Ghana: Selected Issues
Author: International Monetary Fund
Publication Date:
31 Jan 2000
eISBN:
9781451814811
Language:
English
Keywords:
ISCR; CR; export; Ghana; bank; enterprise deficiency; Ashanti goldfields company; divested enterprise; West African mills company; companies assets; Stock markets; Privatization; Public sector; Oil; West Africa
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This paper reviews trends in GDP and other macroeconomic variables since independence. It assesses the performance of the different sectors of the economy and expenditure categories. The paper identifies a number of products that could contribute to maintaining the high growth rate that nontraditional exports have experienced. The medium-term fiscal sustainability analysis provides a useful quantification of the impact of the shocks experienced on fiscal performance. Ghana's social insurance system, stock exchange, divestiture program, rural finance, and poverty are also discussed.

Abstract

This paper reviews trends in GDP and other macroeconomic variables since independence. It assesses the performance of the different sectors of the economy and expenditure categories. The paper identifies a number of products that could contribute to maintaining the high growth rate that nontraditional exports have experienced. The medium-term fiscal sustainability analysis provides a useful quantification of the impact of the shocks experienced on fiscal performance. Ghana's social insurance system, stock exchange, divestiture program, rural finance, and poverty are also discussed.

VI. Ghana’s Divestiture Program: Obstacles and Achievements40

A. Introduction

153. After independence, Ghana chose a state-centered approach to economic development. By the early 1980s, the public sector completely dominated production, accounting for 75 percent of formal employment. Public enterprises (PEs) were involved in almost all sectors of the economy, including mining, agriculture, finance and banking, manufacturing, trade, construction, energy, and telecommunication.41 However, most public enterprises proved to be inefficient, and political interference made them increase their employment levels to a point where productivity was extremely low. As a result, in 1983, the public enterprises had become a major burden on government finances.

154. The Economic Recovery Program (ERP), introduced in 1983 to reverse the economic decline of the previous decade, recognized the need for a comprehensive reform of the public enterprise sector42. The reform program included, among others, overall policy changes (e.g., price liberalization) to ensure commercial operation of public enterprises, reduction and retraining of the workforce to improve efficiency, restoration of financial solvency and discipline through clearance of cross-debts and arrears, and rationalization of the PE sector through privatization and mergers. At the initial stage, responsibility for implementing the divestiture program—together with other reforms in the PE sector—fell to the State Enterprise Commission (SEC). However, lack of commitment to carry out these reforms, together with doubts about the benefits of large-scale privatization, resulted in negligible progress43. That said, it was also true that an overall policy environment conducive to private-sector-led development had yet to be fully established in the late 1980s. As a result, there were still about 350 public enterprises, and the PE sector continued to be a burden on government resources.44

B. The Divestiture Implementation Committee and the Early Efforts

155. In 1988, a major new effort to privatize public enterprises began with the establishment of the Divestiture Implementation Committee (DIC), which took over the divestiture responsibility from the SEC. Although DIC’s responsibility would only be formalized in 1993—when the Divestiture of State Interest Law established the legal framework for divestiture—it immediately undertook responsibilities for communicating government policies and consulting interested bodies on divestiture, formulating criteria for selection of enterprises to be divested, developing and implementing divestiture procedures, and evaluating the effects of all divestitures.45 The SEC became mainly responsible for monitoring performance of public enterprises and, more generally, advising government on restructuring, rehabilitation, and divestiture of public enterprises.

156. The 1988 divestiture program was different from previous attempts because it was formulated concurrently with efforts to liberalize the Ghanaian economy to attract private sector investment. Thus, it was intended to: (a) reduce or eliminate the financial burden of the PE sector on government finances; (b) improve the overall efficiency of the Ghanaian economy; (c) downsize the public sector; and (d) refocus the role of the state in the economy.

Performance during 1989–1992

157. During this period, only 59 public enterprises were divested—out of more than 300 public enterprises operating in all sectors of the economy—generating proceeds amounting to 21.7 billion (Table 19). As a substantial number of the divested public enterprises did not have a viable business, often having negative net worth, 26 of them were liquidated (21 of them in 1990 alone), and produced no proceeds. Aside from these liquidations, the overall pace of divestiture during this period was very slow. Factors which contributed to few sales included: (a) weaknesses in the DIC, including the inability to process enterprises in a reasonable time period; (b) lack of up-to-date financial and other relevant information on the public enterprises being offered for sale; (c) lack of transparency of the divestiture process itself; (d) slow process of asset valuation by the Land Valuation Board; (e) indecision on how to deal with liabilities of the enterprises, particularly, severance payments; and (e) lack of coordination among the DIC and other government bodies involved in the divestiture46. Finally, the slow progress in divestiture also sometimes reflected strong resistance from workers and management of the enterprises being sold who were striving to increase their share of benefits from the sale.

Table 19.

Ghana: Divestiture of State-Owned Enterprises, 1989-September 1999 1/

(In millions, unless otherwise specified)

article image
Source: Ghanaian authorities; and Fund staff estimates and calculations.

Including those enterprises divested through the DIC and outside the DIC framework.

1999: January to September.

Calculated using average exchange rate for the period.

As at end-September 1999.

The values in foreign currency are valued at end-September 1999 exchange rate.

C. Recent Divestiture Experience, 1993–1999

158. In 1992, Ghana’s macroeconomic performance suffered a major setback when pre-election civil unrest forced the government to grant large wage increases as well as incur other expenditures aimed at obtaining the support of key pressure groups. The result was a sharp deterioration in the fiscal position of the government and an acceleration of inflation. Faced with this situation, the government had to find a way to adjust the fiscal position quickly, and yet was not prepared to cut expenditures by as much as would be needed to reverse the fiscal deterioration. As a compromise, the government chose to tackle the fiscal problem largely through flotation on the stock exchange of its shares in some of its most profitable enterprises (see below).

159. The divestiture procedures used by DIC are summarized in Box 5.

Procedural changes

160. To regain momentum and also enhance the contribution of divestiture to economic efficiency, an accelerated divestiture phase was envisaged, in support of which IDA approved in July 1995 a Private Sector Adjustment Credit (PSAC) amounting to SDR46.9 million, complemented by technical assistance from the UK’s Department for International Development (DFID)47. This phase introduced several changes designed to improve the efficiency of the DIC48.

161. First, the DIC, which previously consisted of only government officials, was modified in early 1995 to include two members from the private sector and a representative of trade unions, a change that was expected to increase transparency and involve other stakeholders in the divestiture process. The DIC also established a communications office to educate the public at large on the merits of divestiture and to solicit inputs into the divestiture program. It also agreed to meet more frequently than once a month, its schedule before 1995.

Divestiture Procedures

The list of enterprises to be divested was prepared by the government following consultations among interested government agencies, including the SEC, line ministries, and the DIC itself, and then provided to the DIC. The selection criteria included the need to minimize economic disruption, impact on the economy, and maximization of future tax revenues. As these criteria were not objectively defined and the process lacked transparency, the choice of enterprises for divestiture was somewhat arbitrary. Following selection of public enterprises to be divested, the process of divestiture would begin with regular meetings (once a month) of the DIC—to decide on such issues as the amount of government shares to be divested and the modality of divestiture to be employed.

The choice of the modality of divestiture had to balance the desire for a speedy restart of the enterprise through new management, investment, and better know-how, against a preference toward majority ownership by nationals, and the need to prevent management and workers from forestalling the privatization process. In the case of large enterprises, the mode of divestiture involved the breaking of the enterprises into smaller units for outright sales to nationals, or finding a strategic investor who would take a significant share and management of the enterprise while floating the remaining shares in the Ghana Stock Exchange.

The next step was the preparation by the DIC of a dossier, known as information memorandum, to be presented to potential buyers. The dossier would contain updated financial information, value of assets, and other relevant information on the public enterprises. Then, based on the information memorandum, selected public enterprises would be offered for sale through advertisements in Ghanaian newspapers and, for larger enterprises, also in international publications.

Potential bidders would be allowed to undertake due diligence—look closely into assets, operations, and records of the enterprise before submitting bids. A team of experts from the DIC, line ministries, and other government bodies would undertake the evaluation of investors’ bids. The selection of an investor would be based on prices (prices offered, payment options, and financing of bid) and on investors’ qualifications (business plan, future investment, and employment). Under certain circumstances, for example, in the event of equal bids in price terms, Ghanaian investors were given preference. Negotiations with the selected investor would follow on purchase and sale agreement, including on investor’s qualifications, offered price and timing of payments. The sale of the enterprise would be completed after approvals, first from the DIC and then from the President’s Office, were obtained and agreement was signed with the investor.

Source: DIC and Opoku (1999).

162. Second, to improve its efficiency and accelerate the pace of divestiture, the DIC began employing suitable private consultants for the preparation of information memoranda required to offer public enterprises for sale. A new divestiture procedures manual was introduced, and both the DIC and the private sector consultants were required to use the same standard procedures to divest enterprises.

163. Finally, the DIC set for the first time explicit targets for divestiture. Under the IDA PSAC approved in 1995, a list of 114 public enterprises were specified, of which 46 medium-sized and 64 small-sized enterprises were to be divested and 4 large and strategic ones were to be prepared for divestiture. The latter were Ghana Telecom, State Insurance Corporation, State Housing Corporation, and Mim Timber. This list was later expanded to include a total of 149 enterprises from which divestiture targets of 34 small, 14 medium and the 4 large and strategic enterprises were set by the DIC for the period September 1995-October 1997.

Overview of performance

164. Bavon (1998) shows using pooled data from 32 Ghanaian firms over a ten-year period (1986–95) that the financial performance of private firms both in terms of return on assets and return on sales is stronger than in state-owned than in private enterprises, although other factors also play a role in explaining financial performance.

165. The pace of divestiture accelerated during 1994–96 when 79 public enterprises valued at 756.6 billion were divested (Table 19, Figure 18, and Figure 19). The divestiture included sales of the Government’s interests in Ashanti Goldfields (US$462.4 million), state-owned banks (US$65.2 million), a strategic stake in Ghana Telecom (US$38 million), and other important enterprises (Table 20)49. However, from 1997 to September 1999, the pace of divestiture lost momentum and only 44 enterprises valued at 245.4 billion were divested.

Figure 18.
Figure 18.

Ghana: Number of State Owned Enterprises, 1992–99

Citation: IMF Staff Country Reports 2000, 002; 10.5089/9781451814811.002.A006

Source: DIC
Figure 19.
Figure 19.

Ghana: Divestiture Proceeds, 1992–99

Citation: IMF Staff Country Reports 2000, 002; 10.5089/9781451814811.002.A006

Source: DIC
Table 20.

Ghana: Divestiture of State-Owned Enterprises Outside the DIC, 1989-September 1999

article image
Source: Divestiture Implementation Committee.

In millions of U.S. dollars.

In millions of cedis.

166. Over the period 1993-September 1999, a total of about 133 enterprises were divested, including manufacturing enterprises, such as textiles and matches, farms, real estate units (housing and buildings), hotels, and department stores (Table 19). Of the 133 enterprises, 29 were divested through sale of shares, 77 through outright sale, 12 were liquidated, and 12 were divested through joint ventures. Large enterprises such as Ghana National Trading Corporation (GNTC), State Fishing Corporation (SFC) and State Hotels Corporation were unbundled into smaller units so that Ghanaian investors could have a better chance of competing in their acquisition.

167. Statistics from the DIC indicate that by end-1998 local entrepreneurs had bought about 80 percent of the divested public enterprises. An interesting finding in privatization processes in Africa is that whenever nationals purchase a public enterprise they are more likely to buy it on credit than on cash basis compared to foreign buyers. Also, nationals are more likely to default or request delays in payments agreed when purchasing the enterprise. The privatization process in Ghana is no exception to this rule.

Obstacles

168. The initial acceleration of divestiture (during 1994–96) could not be sustained in later years for several reasons. The operation of some public enterprises remained a source of concern. Their contribution to economic growth has remained consistently below their potential; at times, they have imposed a significant burden on the government. The checkered history of GNPC is an example of how the privatization process can be postponed and ultimately sidetracked, despite clear evidence that moving decisively with it would have been in the national interest (Box 6).

169. The emphasis of the divestiture program seems to have been on small and medium-sized enterprises since many large (and even some medium-sized) public enterprises have yet to be divested.51 The targets set under the PSAC (see above) were not achieved as originally envisaged, as only about 50 enterprises had been divested by early 1998, which was a significant delay. Moreover, out of the target set for large and strategic enterprises, only Ghana Telecom was divested by then52

170. Moreover, as privatization was delayed, some public enterprises’ net worth became increasingly negative. Also, even though several public enterprises have been divested, a substantial portion of the proceeds has yet to be collected even for those enterprises divested earlier. From total proceeds of 1,027 billion for 1989-September 1999, about one-quarter ( 224.2 billion or 1.12 percent of GDP) remained uncollected at end-September 1999 (Table 19).

171. An important factor in the slow progress of the divestiture program continued to be the DIC’s lack of dynamism in preparing public enterprises for divestiture—in particular the large and so-called “strategic” enterprises—and in selecting consultants for outsourcing. The outsourcing of divestiture itself did not help achieve its stated objectives of accelerating divestiture, increasing transparency, helping the DIC play more of a supervisory role, and increasing revenue from the sale of public enterprises.53 This was largely attributed to inexperience in divestiture by local private consultants, lack of transparency in their selection, and the inadequate preparation for privatization of some of the enterprises54. Moreover, the divestiture manual, which was to outline agreed norms and standards for divestiture to be used by both the DIC and the private consultants, came out only in January 1997, which was a significant delay. Also, interference by officials and interested parties, indecision and unwillingness to divest certain public enterprises for political and “strategic” reasons, and the inability of Ghanaian investors to mobilize resources for investment played a role in the slow progress of divestiture. Decisions were often postponed for various reasons, including the absence from the country of key DIC members.

Ghana National Petroleum Corporation (GNPC)

The GNPC was created in 1983 and charged with the exploration and procurement of crude oil. To finance its activities, it was also given the monopoly on the importation of crude oil and, through an arrangement with the Tema Oil Refinery, it became the sole wholesale supplier of petroleum products to the oil marketing companies operating in Ghana. It branched out into other activities, creating a number of subsidiaries in areas as diverse as salt production and gold mining. Despite this broad range of activities and privileged arrangements, GNPC seldom made profits. It financed a number of long-term projects through successive extensions in maturities of oil-import credits extended or guaranteed by the Bank of Ghana. These operations resulted in high interest costs and exchange losses. In 1994, faced with US$15 million in additional losses from investments in financial derivatives, GNPC fell in arrears on credits provided by the Bank of Ghana causing a major monetary expansion that seriously undermined the implementation of monetary policy. The total amount of its losses at that time was estimated at around 200 billion, or about 4 percent of GDP.

These problems prompted the government to take action in 1995 to correct this situation. An audit of GNPC accounts was carried out, and GNPC’s access to new Bank of Ghana credits was eliminated. A decision was also made to sell GNPC’s nonessential assets and to use the receipts to repay the Bank of Ghana. GNPC itself was placed in the list of enterprises to be privatized. Finally, from April 1996 onward, GNPC’s monopoly on importation of crude oil was removed, being replaced by a system of open bidding for oil procurement contracts. GNPC was then directed to focus primarily on hydrocarbon and energy-related activities.

Despite these decisions, there has been no serious efforts to privatize GNPC and the company is no longer in the list of companies to be privatized by the government. The leasing of its drilling rig—and income from nonessential assets and financial investments—allowed it to begin repaying its debt to Bank of Ghana in August 1997. The sale of its non-financial assets, finally achieved in March 1998, allowed it to complete the repayment of its debt to the Bank of Ghana in April 1998. In 1999, the GNPC continues to operate as a public enterprise representing Ghanaian interests in the West African Gas Pipeline, while it continues its efforts to develop a natural gas-fired power plant financed primarily by US Export-Import Bank loans and utilizing natural gas from the Tano field. That project has however faced a number of difficulties including refusal by the government to offer the necessary guarantees as the loan is nonconcessional and failure to find a private sector partner willing to take over a significant share of the project risks. In 1996, the World Bank concluded that, while viable at the margin, the project was not the best option available to Ghana. In January 1999, GNPC’s losses in hedging operations amounting to about US$40.2 million surfaced, plunging GNPC into a new controversy.

172. In addition, inadequate transparency, and a cumbersome legal and regulatory environment, of which the difficulty in transferring land titles has been an important example, beset the whole divestiture process. The divestiture process itself, which required approval of final sale by the President’s Office, proved to be too drawn out, on occasion giving rise to unwarranted consultations with “interested” parties and extending the period required for final approval of sale.

173. Finally, the democratization of the Ghanaian society beginning in the early 1990s has become an important factor in divestiture as it calls for more transparency in the process. Parliament has shown interest in the divestiture process by requiring more information on the sale of key public enterprises and, in some cases, has been vocal in opposing the divestiture of the so-called “strategic” enterprises. Workers and management of certain public enterprises have at times voiced their opposition to sales of enterprises to outside investors and suggested worker-management buyouts, A case in point was Ghana Oil (GOIL) whose divestiture was protracted owing to opposition by a workers-management group. The divestiture process of the Produce Buying Company (PBC) has been delayed by several years to accommodate various stakeholders. The divestiture of Tema Oil Refinery (TOR) has also been postponed in part because of opposition or reluctance to divest this strategic enterprise (Box 7).

Achievements

174. It would be wrong, however, to focus solely on the difficulties faced by the divestiture program, without according due regard to the achievements of the program. First, the sale of public enterprises has generated proceeds for the Ghanaian National Treasury, and the proceeds have been important in financing the fiscal deficits since 1993. More importantly, divested enterprises have generally achieved a vigorous expansion in production, owing to investment in new technology and increased capacity utilization, as well as improved employee’s skills55. As a result, both the tax base and the level of employment have risen in the post-divestiture period. Also, consumers have benefited from increased supply of quality goods and competitive pricing from the divested public enterprises. The divestiture program has also contributed to the development of the local capital market, providing Ghanaian investors an opportunity to make small equity investments56.

Divestiture of Strategic Companies

Ghana Oil Company (GOIL). The attempt to sell GOIL was delayed in 1998 because of the need to enhance transparency in the choice of the investment advisor. Following the offer for sale of GOIL in October 1998, some members of parliament voiced concern regarding sale of this “strategic” enterprise. A worker-management group was put together to make a bid for the company and to oppose the sale of a controlling interest in the company to a single investor. In early 1999, bids from Total Ghana Ltd., Engen of South Africa, and from the GOIL Buyout Consortium representing a workers-management group were evaluated and a recommendation was made by DIC to the President’s Office. The President’s Office has asked DIC to make sure that proper transparency procedures had been followed before it would give final clearance for the sale.

Produce Buying Company (PBC). Privatization of the PBC has been opposed at one time or another by members of parliament, government officials, including cabinet members, farmers, and the staff of PBC and Cocobod. Nevertheless, its sale is a key element of the medium-term cocoa strategy approved by cabinet after a lengthy process of stakeholder consultation. The sale of the PBC was first decided in 1996. It was then delayed pending the formulation of a medium-term cocoa strategy. A proposal to divide PBC into three companies was then floated, but was discarded in 1998, as it was felt that it could result in lenghty discussions regarding the division of the companies assets, which could delay the whole process. A proposal to sell PBC to a strategic investor was also blocked in 1998 as this mode of divestiture was seen as favoring large foreign investors. Instead, the government decided to float 50 percent of PBC shares in the stock exchange to allow wider shareholder participation by Ghanaians. Of the remaining shares, 20 percent will be given to farmer groups, 5 percent to PBC employees, and the government will retain the other 25 percent. The sale is expected to take place before end-1999. To ensure a level playing field among the companies engaged in domestic cocoa marketing, PBC was stripped of some Cocobod’s assets that it used freely in the past. Assets such as warehouses have been made available to all licensed buying companies on an equal basis.

Tema Oil Refinery (TOR). The divestiture of TOR has been delayed partly to rehabilitate the refinery and to accommodate opposition to its sale by several groups, including members of parliament and government officials, because of its “strategic” nature. Following the decision to divest TOR, and its valuation by an investment advisior in 1998, it was decided that the divestiture of the TOR be delayed while the enterprise was being financially restructured. The restruscturing of the company resulted in two general-manager positions being created to oversee petroleum trading and refinery activities, respectively. It became clear from the analysis carried out during the financial restructuring that the main profit center of TOR is its trading activities and that the government should search to sell the company to a strategic investor with expertise in petroleum trading. The government has committed itself to offer TOR for sale by end-1999.

175. Moreover, the divestiture program has signaled a stronger commitment of the government to private-sector led development by attracting domestic and foreign private capital, technology, and managerial skills. It has also given the impetus to other government efforts to create an environment that is supportive of private sector activities, a strategy that was reiterated in the context of the Ghana Vision 2020. These efforts included the Private Sector Advisory Group (PSAG) established in 1991 to enhance dialogue between the public and private sectors; the enactment of a liberal investment code and the establishment of the Ghana Investment Promotion Center (GIPC) in 1994.57 The 1995 “Free Zone” Act designed to attract foreign direct investment in export-oriented activities and the Statutory Corporations Act aimed to facilitate the conversion of public corporations into companies ready for privatization.

176. There are many examples of divested public enterprises that have turned around their desperate situation, which existed before divestiture. Following divestiture new owners often invested in new equipment, increasing employment and production.

  • Ashanti Goldfields Company (AGC). Following its privatization, AGC has been able to tap international capital markets for investment in new equipment and technology and to expand its operation in Ghana as well as in other countries. AGC is listed not only on the Ghana Stock Exchange, but also on other stock exchanges, including those of New York, London, Toronto, and Zimbabwe. It currently has operations in Democratic Republic of the Congo, Guinea, Tanzania, and Zimbabwe. As a result of investment in new technology, AGC’s gold production rose from 1.17 million ounces in 1997 to 1.57 million in 1998, and its cost of production declined from US$254 per ounce to US$217 during the same period.

  • Golden Tulip Hotel. Formerly known as the Continental Hotel, it was operating in poor conditions, having difficulties even in paying wages, which were in arrears. Following divestiture, the hotel was transformed through new investment, staff training, and additional employment. Total employment rose from the pre-divestiture level of 116 to more than 350 people. As a result, its capacity to accommodate guests rose—as number of rooms also increased from 130 to 218—and the quality of services improved dramatically.

  • Tema Steel Company. This company, formerly known as GIHOC STEEL, had practically ceased operations before divestiture. After it was divested in 1991, new owners rehabilitated the company, and production soared to its current level of 21,500 tons a year from its pre-divestiture level of 4,500 tons a year because of increased productivity. Employment rose from the pre-divestiture level of 130 people to almost 600 by 1998.

  • West African Mills Company. New owners installed modern equipment—by investing more than DM 30 million after taking over the company—and employed more workers to boost production. Employment rose from the pre-divestiture level of 170 to 450. Production of cocoa butter more than doubled and processing of cocoa beans rose by more than five times its pre-divestiture level of 10,000 metric tons.

D. Summary and Conclusions

177. After implementation of a divestiture program for the last ten years, several medium-and large-scale public enterprises remain state-owned. A further delay in the divestiture of these enterprises, in particular those with weak financial situation, would not only prevent the efficiency gains expected from divestiture, but could also make the divestiture process more costly for the government. In particular, the opportunity cost of delaying divestiture in terms of lost tax revenue, employment and production could be substantial. The Ghana Vision 2020 strategy requires fast and sustainable economic growth to allow the country to make inroads in poverty alleviation. Divestiture is a key element of this strategy. Therefore, the government will need to find ways to accelerate the divestiture process and take it to its conclusion in the next three to five years.

178. Several measures need to be implemented in order to regain the momentum of divestiture, including the need to enhance transparency, strengthen the DIC structure, and change its divestiture strategy. First, impact studies have noted the lack of transparency and effective participation by stakeholders as major impediments to progress in divestiture58. Accordingly, the timely availability of information on divestiture, the involvement of various stakeholders at an early stage, and the conduct of the bidding process with full knowledge of the stakeholders and the public at large would go a long way to enhance transparency and accountability. This approach would also help expedite the divestiture process by preempting potential questions and opposition to divestiture. The government should also make every effort to publicize the good performance of divested enterprises in the post-divestiture period.

179. Second, the weakness in the administration of the divestiture program needs to be corrected59. To enhance the independence of the DIC and to expedite decisions, the government may want to consider changes in the composition of the Committee to increase representation of the private sector and other interested, but neutral, bodies. Moreover, the DIC Secretariat may have to be restructured to resolve weaknesses in its functioning that have impeded information flow and decision-making60. In particular, there is an urgent need to clearly define and coordinate activities of the Secretariat to improve decision making even during absence of its Executive Secretary.

180. Third, the strategy currently followed to prepare enterprises for divestiture may have to be reconsidered. The preparation of enterprises through, for example financial restructuring or infusion of new investment—which in a number of cases has been the source of long delays—should be avoided in most cases as it could lead to a substantial financial loss for the government when the enterprise is eventually divested. Such a loss could materialize in a situation where the new investments or restructuring may not fit the interests of new owners, who would have preferred a different approach to correcting the enterprise deficiencies.

References

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40

Prepared by Girma Begashaw.

42

During 1966–72, there were some attempts to introduce market-oriented reforms, and to reduce state intervention in the economy through privatization. These attempts largely failed owing to poor execution and lack of commitment.

44

During 1985–89, net outflow from the Government to 14 core public enterprises—which accounted for 60 percent of employment, 72 percent of sales, and 67 percent of value added by the PE sector—averaged about 11 percent of total government expenditures; in 1989 it had reached 17 percent. For details see IDA (1991) and IMF (1996).

45

See Opoku (1999), pp. 4–5.

48

See SDC Investments Ltd. (1995), pp. 12–14, and IDA (1998), p. 3.

49

Included in these were Tema Food Complex Corporation (for US$14 million); Ghana Oil Palm Development Corporation (US$7 million); GNTC Bottling (US$7 million); Ghana National Manganese Company (US$4 million) and; Ghana Rubber Estates Ltd. (French francs 21 million).

51

Included among these are Ghana Airways, Electricity Company of Ghana, Tema Oil Refinery, Produce Buying Company, Ghana Commercial Bank, Ghana Railways Corporation, State Shipping Company, National Investment Bank, and State Insurance Company of Ghana.

52

See IDA (1998), p. 6.

54

Public enterprises passed on by the SEC to DIC for divestiture often could not be sold without difficulties. For example, some enterprises did not have titles to the land they occupied, while others did not have audited financial records for some years.

56

Key companies floated in the Ghana Stock Exchange included: Ashanti Goldfields Company, Aluworks Company, Ghana Aluminium Company, Ghana Commercial Bank, and Social Security Bank. See also Chapter V.

57

From September 1994 to end March 1995, the GIPC registered 834 projects, whose total value was estimated at US$1.3 billion. Out of the foreign investment of US$1.0 billion, one-third was in the form of direct investment and the remaining two-thirds loans. About 77 percent of these projects have been implemented creating 51,000 jobs, of which 48,245 jobs were filled by Ghanaians and 2,973 by expatriates. The remaining 15 percent of the projects were being evaluated while 8 percent were abandoned. For details, see de Dianous (1999).

58

Integrated Solutions Ltd, (1991), IMAS Ltd. (1995), and SDC Investments Ltd. (1999).

59

IMAS (1999).

60

The current structure of the DIC does not provide for a Deputy Executive Secretary who could take a decision in the absence of the Executive Secretary. Also, all senior staff of the DIC reports to the Executive Secretary. This structure does not lend itself to a smooth flow of information and decision, in particular during the absence of the Executive Secretary.

Cover IMF Staff Country Reports
Ghana: Selected Issues
Author: International Monetary Fund
Volume/Issue:
Volume 2000: Issue 002
Publisher:
International Monetary Fund
ISBN:
9781451814811
ISSN:
1934-7685
Pages:
140
DOI:
https://doi.org/10.5089/9781451814811.002

Ghana: Number of State Owned Enterprises, 1992–99

Ghana: Divestiture Proceeds, 1992–99