at the forthcoming workshop on cocoa.

121. First, the experience of Ghana’s competitors suggests that marketing costs can be reduced from their current level of 14-15 percent of the f.o.b. price to 10 percent. The first priority of the cocoa reforms should therefore be to lower marketing costs rapidly to not more than 10 percent of the f.o.b. price. Further reductions beyond this point would be more difficult to achieve.

122. Second, cocoa taxes are important for fiscal revenue in Ghana, and therefore reductions in cocoa taxes will need to be considered carefully. While initial tax reductions may not have a significant impact on fiscal revenue (see Bulíř (1998)), further reductions certainly will. Thus, the timetable for reduction in cocoa export taxes would need to be closely coordinated with other revenue-enhancing tax reforms.

123. Third, quality control has resulted in a premium for Ghanaian cocoa in the world market. However, this premium is declining and is not clear that it would continue to be a net advantage in the future. Quality control is likely to decline with liberalization as it has happened in other countries. Increasingly, importers are carrying out their own tests on the commodities they buy irrespective of official certificates, Therefore, Ghana will need to ponder what changes in quality control procedures it should introduce to ensure that the benefits from quality control exceed its costs.

124. Fourth, Ghana normally ships cocoa later than Côte d’Ivoire. In doing so it incurs higher storage costs. Available evidence seems to indicate that ensuring shorter times between domestic purchases and shipments is likely to result in a net profit for Ghana. Also, there is no reason why cocoa storage operations should be undertaken by the Cocoa Board. Both these aspects of cocoa marketing need to be re-examined urgently.

125. Fifth, cocoa sales to domestic processors have tended to be below world prices representing an implicit subsidy. There seems to be no justification for this practice. The authorities could discontinue the subsidies and use the savings to increase producers’ prices.

126. Sixth, the Cocobod has an arrangement with a large European cocoa processor to process cocoa beans into cocoa liquor, which is then delivered in liquid form to chocolate manufacturers in Europe. This aspect of Ghana’s cocoa marketing has been criticized by traders, processors and manufacturers outside Ghana for its lack of transparency, and may need to be reconsidered.⁴¹

127. Seventh, a careful analysis of the advantages and disadvantages of forward sales needs to be made. It is true that it may initially be more difficult to sell cocoa forward in a situation of many exporters. CMC’s good reputation as a counter-party is well deserved and it may take time for other Ghanaian cocoa exporters to establish similar reputations. The reduction in the share of the crop sold forward will increase uncertainty for producers, taxes and balance of payment forecasts. These difficulties need to be seen in perspective, however. Most commodity markets are not dominated by forward contracts, and still are able to function effectively.

128. Eighth, Ghana meets its financing needs for cocoa exports and domestic purchases through a syndicated loan in the international market. Liberalization of cocoa exports and marketing would mean that individual exporters and traders will need to find their own financing. Importers are likely to finance most of the exports, but domestic marketing will have to be done through the domestic banking sector. Since domestic banks may need to look for new loans anyway as the fiscal deficit declines, there is no reason to believe that this financing will not be forthcoming. It is true, however, that overall interest costs may be higher in the case of liberalization than under present conditions.

129. Ninth, as Varangis and Schreiber (1996) point out, the government should begin implementing a program to prepare the sector for further reforms. It could provide training of local operators to improve their knowledge of world cocoa markets; it could set up or strengthen professional associations dealing with cocoa trade, including farmers’ associations and their management; and it could provide increased market information to all participants in the cocoa economy.

Ghana: Summary of Tax System, May 1997

Sources: International Bureau of Fiscal Documentation, African Tax Systems, and information provided by the Ghanaian authorities.

Ghana: Summary of Tax System, May 1997

Tax

Nature of Tax

Exemptions and Deductions

Rates

A. Central government

1. Taxes on income and profits

1.1. Tax on companies

1.11. Tax on company income Income Tax Decree, 1975 (S.M.C.D. 5); Income Tax (Amendment) Decree, 1977 (S.M.C.D. 129); Income Tax (Amendment Decree, 1978 (S.M.C.D. 195); Income Tax (Amendment) Act, 1980 (Act 398); Income Tax (Amendment) (No. 2) Act, 1980 (Act 419); Income Tax (Amendments) by Decree P.N.D.C.L. 39, 1982; 61, 1983; 127, 1985; 166, 1986; 177, 183, and 192, 1987; 205, 1988; 222, 1989; 231, 1990; 270, 1991; 303, 1992; and Income Tax Regulations L1252 and L1511.

Domestic and foreign companies operating in Ghana are taxed on taxable income accruing in, derived from, brought into, or received in the country. Taxable income includes net profits, interest, royalties, and rent income of companies formed exclusively for real estate development but excludes dividends from other companies. Prior to 1989, the assessment year ended June 30 and tax was payable annually. Following the 1983 budget, all income tax assessments are on a calendar year basis, payable quarterly in arrears. For tax purposes, net profit is assumed to be not less than 5 percent of turnover unless the company is within its first five years of assessment. However, this is waived with respect to companies engaged in mining or farming, and with 10 consecutive years of assessment, or companies that have maintained adequate books of accounts and submitted reliable records for 10 consecutive years of assessment to the satisfaction of the Commissioner. For domestic subsidiaries of nonresident companies, a further floor to net profits exists in that the subsidiary’s share of the consolidated group profits should at least be equal to the subsidiary’s share of group turnover.

Exemptions include the income from cocoa farming, income of other agricultural companies during the first five years of operation, and the income of some public enterprises (e.g., Bank of Ghana and COCOBOD). Deductions allowed include expenditures incurred in the production of income, including interest and rent. Losses incurred in farming are offset and carried forward for two years. Since 1995 a loss incurred can be carried forward for the next five years following the year in which the loss was incurred. This provision is effective for manufacturing, real estate, and all enterprises. Insurance companies have no time limit.

The basic tax rate is 35 percent.

Initial depreciation allowances:

	(Percent)
Buildings	10
Agricultural plantations	10
Mining (exploration and capital expenditure)	20
Plant expenditure	20
A further investment allowance of 5 percent is available for capital expenditure by industrial concerns.

Annual depreciation allowances:

	(Percent)
Buildings (mining and timber companies)	5
(other)	3
Mining (exploration and capital expenditure)	10
Plant expenditure	7.5-20
Investment allowance: Granted at 5 percent to industrial firms for capital capital expenditure on plant and machinery (in the year of investment). A further depreciation allowance of 10 percent is available to companies maintaining a sinking fund for the replacement of plant and buildings in a separate bank account, provided that the accrued addition to the sinking fund exceeds the value of all capital allowances. Companies engaging in non-traditional exports (other than cocoa and coffee beans, timber logs, electricity, unprocessed gold or any other mineral) are subject to a concessionary tax rate of 8 percent. Since 1995, manufacturing companies located outside Accra receive the following rebates: Accra-Tema: No rebate. All other regional capitals: 25 percent of tax liability All other places: 50 percent of tax liability.

1.12 Casino tax

Casino Revenue Tax Decree, 1973 (N.R.C.D. 200); Gambling Machine Decree, 1973 (N.R.C.D. 174); Casino Revenue Tax (Amendment) Decree, 1974 (N.R.C.D. 267); Gambling Machines (Amendment) Decree, 1974 (N.R.C.D. 276); Casino Revenue Tax (Amendment) Decree, 1976 (S.M.C.D. 45); and Budget 1985.

Tax is levied as an annual license fee on each gambling table and slot machine.

None.

The annual license fee is ¢ 150,000 per casino table in Accra, ¢ 80,000 per casino table elsewhere, and ¢ 20,000 per slot machine.

1.2 Taxes on individuals

1.21 Income tax

Income Tax (Amendment) Decree, 1969 (N.L.C.D. 377); Taxation Act, 1970 (Act 330); Taxation (Amendment) (No.2) Act, 1970 (Act 344); Income Tax (Amendment) Act, 1971 (Act 388); Taxation (Amendment) Decree, 1972 (N.R.C.D. 97); (Standard Assessments) Instrument, 1968 (L.I. 590); Income Tax (Standard Assessments) (Amendment) Instrument, 1977 (L.I.1120); Income Tax (Amendment) (No. 2) Act, 1981; Income Tax (Amendment) Act, 1983; and Income Tax (Amendment) Acts of 1984, 1985, 1986, 1987, 1988, and 1989; and P.N.D.C.L. 96, 127,’ 166, 127, 116, 117, and 183.

This tax is payable, subject to the deductions and exemptions noted, on income received by, or accruing to, persons in Ghana.

In addition to wages and salaries, income includes profits, nonbank interest receipts, dividends (which are taxed at the source at 10 percent, final tax), royalties, pensions, rental income and payments in kind (other than dental and medical costs).

Standard assessments, now known as quarterly/monthly/daily advance tax payments, are applied on certain categories of small business owners and self-employed professionals in the course of determining their actual liabilities.

Exemptions include:

(a) income derived from cocoa production;

(b) income derived from farming for an initial period of 3-10 years;

(c) interest on savings accounts;

(d) retirement and sickness annuities;

(e) armed forces disability pensions;

(f) widows’ and orphans’ pensions. Additionally, the income of a wide variety of charitable, educational, religious, and research institutions is exempt.

Deductions include a married man’s allowance of ¢ 200,000 (also for a married woman with a dependent husband and unmarried men and women with two or more dependent children), social security and provident fund contributions, and life insurance premiums (up to ¢ 240,000 and not exceeding 10 percent of the sum assured). A deduction of ¢ 240,000 per dependent child attending secondary school is provided. A disablement relief of 25 percent of income from self-employment is provided to disabled persons, while self-employed persons above 60 years of age are granted relief amounting to ¢ 300,000 of chargeable profits. Other deductions include 30 percent of rental income as well as rates and mortgage interest relating to the property.

Taxable Income

Nonconsolidated wages	Tax rate (in percent)
First ¢ 318,000	Nil
Next ¢ 522,000	5
Next ¢ 1,080,000	10
Next ¢ 6,480,000	15
Next ¢ 7,600,000	25
Over ¢ 16,000,000	35

1.22 Capital gains taxes

Capital Gains Tax Decree, 1975 (N.R.C.D. 347) as amended in 1976 (S.M.C.D. 46); Budget 1984 and P.N.D.C.L. 198, 232, and 267.

This tax is levied on realized capital gains from the sale of buildings, businesses, and business assets including goodwill, land, stocks and shares, and other assets determined by the authorities. Realized capital gains are computed as the price received from the asset less the purchase price and allowable deductions.

In addition to deducting the original purchase price of the asset from the realized sum, deductions are allowed for the cost of improvements and alterations. Capital gains arising during a merger, amalgamation, or reorganization of companies are exempt Capital gains arising out of the disposal of securities of companies listed on the Ghana Stock Exchange are exempt for the first 5 years of the life of the Ghana Stock Exchange.

Tax payable on the assessed capital gain is computed at a flat rate of 5 percent.

Any gain up to ¢ 50,000 is exempt.

2. Social security contributions

Social Security Decree, 1973 (N.R.C.D. 127).

All establishments with five or more employees are required to contribute to the social security and national insurance trust fund. Contributions are based upon each employee’s earnings, with contributions from both employer and employee. Employees’ contributions are withheld at source. Other employees and self-employed persons may enroll on a voluntary basis.

Enterprises with fewer than five employees are exempt.

Contribution by:	Percent of employee’s basic pay:
Employer	12.5
Employee	5.0

3. Payroll taxes (other than social security contributions)

3.1 Selective alien employment tax

Selective Alien Employment Decree, 1973 (N.R.C.D. 201); Selective Alien Employment Tax (Amendment) Decree, 1974 (N.R.C.D. 248); Selective Alien Employment Tax (Amendment) (No. 2) Decree, 1974 (N.R.C.D. 268); Budget 1985; P.N.D.C.L. 196.

This tax is levied on both Ghanaian and foreign firms employing expatriate personnel. The tax is not deductible for income tax purposes. Beginning in 1995, the tax is administered by the Ghana Investment Promotion Centre.

Expatriate employees in the following fields are exempt:

(a) logging and saw milling;

(b) fishing;

(c) mining;

(d) oil prospecting;

(e) government departments and statutory corporations;

(f) manufacturers who have operated in Ghana for less than five years;

(g) farming operations;

(h) missionaries of religious bodies;

(i) employees of hospitals (including clinics and dressing posts) other than government hospitals.

Tax is levied at the annual rate of ¢ 500,000 for each expatriate employee.

4. Taxes on property

4.1 Death and gift taxes

4.11 Gift tax

Gift Tax Decree, 1975 (N.R.C.D. 348); and Budget 1984 as amended by P.N.D.C.L. 195 and 233.

This tax is levied on the recipient of gifts of land, buildings, securities, or money according to a graduated rate, which increases with the total open market value of gifts received within any 12-month period.

Asset transfers under a will are exempt, as are gifts between spouses and gifts between a parent and child. Gifts to religious bodies and for charitable or educational purposes are also exempt Allowable deductions include gifts received up to ¢ 50,000 in value in any 12-month period, provided that the total value of gifts received in the last five years does not exceed ¢ 50,000 in value. Where the five-year total exceeds ¢ 50,000, tax is payable on the balance received in the latest year.

Tax is payable according to a scale which increases with the value of gifts received.

Value of Gifts (In cedis)	Rate of Tax (Percent)
0 - 50,000	Nil
50,001 - 250,000	5.0
250,001 - 500,000	7.5
500,001 - 750,000	10.0
750,001 - 1,000,000	12.5
1,000,001 or more	15.0

5. Taxes on goods and services

5.1 General sales tax

5.11 Sales tax

Sales tax Act, 1965 (No. 257) and Sales Regulations, 1965 (LI 389), as amended through Sales Tax (Amendment) Decree, 1973 (NRCD 196); Sales Tax Exemptions (Amendment) Regulations, 1975 (LI 1026); Sales Tax (fees) (Amendment) Regulation, 1975 (LI1023); Budget 1985-91.

Sales Tax Act has been consolidated into: Customs, Excise and Preventive Service (Management) Law, Part IVA and IVB; Customs and Excise (duty rates and other taxes) Law, 1991 (P.N.D.C.L. 262); Budget 1992-96.

A single-state sales tax is levied on a wide variety of locally produced and imported goods at the manufacturer’s level.

Manufacturers who are registered with CEPS may have the Import Sales Tax on Raw Materials deferred.

Exemptions from sales tax include:

(a) animals, livestock, and poultry produced in Ghana;

(b) animals, livestock, and poultry imported for breeding purposes;

(c) animal product in its raw state produced in Ghana;

(d) agricultural and aquatic food product in its raw state produced in Ghana;

(e) seeds, bulbs, rootings, and other forms of propagation;

(f) agricultural inputs;

(g) fishing equipment and fish caught by Ghanaian-owned vessels;

(h) all goods imported or purchased for Missions etc.

(i) printed matter (books and newspaper);

(j) laboratory equipment for educational purposes and library equipment;

(k) machinery;

(l) crude oil and hydrocarbon products; and

(m) goods for the disabled.

The sales tax rate is generally 15 percent on concessionary, consumption, and luxury goods. The rates are applied equally on the f.o.b. price on domestically produced goods and on the c.i.f. plus duty value of imports.

5.2 Excise taxes

5.21 Tobacco

Customs and Excise Tariff, 1973; Cigarettes (Special Tax) Decree, 1976 (S.M.C.D. 40); Cigarettes Special Tax (Amendment) Decree, 1977 (S.M.C.D. 111); Cigarettes (Special Tax Law), 1983 (P.N.D.C.L. 73); Budget 1985-96.

Special duties are applied to tobacco products, both local production and imports.

None.

Tobacco products are taxed at a rate of 170.65 percent of ex factory price and a sales tax of 15 percent.

5.22 Spirits and beer

Customs and Excise Tariff, 1973; Beer (Special Tax) Decree, 1975 (N.R.C.D. 342); Beer and Stout (Special Tax) (Amendment) Decree, 1977 (S.M.C.D. 110); 1983 (P.N.D.C.L. 72); Budget 1985-96.

Ad valorem excises are applied to alcoholic beverages.

None.

Ad valorem rates of excise duty applied on the invoice price are: 75.8 percent for bottled beer and Guinness Stout; 25 percent on spirits; and 10 percent on malt. All alcoholic beverages are subject to a sales tax of 15 percent.

5.23 Luxury goods Budget 1995.

Ad valorem excise is applied to domestically manufactured and imported luxury goods.

None.

Ad valorem rate of 15 percent is applied in addition to a sates tax of 15 percent.

5.24 Petroleum products Budget 1987-95.

Specific excises are applied to petroleum products.

None.

Excise duties in cedis per liter vary as follows:

Premium	621.50
Kerosene	397.00
Gas oil	567.00

5.25

Other excises

5.25.1 Local duty on cocoa Cocoa (Local Duty) Ordinance, 1952; Cocoa Duty Decree, 1973 (N.R.C.D. 168); Cocoa Duty Decree, 1974 (N.R.C.D. 265); and Cocoa Duty (Amendment) Decree, 1977 (S.M.C.D. 112).

All laws on excise taxes have been consolidated into the Customs, Excise and Preventive Service (Management) Law, Parts IVA and IVB; and the Customs and Excise (duty rates and other taxes) Law, 1991 (P.N.D.C. 262); Budget 1992-96.

This tax is the domestic counterpart to the cocoa export tax (see 6.21 below) and is levied on the Cocoa Marketing Board’s sales of cocoa within Ghana.

None.

The levy is 100 percent duty on all proceeds from domestic cocoa sales by the Cocoa Marketing Board after allowing for the producer price of cocoa and costs of the Board.

5.3 Selective tax on services

5.31 Airport tax

Airport Tax Act, 1963 (No. 209); Airport Tax (Amendment) Decree, 1973 (N.R.C.D. 203); Airport Tax (Amendment) Decree, 1977 (S.M.C.D. 119); and Budget 1985-96.

This tax is levied on passengers departing from airports for both domestic and international destinations. The tax is ceded to the Civil Aviation Authority.

None.

The tax is levied at ¢ 22,000 for international flights and ¢ 500 for domestic flights.

5.32 Service tax

Admission tickets for a wide variety of entertainment are taxed on the basis of the admission price.

None.

Tickets are taxed at 15 percent of their value.

Accommodation. This tax is an ad valorem levy on accommodations and food by hotels and restaurants.

Exemptions include services less than ¢ 200 in value. Foreign diplomatic staff are also exempt.

Tax is levied at the rate of 15 percent on the value of accommodation and food.

Advertisement through all media.

None.

Tax is levied at the rate of 15 percent on the cost of advertisement.

Betting. This tax is levied on all sums wagered in regular betting, on the sums paid for licenses in sweepstakes, or price money paid from football pools.

None.

Tax is levied at the rate of 15 percent of:

(a) sums wagered at betting events;

(b) football pool prize money paid out;

(c) sums paid for sweepstake tickets.

6. Taxes on international trade

6.1 Taxes on imports

6.11 Customs duties

Customs and Excise Decree, 1972 (N.R.C.D. 114); Customs and Excise Tariff, 1973 (L.I. 838); Customs and Excise Tariff (Amendment) Regulations, 1976 (L.I. 1080); Customs and Excise Tariff (Amendment) Regulations, 1977 (L.I. 1286); Customs and Excise Tariff (Amendment) (No.2) Regulations, 1983 (L.I. 1291); Customs and Excise Tariff (Amendment) Regulations 1984 (L.I. 1309); Budget 1985-96.

Duties are levied on most imported goods, generally as ad valorem taxes on the c.i.f. value, but for some goods the rates are specific.

Exemptions are granted for special purposes. Most imports of World Bank projects, the Volta Aluminum Company Ltd. (VALCO), Volta River Authority, diplomats, and certain welfare organizations are also exempt.

Items that are duty free are:

(a) agricultural machinery and tractors;

(b) bank notes and coins;

(c) crude oil;

(d) educational material;

(e) newsprint; and

(f) postage stamps.

Ghana maintains a column tariff, based on the Harmonized System. There are four ad valorem rates: 0 percent, 5 percent, 10 percent, and 25 percent. A special tax of 10 percent is applied to certain items such as textiles, alcoholic and nonalcoholic beverages, tobacco, etc. Motorcars including cross country cars of cylinder capacity in excess of 2,500 cc and vehicles designed for traveling on snow, golf carts, and similar vehicles attract a special tax of 17.5 percent.

Other exempted goods include:

(a) items imported for purpose of exhibition at trade fairs;

(b) advertising materials;

(c) aircraft parts;

(d) passengers’ baggage and effects not for resale;

(e) jute bags imported by COCOBOD;

(f) agrochemicals; and

(g) foodstuff of West African origin.

6.2 Export taxes

6.21 Cocoa export duty Customs and Excise Tariff, 1973 (L.I. 838); Excise Tariff (Amendment) Regulations 1975 (L.I. 1024); and Customs and Excise Tariff (Amendment) Regulations, 1978

This tax is levied on the f.o.b. price received by the Cocoa Marketing Board for all cocoa exported from Ghana.

None.

The cocoa levy is a 100 percent duty on all proceeds received from cocoa exports after paying producers’ costs and COCOBOD’s marketing and other costs.

6.21 Cocoa export duty (L.I. 1162). All laws under taxes on international trade have been consolidated into the Customs, Excise and Preventive Service (Management) Law, Part III; and Customs and Excise (duty rates and taxes) Law, 1991 (P.N.D.C. 262); Budget 1992-96.

7. Other taxes

7.1 Stamp duties

Stamp Act, 1965 (Act 3111); Stamp Act (Amendment) Decree, 1975 (N.R.C.D. 355); and Stamp Act 1980 (S.M.C.D. 424).

Ad valorem or specific rates of tax are levied on a range of legal documents and instruments, including bills of exchange, promissory notes, bills of lading, agreements, conveyances, extracts from registers, and mortgages.

Exemptions include instruments transferring ships, transactions where the Government would be liable for the stamp tax, and the transfer of company shares to a Ghanaian citizen.

Duties are both specific and ad valorem, varying with the particular instrument. Examples of rates are:

Mineral lease	¢ 10,000
Agreements	¢ 2
Mortgages	1.0 percent of the face value
Checks	¢ 0.1
Conveyance or transfer	¢ 5 for every ¢ 60 of the amount or fraction thereof.

7.2 Other taxes, not elsewhere classified

7.21 Taxes on minerals and mining Minerals and Mining Law (P.N.D.C.L. 153); Selective Alien’s Employment Tax Decree, 1973 (N.R.C.D. 201, 248, and 268); Income Tax Decree, 1975 (S.M.C.D. 5); and Regulations 1986 (L.I. 1340).

The Minerals and Mining Law makes taxable any holder of a mining lease. Tax is also payable on the carry forward cash balance of an individual involved in mining operations. There are no tax holidays. Tax jurisdiction under S.M.C.D. 5 makes persons involved in the industry taxable on income accruing in, derived from, brought into, and received in Ghana for resident companies subject to deductions and exemptions noted.

Exemptions include:

(a) exemption of staff from payment of income tax relating to furnished accommodation at the mine site;

(b) personal remittance quota for expatriate personnel free from any tax imposed by any enactment for the transfer of external currency out of Ghana; and

(c) exemption from the selective aliens employment tax under the Selective Alien Employment Tax Decree (N.R.C.D. 201).

Mining operations 35 percent

Rate of royalty

3-12 percent; depending on profitability and certain operating costs.

7.22 Additional Profit Tax Law 1986 (P.N.D.C.L. 122).

An additional profit tax is chargeable on the carry forward cash balance of a year of assessment. The qualifying expenditure governing the determination of capital allowance under this law is deemed to have been incurred during January 1-December 31, 1984 at a value to be determined by the Ministry of Finance and Economic Planning. The Secretary for Finance and Economic Planning has the responsibility for fixing the rate of return for the operation.

None.

Additional profit tax	25 percent
Current recommended rate of return	17.5 percent

7.23 Petroleum Income Tax Law 1987 (P.N.D.C.L. 188)

This law covers all persons carrying on petroleum operations, and is payable on income from the sale of petroleum less deductions.

Deductions allowed:

(a) rent;

(b) interest paid on loans;

(c) repairs of premises used for the business;

(d) bad and doubtful debts;

(e) contributions to a pension fund approved by the Commissioner—where such contributions exceed 25 percent of the employees’ remuneration, a 25 percent deduction is allowed; and

(f) losses incurred during a previous year of accounting, with the deduction being a sum equal to or less than the amount of such loss.

Petroleum companies:

35 percent unless a provision is made in particular petroleum agreement making alternative arrangements for paying the tax at a different rate, or another tax altogether.

B. Local governments

No details available.

Sources: International Bureau of Fiscal Documentation, African Tax Systems, and information provided by the Ghanaian authorities.

Ghana: Summary of Tax System, May 1997

Tax

Nature of Tax

Exemptions and Deductions

Rates

A. Central government

1. Taxes on income and profits

1.1. Tax on companies

The basic tax rate is 35 percent.

Initial depreciation allowances:

	(Percent)
Buildings	10
Agricultural plantations	10
Mining (exploration and capital expenditure)	20
Plant expenditure	20
A further investment allowance of 5 percent is available for capital expenditure by industrial concerns.

Annual depreciation allowances:

	(Percent)
Buildings (mining and timber companies)	5
(other)	3
Mining (exploration and capital expenditure)	10
Plant expenditure	7.5-20
Investment allowance: Granted at 5 percent to industrial firms for capital capital expenditure on plant and machinery (in the year of investment). A further depreciation allowance of 10 percent is available to companies maintaining a sinking fund for the replacement of plant and buildings in a separate bank account, provided that the accrued addition to the sinking fund exceeds the value of all capital allowances. Companies engaging in non-traditional exports (other than cocoa and coffee beans, timber logs, electricity, unprocessed gold or any other mineral) are subject to a concessionary tax rate of 8 percent. Since 1995, manufacturing companies located outside Accra receive the following rebates: Accra-Tema: No rebate. All other regional capitals: 25 percent of tax liability All other places: 50 percent of tax liability.

Tax is levied as an annual license fee on each gambling table and slot machine.

None.

The annual license fee is ¢ 150,000 per casino table in Accra, ¢ 80,000 per casino table elsewhere, and ¢ 20,000 per slot machine.

1.2 Taxes on individuals

Taxable Income

Nonconsolidated wages	Tax rate (in percent)
First ¢ 318,000	Nil
Next ¢ 522,000	5
Next ¢ 1,080,000	10
Next ¢ 6,480,000	15
Next ¢ 7,600,000	25
Over ¢ 16,000,000	35

1.22 Capital gains taxes

Capital Gains Tax Decree, 1975 (N.R.C.D. 347) as amended in 1976 (S.M.C.D. 46); Budget 1984 and P.N.D.C.L. 198, 232, and 267.

Tax payable on the assessed capital gain is computed at a flat rate of 5 percent.

Any gain up to ¢ 50,000 is exempt.

2. Social security contributions

Social Security Decree, 1973 (N.R.C.D. 127).

Enterprises with fewer than five employees are exempt.

Contribution by:	Percent of employee’s basic pay:
Employer	12.5
Employee	5.0

3. Payroll taxes (other than social security contributions)

3.1 Selective alien employment tax

Tax is levied at the annual rate of ¢ 500,000 for each expatriate employee.

4. Taxes on property

4.1 Death and gift taxes

4.11 Gift tax

Gift Tax Decree, 1975 (N.R.C.D. 348); and Budget 1984 as amended by P.N.D.C.L. 195 and 233.

Tax is payable according to a scale which increases with the value of gifts received.

Value of Gifts (In cedis)	Rate of Tax (Percent)
0 - 50,000	Nil
50,001 - 250,000	5.0
250,001 - 500,000	7.5
500,001 - 750,000	10.0
750,001 - 1,000,000	12.5
1,000,001 or more	15.0

5. Taxes on goods and services

5.1 General sales tax

5.2 Excise taxes

Special duties are applied to tobacco products, both local production and imports.

None.

Tobacco products are taxed at a rate of 170.65 percent of ex factory price and a sales tax of 15 percent.

Ad valorem excises are applied to alcoholic beverages.

None.

5.23 Luxury goods Budget 1995.

Ad valorem excise is applied to domestically manufactured and imported luxury goods.

None.

Ad valorem rate of 15 percent is applied in addition to a sates tax of 15 percent.

5.24 Petroleum products Budget 1987-95.

Specific excises are applied to petroleum products.

None.

Excise duties in cedis per liter vary as follows:

Premium	621.50
Kerosene	397.00
Gas oil	567.00

5.25

Other excises

This tax is the domestic counterpart to the cocoa export tax (see 6.21 below) and is levied on the Cocoa Marketing Board’s sales of cocoa within Ghana.

None.

The levy is 100 percent duty on all proceeds from domestic cocoa sales by the Cocoa Marketing Board after allowing for the producer price of cocoa and costs of the Board.

5.3 Selective tax on services

5.31 Airport tax

Airport Tax Act, 1963 (No. 209); Airport Tax (Amendment) Decree, 1973 (N.R.C.D. 203); Airport Tax (Amendment) Decree, 1977 (S.M.C.D. 119); and Budget 1985-96.

This tax is levied on passengers departing from airports for both domestic and international destinations. The tax is ceded to the Civil Aviation Authority.

None.

The tax is levied at ¢ 22,000 for international flights and ¢ 500 for domestic flights.

5.32 Service tax

Admission tickets for a wide variety of entertainment are taxed on the basis of the admission price.

None.

Tickets are taxed at 15 percent of their value.

Accommodation. This tax is an ad valorem levy on accommodations and food by hotels and restaurants.

Exemptions include services less than ¢ 200 in value. Foreign diplomatic staff are also exempt.

Tax is levied at the rate of 15 percent on the value of accommodation and food.

Advertisement through all media.

None.

Tax is levied at the rate of 15 percent on the cost of advertisement.

Betting. This tax is levied on all sums wagered in regular betting, on the sums paid for licenses in sweepstakes, or price money paid from football pools.

None.

Tax is levied at the rate of 15 percent of:

(a) sums wagered at betting events;

(b) football pool prize money paid out;

(c) sums paid for sweepstake tickets.

6. Taxes on international trade

6.1 Taxes on imports

Duties are levied on most imported goods, generally as ad valorem taxes on the c.i.f. value, but for some goods the rates are specific.

6.2 Export taxes

6.21 Cocoa export duty Customs and Excise Tariff, 1973 (L.I. 838); Excise Tariff (Amendment) Regulations 1975 (L.I. 1024); and Customs and Excise Tariff (Amendment) Regulations, 1978

This tax is levied on the f.o.b. price received by the Cocoa Marketing Board for all cocoa exported from Ghana.

None.

The cocoa levy is a 100 percent duty on all proceeds received from cocoa exports after paying producers’ costs and COCOBOD’s marketing and other costs.

7. Other taxes

7.1 Stamp duties

Stamp Act, 1965 (Act 3111); Stamp Act (Amendment) Decree, 1975 (N.R.C.D. 355); and Stamp Act 1980 (S.M.C.D. 424).

Exemptions include instruments transferring ships, transactions where the Government would be liable for the stamp tax, and the transfer of company shares to a Ghanaian citizen.

Duties are both specific and ad valorem, varying with the particular instrument. Examples of rates are:

Mineral lease	¢ 10,000
Agreements	¢ 2
Mortgages	1.0 percent of the face value
Checks	¢ 0.1
Conveyance or transfer	¢ 5 for every ¢ 60 of the amount or fraction thereof.

7.2 Other taxes, not elsewhere classified

Mining operations 35 percent

Rate of royalty

3-12 percent; depending on profitability and certain operating costs.

7.22 Additional Profit Tax Law 1986 (P.N.D.C.L. 122).

None.

Additional profit tax	25 percent
Current recommended rate of return	17.5 percent

7.23 Petroleum Income Tax Law 1987 (P.N.D.C.L. 188)

This law covers all persons carrying on petroleum operations, and is payable on income from the sale of petroleum less deductions.

Petroleum companies:

35 percent unless a provision is made in particular petroleum agreement making alternative arrangements for paying the tax at a different rate, or another tax altogether.

B. Local governments

No details available.

Sources: International Bureau of Fiscal Documentation, African Tax Systems, and information provided by the Ghanaian authorities.

STATISTICAL APPENDIX

Table 18.

Ghana: Gross Domestic Product by Sector, 1993-97

Sources: Statistical Service; and staff estimates.

^{^1/}Revised estimates.

^2/Estimates.

^3/Including restaurants and hotels.

Table 18.

Ghana: Gross Domestic Product by Sector, 1993-97

			1993	1994	1995	1996	1997
			(In millions cedis at constant 1993 prices)
Agriculture			1,430.0	1,456.7	1,511.2	1,590.1	1,658.4
	Agriculture and livestock		994.0	1,003.0	1,038.4	1,103.5	1,132.7
		Cocoa	108.1	121.3	134.7	138.6	151.5
		Forestry and logging	107.7	109.6	111.8	114.8	139.5
		Fishing	220.2	222.8	226.3	233.2	234.7
Industrial			961.1	994.5	1,035.3	1,084.4	1,153.3
	Mining and quarrying		211.4	222.1	234.3	244.2	257.8
	Manufacturing		363.3	368.7	375.4	388.4	416.9
	Electricity, water, and gas		99.6	104.9	111.2	118.3	130.4
	Construction		286.8	298.8	314.4	333.5	348.2
Services			1,065.8	1,118.6	1,170.8	1,220.3	1,300.2
	Transport, storage, and communications		166.0	176.1	183.5	192.7	206.6
	Wholesale and retail trade ^1/		224.7	237.1	252.5	273.4	299.4
	Finance, real estate, and business services		158.8	165.2	170.1	177.3	189.2
	Public administration defense and other services		409.5	430.4	451.9	462.6	482.4
	Community, social and personal services		70.8	72.9	74.8	75.6	81.1
	Producer of private non-profit services		36.0	36.9	38.0	38.7	41.5
Net Indirect Taxes			415.6	429.3	442.7	456.4	422.0
Gross domestic product			3,872.5	3,999.1	4,160.0	4,351.2	4,533.9
			(In billions of cedis at current market prices)
Agriculture			1,430.0	1,971.2	3,006.0	4,417.0	5,050.1
	Agriculture and livestock		994.0	1,307.0	1,827.0	2,750.0	3,192.6
		Cocoa	108.1	235.2	524.0	690.0	656.1
		Forestry and logging	107.7	139.0	211.0	297.0	477.2
		Fishing	220.2	290.0	444.0	680.0	724.2
Industrial			961.1	1,294.0	1,882.0	2,673.0	3,622.6
	Mining and quarrying		211.4	293.0	371.0	536.0	719.8
	Manufacturing		363.3	472.0	723.0	979.0	1,277.5
	Electricity, water, and gas		99.6	139.0	206.0	302.0	425.7
	Construction		286.8	390.0	582.0	856.0	1,199.6
Services			1,065.8	1,420.8	2,152.6	2,977.0	3,935.8
	Transport, storage, and communications		166.0	224.0	303.0	423.0	580.4
	Wholesale and retail trade		224.7	297.8	465.0	654.0	917.0
	Finance, real estate, and business services		158.8	209.0	302.6	430.0	586.6
	Public administration defense and other services		409.5	540.0	825.0	1,124.0	1,377.0
	Community, social and personal services		70.8	103.0	185.0	249.0	341.6
	Producers of private non-profit services		36.0	47.0	72.0	97.0	133.2
Net indirect taxes			415.6	519.0	712.0	1,272.0	1,504.9
	Gross domestic product		3,872.5	5,205.0	7,752.6	11,339.0	14,113.4
			(Annual percentage of change)
Memorandum items:
	GDP deflator		…	30.2	43.2	39.8	19.5
	GDP at current market prices		…	34.4	49.0	46.3	24.5
	GDP at constant 1993 prices		…	3.3	4.0	4.6	4.2
	Per capita real GDP		…	0.1	0.9	1.4	1.2

Sources: Statistical Service; and staff estimates.

^{^1/}Revised estimates.

^2/Estimates.

^3/Including restaurants and hotels.

Table 18.

Ghana: Gross Domestic Product by Sector, 1993-97

			1993	1994	1995	1996	1997
			(In millions cedis at constant 1993 prices)
Agriculture			1,430.0	1,456.7	1,511.2	1,590.1	1,658.4
	Agriculture and livestock		994.0	1,003.0	1,038.4	1,103.5	1,132.7
		Cocoa	108.1	121.3	134.7	138.6	151.5
		Forestry and logging	107.7	109.6	111.8	114.8	139.5
		Fishing	220.2	222.8	226.3	233.2	234.7
Industrial			961.1	994.5	1,035.3	1,084.4	1,153.3
	Mining and quarrying		211.4	222.1	234.3	244.2	257.8
	Manufacturing		363.3	368.7	375.4	388.4	416.9
	Electricity, water, and gas		99.6	104.9	111.2	118.3	130.4
	Construction		286.8	298.8	314.4	333.5	348.2
Services			1,065.8	1,118.6	1,170.8	1,220.3	1,300.2
	Transport, storage, and communications		166.0	176.1	183.5	192.7	206.6
	Wholesale and retail trade ^1/		224.7	237.1	252.5	273.4	299.4
	Finance, real estate, and business services		158.8	165.2	170.1	177.3	189.2
	Public administration defense and other services		409.5	430.4	451.9	462.6	482.4
	Community, social and personal services		70.8	72.9	74.8	75.6	81.1
	Producer of private non-profit services		36.0	36.9	38.0	38.7	41.5
Net Indirect Taxes			415.6	429.3	442.7	456.4	422.0
Gross domestic product			3,872.5	3,999.1	4,160.0	4,351.2	4,533.9
			(In billions of cedis at current market prices)
Agriculture			1,430.0	1,971.2	3,006.0	4,417.0	5,050.1
	Agriculture and livestock		994.0	1,307.0	1,827.0	2,750.0	3,192.6
		Cocoa	108.1	235.2	524.0	690.0	656.1
		Forestry and logging	107.7	139.0	211.0	297.0	477.2
		Fishing	220.2	290.0	444.0	680.0	724.2
Industrial			961.1	1,294.0	1,882.0	2,673.0	3,622.6
	Mining and quarrying		211.4	293.0	371.0	536.0	719.8
	Manufacturing		363.3	472.0	723.0	979.0	1,277.5
	Electricity, water, and gas		99.6	139.0	206.0	302.0	425.7
	Construction		286.8	390.0	582.0	856.0	1,199.6
Services			1,065.8	1,420.8	2,152.6	2,977.0	3,935.8
	Transport, storage, and communications		166.0	224.0	303.0	423.0	580.4
	Wholesale and retail trade		224.7	297.8	465.0	654.0	917.0
	Finance, real estate, and business services		158.8	209.0	302.6	430.0	586.6
	Public administration defense and other services		409.5	540.0	825.0	1,124.0	1,377.0
	Community, social and personal services		70.8	103.0	185.0	249.0	341.6
	Producers of private non-profit services		36.0	47.0	72.0	97.0	133.2
Net indirect taxes			415.6	519.0	712.0	1,272.0	1,504.9
	Gross domestic product		3,872.5	5,205.0	7,752.6	11,339.0	14,113.4
			(Annual percentage of change)
Memorandum items:
	GDP deflator		…	30.2	43.2	39.8	19.5
	GDP at current market prices		…	34.4	49.0	46.3	24.5
	GDP at constant 1993 prices		…	3.3	4.0	4.6	4.2
	Per capita real GDP		…	0.1	0.9	1.4	1.2

Sources: Statistical Service; and staff estimates.

^{^1/}Revised estimates.

^2/Estimates.

^3/Including restaurants and hotels.

Table 19.

Ghana: Gross Domestic Product by Expenditure Category, 1993-97

Sources: Ghana Statistical Service.

Table 19.

Ghana: Gross Domestic Product by Expenditure Category, 1993-97

		1993	1994	1995	1996	1997
		(In million of cedis at constant 1993 prices)
Consumption		3,616.9	3,542.0	3,686.2	3,704.5	4,082.2
	Government	568.2	583.1	588.2	593.6	592.5
	Private sector	3,048.7	2,958.9	3,098.0	3,110.9	3,489.7
Total investment		860.6	1,027.1	940.8	1,078.6	1,115.3
	Gross fixed capital formation	921.3	965.8	1,002.7	1,016.1	1,054.5
	Inventories	-60.7	61.3	-61.9	62.5	60.8
Foreign balance		-604.7	-570.0	-467.0	-431.9	-663.6
	Exports of goods and non factor services	693.3	729.8	908.4	1,120.6	1,115.7
	Imports of goods and non factor services	-1,298.0	-1,299.8	-1,375.4	-1,552.5	-1,779.3
Gross domestic expenditure		5,775.5	5,868.9	6,002.4	6,335.6	6,976.8
Gross domestic product		3,872.8	3,999.1	4,160.0	4,351.2	4,533.9
		(In billion of cedis at current market prices)
Consumption		3,616.9	4,548.8	6,845.8	9,994.6	12,726.5
	Government	568.2	714.3	935.9	1,365.6	1,743.8
	Private sector	3,048.7	3,837.9	5,909.9	8,629.0	10,982.7
Total investment		860.6	1,246.7	1,552.1	2,434.2	3,405.5
	Gross fixed capital formation	921.3	1,174.5	1,638.0	2,332.0	3,278.2
	Inventories	-60.7	72.2	-85.9	102.2	127.3
Foreign balance		-604.7	-590.7	-645.3	-1,089.6	-2,018.6
	Exports of goods and non factor services	693.3	1,171.5	1,898.9	2,827.3	3,393.9
	Imports of goods and non factor services	-1,298.0	-1,762.2	-2,544.2	-3,916.9	-5,412.5
Gross domestic expenditure		5,775.5	5,868.9	6,002.4	6,335.6	6,976.8
Gross domestic product		3,872.8	5,204.8	7,752.6	11,339.2	14,113.4

Sources: Ghana Statistical Service.

Table 19.

Ghana: Gross Domestic Product by Expenditure Category, 1993-97

		1993	1994	1995	1996	1997
		(In million of cedis at constant 1993 prices)
Consumption		3,616.9	3,542.0	3,686.2	3,704.5	4,082.2
	Government	568.2	583.1	588.2	593.6	592.5
	Private sector	3,048.7	2,958.9	3,098.0	3,110.9	3,489.7
Total investment		860.6	1,027.1	940.8	1,078.6	1,115.3
	Gross fixed capital formation	921.3	965.8	1,002.7	1,016.1	1,054.5
	Inventories	-60.7	61.3	-61.9	62.5	60.8
Foreign balance		-604.7	-570.0	-467.0	-431.9	-663.6
	Exports of goods and non factor services	693.3	729.8	908.4	1,120.6	1,115.7
	Imports of goods and non factor services	-1,298.0	-1,299.8	-1,375.4	-1,552.5	-1,779.3
Gross domestic expenditure		5,775.5	5,868.9	6,002.4	6,335.6	6,976.8
Gross domestic product		3,872.8	3,999.1	4,160.0	4,351.2	4,533.9
		(In billion of cedis at current market prices)
Consumption		3,616.9	4,548.8	6,845.8	9,994.6	12,726.5
	Government	568.2	714.3	935.9	1,365.6	1,743.8
	Private sector	3,048.7	3,837.9	5,909.9	8,629.0	10,982.7
Total investment		860.6	1,246.7	1,552.1	2,434.2	3,405.5
	Gross fixed capital formation	921.3	1,174.5	1,638.0	2,332.0	3,278.2
	Inventories	-60.7	72.2	-85.9	102.2	127.3
Foreign balance		-604.7	-590.7	-645.3	-1,089.6	-2,018.6
	Exports of goods and non factor services	693.3	1,171.5	1,898.9	2,827.3	3,393.9
	Imports of goods and non factor services	-1,298.0	-1,762.2	-2,544.2	-3,916.9	-5,412.5
Gross domestic expenditure		5,775.5	5,868.9	6,002.4	6,335.6	6,976.8
Gross domestic product		3,872.8	5,204.8	7,752.6	11,339.2	14,113.4

Sources: Ghana Statistical Service.

Table 20.

Ghana: Composition and Growth of Gross Domestic Product by Sector, 1993-97

Sources: Ghana Statistical Service.

^{^1/}Including restaurants and hotels.

Table 20.

Ghana: Composition and Growth of Gross Domestic Product by Sector, 1993-97

		1993	1994	1995	1996 Prov.	1997 Prov.
		(In percent of nominal GDP)
Agriculture		36.9	36.4	36.3	36.6	36.6
	Agriculture and livestock	25.7	25.1	25.0	25.4	25.0
	Cocoa	2.8	3.0	3.2	3.2	3.3
	Forestry and logging	2.7	2.7	2.7	2.6	3.1
	Fishing	5.7	5.6	5.4	5.4	5.2
Industrial		24.9	24.9	24.9	24.9	25.5
	Mining and quarrying	5.5	5.6	5.6	5.6	5.7
	Manufacturing	9.4	9.2	9.0	8.9	9.2
	Electricity, water, and gas	2.6	2.6	2.7	2.7	2.9
	Construction	7.4	7.5	7.6	7.7	7.7
Services		27.5	28.0	28.2	28.0	28.6
	Transport, storage, and communication	4.3	4.5	4.4	4.4	4.5
	Wholesale and retail trade ^1/	5.8	5.9	6.1	6.3	6.6
	Finance, real estate, and business services	4.1	4.1	4.1	4.1	4.2
	Public administration defense and other services	10.6	10.8	10.9	10.6	10.6
	Community, social and personal services	1.8	1.8	1.8	1.7	1.8
	Producers of private non-profit services	0.9	0.9	0.9	0.9	0.9
Net indirect taxes		10.7	10.7	10.6	10.5	9.3
Gross domestic product		100.0	100.0	100.0	100.0	100.0
		(Annual percentage changes in 1993 constant prices)
Agriculture		…	16.1	18.1	14.9	34.0
	Agriculture and livestock	…	0.9	3.5	6.3	2.6
	Cocoa	…	12.2	11.0	2.9	9.3
	Forestry and logging	…	1.8	2.0	2.7	21.5
	Fishing	…	1.2	1.6	3.0	0.6
Industrial		…	16.1	18.5	20.2	27.5
	Mining and quarrying	…	5.1	5.5	4.2	5.6
	Manufacturing	…	1.5	1.8	3.5	7.3
	Electricity, water, and gas	…	5.3	6.0	6.4	10.2
	Construction	…	4.2	5.2	6.1	4.4
Services		…	26.2	24.3	22.8	42.2
	Transport, storage, and communication	…	6.1	4.2	5.0	7.2
	Wholesale and retail trade ^1/	…	5.5	6.5	8.3	9.5
	Finance, real estate, and business services	…	4.0	3.0	4.2	6.7
	Public administration defense and other services	…	5.1	5.0	2.4	4.3
	Community, social and personal services	…	3.0	2.6	1.1	7.3
	Producers of private non-profit services	…	2.5	3.0	1.8	7.2
Net indirect taxes		…	3.3	3.1	3.1	-7.5
Gross domestic product		…	3.3	4.0	4.6	4.2

Sources: Ghana Statistical Service.

^{^1/}Including restaurants and hotels.

Table 20.

Ghana: Composition and Growth of Gross Domestic Product by Sector, 1993-97

		1993	1994	1995	1996 Prov.	1997 Prov.
		(In percent of nominal GDP)
Agriculture		36.9	36.4	36.3	36.6	36.6
	Agriculture and livestock	25.7	25.1	25.0	25.4	25.0
	Cocoa	2.8	3.0	3.2	3.2	3.3
	Forestry and logging	2.7	2.7	2.7	2.6	3.1
	Fishing	5.7	5.6	5.4	5.4	5.2
Industrial		24.9	24.9	24.9	24.9	25.5
	Mining and quarrying	5.5	5.6	5.6	5.6	5.7
	Manufacturing	9.4	9.2	9.0	8.9	9.2
	Electricity, water, and gas	2.6	2.6	2.7	2.7	2.9
	Construction	7.4	7.5	7.6	7.7	7.7
Services		27.5	28.0	28.2	28.0	28.6
	Transport, storage, and communication	4.3	4.5	4.4	4.4	4.5
	Wholesale and retail trade ^1/	5.8	5.9	6.1	6.3	6.6
	Finance, real estate, and business services	4.1	4.1	4.1	4.1	4.2
	Public administration defense and other services	10.6	10.8	10.9	10.6	10.6
	Community, social and personal services	1.8	1.8	1.8	1.7	1.8
	Producers of private non-profit services	0.9	0.9	0.9	0.9	0.9
Net indirect taxes		10.7	10.7	10.6	10.5	9.3
Gross domestic product		100.0	100.0	100.0	100.0	100.0
		(Annual percentage changes in 1993 constant prices)
Agriculture		…	16.1	18.1	14.9	34.0
	Agriculture and livestock	…	0.9	3.5	6.3	2.6
	Cocoa	…	12.2	11.0	2.9	9.3
	Forestry and logging	…	1.8	2.0	2.7	21.5
	Fishing	…	1.2	1.6	3.0	0.6
Industrial		…	16.1	18.5	20.2	27.5
	Mining and quarrying	…	5.1	5.5	4.2	5.6
	Manufacturing	…	1.5	1.8	3.5	7.3
	Electricity, water, and gas	…	5.3	6.0	6.4	10.2
	Construction	…	4.2	5.2	6.1	4.4
Services		…	26.2	24.3	22.8	42.2
	Transport, storage, and communication	…	6.1	4.2	5.0	7.2
	Wholesale and retail trade ^1/	…	5.5	6.5	8.3	9.5
	Finance, real estate, and business services	…	4.0	3.0	4.2	6.7
	Public administration defense and other services	…	5.1	5.0	2.4	4.3
	Community, social and personal services	…	3.0	2.6	1.1	7.3
	Producers of private non-profit services	…	2.5	3.0	1.8	7.2
Net indirect taxes		…	3.3	3.1	3.1	-7.5
Gross domestic product		…	3.3	4.0	4.6	4.2

Sources: Ghana Statistical Service.

^{^1/}Including restaurants and hotels.

Table 21.

Ghana: Composition and Growth of Gross Domesitc Product by Expenditure Category, 1993-97

Sources: Statistical Service; and staff estimates.

^1/Total investment expenditure published by the GSS is smaller than the staffs estimate; it differs by the amount of government domestic investment expendiutre on commitment basis and by the estimate of foreign financed investment expenditure.

Table 21.

Ghana: Composition and Growth of Gross Domesitc Product by Expenditure Category, 1993-97

		1993	1994	1995	1996	1997
		(In percent of nominal GDP)
Consumption		93.4	87.4	88.3	88.1	90.2
	Government	14.7	13.7	12.1	12.0	12.4
	Private sector	78.7	73.7	76.2	76.1	77.8
Total investment		22.2	24.0	20.0	21.5	24.1
	Gross fixed capaital formation	23.8	22.6	21.1	20.6	23.2
	Inventories	-1.6	1.4	-1.1	0.9	0.9
Foreign balance		-15.6	-11.4	-8.3	-9.6	-14.3
	Exports of goods and nonfactor services	17.9	22.5	24.5	24.9	24.0
	Imports of goods and nonfactor services	-33.5	-33.9	-32.8	-34.5	-38.3
Gross domestic expenditure		149.1	145.2	141.1	144.2	152.7
Gross domestic product		100.0	100.0	100.0	100.0	100.0
		(Annual percentage changes in constant 1993 prices)
Consumption		…	-2.1	4.1	0.5	10.2
	Government	…	2.6	0.9	0.9	-0.2
	Private sector	…	-2.9	4.7	0.4	12.2
Total investment		…	19.3	-8.4	14.6	3.4
	Gross fixed capital formation	…	4.8	3.8	1.3	3.8
	Inventories	…	-201.0	-201.0	-201.0	-2.7
Foreign balance
	Exports of goods and nonfactor services	…	0.9	2.5	0.8	-5.1
	Imports of goods and nonfactor services	…	5.9	12.3	24.1	-1.3
Gross domestic expenditure		…	3.3	4.0	4.6	4.2
Gross domestic product		…	3.3	4.0	4.6	4.2

Sources: Statistical Service; and staff estimates.

Table 21.

Ghana: Composition and Growth of Gross Domesitc Product by Expenditure Category, 1993-97

		1993	1994	1995	1996	1997
		(In percent of nominal GDP)
Consumption		93.4	87.4	88.3	88.1	90.2
	Government	14.7	13.7	12.1	12.0	12.4
	Private sector	78.7	73.7	76.2	76.1	77.8
Total investment		22.2	24.0	20.0	21.5	24.1
	Gross fixed capaital formation	23.8	22.6	21.1	20.6	23.2
	Inventories	-1.6	1.4	-1.1	0.9	0.9
Foreign balance		-15.6	-11.4	-8.3	-9.6	-14.3
	Exports of goods and nonfactor services	17.9	22.5	24.5	24.9	24.0
	Imports of goods and nonfactor services	-33.5	-33.9	-32.8	-34.5	-38.3
Gross domestic expenditure		149.1	145.2	141.1	144.2	152.7
Gross domestic product		100.0	100.0	100.0	100.0	100.0
		(Annual percentage changes in constant 1993 prices)
Consumption		…	-2.1	4.1	0.5	10.2
	Government	…	2.6	0.9	0.9	-0.2
	Private sector	…	-2.9	4.7	0.4	12.2
Total investment		…	19.3	-8.4	14.6	3.4
	Gross fixed capital formation	…	4.8	3.8	1.3	3.8
	Inventories	…	-201.0	-201.0	-201.0	-2.7
Foreign balance
	Exports of goods and nonfactor services	…	0.9	2.5	0.8	-5.1
	Imports of goods and nonfactor services	…	5.9	12.3	24.1	-1.3
Gross domestic expenditure		…	3.3	4.0	4.6	4.2
Gross domestic product		…	3.3	4.0	4.6	4.2

Sources: Statistical Service; and staff estimates.

Table 22.

Ghana: Saving and Investment, 1993-1997

Sources: Ghana Statistical Service.

Table 22.

Ghana: Saving and Investment, 1993-1997

		1993	1994	1995	1996	1997
		(In billions of cedis at current market prices)
National income		3,470.6	4,688.0	7,083.6	10,318.4	12,847.7
	Net transfer from abroad	335.8	451.4	628.0	788.6	1,180.0
National disposable income		3,806.4	5,139.4	7,711.6	11,107.0	14,027.7
	Total consumption	3,616.9	4,548.8	6,845.8	9,994.6	12,726.5
Net saving		189.5	587.2	865.8	1,112.4	1,301.2
Net capital formation		531.6	835.5	1,037.8	1,633.7	2,408.8
Consumption of fixed captial		329.0	411.2	514.0	800.8	996.7
Gross capital formation		860.6	1,246.7	1,551.8	2,434.5	3,405.5
	Buildings	461.3	563.3	832.1	1,092.0	1,445.2
	Other construction work	64.1	92.6	143.2	235.2	385.6
	Land improvements and plantations	0.7	1.3	1.6	2.2	3.5
	Transport equipment	168.4	210.8	271.5	401.8	602.2
	Machinery and equipment	226.8	306.5	389.3	601.1	868.7
	Change in stocks	-60.7	72.2	-85.9	102.2	127.3
External current account balance		362.7	-248.3	172.4	530.0	1,109.0
GDP		3,872.5	5,204.8	7,752.6	11,339.2	14,113.4
		(In percent of nominal GDP)
National disposable income		98.3	98.7	99.5	98.0	99.4
Total consumption		93.4	87.5	88.3	88.1	90.2
Net saving		4.9	11.3	11.2	9.8	9.2
Net capital formation		13.7	16.1	13.4	14.4	17.1
Gross capital formation		22.2	24.0	20.0	21.5	24.1
External current account balance		9.4	4.7	2.2	4.7	7.9

Sources: Ghana Statistical Service.

Table 22.

Ghana: Saving and Investment, 1993-1997

		1993	1994	1995	1996	1997
		(In billions of cedis at current market prices)
National income		3,470.6	4,688.0	7,083.6	10,318.4	12,847.7
	Net transfer from abroad	335.8	451.4	628.0	788.6	1,180.0
National disposable income		3,806.4	5,139.4	7,711.6	11,107.0	14,027.7
	Total consumption	3,616.9	4,548.8	6,845.8	9,994.6	12,726.5
Net saving		189.5	587.2	865.8	1,112.4	1,301.2
Net capital formation		531.6	835.5	1,037.8	1,633.7	2,408.8
Consumption of fixed captial		329.0	411.2	514.0	800.8	996.7
Gross capital formation		860.6	1,246.7	1,551.8	2,434.5	3,405.5
	Buildings	461.3	563.3	832.1	1,092.0	1,445.2
	Other construction work	64.1	92.6	143.2	235.2	385.6
	Land improvements and plantations	0.7	1.3	1.6	2.2	3.5
	Transport equipment	168.4	210.8	271.5	401.8	602.2
	Machinery and equipment	226.8	306.5	389.3	601.1	868.7
	Change in stocks	-60.7	72.2	-85.9	102.2	127.3
External current account balance		362.7	-248.3	172.4	530.0	1,109.0
GDP		3,872.5	5,204.8	7,752.6	11,339.2	14,113.4
		(In percent of nominal GDP)
National disposable income		98.3	98.7	99.5	98.0	99.4
Total consumption		93.4	87.5	88.3	88.1	90.2
Net saving		4.9	11.3	11.2	9.8	9.2
Net capital formation		13.7	16.1	13.4	14.4	17.1
Gross capital formation		22.2	24.0	20.0	21.5	24.1
External current account balance		9.4	4.7	2.2	4.7	7.9

Sources: Ghana Statistical Service.

Table 23.

Ghana: Cocoa Bean Production, Consumption, Prices, Payments to Fanners, and Export Receipts, 1985/86-1997/98

Source: Cocoa Board.

^{^1/}Includes sales to processing companies; most of the processed products are then exported.

^{^2/}Including bonus payments until 1986/87, but excluding bonus payments thereafter.

^{^3/}Main crop.

^{^4/}Midcrop.

Table 23.

Ghana: Cocoa Bean Production, Consumption, Prices, Payments to Fanners, and Export Receipts, 1985/86-1997/98

	Production			Consumption		Producer Price ^2/		Payments to cocoa farmers	Export receipts (beans)
Oct. 1-Sept. 30	Main Crop	Midcrop	Total	Domestic ^1/	Export	Producer Price ^2/		Payments to cocoa farmers	Export receipts (beans)
	(Thousands of metric tons)					(Cedis per metric ton)		(In millions of cedis)
1985/86	205	14	219	25	193	56,600	^3/	12,786	40,225
						85,500	^4/
1986/87	218	9	227	22	205	85,500	^3/	21,590	52,869
						150,000	^4/
1987/88	173	15	188	20	168	150,000	^3/	32,149	66,600
						165,000	^4/
1988/89	290	15	300	20	281	165,000	^3/	49,594	115,717
						174,400	^4/
1989/90	282	13	295	20	275	174,400	^3/	52,000	105,000
						224,000	^4/
1990/91	261	32	293	20	242	224,000	^3/	66,502	117,962
						251,200	^4/
1991/92	229	13	242	23	254	251,200	^3/	60,879	131,089
						258,000	^4/
1992/93	262	49	311	30	281	258,000	^3/	67,915	137,866
						308,000	^4/
1993/94	220	20	240	40	200	308,000	^3/	86,784	243,805
						700,000	^4/
1994/95	260	30	290	30	260	700,000	^3/	205,500	381,360
						…	^4/
1995/96	349	54	403	58	345	840,000	^3/	372,666	693,605
						1,200,000	^4/
1996/97	295	25	320	60	260	1,200,000	^3/	399,963	709,200
						1,800,000	^4/
1997/98	360	30	390	60	330	1,800,000	^3/	711,000	1,109,434
						2,250,000	^4/

Source: Cocoa Board.

^{^1/}Includes sales to processing companies; most of the processed products are then exported.

^{^2/}Including bonus payments until 1986/87, but excluding bonus payments thereafter.

^{^3/}Main crop.

^{^4/}Midcrop.

Table 23.

Ghana: Cocoa Bean Production, Consumption, Prices, Payments to Fanners, and Export Receipts, 1985/86-1997/98

	Production			Consumption		Producer Price ^2/		Payments to cocoa farmers	Export receipts (beans)
Oct. 1-Sept. 30	Main Crop	Midcrop	Total	Domestic ^1/	Export	Producer Price ^2/		Payments to cocoa farmers	Export receipts (beans)
	(Thousands of metric tons)					(Cedis per metric ton)		(In millions of cedis)
1985/86	205	14	219	25	193	56,600	^3/	12,786	40,225
						85,500	^4/
1986/87	218	9	227	22	205	85,500	^3/	21,590	52,869
						150,000	^4/
1987/88	173	15	188	20	168	150,000	^3/	32,149	66,600
						165,000	^4/
1988/89	290	15	300	20	281	165,000	^3/	49,594	115,717
						174,400	^4/
1989/90	282	13	295	20	275	174,400	^3/	52,000	105,000
						224,000	^4/
1990/91	261	32	293	20	242	224,000	^3/	66,502	117,962
						251,200	^4/
1991/92	229	13	242	23	254	251,200	^3/	60,879	131,089
						258,000	^4/
1992/93	262	49	311	30	281	258,000	^3/	67,915	137,866
						308,000	^4/
1993/94	220	20	240	40	200	308,000	^3/	86,784	243,805
						700,000	^4/
1994/95	260	30	290	30	260	700,000	^3/	205,500	381,360
						…	^4/
1995/96	349	54	403	58	345	840,000	^3/	372,666	693,605
						1,200,000	^4/
1996/97	295	25	320	60	260	1,200,000	^3/	399,963	709,200
						1,800,000	^4/
1997/98	360	30	390	60	330	1,800,000	^3/	711,000	1,109,434
						2,250,000	^4/

Source: Cocoa Board.

^{^1/}Includes sales to processing companies; most of the processed products are then exported.

^{^2/}Including bonus payments until 1986/87, but excluding bonus payments thereafter.

^{^3/}Main crop.

^{^4/}Midcrop.

Table 24.

Ghana: Operations of the Cocoa Board, 1990/91-1997/98

Source: Cocoa Board.

^1/Crop year ending September 30.

^{^2/}Mainly discount charges on bills drawn to finance the purchases of cocoa, export duty, and operations of the Cocoa Board

^{^3/}Includes provision for doubtful debts and depreciation. Includes all other Cocoa Board costs in 1992/93.

^{^4/}Includes outlays for produce inspection, research, construction of feeder roads, and subsidies for insecticides and spraying. Includes a provision of 8.5 billion cedis for retrenchment in 1993/94.

Table 24.

Ghana: Operations of the Cocoa Board, 1990/91-1997/98

		1990/91	1991/92	1992/93	1993/94	1994/95	1995/96	1996/97	1997/98
							Actual	Actual	Budget
		(In millions of cedis)
Revenue		134,560	141,983	168,302	267,240	460,432	793,990	873,325	1,396,265
	Exports	119,522	126,450	137,866	243,805	381,360	693,605	709,200	1,109,734
	Local deliveries	13,938	15,223	19,220	16,347	72,072	73,836	136,831	233,206
	Miscellaneous	206	310	11,216	7,088	7,000	26,549	27,294	53,325
	Other	894	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Costs		105,600	109,848	138,034	147,451	306,410	523,990	607,393	1,006,062
	Producer proceeds	64,714	62,034	67,915	86,784	205,500	372,666	399,963	711,000
	Licensed buying agents	13,871	14,661	–	15,116	32,580	86,475	88,400	125,463
	Freight	2,406	1,857	–	16,862	31,238	16,984	28,896	36,660
	Finance costs ^2/	9,892	8,576	19,449	5,060	7,402	16,157	21,311	29,115
	Administration ^3/	3,800	11,406	4,661	4,108	3,523	13,138	6,457	7,104
	Other ^4/	10,917	11,314	46,009	19,521	26,167	18,570	62,366	96,720
Profits/Losses (-) before taxes		28,960	32,135	30,268	119,789	154,022	270,000	265,932	390,203
Duties paid		31,552	20,610	36,703	122,999	154,022	270,000	265,932	390,203
Profits/Losses (-) after taxes		-2,592	11,525	-6,435	-3,210	0.0	0.0	0.0	0.0
		(In thousands of metric tons)
Memorandum items:

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Abstract

V. Trends in Cocoa World Markets and Options to Strengthen Ghana’s Competitive Position34

A. Introduction

B. Cocoa Trends in the Last Decade35

C. Comparisons with Côte d’Ivoire38

D. Ghana Cocoa Reforms, 1987-97

E. Next Steps and Conclusions

STATISTICAL APPENDIX

V. Trends in Cocoa World Markets and Options to Strengthen Ghana’s Competitive Position³⁴

B. Cocoa Trends in the Last Decade³⁵

C. Comparisons with Côte d’Ivoire³⁸