This report highlights Ghana’s Poverty Reduction Strategy Paper (PRSP). The Ghana Poverty Reduction Strategy (GPRS) represents comprehensive policies, strategies, programs, and projects to support growth and poverty reduction from 2002 to 2004. The GPRS will also focus on providing the enabling environment that will empower all Ghanaians to participate in wealth creation and to partake in the wealth created. The GPRS aims at removing key obstacles to access and use, by the poor, of basic education, health care, population control, good drinking water, and improved sanitation.

Abstract

This report highlights Ghana’s Poverty Reduction Strategy Paper (PRSP). The Ghana Poverty Reduction Strategy (GPRS) represents comprehensive policies, strategies, programs, and projects to support growth and poverty reduction from 2002 to 2004. The GPRS will also focus on providing the enabling environment that will empower all Ghanaians to participate in wealth creation and to partake in the wealth created. The GPRS aims at removing key obstacles to access and use, by the poor, of basic education, health care, population control, good drinking water, and improved sanitation.

1.0 INTRODUCTION

The Ghana Poverty Reduction Strategy (GPRS) is a comprehensive development policy framework in support of poverty reduction and growth. It provides a comprehensive understanding of poverty and its causal relationships. The strategy includes measures to ensure macro-economic stability and a framework for sustainable economic growth to support poverty reduction. The salient features of the GPRS include a broad based sequence of programmed events in support of growth and poverty reduction and a three-year costed growth and poverty reduction measures to find expression in the sectoral Medium Term Development Plans (SMTDP), the corresponding Medium Term Expenditure Framework (MTEF) and annual budgets. It has a comprehensive monitoring and evaluation mechanism for tracking expenditure, outputs and activities in support of growth and poverty reduction and to identify the societal impact of measures taken.

1.1 DEVELOPMENT POLICY FRAMEWORKS SINCE THE MID 1990s

1.1.1 Ghana Vision 2020

Vision 2020, originally entitled National Development Policy Framework, was a wide ranging, twenty five year perspective dedicated to the improvement of individual and social well being. The development of the vision 2020 was preceded by the National Development Goal Setting Exercise, which all districts and regions participated in. The latter exercise produced the underlying national goal which was to improve the quality of life of all Ghanaians by reducing poverty, raising living standards through a sustained increase in national wealth and a more equitable distribution of the benefits therefrom. Issues addressed in the report included the role of the public and private sector, poverty, gender equity, employment generation and rural development.

1.2.2 The First Medium Term Development Plan (MTDP) 1997-2000

The MTDP was the first of the series of 5-year development plans that were to be developed from the 25-year vision. The MTDP, referred to as Vision 2020the First Step, was based upon collaborative work among Ministries, Departments, Agencies (MDA), Regions, Districts and consultations with civil society. Collaboration at national level had been achieved through broad Cross Sectoral Planning Groups, for each thematic area, representing MDA and representative interest groups. The MTDP covered five thematic areas; economic growth, human development, rural development, urban development and the development of an enabling environment

Analysis of these thematic areas indicates that the plan had strictly limited success. This was largely due to limited coordination between the National Development Planning Commission (NDPC) responsible for plan formulation and the Ministry of Finance (MOF) responsible for economic and fiscal management. In the event, annual budgetary allocations did not reflect MTDP Programme objectives. There also appeared to be a lack of political commitment to implementation of the plan.

1.2 PREVIOUS POVERTY RELATED PLANS

The GPRS was preceded by a series of plans, which placed emphasis on poverty reduction and human development. The first was the report entitled Making People Matter: A Human Development Strategy for Ghana (1991) followed by the National Development Policy Framework,1 (1994) a twenty five year development perspective and Vision 2020: the First step (1995), a five year policy statement later developed into the First Medium Term Development Plan 1996-2000, (MTDP). In 2000 an Interim Poverty Reduction Strategy Paper (I-PRSP) was produced. The latter document was limited in scope.

Vision 2020: the First Step and the MTDP were not costed and the latter prepared in insufficient detail to provide effective guidance by which MDA could prepare appropriate programmes and projects. In the event annual budgets failed to reflect the policies incorporated in the plan, which was, therefore, not fully implemented.

1.3 EXPENDITURE ON POVERTY REDUCTION AND GROWTH

Government expenditure has been biased in favour of recurrent expenditure the majority of which went into salaries. The latter represents approximately 30% of total government expenditure. Spending on poverty reduction and growth programmes and projects has been low. Regressive elements in spending on health and education have constrained poverty reduction. The level of expenditure in the social sector is low relative to African averages with spending on health and education at 2.0% and 2.8% of GDP respectively. Education and health account for about 90% of social sector spending with the remaining sub sectors each receiving a small proportion of expenditure. Multilateral and bilateral donors make a significant contribution to development expenditure in favour of health and education.

Overall, donors contributed the largest share of non-wage expenditure. This share represented 75% of total non-wage expenditure in 1997 but declined to about 66% in 1998 Donor aid to economic services and infrastructure represents a substantial proportion of total expenditure in those two areas, for 2001, as follows:

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This level of donor support for poverty reduction and growth represents an unsustainable situation in the long term.

The structure and geographical distribution of government expenditure over the period gives cause for concern. Civil service employment as a percentage of population was the third highest (1.8%) in sub-Saharan Africa (SSA). The government wage bill as a percentage of GDP (5.6%) was significantly higher than the average for low wage non CFA countries, (4.1%). Despite these figures, emoluments in the public service represent unacceptably low conditions of service. Of total government expenditure general administrative costs are very high. Within expenditure on poverty reduction and growth an inordinate amount is dedicated to goods and services. Expenditure at the grass roots on social protection, production and productivity remains derisory. The geographical distribution of expenditure has not been influenced by policies to achieve a more equitable distribution of benefits. Expenditure has continued to be biased against development of the rural environment and has failed to ameliorate disparities between north and south.

1.4 INTERIM POVERTY REDUCTION STRATEGY PAPER 2000-2002

The limited impact of the Ghana Vision 2020: The First Step and the MTDP in laying the foundation for sustained poverty reduction led to attempts to formulate more poverty-focused policy initiatives. Consequently, the Interim Poverty Reduction Strategy Paper (I-PRSP) for Ghana was prepared in June 2000 for the period 2000 to 2002 and has been used as an outline for growth and poverty reduction.

Preparation of the GPRS for 2003-2005 builds on the I-PRSP, with greater emphasis on participation of key partners, including civil society, the media, private sector, all arms of government and development partners.

1.5 A DEFINITION OF POVERTY

Poverty is recognized as multi-dimensional with complex interactive and causal relationships between the dimensions. For purposes of the Ghana Poverty Reduction Strategy (GPRS) poverty is defined as unacceptable physiological and social deprivation. This may be caused or exacerbated by:

  • - lack of macro-economic stability that erodes the resources of the poor through inflation and other variables

  • - the inability of the national economy to optimise benefits within the global system

  • - low capacities through lack of education, vocational skills, entrepreneurial abilities, poor health and poor quality of life

  • - low levels of consumption through lack of access to capital, social assets, land and market opportunities

  • - exposure to shocks due to limited use of technology to stem effects of droughts, floods, army worms, crop pests, crop diseases, and environmental degradation

  • - habits and conventions based upon superstition and myths giving rise to anti social behaviour

  • - the lack of capacity of the poor to influence social processes, public policy choices and resource allocations

  • - the disadvantaged position of women in society

  • - other factors leading to vulnerability and exclusion

1.6 STRUCTURE OF THE GPRS DOCUMENT

This volume provides the analysis and policy statements of the Ghana Poverty Reduction Strategy in eleven chapters. Chapter 1 is the introduction while chapter 2 provides the process of preparing the GPRS. Chapter 3 focuses on poverty diagnostics followed by the long-term growth and poverty reduction goals in chapter 4. Chapter 5 provides the strategy for ensuring macro-economic stability, while chapter 6 focuses on the strategy for increased production and gainful employment. Chapter 7 discusses the strategies for human resources development and the provision of basic services. Chapter 8 contains the special programmes for the vulnerable and the excluded, and chapter 9 discusses Good governance. Chapter 10 summarizes the medium term priorities of government, which consists of programmes and projects that span across all the thematic areas discussed in the previous chapters. Finally, chapter 11 presents the plan for monitoring and evaluating the implementation of the GPRS.

2.0 PROCESS OF PREPARING THE GPRS

2.1 APPROACH

One of the key principles adopted in the preparation of the GPRS was the participation of Ghanaians to ensure national ownership by all stakeholders of the strategy formulation, programme implementation, and monitoring. Mechanisms employed included information dissemination, collaboration, coordination, and consultation in the context of existing political and governance systems. Consultations were employed within government, between government and civil society at the national level; and between government and civil society at the local level.

Groups for consultation were selected based on their ability to build broad legitimacy for the GPRS, The groups were also seen as partners whose support was felt to be necessary for the implementation of the GPRS. Care was taken to ensure the inclusion of a full range of skills necessary for the preparation of the GPRS and the selection of effective policies for addressing poverty. The results of past participatory studies were also included as inputs into the formulation of the GPRS to reduce the pressure and costs of undertaking fresh participatory studies.

2.2 PROCESS

The GPRS preparation process started in early 2000 with a national forum of stakeholders involved in poverty reduction activities. Representatives from government, the private sector, NGOs involved in the delivery of basic services, Civil Society groups involved in policy work and advocacy and some development partners participated in the forum. Discussions at the forum focused on the changing dimensions of poverty in Ghana during the 1990s and the areas of focus for the preparation of the revised poverty strategy for Ghana. A preliminary poverty situation analysis identified five major thematic areas of significance to poverty reduction and growth. These areas were:

  • - The Macro Economy

  • - Production and Gainful Employment

  • - Human Resource Development and Basic Services

  • - Vulnerability and Exclusion

  • - Governance

In July 2000, a formal launching of the Ghana Poverty Reduction Strategy process was held involving a wider cross section of Ghanaians and other stakeholders in development. This constituted a public declaration of the intention of Ghanaians to prepare a poverty reduction strategy with the participation of all stakeholders in development. The process was to be led by Government. Civil society at this forum, declared its preparedness to collaborate with Government to develop the poverty reduction strategy.

Following the launching of the process, Core Teams were established for the five thematic areas in August 2000. The teams comprised representatives of appropriate Government Ministries (which chaired each team), Civil Society Organisations, Non-governmental Organisations, the private sector, development partners and some private individuals. The Core Teams were chaired by the lead government agency for that sector. Broad guidelines were provided to Core Teams at the start of the exercise, but teams were expected and did develop their own detailed approach to the task. A consultant sponsored by a lead donor or other interested stakeholders assisted the Core Teams with their analytical work. A conscious effort was made to ensure the participation of all stakeholders with a view to achieving the following objectives;

  1. To ensure reflection of views of average citizen in the GPRS;

  2. To ensure input of Government Ministries, Departments and Agencies;

  3. To make certain that civil society’s role in implementation was well defined;

  4. To enhance the advocacy and watch-dog role of civil society;

The Core Teams worked throughout the change in Government at the end of year 2000 and submitted its zero draft document, which was discussed at a harmonisation workshop in March 2001 comprising all the five teams, private sector, NGOs, Civil Society and development partners.

The work of the Core Teams was itself part of the process of consultation between government, civil society and donors. To complement this, an additional series of consultations were organised in selected locations throughout the country in order to ensure the reflection of the views of a cross section of Ghanaians, especially those at the local levels in the document.

At the sector level, use of the Medium Term Expenditure Framework (MTEF) policy hearings at sector levels forms part of the existing consultation mechanisms employed for the GPRS. District Assemblies have been involved in the consultation processes for the GPRS, firstly as part of their usual consultation role in district medium-term plan preparation processes and also specifically for the GPRS. The sub-district structures also played a key role in ascertaining the views of citizens within their areas of jurisdiction, especially in the area of obstacles faced by the poor participating in growth, the prioritisation of their needs for poverty reduction, setting targets and indicators for monitoring. Some of these consultations have already been institutionalised as part of the process of preparing the district five-year plan.

2.3 GROUPS CONSULTED

Specific groups were identified for participation in the formal consultations for the GPRS. They are listed below as follows:

1. Community Groups: Consultations were conducted in a sample of thirty-six communities at the start of the GPRS to:

  • - Disseminate information on the GPRS process

  • - Obtain community perceptions on poverty

  • - Ascertain from respondents the priorities for poverty reduction; and

  • - Find out from respondents, the obstacles to poverty reduction

Groups consulted in the sample communities included women, the youth, men, occupational and interest groups and traditional authorities. These groups were selected in consultation with District Assemblies especially their respective District Planning and Coordinating Units (DPCUs).

These community consultations in the selected districts were followed by district Wrap up sessions with District Assembly personnel including the Planning and Budget officers, the district directors of Agriculture, Education and Health and the District Coordinating Director. The district wrap-up sessions were followed by regional workshops, which had participation from all the districts within each region. Participants were from the public, private, NGO and civil society groups and community based organisations. In all, consultation workshops were also held in twelve Districts and six administrative Regions. The outputs from these consultations were fed into the analytical work of the relevant core team and these guided their study programmes.

2. The Communications Media through a one-day seminar involving the following subgroups:

  • - The Ghana Journalists Association

  • - Representatives of media houses (state-owned and private)

  • - Representatives of the print and electronic media

This group’s seminar was combined with that of the coalition of women’s groups to ensure good media coverage of the event and of gender issues in the GPRS process.

3. The Trades Union Congress (TUC) & members of the Structural Adjustment Participatory Review Initiative (SAPRI). A one-day seminar was organised for this group, which included all the unions under the TUC, other civil society groups such the Ghana Association of Teachers, the Ghana Registered Nurses Association etc. The TUC later sent a detailed comment on the GPRS.

4. The Professional Bodies & Student Unions - (National Union of Ghana Students and National Union of Polytechnic Students). A call for comments was made to these two groups on the first draft of the GPRS. The two groups also participated in the seminar organised for research institutions and policy think tanks.

5. Women leaders/Coalition of women’s groups. A one-day seminar was organised initially for this group together with the communications media. The coalition of women’s groups, Netright, expressed their dissatisfaction with the lack of gender sensitivity of the first draft of the GPRS and obtained funding to hold another one-day workshop. The coalition of women’s groups prepared a statement listing the areas, which they felt, could be more engendered and which had not been treated as part of the first draft document. Following this workshop, Netright engaged a consultant to prepare inputs into the GPRS to make it more gender sensitive.

6. NGOs in Service Delivery and Religious Bodies also had a day’s workshop where together with the GPRS drafting team, NGO guidelines for implementation were drafted for their comments. These guidelines detailed the role of Civil Society in the implementation of the GPRS, their areas of interest and their areas of comparative advantage in service delivery in relation to other development stakeholders. The agreement was that these organisations were to work within the development plans of District Assemblies and Ministries, Departments and Agencies to avoid duplication.

7. The National Association of Local Authorities Ghana (NALAG) received a call for comments on the first draft GPRS which they responded to.

8. A call for comments was made to the Ghana Institute of Planners.

9. The Ghana Employers Association, the Trades Unions and the Government had a tripartite meeting on the GPRS, followed by a meeting with the labour unions, which in turn circulated that draft GPRS to their constituent members at the regional and district levels. A comprehensive statement was presented to Government from the TUC about their concerns with the document. In the main, these comments were reflected in subsequent drafts with the exception of a few which required further analytical work before they could be included. These are slated for reflection in the annual reviews of the GPRS.

10. A day’s seminar was organised for the Research Institutions And Policy Think Tanks for their comments and inputs into the first draft GPRS.

11. Members of Parliament & representatives of Political parties were consulted through a two-day retreat and a one-day seminar to solicit their inputs into the GPRS. Use was also made of other seminars organised by interested groups for the Finance and Public Accounts Committees of Parliament.

12. For Sector Ministers and their deputies, a one-day meeting was held followed by another meeting with their Chief Directors.

As a follow-up to the meeting with Ministers and Chief Directors, a meeting was also organised together with the Ministry of Finance, with Chief Directors of MDAs and the Directors of various departments within the MDAs. Drafts of the GPRS were also circulated to divisional directors of MDAs for their specific technical comments on the GPRS. On the basis of the foregoing consultations further updating and upgrading was made to the GPRS, which was then used as the input into the MTEF and budget process, through:

  • - Separate GPRS/MTEF/Budget Policy Review workshops for the functional Sectors: Administration, Public Safety, Economic Services, Infrastructure and Social Services

  • - Separate GPRS/MTEF/Budget Cross Sectoral meetings for Functional Sectors

  • - Separate GPRS/MTEF/Budget Policy Hearings/Strategic Plans for MDA by Functional Sectors

  • - GPRS/MTEF, Budget Hearings for MDAs

Following the finalisation of draft estimates by MDAs, the MOF and NDPC/MEPRC scrutinised and completed these for review by Cabinet and Parliament. The output from this final process formed the basis for the three years of costed poverty reduction and growth measures.

13. For Ghana’s development partners, the regular Mini-Consultative Group meetings organised as part of the Comprehensive Development Framework process served as the forum for consultations. In addition, a separate seminar was held with development partners on the first draft following which a call for comments was made. Partners also sent in missions to determine how best they could streamline their country programmes to fit within the priorities of the GPRS as endorsed by all stakeholders.

14. A Parliamentary Select Committee on GPRS implementation, monitoring and evaluation has been formed following a statement by the Minister for Economic Planning and Regional Cooperation in Parliament on the GPRS.

15. At Ministerial level, three Ministerial Workshops to ensure Government ownership and commitment. During the final workshops, the medium-term priorities of the GPRS were agreed. This has focused the broader GPRS on the priority areas for implementation.

Table 2.1:

Chronology of the consultations by activity

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2.4 DISSEMINATION AND PUBLICITY STRATEGY

Government wishes as many Ghanaians as possible, especially the poor, to be aware of the content of the final GPRS document and how they can benefit from it or use it in their development efforts. For this reason, the objective of the dissemination and publicity of the GPRS document is:

To create a national understanding of the GPRS for effective participation of communities, groups or individuals in influencing decisions on development policies and expenditures.

The following target groups have been identified for the dissemination and publicity strategy of the GPRS at the various levels:

At the National level, groups identified include:

  • Members of Parliament (primarily as the “voices” of the poor)

  • Ministers of State

  • Political parties

  • Government sub-vented agencies (including Chief Directors &. Directors, Planning & Budget officers)

  • Research institutes and think-tanks

  • Civil society organisations - e.g. TUC, GNAT, etc

  • NGOs

  • Private Sector, e.g. business and professional associations

  • Media houses and journalists

At Regional and District levels:

  • Traditional authorities

  • Regional Planning and Coordinating Units (RPCU);

  • District Planning & Coordinating Units (DPCU)

  • Political parties - regional and district branches

  • Regional and district heads of departments of Government Agencies & departments

  • Private sector

  • Civil society organisations

  • NGOs

  • Project Management units of Poverty Reduction Projects e.g. VTP, SIF etc.

  • Media houses and journalists

At the Community level:

  • CBOs

  • Assembly persons

  • Sub-district institutions

  • Religious leaders

  • Traditional leaders (men and women)

  • Community members

At the international level, the aim is to ensure that staff in the country’s embassies and “Ghanaian societies” outside Ghana become familiar with the content of the GPRS.

2.4.1 Dissemination Activities

Dissemination activities vary depending on the target group and level. The following activities at the different levels have been identified:

National Level:

  • Printing and distribution of the two major documents on GPRS and

  • Preparation, printing and dissemination of shorter/simplified versions

  • Official launching of the GPRS at national level

  • Exhibitions of GPRS performance (in its second year)

  • Seminars and Workshops for various national level target groups

  • TV and Radio Discussion programmes

  • GPRS documentaries on TV and radio

  • Development of a website on GPRS

  • Information posters for publicising GPRS events

Regional/District Levels:

  • Dissemination of the two major documents on GPRS and simplified versions

  • Seminars and workshops for various regional/district level groups (non-technical groups)

  • TV & radio discussion programme in local languages

  • Seminars and workshops for Area/Town councils members and staff

  • GPRS documentary/drama (on its essence) in major local languages

  • Exhibitions at regional and district levels

  • Information posters for publicising GPRS events

Community Level

  • Discussion forums on local radio (FM)

  • Seminars and workshops for assemblypersons

  • Durbars

  • Workshops for CBOs

  • GPRS summary versions (25-page, one-page leaflets) translated into local languages

  • Information posters

All of the above activities form part of a multimedia campaign at all levels, which uses radio and TV as the major channels because of the low literacy rate, especially among the poor. Some of the GPRS programmes will be conducted in local languages. Considering the gender dimensions of poverty, attention will be given to make dissemination and publicity of the GPRS gender-sensitive.

3.0 DIMENSIONS OF POVERTY IN GHANA

Poverty has many dimensions. Therefore a range of indicators is needed to inform the range of policies to tackle the causes and mitigate the consequences of poverty. Households and communities may be characterised as poor based on lowness of income, malnutrition, ill health, illiteracy, lack of access to safe water and sanitation facilities, and general insecurity. These conditions combine to keep households and whole communities in persistent poverty. The analysis here therefore focuses on three dimensions of poverty: income or consumption poverty, lack of access to basic services, and deprivations in human development. The analysis is based on the Ghana Living Standards Survey (GLSS 4) conducted by the Ghana Statistical Services over the period April 1998-March 1999. It also makes use of several supplementary data. Notably, the Participatory Poverty Analysis (PPA) survey administered in 36 sample communities from 14 districts in 6 regions provides qualitative data on perceptions of poverty. The Ghana Macroeconomics and Health Initiative background reports provide further disaggregated data on health indicators of poverty.

3.1 TRENDS IN CONSUMPTION POVERTY IN THE 1990s

Poverty trends in the 1990s are the single most important indicator of whether past policies succeeded in improving standards of living, if so, by how much. We will relate the trends to the country’s economic growth experience. Table 1 provides a summary picture of some of the quantitative and qualitative poverty indicators. Overall poverty levels decreased between 1991/92 and 1998/99 from 52% to 40%. Extreme poverty declined from 37% to 27% over the same period1 This progress, however, masks the uneven decline in poverty and incidents of growing and deepening poverty in some geographical areas.

Table 3.1:

Dimensions of Poverty in Ghana

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Source: Ghana Living Standards Survey 4

The evidence suggests that the vulnerability and exclusion among some geographical groups, socio-economic groups, gender and age groups may have worsened. Population growth during the period may have far outstripped the positive impact of growth on the rate of decline in poverty levels in some areas. And, but for the migration of the youth from the rural to the urban areas as head porters, street hawkers and so forth, poverty levels in some of these areas could have been worse than what the statistics reveal.

3.1.1 Geographical Disparities

There are significant differences in the spatial distribution of poverty. Five out of the 10 regions in Ghana had more than 40% of their population living in poverty in 1999. By income measure, poverty levels are highest in the three northern savannah regions (the Upper East, Upper West and Northern Regions), ranging between 69% and 88%. Nine out of ten people in the Upper East, eight out of ten in Upper West, seven out of ten in Northern Region and five out of ten in Central and Eastern Regions were classified as poor in 1999 (Figure 3.1). Of the ten regions, the Upper East, Northern and Central regions experienced increases in poverty levels and extreme poverty in the 1990s. Urban areas in the northern savannah also experienced significant increases in poverty levels during the period.

Figure 3.1:
Figure 3.1:

Regional Poverty Profile

Citation: IMF Staff Country Reports 2003, 056; 10.5089/9781451814798.002.A001

Figure 3.2 provides another perspective of the incidence of poverty for the country as a whole and by localities that span different administrative regions. At the national level, despite the 10 percent drop between 1991-92 and 1998-99, nearly one-quarter of the population (27%) in 1989-99 was unable to meet their basic nutritional requirement even if they devoted their entire consumption budget to food. The geographical variations of extreme poverty ranged from 2% in Greater Accra to 59% in Rural Savannah, which spans much of the Northern, Upper West and Upper East administrative regions. The 1% increase in extreme poverty between the two census periods in rural savannah is in contrast with the no-change in extreme poverty in the urban savannah. The increase in overall poverty across these three administrative regions is therefore largely a rural phenomenon, a case of the poor getting poorer, and an indication that policy measures to alleviate poverty could not have taken hold in this region of the country.

Figure 3.2:
Figure 3.2:

Extreme Poverty Incidence by Locality

Citation: IMF Staff Country Reports 2003, 056; 10.5089/9781451814798.002.A001

Source: Ghana Statistical Service

In contrast, reductions in extreme poverty have occurred noticeably in rural forest belt (covering Brong Ahafo, Western, Ashanti regions) and moderately in the rural coastal (covering parts of Eastern, Central and Volta regions). Despite these reductions, the levels of poverty in Brong Ahafo, Volta, and Eastern regions remain high. The information in Figure 3.2 also suggests that apart from Accra average reductions in extreme poverty in the urban areas have been marginal, falling from 18% in 1991/92 to 17.3% in 1998/99.

The lack of disaggregated data covering districts and communities is a major limitation of poverty analysis in Ghana which future surveys must rectify. For example, although rural poverty in Coastal belt is around 30%, (Figure 2) there is evidence that this figure like all the broad geographical income poverty indicators masks significant variations that may exist at the district levels. It is conceivable that some districts in larger areas classified with higher incomes (lower poverty) have significantly higher poverty incidences. For example, a 1993-94 research study of Osudoku, a sub-district of Dangme-West, a rural coastal area, suggested poverty levels as high as 70%. The GLSS 4 therefore fails to uncover the true incidence of poverty even based on consumption levels.

3.1.2 Disparities Among Occupational Groups

Figure 3.3 presents the incidence of poverty by main economic activity of households based on the upper poverty line. Poverty is by far highest among food crop farmers. Their poverty remains nearly 19% above the national average of 40% in 1998/99 and they, together with those in non-farm self-employment, experienced the least reduction (9%) in poverty. This is of concern for three reasons: (1) the contribution of food crop farmers to the national incidence of poverty is much in excess of their population share, (2) poverty among food crop farmers is also much more pronounced based on the measure of extreme poverty, and (3) women are more predominant in both the food crop and non-farm self-employment sectors. Although the incidence of poverty among export farmers remains relatively high (39%), they experienced the largest reduction in poverty (25%). The strength of their poverty reduction reflects a number of factors including the conscious policy effort to promote the growth of the non-traditional exports in the 1990s, the relatively easier access to financing, and access to markets.

Figure 3.3:
Figure 3.3:

Poverty by Socio-Economic Groups

Citation: IMF Staff Country Reports 2003, 056; 10.5089/9781451814798.002.A001

Also experiencing noticeable reductions in poverty are those in formal private sector employment followed by those in the informal private sector and wage employees in the public sector. Looking forward, the trends in poverty reduction in the 1990s suggest that the growth in the private sector and access to marketing opportunities, especially for exportable products, may hold greater promise for poverty reduction. The range of policies to reduce poverty must address the constraints on food crop farmers (predominantly rural, small scale) and the non-farm self-employed, also predominantly women engaged in micro enterprises.

3.2 TRENDS IN SOCIAL DIMENSIONS OF POVERTY

3.2.1 Health-Based Indicators of Poverty

Social indicators point to mixed progress in the 1990s. Although early mortality rates decreased (66/1000 to 56/1000 for infants and 119/1000 to 108/1000 for under five) from 1992 to 1998, there are deep geographical disparities. Infant and under five mortality in the three northern regions are generally higher than in the south. In comparison with the Greater Accra Region, they are twice and three times as high respectively. A contributory cause is the fact that over 30% of children in the north are not fully immunized before their first birthday. The 31% incidence of diarrhoea in the north is unacceptably high compared to the national average of 18%. The immediate contributory factors to this problem are the lack of access to health-determining facilities, in this case, water and sanitation.

Poverty and Nutrition

Nutritional-based measures of poverty reveal similar regional patters. Although the incidence of stunting and wasting3 declined in the ten-year period since 1988, the incidence of wasting increased in three regions. Nation-wide, about every 30 in 100 children under 5 years were found to be stunted. The percentage for the rural areas is 33 in every 100 and for urban areas 21 in every 100. Boys were 14% more likely to be stunted than girls in the same age cohort. In contrast, boys were 40% less likely to be wasted than girls. Malnutrition measured by underweight and stunting among children under five similarly shows adverse conditions prevailing in the north of the country with 34%-38% and 35-40% respectively compared to 25-27% and 26% nationally. Boys were nearly 7% more likely to be underweight than girls.

These children are more than hungry. There is not only a discomfort in being malnourished, high incidence of malnutrition can affect brain growth and development. For school-going children, there is impairment in the capacity to do mental work through illness and plain weakness.

Poverty and Access to Health Care

Use of health facilities (as indicated by the number of individuals seeking modern medical care following an illness or injury) is also low and on the decline (Figure 3.4), a feature observed to be closely linked with the introduction of increases in health user fees. Delivery assistance signals the depth of delivery of health services. Data for 1998 indicate that about 45% of all deliveries at the national level were supervised by a medical practitioner, about 31% by Traditional Birth Attendant, and 25% by unsupervised self help. The percentage of supervised births by a medical practitioner in the urban areas of nearly 79% is more than twice the rural figure of 33%. For 56% of the population who are predominantly rural, unsupervised deliveries is nearly one-third of all deliveries. On regional basis and for no apparent reason, Traditional Birth Attendant delivery is highest in the Eastern region. Unsupervised delivery appears to be the norm in the Upper East region.

Figure 3.4:
Figure 3.4:

Access to Medical Personnel and Delivery Assistance

Citation: IMF Staff Country Reports 2003, 056; 10.5089/9781451814798.002.A001

Nearly 70% of the sample population (especially among the rural and urban poor) cited cost as one key reason for non-use of medical services. Physical location of health facilities, which is not directly related to household income and affordability, is another important factor. The not-for-profit religious missions sector operates 43 hospitals outside the regional capitals, making them relatively accessible to rural populations in districts where they are sited. Dyna Arhin remarked that in other rural districts where neither mission nor state hospitals are located, distance represents a major obstacle for the rural population even when incomes in these districts may be higher than the national average4. By the GLSS 4, the proportion of the population in rural areas who needs more than 30 minutes to reach the nearest health facility increases by the level of poverty. It ranges from 51% for the non-poor to 70% for the lowest 2 poverty groups.

Poverty and Handicapped Persons

It is noteworthy that the level of handicapped persons is higher in the rural areas of the country than in the urban areas. Surprisingly, the level of handicap persons tends to increase monotonically with increasing poverty. The fundamental reason is that generally, women in poor households are less likely to seek or to receive maternal care services than their urban counterparts. Children from poorer households in both urban and rural areas therefore are more likely to be born without medical supervision. These together with poor nutrition increase the likelihood of abnormal growth and vulnerability to disease and mishaps with adverse developmental effects. Even some congenital effects may themselves reflect poor pre- and post-natal care.

Poverty and Access to Safe Water and Sanitation

The relatively high incidence of diarrhoea in the northern parts of the country was attributed partly to the lack of access to clean drinking water and proper sanitation. Coverage of potable drinking water varies substantially across the country.

Given the preponderance of water-borne diseases, the vulnerability of 81% of the rural population who depend on untreated water should be a matter of concern. The problem may be no less severe even among urban districts, especially those in the periphery of urban (peri-urban) areas. A study of 60 communities in the second largest municipality in Ghana (Kumasi Metropolitan) and five other districts found that 23% of the sample did not have access to pipe-borne water or pipe network. Moreover, 63% had pipe network but had no water or experienced irregular flow of water and up to 30% of households depended on hand-dug wells. Using access to water as an indicator of poverty, the study estimated the level of poverty in this urban sample to be between 50-75%. The study suggests that some districts even in the larger urban classification would require prioritisation of investments in water to alleviate poverty. 5 The study also observed that households without access to piped water tend to rely on a variety of less reliable and unhygienic sources, including mobile water tankers, and fixed vendors of water, shallow wells and deep wells, boreholes, springs and commercially bottled water.

Research has also shown that water quality in the peri-urban areas has fallen for one simple reason: increasing demands on waste management systems cannot cope with urbanization.6 As a result, pollution of water and all facets of the physical environment are rising, making waste management strategies an urgent need in order to avert the detrimental impact on health of some sections of the population. Of concern is that those likely to be hardest hit by a high exposure to contamination from improperly disposed sewage and refuse are the poor and vulnerable groups- those least able to cope with it.

Poverty and the Incidence of HIV/AIDS

Table 3.3 below highlights the incidence of HIV/AIDS and the prevalence rates in 1999. The sharp geographical variations are just as important as the incidence by age groups. Of the half a million afflicted Ghanaians the majority are within the ages of 15-49 years, and the prevalence rate is twice as high for females as males. The implications for poverty are many especially in the areas of socio economic development. The loss of the youth in their productive years will diminish the capabilities of households to support themselves. In agriculture, the loss of labour may compel farmers to shift from export or cash to food crops. And in industry, the loss of skilled manpower will increase the costs for training and replacement training, and health bills. Moreover, for households, the increase in the prevalence rate will mean the loss of the first social safety net, loss of income to the family as a result of loss of breadwinners, increase the dependency of children on the aged, selling of family assets to pay for bills, increased orphans, and children may not attend school.

Table 3.2:

Source of Drinking Water

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Source: GLSS 4
Table 3.3:

HIV Prevalence Rate (1999)

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Source: Information supplied by Ghana Aids Commission from NACP, HIV Sentinel Surveillance 2001 (May 2002).

The above evidence suggests a number of priority areas for the country’s efforts at addressing access to health and health related causes of poverty. The key major areas are financial and physical barriers to accessing health care, diarrhoea, malaria, early childhood vaccination and immunization against killer diseases, maternal care, source of drinking water, and reducing the spread of HIV/AIDS. Several aspects of the above areas relate to efficiency and effectiveness of the use of existing resources, improved physical location of health care facilities, additional manpower needs, improved community education, and additional resource mobilization.

3.2.2 Education and Poverty

The level of education attained is a signal of the income earning potential of individuals and households and therefore a predictor of the population segment likely to be vulnerable to income shocks especially with ageing. Table 4 highlights the education attainment of people aged 15 years and above. About 32 percent of adults and nearly twice as many females as men had never been to school. And not a negligible number (25%) went to school but did not complete the minimum years for any certificate.

Table 3.4:

Levels of Educational Attainment

(Population aged 15 and above)

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Source: GLSS 4

Table 3.5 summarizes further the rural-urban and regional analysis of individual characteristics of education by gender. There is a substantial difference between girls and boys in their school attendance, noticeably so in the rural areas and in the Northern, Upper East and Upper West regions. For example, for every 100 girls who never attended school there were 45 (Urban) and 64 (rural) boys who also never attended school. For those who attend school, the higher girl’s school dropout rate is evident in the ratio of girls to boys who finally complete secondary school education.

Table 3.5:

Gender Analysis of Education by Region

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Table 3.5:

Education Characteristics by Poverty Quintile

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Source: CWIQ Survey 1997, Ghana Statistical Service March 1998

As we see from Table 3.5, the ratio is 100 girls to 201 boys in the urban areas and to 417 boys in the rural areas. The regional disparities in the level of highest school attained are also evident in Table 3.5, and are more noticeable in regions with higher rural population concentration. In terms of school completion, the results show that the poorest regions also tend to have the highest girl’s school dropout rate at the primary and junior school level. The dropout rate picture is different at the secondary school level. For every 100 girls who managed to complete Senior Secondary school, there were 833 boys in Brong Ahafo, 600 boys in Central region, 460 boys in the Eastern region, 440 in Northern region and 190 in Upper West.

Table 3.6 highlights some of the reasons that might contribute to dropout rates by poverty quintile in the rural and urban areas. The reasons range from the lack of books and supplies, poor teaching, lack of teachers and overcrowding, distance, high cost, child labour, disease, pregnancy, and early marriage. Nearly one-third of children cited the need to work as the reason for not attending school. Another third cited cost as the reason. The two reasons are closely linked because children from poor to poorer homes are the ones most likely to be in need of work to earn income or provide supplementary family labour. Child labour therefore is a national problem. It breeds another cycle of people who most likely will be less well off or end up in poverty later. Participatory assessments further reveal the depth of social problems, particularly, the phenomenon of street children, kayayei and harmful tradition practices as both causes and effects of school dropout rates.

Overall, gross primary one admission and primary school enrolment ratios have not significantly improved since 1992. Dropout rates remain high at about 20% for boys and 30% for girls at Primary School and 15% for boys and 30% for girls at Junior Secondary School. Gender and location disparities are evident. The quality of education is alarmingly low (Figure 3.5) further impinging on enrolment and retention.

Figure 3.5:
Figure 3.5:

Share of Pupils Reaching Mastery Levels7 in English and Mathematics (1999)

Citation: IMF Staff Country Reports 2003, 056; 10.5089/9781451814798.002.A001

Source: Ministry of Education, Criterion Reference Test, 1999

3.2.3 Poverty and Landlessness

Until recently landlessness in Ghana was not perceived to be a problem. Almost all communities were self-sufficient in their basic land requirements for subsistence and related needs, thanks to progressive customary tenurial systems.8 However, emerging land use patterns, urbanization, and gender insecurity especially in communities adjacent to sprawling urban centers pose problems. Rapid urbanization is likely to threaten overwhelming majority of the indigenous communities given their weakened or non-existent land rights, the lack of alternative sources of livelihoods and employment avenues. With the current population growth of 2.6%, the growth of urban centers and their peripheries is likely to be at least double the national rate and it can be expected that the pressure of landlessness and homelessness on the poor and the very poor can be intense. A case study of Ofankor lands, a peripheral community of the nation’s capital, Accra, shows that the poor and indigenous communities are often the victims of land expropriation into government lands which are subsequently allocated to individuals outside the community often with paltry compensation to the indigenous people.9 Besides high population growth pressures, rapid urbanization and emergent informal land markets, many point to failures of formal land policy interventions by government at the misinterpretation and misapplication of the basic tenets of the law to the disadvantage of the poor and vulnerable groups.

3.2.4 Disparities By Gender

The analysis so far indicates that poverty in Ghana has important gender dimensions and therefore requires focused public policy measures. Females represent 50.5% of the total population, with regional variations of 49% in the Western region to 52% in the Central region. The evidence also suggest that regions experiencing the least reductions (or experiencing increases) in poverty levels (Central, Eastern, Northern, Upper East and Upper West - Figure 3.1) also tend to have female population in the range of 50 - 52 percent. Incidentally, these regions also tend to have greater population concentrations in the rural areas.

Studies have shown that women experience greater poverty, have heavier time burdens, lower rates of utilisation of productive resources and lower literacy rates. Gender disparities exist with respect to access to and control of a range of assets including direct productive assets such as land and credit, human capital assets including education and health, and social capital assets such as participation at various levels, legal rights and protection. Lack of startup capital and resources for any kind of income generating enterprise and lack of labour in smaller households prevent women from escaping poverty.10

Some socio-cultural factors continue to perpetuate the gender inequities in access to and use of services and also contribute to such situations as the inequitable allocation of food within the household, leading to malnutrition - notably among women and children. Gender-based violence also has important health, economic and political implications.

The connection between education, female household heads and income earning capability is a good reason to worry about the fact that only 6% of females aged 15 years and over had attained higher than secondary school education. Nearly 35% of all household heads are females. About 61% (53%) of female household heads in the urban (rural) areas fall in the poorest 20% of the population. 11 Most important of this statistics is that female poverty entails further deprivations that manifest in children’s significant under nourishment and infant mortality.

The different HIV prevalence rate (Table 3.3) among women and men between the ages 15-49 is also another cause for concern. The risk factors and vulnerability are different for men and women as are the implications for the impact of HIV/AIDS by gender. There are implications for care, treatment and for addressing the needs of AIDS orphans, which falls disproportionately on women.

Gender differences also exist with regard to legal status and also in their rights and protection under the law. Women’s legal rights with regard to access and control of land differ by the diverse lineage systems. Women are also poorly represented at all levels of decision-making. Women’s decision-making choices at the community and household levels, especially in rural areas, are constrained by cultural taboos and resistance from men.

3.2.5 Poverty and Infrastructure Support

It is hard to conceive of any poverty reduction measures without devising appropriate policy measures to address issues of deprivations as reflected in inequitable access to health facilities, opportunities for children to go to school, availability of electricity and safe water, and access to markets. These have direct and indirect bearings on a number of poverty indicators, varying from the income poverty of food crop farmers, limited access to health, and the vulnerability of the rural population to internal shocks.

It is generally acknowledged that while feeder roads are in very bad conditions and trunk roads bad, the problems of transportation along the coast and connecting most of the food growing regions - Central, Western, Ashanti and Brong Ahafo - are not any better. Poor road network is a constraint to a resource-based expansion for 2 reasons. On the production side, it severely limits access to prime agricultural lands, especially in the Brong Ahafo, Western and Ashanti regions. On the distribution side, it limits opportunities and access to markets, raises costs to producers and the predominantly self-employed women in the distributive trade, and serves as disincentives to those who wish to invest in the agricultural sector. For food crop farmers, as an example, increasing productivity may not be sufficient to alleviate their plight, especially if farmers in the same geographical area tend to grow similar products and therefore cannot find markets among themselves. A study of peripheral communities around Kumasi, the second largest metropolis, found that improvements in road infrastructure enabled some farmers to supply a much bigger market than they had previously been able to serve. This led to an increase in the proportion of higher value horticultural and intensive poultry enterprises.12

Granted that bad roads conditions are not the sole reason for accidents, the high incidents of road accidents in Ghana and the consequent handicaps and lost of lives, are as inimical to growth as diseases that lead to premature death of the working population.

As with access to water and sanitation, Figure 3.6 suggests that initiative by government in the 1990s to improve rural electrification has yielded positive results, but more marked for richer groups than for poorer groups. While there was a 37% and 40% increase in access to electricity for the urban and rural top two income quintiles, there was only a net gain of 17% for the lowest three groups in the rural areas, and a 10% reduction in access for their urban counterparts. The overall picture indicates that the proportion of “poor” and “very poor” using electricity increased from 29.8% to 31.7% between 1991/92 and 1998/99.

Figure 3.6:
Figure 3.6:

Percentage of households using electricity

Citation: IMF Staff Country Reports 2003, 056; 10.5089/9781451814798.002.A001

3.3 PERCEPTIONS OF POVERTY BY COMMUNITIES

3.3.1 Attitudes to Poverty

Participatory Poverty Analysis (PPA) was administered in thirty- six sample communities from fourteen Districts and six Regions. It was evident in the course of the survey that communities, on the whole, had an innate understanding of the symptoms and causes of poverty. There was also ample evidence that over the past decades there had been a marked attitudinal change. Only in a small minority of cases was poverty seen, as in the past, as an inevitable condition expressed by a few as destiny, fate, and incurable disease. The large majority were aware that with help communities and individuals had the ability to intervene in the pattern and rhythm of life, to improve their social and economic environments and to enlarge choice.

At the District and Regional levels there was optimism that policy measures, programmes and projects when properly planned and effectively delivered, were the means of first reducing and then eliminating poverty. This awareness is important to the role of District Assemblies as,

  • - Change agent for the transformation of society and the local economy

  • - Mobilizer of human and physical resources

  • - Protector of vulnerable groups and

  • - Provider of information to occupational and social groups

To most communities sampled poverty was represented by a lack of basic necessities and facilities, an inability to provide education and medical care for the family, a lack of access to assets and a lack of education. In all communities there was a noticeable gender differentiation in relation to poverty. Men gave priority to the need for support to agriculture, non-farming activities and other alternative employment. Women stressed the importance of being able to support the family by provision of basic necessities with particular reference to education and health. Lack of access by women to land and other assets was also noted.

3.3.2 Manifestations of Poverty

There was a differentiation between communities in the north of the country and those in the south. The former saw a priority need for irrigation, potable water, health facilities and employment generation alternative to farming. In the southern communities there was considerable emphasis on skill training, general education, transparency, good governance and provision of economic and social infrastructure. In both north and south lack of access to credit was a factor noted as exacerbating conditions of poverty particularly affecting the farming community and the informal industrial sector. There was a similar concurrence regarding the effects and manifestation of poverty. A loss of dignity and respect was noted in a number of northern communities and some in the south. The north in particular noted out-migration as a direct result of poverty. All communities recorded hunger, malnutrition, ill health, high mortality rates, low life expectancy, increase in school dropouts, low levels of education, increase in crime, personal conflicts, loss of integrity as some of the consequences of poverty. In the urban areas crime, increase of children living on the streets and commercial sex were noted.

3.4 TACKLING POVERTY

At the individual and community level, methods for dealing with conditions of poverty varied across communities. They included seeking alternative employment, working harder, mortgaging property, selling assets, reducing diet, taking children out of school to put to work, borrowing, begging, prostitution, and stealing. Overall those in poverty make light of their condition, which obscures the level of hardship and suffering which such people, and sometimes, whole communities, are forced to endure. Those in poverty and extreme poverty represent an under-class in society, which remains under-privileged, unrepresented and a prey to exploitation.

The overall picture of the diversity of socio-economic conditions and the disparities in the incidence of poverty in the country suggests that there can be no excuse for complacency in tackling poverty. At one end of the scale Upper East, Upper West and Central regions showed the highest incidence of consumption poverty. Greater Accra showed the lowest incidence of poverty, although it too has its share of pockets of extreme poverty that are not well reflected in aggregate statistics. Incidence of extreme poverty is highest in the rural savannah, and just as high in urban savannah as in the rural coastal belt. The rural nature of poverty has not changed much since the early 1990s. It suggests that poverty is also primarily an agricultural phenomenon and largely in the informal sector.

As to the gender dimensions of consumption poverty, the evidence is that regions with least reduction (experiencing increases) in poverty levels tend to have high female population in the range of 50-52 percent. Also noteworthy is that the youthful age structure of the population, their concentration in rural areas, their preponderance among poorer households all have implications for public spending on education and health, manpower training and development, and population planning measures.

The indicators, the varied incidence and depth of poverty also suggest that the continuation of economic policies of the 1990s is not likely to improve the socio-economic conditions of the poor, especially those in extreme poverty in the current decade. And, even if it does, change may be very slow or not fast enough to avoid a widening gap between the poor and non-poor. In its 1995 report, the World Bank observed that despite the positive impact of Economic Recovery Programme, it will take the average poor Ghanaian no less than 10 years to escape poverty, and for the poorest nearly 40 years if specific policies are not in place. The overall picture is that economic growth has taken place unevenly across regions, among socioeconomic groups, between genders, or that the positive effects of growth on poverty have not been uniform.

Here are two reasons why. One is that development policies put in place to address the hardships experienced by the poor and the vulnerable were not sufficiently guided by adequate data on the incidence and depth of poverty and, therefore, how to design and deliver targeted poverty alleviation measures. Another is that population increases may have outstripped the positive effects of growth on poverty. Be that as it may, desired poverty reduction measures should be guided by the fact that economic growth does not automatically benefit all income groups equally, and, without proper policy interventions, can exacerbate inequalities. For example, the terrible phenomenon of head porters (or kayayei) and the street hawkers has to be recognized with demographic and social information of where they migrated from rather than policies that seek to rectify their abject poverty in the urban areas, lest the migration will continue. Even if economic growth is positive, as it has been throughout the 1990s, but the initial structures such as access to markets, availability of social amenities are very unequal, the poor will get a relatively small share of the benefits with or without population growth.

Admittedly, designing public policy to address the incidence of poverty head on at the grassroots is difficult if only because data are sparse. To date we do not have district specific data, let alone on communities within districts. Aggregate regional statistics is bound to obscure the plight of small communities in the periphery of urban areas. It is not unreasonable to guess that what we would find in the peri-urban areas is that their situation would be more like those in the rural than in urban settings.

Sample community consultations have made clear that poverty, particularly in the rural areas requires actions that are directly focussed on the fundamental causes of poverty, and the inequitable distribution of the benefits of society. There is the need for priority action to redress the exclusion of the poor, particularly those in the rural environment. Clear guidelines are required regarding a poverty focus in decision-making and the application of participatory planning at all levels. The Participatory Poverty Analysis, (PPA), has clearly shown that local communities have an important part to play in development decision making and have a commonsensical approach.

A number of key entry points identified during the PPA for priority interventions include the following:

  • - Small scale irrigation schemes, particularly in the northern savannah.

  • - Provision of potable water in rural areas.

  • - Generation of non-farming employment in rural areas.

  • - Improved access to education and health facilities in rural areas.

  • - Free basic education including provision of school clothing and meals for children in the three northern Regions.

  • - Measures to ensure equal rights to women.

  • - Provision of safety nets and measures to rehabilitate those trapped within demeaning and anti social circumstances.

  • - More equitable distribution of basic services between rural and urban environments, particularly in the north.

  • - Reform of the traditional land administration system to give farmers and those in the informal industrial sector access to land as a monetary asset.

  • - Increased provision for useable vocational training schemes.

4.0 GROWTH AND POVERTY REDUCTION

4.1 THE MAIN GOAL

The main goal of the Ghana Poverty Reduction Strategy is to ensure sustainable equitable growth, accelerated poverty reduction and the protection of the vulnerable and excluded within a decentralized, democratic environment.

This will be achieved by

  • - ensuring economic stability for accelerated growth

  • - increasing production and promoting sustainable livelihoods

  • - facilitating direct support for equitable human resource development

  • - providing special programmes in support of the vulnerable and excluded ensuring gender equity

  • - ensuring good governance and the increased capacity of the public sector

  • - the active involvement of the private sector as the main engine of growth and partner in nation building.

4.2 STRUCTURAL REFORM FOR SUSTAINED GROWTH

Ghana’s early development, within the world economy was accompanied by a high level of geographical polarization and an interruption in the development of indigenous political, economic, and spatial structures and systems. Colonial penetration consolidated a process informed largely by external circumstances and priorities. This situation led to a condition commonly referred to as the producing what is not consumed and consuming what is not produced syndrome. This characteristic still obtains today.

4.3 STRUCTURE OF THE ECONOMY

The structure of Ghana’s economy remains little changed since independence. The economy remains fragile and very vulnerable to internal and external shocks in the formal sector. The geographical distribution of settlements and economic and social activities reflect a certain level of polarization. Concentration occurs in four major centres dominated by entrepôt and service functions.2 These centres and other enclave economies have a greater connectivity with external systems, including pricing mechanisms, to which they are economically subservient, than with their indigenous hinterlands towards which they have parasitic tendencies.

The concentration of resource investment in a few areas has resulted in a large proportion of human and physical resources remaining outside the commercial economy. These economically and socially peripheral regions remain rudimentary in terms of development. The characteristic of such a dualistic economy is an ever-widening gap between rich and poor. Significant and sustainable reduction of poverty, vulnerability, and exclusion therefore remain an intractable problem. Disparities in levels of poverty and the rate of poverty reduction are particularly evident between the north and the south and Accra and the rest of the country respectively. The exceptionally rapid growth of Accra-Tema and the significant reduction in poverty there has been fuelled by the massive injection of donor aid largely spent locally on goods and services over the past two decades.

4.312 Economic Crises

Ghana is currently suffering one of many periodic economic crises, which have characterized its modern economic history. These crises manifest in several ways. Double-digit inflation has been fuelled by donor aid and the monetising of fiscal deficits. The excessive growth of money supply has resulted in the depreciation of the nominal value of the cedi. Persistent deficit financing has resulted in a massive debt overhang giving a ratio of external debt to GDP of 120%, the highest in Africa. The current crisis is a symptom of the domestic policy framework that has retarded Ghana’s economic growth and development. In this context, crises are the consequences of past policy regimes. The mismanagement of each crisis lays the foundations for the next. The fundamental reasons for economic stagnation and for Ghana’s susceptibility to crises is that the state has attempted to accomplish more than it is able given the limited resources it can command. It is also constrained by a weak administrative apparatus. Poor prioritisation has exacerbated the situation. The State has reached beyond its means and capabilities throughout Ghana’s post-colonial history. The only difference in the performance of the various governments have been in the explicit policy means that have been used to express the presence of the state in the economic affairs of the nation.

4.3.2 Geographical Distribution of Resources

Past policies for a more equitable distribution of resource investment have not been implemented. Failure to allocate investment on the basis of a rational analysis of prevailing conditions has led to very high levels of deprivation in some parts of the country. A disproportionate per capita investment in Accra has dramatically skewed opportunities, life styles and quality of life in favour of this metropolitan area to the disadvantage of those living elsewhere. The northern parts of the country suffer enduring high levels of poverty. Poverty has deepened and become more intractable in the Northern, Upper East and Central Regions. High rates of under-five mortality and infant mortality occur in Central Region and under-five mortality in Brong Ahafo. Inadequate levels of economic infrastructure occur in Brong Ahafo, Volta and parts of Western Region.

Positive action to redress gross imbalances in geographical distribution of resource investment must be taken in the interests of the more effective use of human and physical resources and of equity.

4.3.3 Governance and the Global Economy

Governance, that is the manner of governing, is a dynamic element in which the role of the state is adjusted as demanded by political philosophy and internal and external factors. The art of governance is the ability to balance national aims with a changing global environment. Most African states were borne out of commercial and political coercion resulting in national boundaries, which are without political, geographical, historical or ethnic relevance. These circumstances are inhibiting to development and growth. Global financial markets currently beyond the control of national and international authority impose an additional constraint. An economy with undue reliance on market forces has a propensity to increase and magnify the gap between rich and poor. A global economy with the same characteristics widens the gap between the rich and poor nations. The fact is that financial markets have moved with greater speed, skill and positive intuition than national and international political systems. Global market mechanisms are penetrating into fields of activity such as societal values in which they do not belong. Unless adjustments are made undue reliance on market forces may override democratic national determination and collective interests. The world has entered into a period of profound imbalance in which effective collective decision making mechanisms for the global economy do no exist at present. Uncontrolled global trends, which tend to stimulate cyclical conditions of boom and bust, may inhibit structural change. Action to counteract or ameliorate this may be needed at a continental or intercontinental scale.

4.4 LESSONS FROM PAST REFORM PROGRAMMES

4.4.1 Limited Structural Change

The GPRS strategy is informed by the experiences of the past reform programmes. The economic reform programmes undertaken from the early 1980s represented the first serious attempt to introduce important market principles into Ghana’s economy. The programmes met with some success in macroeconomic recovery and stabilization, albeit short-lived but largely failed in structural reform. The programmes produced a limited success in the growth of agriculture and manufacturing, propelling expansion only in services on the back of a debt financed import/consumption boom. In the 1970s, agriculture accounted for more than half of the nation’s total value added, but declined to just over 40 percent in the 1990s. By 1998 agricultural growth rose to 5.1% but fell to 3.9% and 2.1% in 1999 and 2000 respectively.

The structure of the agriculture sector remained unchanged. Farm gate expenditure in agriculture has been derisory. Industry also declined from about 20 percent to 14 percent of GDP during the same period. Services on the other hand rose from about 30 percent to 44 percent, overtaking agriculture as the most dominant sector. The sharp expansion of services coincided with a virtual disappearance of private savings during the 1980s and 90s while the imports/GDP ratio rose thirteen-fold, far surpassing the exports/GDP ratio and opening up a wide trade gap. The public saving ratio that improved during the 1980s under the reform programmes lapsed again into dissaving during the 1990s. The reform programmes left in their wake large and persistent fiscal and external gaps, the fiscal deficits creating a heavy debt burden, External deficits put pressure on the balance of payments. This culminated in a crisis situation at the end of the 1990s. As a result Ghana had no recourse but to seek relief under the HIPC Initiative.

Structural rigidities in agriculture remain intractable largely because of the predominance of subsistence farming. Cash crops are subject to prohibitively high transaction costs, as evidenced by large differentials between producer and consumer prices, arising from monopolistic and inadequate distribution systems. Agricultural policy, notwithstanding massive donor support, has failed to address these market impediments. Another important structural rigidity is the predominance of parastatals in several sectors of the economy. Two out of every three workers in the modem formal sector are employed in the public sector.14They tend to be immobile. Many parastatals are vested with quasi monopoly power, inefficient with budgetary allocations and no tax obligations, and with preferential access to bank credit. These parastatals crowd out private business and create deep-rooted mistrust between the public and private sectors. A credible privatisation programme is needed to restore sound public finance and create incentives for private activity together with actions to curb monopolistic tendencies.

4.4.2 Low Private Sector Response

Private sector led growth did not occur as intended under the economic reform programmes because not only were the public policies misguided but the structural rigidities inherent in the Ghanaian economy were not recognized. The problem was in large part the combination of an expansionary fiscal policy largely financed by massive externally funded budget support of which little was spent on supporting directly productive activities, productivity or the promotion of sustainable livelihoods. The ensuing pattern of government expenditure tended to be inflationary. A tight monetary policy completely failed to counter the monetary impact of large public capital inflows. These policies led to an overvalued real exchange rate and high real interest rates, which not only penalized the tradable sector but also depressed the entire domestic economy, a case of the public sector crowding out the private sector. Meanwhile, the public capital inflows led to a consumption/import boom that fuelled the service sector expansion. As a result, services expanded while agriculture and industry lagged behind.

4.4.3 Excessive Government Borrowing

Ghana began borrowing heavily from external sources in the early 1980s. The large inflows of external aid never ceased. Aid proceeded through a succession of IMF and World Bank programmes as well as bilateral aid. Donor aid is firmly entrenched in the structure of the Ghanaian public financial systems. Over 70 percent of Government’s development expenditure, is externally funded. Although external aid enabled the Government to restore confidence, increase outlays on infrastructure development and social services, spur economic growth, and contribute significantly to poverty alleviation, especially during the 1980s, it also created a basis for the macroeconomic instability that the IMF and World Bank programmes intended to solve. The deterioration of macroeconomic stability was more manifest during the late 1990s than in the preceding decade. Since 1983 multilateral and bilateral donor support has inadvertently created monetary shocks and quasi-fiscal deficits of a magnitude overwhelming the Government’s capacity for macroeconomic management. The latter was also constrained by the dwindling portion of the budget covered by internally generated funds, Long term, Ghana must grow out of aid dependency before the debt overhang stifles the domestic economy altogether. Aid and debt policy needs to be reassessed with a view to bringing it down, along with the fiscal deficit, to a level that would restore market incentives for private sector activity, i.e., macroeconomic stability and competitiveness as well as long-term creditworthiness. The HIPC Initiative presents an opportunity to do so. Concurrently, efforts must be made to generate greater domestic savings to make up for a reduction in foreign aid. A financial sector development policy, including strengthening of the banking sector and contractual savings institutions, needs to be developed and implemented.

4.4.4 Public and Private Sectors

There has been a persistent lack of clarity in the respective roles of the public and private sectors. Failure to acknowledge and utilize the pre-eminent role of the private sector in promoting growth has severely limited economic opportunities. Failure of the public sector to manage the macro economy has contributed to the deplorable failure of past development policies.

Plans to reform the public service in the 1980s by improved institutional structures and more clearly defined roles had very limited success. There appeared to be a lack of political commitment to the programme. Few of the reforms, including decentralization and the decomposition of power, were implemented. The capacity of the public service remains limited despite available talents and skills. This situation would appear to have been caused by a number of interactive factors including a dysfunctional relationship between political and official decision makers, politicisation of public service posts, patronage, lack of discipline, endemic corruption and unacceptably poor conditions of service. Thirty years of attrition have left their mark. Great commitment and positive action at all levels is required to redress the situation.

4.4.5 Parastatal Sector Reform

Privatisation of the parastatal sector is an integral part of the transition from a government-centred economy to a private sector led economy. Attainment of a sustainable growth path is not possible without completing this transition. It still has a long way to go before the process complete.

A parastatal sector reform programme was launched in 1983 as part of Ghana’s overall economic recovery programme. The efforts for privatisation were renewed in 1988 with creation of the Divestiture Implementation Committee. The reform programme consisted of measures to both improve the performance of state-owed enterprises remaining in state ownership and divesture of enterprises designated for privatisation. While those enterprises that were privatised brought in foreign direct investment, increased efficiency, profitability, and employment, a number of major strategic state-owned enterprises languished in the privatisation process due to political interference and opposition from workers and managers. Government is currently proceeding with plans for the divestiture of four large strategic state enterprises, sixteen medium sized ventures and two small sized enterprises.

4.5 PERSPECTIVES FOR GROWTH

A strategy for rapid and sustained growth must first and foremost rely on the skills and creativity of the nation’s people and their ability to respond to opportunities in an environment of good governance, political stability and economic transparency. This strategy deals with the fundamentals of creating an environment of economic transparency in which the efforts and entrepreneurial talents of Ghanaians can express themselves free from over-regulation and onerous administrative hassles. The environment of good governance and political stability is essential to success. In the development of the GPRS due consideration has been given to the bi-directional nature of the relationship between economic, governance and political factors.

The overall target in Ghana’s long-term poverty reduction strategy is to achieve growth to ensure the virtual disappearance of poverty by 2020 as originally set forth in Ghana Vision 2020. The GPRS attempts to out-perform the International Development Targets cast in terms of reduction of extreme poverty, social and human development, environmental sustainability and regeneration as well as democratic accountability, protection of human rights and the rule of law.15 These targets presuppose attainment of an overall GDP growth averaging at least 6 percent per annum and implementation of public policies for drastic spatial reorganization of investment for economic activity and social protection.

Poverty impacts on all aspects of human life and therefore poverty reduction requires a multi-sectoral approach. The overriding goal of Ghana’s economic and social development policies is to improve the quality of life for all Ghanaians by guaranteeing basic human rights, creating a strong economy, and ensuring universal access to work, health, and education. It requires development activities undertaken by a wide range of agencies and organizations concerned with particular sectors of development, all of which will need to be closely integrated. Sustainable growth in support of poverty reduction requires intervention in the following areas.

4.5.1 Development of a Mature Economy

Action by government progressively to grow out of the high level of aid dependency creating a debt overhang, which is stifling the domestic economy, is of critical importance. Government must restore market confidence and create incentives to promote a private sector environment in which Ghanaian skills, talents, and enterprise can thrive in a globally competitive economy. This environment will be attained by

  • - Sustainable and predictable public sector savings through effective control of fiscal excesses in government,

  • - A functional financial sector in which market forces, supported by the creative management of the public sector, mobilize private domestic savings for productive investments and attract foreign capital

  • - An economic environment in which workers and enterprises are encouraged to be competitive and to capture the legitimate returns for their efforts and risk taking

These processes must be supported by enduring actions which will improve foreign reserves and ensure a competitive exchange rate. Revenue mobilization must be perpetually strengthened with a tariff structure to maximise revenues and minimize unfair competition.

The fundamentals of the strategy are centred on an economic role for the State that is consistent with the realities of Ghana’s current place in the world economy, the nation’s resource base, and the need to create a framework in which Ghanaians and their enterprises can become increasingly competitive in domestic and global markets. Given this context, the state must have limited economic objectives. They must be focused on normative and regulatory functions. Government must also generate positive savings to restore solvency to the financial system and to restore credibility to its economic role, as well as to the economy as a whole. The strategy should be focused on wealth creation and the eradication of poverty through the performance of markets, which must be allowed to carry out their resource allocation functions. The State’s legitimate role in the creative management of the economy and the distribution of social and other appropriate public services is an essential component to this strategy.

Development of the rural environment is seen as the catalyst for the transformation of the national economy and the drive to economic maturity. Reform of the land administration system is pivotal to this revolution. The change of the archaic, near-subsistence agricultural economy into a progressive, dynamic, entrepreneurial and profitable business will bring about structural change and change to the spatial organisation of the rural environment. It will also act as a stepping-stone to widespread industrialization. Appropriate macroeconomic policies supported by the appropriate sectoral strategies will lead to structural changes in economic and social linkages and the geographical pattern of urbanization. Economic and social policies, decomposition of power, decentralization and appropriate investment strategies will bring about desired changes. These processes should ultimately lead to the growth of a mature national economy based upon the optimum use of human and natural resources and manifested by the nesting and overlapping of social and economic systems. The aim is to achieve an optimal geographical pattern of resource investment designed to strengthen and extend national and local connections between both production and trading activities. This will require a determination by both public and private sectors; the former in providing an appropriate environment and the latter by seeking profits in a socially beneficial way.

Initially the provision of economic and social infrastructure, land reform and incentives to entrepreneurs by the public sector must be directed towards creating an environment in which these structural changes will be stimulated to the point of self-perpetuation. What is required is a coordinated and comprehensive approach to develop and then to strengthen socio-economic activity systems by bringing into close proximity, in terms of time and space, the four phases of economic activity, viz. investment, production, processing and distribution. This approach will incorporate more human, physical and financial resources into the economy and significantly increase choice.

Such changes will bring about a more efficient and geographically balanced urbanization process in which town and country offer inter related and complementary services and life styles. Within this structure towns will play a pivotal role as catalysts for social, economic and cultural development and change. To perform this role in the future there must be a departure from the chaotic, inefficient, unplanned urban systems that currently prevail. The planning of towns to serve as an integral part of the national economy is an essential element in national development, growth and poverty reduction.

4.5.2 Financial Sector Development

A well functioning financial sector is indispensable to economic growth and development, and thereby the reduction of poverty. The ability of the financial sector to serve as an effective and low cost intermediary between savers and borrowers for investment purposes has been seriously compromised by problems that threaten its soundness and stability. It is saddled with a large and growing burden of non-performing assets, primarily loans to state-owned enterprises. It has a serious over exposure to foreign exchange liabilities. As a result of excessive government deficit financing, more than one-third of its assets are tied up in the indebtedness of the government and state-owned enterprises. Currently, it is under a great deal of stress, stemming from the deterioration of loan quality as businesses came under increasing pressure due to prohibitively high real interest rates. This has been exacerbated of late by unfavourable terms of trade and the large cedi depreciation in 2000. The non-performing loan problem was exaggerated by loans to state-owned enterprises, including the massive syndicated loan to the Tema Oil Refinery. These problems must be overcome expeditiously.

Long-term capital is at a rudimentary state of development in Ghana. The total capitalization of the Ghana Stock Exchange is small even by emerging market standards. Trading volumes have deteriorated over the past few years. The bulk of Ghana’s long-term funds are concentrated in SSNIT, which is in financial disarray. It has many non-performing loans and low return equity investments in insolvent or distressed state-owned enterprises. As a result SSNIT suffers from liquidity problems. A thorough review needs to be conducted with a view to developing and implementing policies for the reform of the nation’s social security programme. The strategy for financial sector development calls for macroeconomic stabilization, of which sustained fiscal discipline is a sine qua non. Macroeconomic stabilization along with a reduction of domestic debt will help lower interest rates and create incentives for private investment. In parallel, the government will need to deal with non-performing loans through strengthened supervision and regulation, recapitalizing and eventually privatising state-owned banks. The large open position in foreign exchange must be closed.

The government should privatise or otherwise sell its equity in state-owned or state controlled banks. If these banks are bailed out again, it will be the second time in roughly a decade that public funds have been used for this purpose. These resources are very costly. Every cedi spent on a bail out could have been spent on poverty reduction and growth. Returning the financial sector to private sector ownership would also boost credibility in the government’s deficit reduction strategy and in its commitment to private-sector led growth.

4.5.3 Rural Development and Industrialization

Poverty reduction in the rural environment is largely synonymous with growth. The potential for growth is considerable. Under- and un-utilized human and physical resources abound. The long-term growth strategy is predicated on the concept of the modernization, restructuring, and development of the rural environment as the catalyst for the transformation of the national economy. Ghana is predominantly an agricultural country. The entrepreneurial opportunities in large and small-scale farming and the farm gate processing of both food and industrial crops are considerable given an appropriate marketing environment. Agricultural industrialization provides for spin-offs and the creation of backward and forward linkages.

Government must play a supportive role in achieving the transformation of the rural environment from its subsistence orientation to a commercially attractive, viable, and dynamic sector, which is vital for the achievement of sustained equitable growth. The restructuring of the rural environment is an important aspect of devolution and decentralisation and is seen as the catalyst for transformation. It is an essential element in reinforcing macro economic policies for stability and sustainable growth. The need is to change the concept of agricultural activities as simply a way of life to that of a profitable commercial and industrial occupation. The necessary achievement of this objective requires a corresponding transformation in attitudes and conventional societal values. These include attitudes to land. The need is to incorporate the value of land into the national economy as a tradable asset whilst retaining its communality. Representational and gender issues also arise. Habits and conventions based upon superstition and myths which give rise to anti social behaviour and inhibit structural change must be subtly excised by sustained education and demonstration. At the same time traditional values which enrich the culture of life and social stability must be assisted to endure within a changing society.

The transition of Ghana’s economy to a market-oriented policy environment was set in motion in the early 1980s under the economic reform programmes but the process was interrupted by a series of policy and market failures. This is especially so with agriculture, the mainstay of Ghana’s economy. Performance of the agricultural sector has a strong correlation with Ghana’s overall cyclical fluctuations. Agricultural policy, despite massive support from donors and external financial institutions, has generally failed because it has not effectively addressed the fundamental technical and institutional constraints. It has not been accompanied by policies, including macroeconomic policy, to set pricing in a way that is consistent with competitiveness and incentives for production and marketing.1617

Ghana must industrialize. The process should begin with refocusing on its traditional core competency, agriculture. Development in agriculture must be stimulated by policies, which will encourage and facilitate links with agro-industry including simple farm gate processing. Foreign direct investment should be very actively encouraged. Joint ventures can be formed between Ghanaian and foreign firms where foreign technology and capital could be combined with locally grown raw materials and expertise. Policies needed to create an enabling environment for FDI and technology transfer include infrastructure development, establishment of a legal framework for protecting property rights, contract enforcement, and land tenure reform.

In order to establish effective linkages with agro-industry, agriculture must transform itself into an efficient entrepreneurial activity and provide a stable supply of quality raw materials at low costs. The process must start with reforming the present state where subsistence agriculture predominates for historical reasons and because disincentives exist for production and marketing. Policies should focus on removing pricing distortions. The real effective exchange rate of the cedi is inconsistent with competitiveness. This should be corrected by macroeconomic policy. Taxation on agricultural production should be removed. Cocoa marketing should be deregulated while retaining provisions for price stabilization for the farmer. Competition needs to be introduced into the distribution system and monopoly profits that currently drive a wedge between producer and consumer eliminated. Competitiveness should also be enhanced by measures to make the economy more efficient through a reduction of investment risks. These measures include improvement of storage facilities and construction of feeder roads and the connection of these with the national road system. The latter is critically important to opening up the rural sector and to expose it to market incentives. The stimulation of agricultural industrialization will lead the way to a broader industrial environment in both formal and informal sectors.

4.5.4 Natural and Built Environments

The quality of both the built and the natural environments is vital for long-term growth and development. Increased production can only be meaningful on the one hand when it occurs in well-managed, amenable, efficient, safe and healthy built environments. On the other hand, protection of the natural environment to prevent deforestation, land degradation, and loss of ecosystems is paramount.

Safeguarding the environment is therefore an essential condition for sustainable development and improving the quality of life. The long-term objective is to maintain a sound environment and to prevent all forms of environmental degradation. This will be achieved by ensuring that the national policies now in place, such as the requirement that all investment projects are subject to environmental impact assessment and the prohibition on practices, which destroy the environment, are fully implemented. Mining activities, fishing, farming and timber resource exploitation, energy provision and manufacturing industrial production must be subjected to environmental impact assessments and audits. Institutions concerned with environmental protection will be strengthened to enable them enforce regulations.

Generally the adoption of improved technologies will favour the environment. For example, the replacement of shifting cultivation with permanent rotational cropping, which is an objective of agricultural policy, will help to prevent deforestation and soil degradation. A replanting programme must be developed and fully implemented in the lumber industry to ensure regeneration of forestry resources, an important source of foreign exchange earnings. Collaborative natural resource management with communities is essential. The use of administrative regulations must be enforced alongside market based economic incentives. For instance, product quality, especially agricultural, is increasingly a key determinant of marketability, price and profitability. The early preparation of a National Land Use Plan is an essential tool in environmental management.

Concern for the environment requires constant and detailed vigilance and political commitment. The achievement of the environment objectives will to a large extent depend on the effectiveness of the recently formed district level environmental committees and the full implementation of the policy of administrative decentralization.

Sound environmental quality is not achieved by individual countries acting alone. Improved management of trans-boundary resources including water, air, fauna and flora will be pursued in collaboration with countries of ECOWAS and beyond.

4.5.5 Social Development

The ultimate objective of the social development programme in the GPRS is to ensure equitable growth for all Ghanaians, and in particular to upgrade the pre-capitalist rural sector. It seeks to ameliorate the spatial disparities in the growth process and provide social safety nets for the vulnerable and excluded. The prime objective for education must be to achieve near universal literacy and to enable all children to receive at least basic education. The education objectives also provide for increased enrolment rates in secondary and tertiary education, especially for females. The objective is to raise the median level of education of the population as a whole to JSS3 by 2020. Curricula at all levels must place greater emphasis on scientific subjects and mathematics which together with improved vocational training will contribute to achieving the objectives for science, technology and production. Improvement in the general level of health requires not only an expansion and upgrading of the health living environment. Achievement of the health objectives is thus equally dependent on securing adequate food supplies, better understanding of health matters, provision of safe water supply and sewerage, improved housing, well planned settlements and the prevention of environmental pollution as it is on the provision of medical facilities. Access to all these facilities will be affected by the spatial distribution of population and of economic activities and by their location in relation to transport facilities. Social sector investment will be enhanced by the HIPC initiative.

Improvements in the fields of education and health are not simply moral and equity issues. An improved quality of life and the availability of choice are essential to equipping people with a capacity to understand the need for change and the notion that it is possible for communities to intervene and change their economic and social environments. A shift in attitudes is an essential prerequisite to the adjustment to societal values required to embrace, perpetuate and develop new technologies and economic and social structures.

4.5.6 The Role of the State

Government will need to play a supportive role in achieving the transformation of the agricultural sector from its subsistence orientation to a commercially attractive, viable, and dynamic activity. This is vital for the achievement of sustained equitable growth. However, agricultural transformation will not be achieved without a corresponding transformation of the attitudes of individuals to work in general and commercial farming in particular. It requires a transformation from a culture of subsistence to a culture of business focused on profit and accumulation. Pivotal to the process of change in the rural environment is the reform of traditional land administration systems. Under present conditions land as an asset is excluded from the national economy and its value denied to the farmer. It is not tradable. Legal title to land within the concept of communality is an essential prerequisite to attracting entrepreneurship into farming and the promotion of agricultural industry. Without legal title to land there can be no transformation. Effective management of the transformation demands an integrated cross-sectoral approach and dynamic government support.

Ghana must redefine the role of the State as the policy manager for development and the economy, enforcer of laws, rules and regulations and a provider of public utilities and services. Public sector reform involving right-sizing of the public service, restoring competitive conditions of service and SOE reform is a sine qua non for provision of an enabling environment for private sector development and the effective provision of public services. Progressive public sector reform is required significantly to improve capacity and efficiency. A continuous process of reform is also required to enable the public service to accommodate its changing operational role in relation to the private business sector and civil society. New skills are also required to deal with development and economic issues at an international level and to contribute to decision making in relation to the global economy, within international groupings.

Strong regional and continental affiliations offers particular opportunities for forging alliances with states with like-minded, people oriented policies in order to exercise greater influence internationally. Ghana is in a fortunate position as a member of he Economic Commission of West African States with a positive policy for cooperation and integration. The emerging African Union offers particular opportunities for the continent to exercise political and market influences worldwide. International groupings, such as ECOWAS, offer a means to overcome the limitations to effective exploitation of resources imposed by colonial boundaries by, for example, river basin development across national borders. Cooperation between the African Union and other people oriented continental power blocs provides a means of limiting the adverse affects of the imbalances between individual and corporate decisions expressed by global markets and collective decision-making as expressed through political dialogue. Long term futures in governance demand an extra national and continental posture to development and growth within the world economy for sustainable poverty reduction. This will necessitate adjustments to the role of government within the international community of nations.

4.5.7 Decentralization and Equity

In terms of governance at the national level the need is for a vigorous and progressive deepening of decentralization and the devolution of power. A combination of the latter with permanent mechanisms for a symbiotic relationship between communities NGOs, civil society organizations, private business and the public sector and between levels of government will strengthen national government and nation building through dialogue and consensus. The aim must be to decompose power to the District to the extent that Assemblies are in effective and total control of their departments and staff within the context of relevant legislation. Ultimately District departments must have the capacity to carry out all District level programmes and projects funded from their own resources and by central government. In the latter case decisions on resource utilization including priorities and intra-District location must lie with the local authority. Central government should progressively use District Assemblies as agents for the local provision of physical infrastructure and services wholly or part funded by the former. The goal is to provide for a situation where national development plans are an aggregation of local development plans and the latter are a disaggregation of national plans. Dialogue between the national and local level must achieve a synthesis of mutually supportive measures, which bind together national policies and local aspirations.

4.5.8 Resource Investment and the Budgetary Process

The current sectoral and sub sectoral allocations of government expenditure, including the donor component, do not represent an optimum distribution in support of poverty reduction and growth. A better distribution must be achieved within the next few years. This will require experimentation and innovation to move from a somewhat inflexible system of budget planning and to remove the rigidities in the system. The budget is an essential planning tool. Perspective and medium term planning processes must be integrated with the procedures for MTEF and the annual budget. Significant adjustments are required to procedures. The review of MTEF and proposals for the second stage of this instrument must be seen as part of proposals to improve the overall long, medium and short-term government planning machinery. What is needed for the medium term is a process jointly owned by the NDPC and MOF; the latter being concerned with GOG fiscal and economic management and the former with medium term policy planning, including the role of the private sector.

Improvements are also required to ensure the more timely receipt of budget allocations by MDA. Forward planning by sectors requires an assured flow of funds over the three-year period. Failures in provision not only affect GOG funded programmes and projects but also donor programmes where counterpart funds are required.

4.5.9 Growth and Poverty Reduction

In the last analysis the pace of poverty decline will be determined by the rate of economic growth and the appropriate distribution of resources sectorally and geographically.

Analysis18 has shown the pace of poverty decline to be very sensitive to the rate of growth in total consumption. A consumption growth rate of 7% per annum would eradicate urban poverty by 2020 and reduce rural poverty to just over 10% of the population. Growth in consumption of 6% would also produce a sharp decline in numbers of people in poverty as the table below shows.

Table 4.1.

Poverty Projections in Relation to Growth of Consumption

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4.6 MEDIUM TERM ACTIONS IN SUPPORT OF LONG TERM GROWTH

4.6.1 Composition of Expenditure Medium Term to Long Term

The intention is to achieve a better sectoral composition of expenditure, a better balance between administration and development costs and a geographical distribution responding to a rational assessment of need for social protection and the potential for growth. Problems arise in attempting to calculate the proportion devoted to overheads by the classification system used. For purposes of analysis, from a development perspective, the categorization of expenditure tends to lack clarity. This needs resolution together with a rationalization of the process of medium term planning and expenditure forecasts. Proposals are made under the governance section of this document. The aim in the medium to long term is to achieve a division between overheads and development costs of 20-25% and 80-75% respectively. Of development costs the aim is to achieve a distribution between social and economic sectors of about 60% for the former and 40% the latter. Over time the following distributions of development expenditure is suggested as a guide within the social and economic sectors.

Table 4.2.

Suggested Guide for Expenditure within the Social and Economic Sectors

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These figures are comparable to expenditure allocations in other countries.

Provision is made for the geographical distribution of expenditure by MDA down to Regional level on the basis of twenty-seven parameters19. Data is currently not available for a further dissaggregation. RCCs are required to consult with District Assemblies using proactive workshop techniques for defining sub Regional distributions. RPCU and DPCU must devise simple methods to facilitate the allocation of resource investment at District level by a rational analysis of prevailing conditions and need. More comprehensive methods for sub Regional allocations of government expenditure related to the preparation and regional coordination of District Development Plans will be provided by NDPC at a later stage.

Considerable additional resources are required in the three northern Regions overall, significantly to ameliorate the very high level of deprivation in this part of the country20. The northern parts of Brong Ahafo and the Volta Regions have similar conditions prevailing. Upper East, Northern and Central Regions record a deepening of poverty; all of these Regions in addition to Eastern Region have above average levels of poverty. Extra funding is required. Subject specific need is also identified for the advice of MDA21. The need to reduce under-five mortality in Central and Brong Ahafo Regions is illustrated. Deficiencies in physical infrastructure are revealed in Brong Ahafo, Central and Volta Regions. A realistic locational pattern of resource expenditure must be devised to eradicate these inequitable variations.

The cost effectiveness of expenditure must be improved. Expenditure by MDA on goods and services in relation to spending on production, productivity and direct social protection is excessive. A better balance must be achieved. Guidance is given in Appendix A of this report22. In addition to the foregoing, future improvements to the composition of expenditure in support of poverty reduction and growth will depend upon two main factors: the ability of government to reduce spending on general administration, and the cooperation of donors in the interpretation of the GPRS.

There are rigidities that limit adjustments to the sectoral composition of expenditure in favour of poverty reduction and growth in the medium term. Public sector salaries represent a large part of administrative or overhead costs. The relative proportion cannot be reduced over a short period. On-going programmes and projects, particularly those that are donor funded, must run their course, in most cases. These constraints limit the changes which can be made to sectoral and sub sectoral allocations. In the course of implementation, the outcome of the monitoring process will determine the ability to improve composition in support of poverty reduction and growth.

4.6.2 Framework for Poverty Reduction and Growth

The policies implicit in the foregoing section will inform short, medium and long term action by MDA to achieve the main goal of the GPRS to ensure sustainable equitable growth, accelerated poverty reduction and the protection of the vulnerable and excluded within a decentralized democratic environment.

Policies and areas for intervention in response to medium-term growth and poverty reduction are elaborated in the next five chapters under the thematic areas of

  • - Macro Economy Stability

  • - Production and Gainful Employment

  • - Human Resource Development and provision of basic services

  • - Special Programmes for the Vulnerability and Exclusion

  • - Governance

The immediate actions required in each of the thematic areas are identified below.

4.5.2.1 The Macro Economy
  • - Generate a primary budget surplus that exceeds interest payments such that public debt is reduced both in absolute terms and in relation to GDP. Sustain this policy until the public debt/GDP ratio stabilizes in a low range

  • - Reassess the use of external assistance. Re-calibrate and reallocate external assistance in a manner consistent with Ghana’s absorptive capacity and macro economic stability

  • - Gradually phase out externally funded budget support in the long term by first reallocating all available external funds for budget support, including adjustment lending, to essential poverty reduction programmes and investment programs

  • - Strictly control money supply with a firm monetary policy objective of re-establishing price stability.

  • - Minimize monetary shocks by restricting external funds to the foreign exchange components of social or investment programmes or balance of payments support. Regain competitiveness by keeping inflation in check.

4.5.2.2 Production And Employment
  • - Remove taxation on cocoa production and break up monopolies in the distribution system with a view to minimizing gaps between producer and consumer prices

  • - Support the improvement of storage facilities to minimize post harvest losses

  • - Improve the road network to streamline distribution and generally expose the rural sector to market incentives

  • - Develop and implement a land programme with a view to harnessing the potential of land as the main productive asset in rural development

  • - Introduce specific strategies to improve women’s labour productivity and access to and control of economically productive assets, especially land

  • - Empower women through the promotion of income-generating activities supported by the introduction of improved technologies, credit and guaranteed markets

  • - Emphasise comprehensive, integrated rural development in priority locations

  • - Develop small scale irrigation schemes

  • - Support agro-processing, promoting the development of techniques and equipment which reduces the time burden of women

  • - Reduce dependence on traditional farming techniques that are time intensive and which result in low productivity

  • - Support development of farmer based organisations (FBO) to facilitate access to inputs, credit and markets

  • - Support appropriate technology generation and transfer

  • - Support promotion of priority NTE

  • - Support promotion of the informal industrial sector with provision for skills training

  • - Promote labour intensive methods in all appropriate building and engineering projects

  • - Vigorously support all programmes which lead to sustainable livelihoods

  • - Increase the proportion of government expenditure in support of the agricultural economy

  • - Promote competitiveness in regional and international markets

  • - Undertake re-afforestation and rehabilitation of degraded lands

  • - Enforce tree planting regulations by timber firms

  • - Initiate community participation in national resource and environmental management, monitoring & evaluation

  • - Initiate and implement effective planning of human settlements in the interest of efficiency and amenity

4.5.2.3 Human Resources
  • - Increase the proportion of government expenditure dedicated to the social sector

  • - Accelerate the implementation of programmes and projects which improve quality of life with particular reference to education

  • - Actively support the removal of gender biases which affect the access of women and girls to human capital assets

  • - Promote publicity campaigns down to Unit level to reduce the rate of population growth

  • - Actively generate an understanding nationwide, of the concept of societal change in support of an universal commercial economy and new technologies particularly in the rural environment

  • - Aggressively attack the incidence of HIV/AIDS by publicity campaigns down to Unit level

  • - Urgently provide safety nets for the vulnerable and excluded

  • - Educate and publicise in favour of the eradication of conventions and traditions which are anti social or impede development and relative equity

  • - Support cultural traditions which strengthen and enrich society

  • - Promote entrepreneurial training among young people

  • - Expand the traditional apprenticeship system

4.5.2.4 Governance
  • - Enforce a palpable political commitment to the processes of reform and development and the agencies responsible for their implementation

  • - Define the role of the state and its relationship to the private business sector as the engine of growth

  • - Incorporate civil society, including local communities into the nation building and development planning processes

  • - Vigorously proceed with de facto decentralisation and devolution involving a positive role for Traditional Authority and communities as partners of the District Assemblies

  • - Urgently increase the capacity of an appropriately sized public service with radically improved conditions of service

  • - Define the role of the Central Management Agencies (CMA) requiring provision of a standing technical body for the coordination of national strategies on financial management, human resource management and development policy

  • - Define the functions, locate and strengthen the planning agencies (NDPC/MEPRC/PPMED/RPCU/DPCU) to provide a service in which economic, social and political policies in space and time are analysed and formulated as a single integrated task in collaboration with civil society

  • - Rationalise the roles of and procedures for MTDP and MTEF

  • - Accelerate the programme of divestiture as a matter of urgency

  • - Complete the programme for subvented agencies during the plan period

  • - Use divestiture proceeds entirely for debt reduction

  • - Introduce reforms to the budget and public expenditure management system as a matter of urgency

  • - Exert pressure for a coordinated posture by the African Union in relation to the global economy, the WTO and G7

  • - Explore the potential for international development programmes within ECOWAS

In the first year of the three-year plan MDAs have been advised to concentrate on the acceleration, greater cost effectiveness of on-going programmes and projects and better targeting for poverty reduction and growth. This should be accompanied by the planning of expenditure on future programmes directed at the poor as a specific target group. Such policies and programmes should provide for the practical provision of physical infrastructure or services designed to reduce poverty, stimulate economic growth or provide sustainable livelihoods in favour of identifiable beneficiaries.

4.6.3 Cross Cutting Issues

Implementation of the programme objectives and project outputs will in many cases be at a sectoral level. However a number of priority cross cutting issues have been identified in the process of preparing the GPRS. These will require an integrated, inter disciplinary and cross-sectoral approach. It is anticipated that the main thrust for achieving growth and poverty reduction will depend upon the provision of a dynamic multi sectoral approach. Comprehensive programmes and projects are required.

The following cross cutting issues will require an integrated, interdisciplinary and cross-sectoral approach by MDA, The lead Ministry or Agency is indicated against each.23

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Time will not permit MDAs to put in place the necessary organization required to prepare cross-sectoral programmes for inclusion in the 2002 budget. However, functional and sectoral MDAs are required to commence preparing the above cross-sectoral programmes to find expression in the budget for 2003 and succeeding years. For this purpose the NDPC will re-establish Cross Sectoral Planning Groups, which includes membership of civil society, to support the preparation of cross-sectoral programmes for the above cross cutting issues.

The need for an inter sectoral approach to cross-cutting issues is self evident. An inter sectoral approach is also necessary geographically. In the past the tendency has been for expenditure on development to be widely dispersed which results in a limited impact. It is important that investment and services in support of poverty reduction and growth are concentrated in specific locations of identified need and opportunity in an integrated and comprehensive manner to create a critical mass of mutually supportive activities and services. To this end, NDPC and MEPRC will in collaboration with MDAs identify locations for this purpose including locational priorities for Accelerated Agri Business Zones (AABZ). It is emphasised that the MTDP and its poverty reduction and growth component are open-ended rolling plans, which are subject to monitoring, evaluation and revision as a continuous process. The same principle applies to sectoral and District Plans.

The subject of cross cutting issues and planning for integrated development will require further elaboration for which the MTDP is the appropriate vehicle. Policies within the GPRS will form the central feature of the second Medium Term Plan.

4.6.4 Poverty and Growth Targets

The implementation of the three-year rolling programme for poverty reduction and growth is framed to result in realistic but significant improvements in terms of poverty reduction and growth.

Table 4.4.

Poverty Reduction Targets

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Or latest year.

4.6.5 Expenditure

Volume 2 comprises:

  • - An analysis of expenditure for poverty reduction and growth within the budget ceilings for 2002-2004

  • - Costed programmes within the budget ceilings for 2002-2004

  • - Costed programmes to achieve the GPRS unconstrained by the budget ceilings.

5.0 THE MACRO-ECONOMY

5.1 AN OVERVIEW

5.1.1 MACROECONOMIC STABILITY AND POVERTY

The poverty reduction strategies and programmes outlined in this document will not succeed in an environment of macro-instability. However, this is not to suggest that macro-stability is a sufficient condition for poverty reduction; it fosters a positive environment for growth. To the extent that the strategy for growth is pro-poor, growth will lead to significant reductions in poverty.

While the causes of poverty in Ghana are multifaceted, macro-instability has played a significant role in exacerbating poverty. Macro-instability in Ghana has been fuelled to a large extent by government policies that have resulted in a persistent overshooting of the budget deficit and also by the measures employed to finance the growing deficit. Prominent among such measures are debt monetization and the sale of Treasury Bills.

Key factors that have accounted for government’s tendency to overshoot the deficit include weak revenue mobilization mechanisms, anticipatory spending (i.e. spending in anticipation of donor inflows), continued expenditures to support a large and inefficient public sector (including debt guarantees of subvented agencies), expenditures to finance election year campaigns, social investment expenditures and expenditures to service the debt created by the fiscal deficit. In effect, government expenditure control and monitoring systems have been weak.

In particular, domestic financing of the deficit through the sale of Treasury Bills and through the printing of money (i.e. debt monetization) by the Bank of Ghana, has contributed immensely to high interest rates and inflation24. High interest rates have raised the cost of credit to the private sector, stifled investment and consequently, the growth of employment opportunities in the private sector. On the other hand, the relative attractiveness of Treasury Bills together with the minimal risk associated with such investments have subverted the intermediation role of financial institutions and undermined competition for savings mobilization within the banking sector. This in part explains the large spread between the lending and savings rate25.

By continually depreciating the value of the domestic currency relative to other currencies, the growth in inflation, resulting from the central Bank’s accommodation of the deficit (i.e., the printing of money), has not only contributed to the volatility in the exchange rate but has fuelled secondary rounds of inflation by raising the domestic currency price of imports.

In effect, macro-instability in Ghana has been characterized by investment stifling real interest rates (i.e., the nominal rate adjusted for inflation), double digit inflation, an exchange rate that is both overvalued and volatile, a low level of savings and balance of payments deficits stemming from excess domestic demand for imports.

Macro-instability has also exacerbated poverty through at least four channels. First, inflation and inflationary expectations have eroded the real wages particularly of workers on fixed incomes. Furthermore, inflation has increased the risk and uncertainty associated with long term investments in sectors such as agriculture and industry. Indeed, food producers have been particularly disadvantaged because of poor distribution and marketing channels while limited storage facilities have undermined their leverage over farm gate prices. On the other hand, service activities such as wholesale and retail trading have thrived in part because of the relatively quick turn-around of such investments. In addition, the financial sector has benefited immensely from their virtually risk-free investments in high yielding Treasury Bills. To the extent that the service sector activities are concentrated in the urban metropolis, and to the extent that the bulk of the poor are engaged in rural agriculture, the poverty reducing potential of service sector growth is significantly lower than the corresponding impact of the agricultural sector.

Secondly, high interest rates have crowded out the private sector investments and reduced the rate of employment growth. Employment options for lowly paid public sector workers have consequently been reduced. Indeed, this may have contributed to the slow pace of public sector reform and increased the attractiveness of graft as an option for income generation within the public sector.

Thirdly, currency volatility has negatively impacted on foreign direct investment (FDIs) by introducing greater risk in the returns on such investments. Indeed, it is conceivable that the concentration of FDIs in relatively low risk areas such as the extractive and service industries is in part a result of currency volatility. Foreign direct investment is linked with poverty because of the potential economic opportunities (e.g., technology and skill transfer and employment) it can provide to the domestic economy.

Fourthly, inflation has eroded the real value of government revenues and hence, the ability to provide adequate social services to the poor. Indeed, as real wages have declined with inflation, government’s development expenditures have been crowded out by pressure on government to pay a “living wage”. Expenditures on social services have also been compromised by the fact that debt servicing has taken up a growing share of the budget, leaving few resources for poverty-related investments.

5.1.2 THE MACRO ECONOMIC FRAMEWORK

The broad objectives of the medium term macro-framework are to promote private sector-led growth including small-scale business development, in a manner consistent with poverty reduction and to adjust government’s budget for increased expenditures on education, health and other priority social sectors. Achieving this goal will require the achievement of macroeconomic stability in the first instance and reforms in the area of fiscal, monetary and trade policy to ensure sustained growth.

In the short to medium term (i.e., 2003-2005), changes in the key macro indicators are expected to be modest. The real GDP is expected to rise from 4.7 percent in 2003 to about 5 percent in 2005. Agriculture is expected to play a progressive role in achieving this objective. Agricultural growth is expected to rise from 4.1 percent per annum in 2002 to 4.8 percent per annum by 2005. The service sector, which has consistently enjoyed the fastest growth, is expected to experience a slower growth rate of 5.1 percent in 2005 relative to the 4.7 percent growth rate in 2002. Industry on the other hand, is projected to experience accelerated growth with the implementation of agro-processing initiatives proposed in Chapter 6 of this document. The overall targets for the period 2003-2005 are provided in Table 5.1.

Table 5.1.

Key Macro-Economic and Financial Targets: 2002-2005*

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Projected values;

Revised Projections

Projected unless otherwise stated.

Increase in credit to government as a percent of broad money at the beginning of the period.

Including capital outlays

After domestic arrears clearance

Functional shares for 2003-2005 exclude debt relief savings financed through external project aid and transfers to the local authorities.

Reflects large cedi depreciation relative to dollar in 2000

5.1.3 MACRO ECONOMIC TARGETS AND JUSTIFICATION

5.1.3.1 GDP Targets

The targeted GDP growth rate of 5 percent by 2005 is based on historical trends and the anticipated impact of the proposed growth and poverty reduction strategies on the overall growth rate. As shown in Table 5.2, over the period 1995-2001, real GDP growth has averaged approximately 4.3 percent. During that period, the agricultural, service and industrial sectors experienced average growth rates of 4.0 percent, 5.3 percent and 4.3 percent respectively. The highest overall GDP growth rate during the period was 4.7 percent in 1998 and the lowest was 3.7 percent in 2000. The targeted GDP growth rate of 5.0 percent in 2005 takes into account the expected positive impact of the measures proposed in this document, primarily macro-stabilization and improved agricultural productivity and processing on income and wealth generation. The effects of these measures will however, not be felt until the later part of 2004.

Table 5.2.

Real GDP and Sectoral Growth Rates: 1995-2000

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Source: various Budget Statements

In particular the anticipated boost in agricultural production, which currently makes the greatest contribution to the GDP, will be critical to the realization of the overall GDP targets. In 2000, the contributions of agriculture, industry and services to the GDP were 36.5, 25.2 and 29.2 percent respectively. Net indirect taxes accounted for the remaining 9.1 percent. The targets for the period 2003-2005 assume that the sectoral contributions will remain largely unchanged. Using the 2000 sectoral shares as a point of departure, the projected growth rate for agriculture, industry and services for the year 2005 are 4.8 percent, 5.2 percent and 5.1 percent respectively. Indirect taxes are estimated to grow at the rate achieved in 2000 (4.4 percent) and maintain their 2000 contribution to GDP of 9.1 percent. The targeted sectoral growth rates are consistent with the projected overall growth rate of 5 percent in 2005.

It is important to note that the projected sectoral growth rates do not represent historical highs and have been achieved in the past. Hence, the proposed overall growth rate of 5 percent is realistic and indeed modest if the proposed policy measures are implemented.

5.1.3.2 Agriculture Sector Targets

The agricultural sector growth rate is expected to rise from 4.1 to 4.8 percent between 2002 and 2005. The targeted agricultural growth rate of 4.8 percent is premised on the successful implementation of a proactive Agri-business strategy that focuses on improving access to land and promoting effective marketing, storage and transportation systems to reduce price volatility and minimize production risks particularly those stemming from post harvest losses.

5.1.3.3 Industry Targets

Industrial growth is projected to reach 5.2 percent in 2005 on account of increased agro-processing activities, lower transaction costs associated with production, lower real interest rates resulting from a decline in inflation and inflationary expectations and the adoption of cost recovery pricing of utilities.

5.1.3.4 Services Targets

The growth in the service sector is expected to rise from 4.7 percent in 2002 to 5.1 percent in 2005. However, this growth rate will remain below the 5.4 percent level achieved in 2000. Government services constitute the largest (37 percent in 2001) component of the services subsector, and accounts for approximately 10.7 percent of GDP. With the GPRS emphasis on private sector led growth, the relative decline in Service sector growth therefore reflects a more rationalized role for government in the development process. In effect, growth in government services is projected to decline as the private sector assumes a leading role in the development process.

Furthermore, the relative growth of the service sector will decline as resources gravitate to the agricultural and industrial sectors of the economy in response to incentives that make such sectors relatively more attractive to investors. Moreover, the decline in the yield on Treasury Bills resulting from successful efforts at reducing government borrowing will in the short run have an adverse impact on profit growth in the financial sector which currently accounts for approximately 14 percent of total service sector output.

5.1.3.5 Functional Expenditure Targets

The functional distribution of expenditures is projected to change in conformity with the strategies outlined in the GPRS. The proposed allocations in Table 5.1 are based on a broad resource envelope (i.e., includes Government of Ghana and Donor funds).

a) Administration

Allocations to this sector are expected to decrease over the period due to efforts aimed at maximising efficiency in service delivery. The allocation to this broad sector is expected to decline from approximately 20 percent in 2002 to 13 percent in 2005. The decline in the relative size of the Administration sector is largely due to the reclassification of General Government Services as a Contingency item and not a component of the Administration sector as was done in the past.

b) Economic Services

The allocation to this sector will be stable at 10.3 percent after declining from 18 percent in 2002. The downward trend is largely due to a decline in expected donor inflows to the energy sector.

The relative allocations to MDAs in this broad sector will change partly as a result of increased funding to the Ministry of Agriculture, over the 2003-2005 period. This increase is on account of the emphasis and priority given to the agricultural sector as will become evident in chapter 6. It is anticipated that the Ministry of Agriculture will devote greater resources to facilitating irrigation and storage construction and improving marketing and distribution channels. It is also expected that in conformity with the GPRS priorities, the relative share of donor funds to this vital sector will increase accordingly.

c) Infrastructure

The allocation to this sector will increase from 17 percent in 2002 to 19 percent of discretionary expenditure by 2004 and 2005 because of the need to rehabilitate existing feeder roads, trunk roads, and major road networks. The rate of increase in the sectoral share of infrastructure is gradual because of an expected improvement in efficiency with respect to road construction.

d) Social Services

The bulk of the savings from the HIPC Initiative will be devoted to social services. Hence, HIPC savings will be additional to the shares depicted in Table 5.1. It is projected that after the HIPC savings are taken into account, the relative share of social services will rise above the projected level of 34 percent for 2005. The increase in the relative share of resources devoted to the social sector reflects the major role that education, health and social welfare services is expected to play in the fight against poverty. However, efforts to increase efficiency in this sector will boost the cost-effectiveness of social service expenditures.

e) Public Safety

The allocation to this sector, which increased from 7.94% in 2001 to 9.66 percent in 2002 will rise to 11.1% in 2003 and levels off at 9.0% thereafter. Efficiency gains are expected which will increase resources available to help strengthen the enforcement of human rights particularly for vulnerable groups such as women and children. The initial increase in resources to the sector is intended to quickly equip and strengthen the police service in fighting armed robbery and the military in rapid response to national disasters.

5.1.3.6 Inflation Targets

The year-on-year inflation rate is projected to decline from 40.5 percent in December 2000 to 9.0 percent in 2003 and to 5.0 percent by 2005. The end of period CPI for 2002 was 15.2 percent and expected to decline to 5.0 percent by 2005. The target of 5 percent for 2005 is based on the assumption that the growth in both broad and reserve money will decline from 50.0 and 42.6 percent respectively in 2002 to 12.1 percent for both indicators in 2005. Credit to government is also targeted to decline from a growth rate of 32.5 percent in 2002 to zero percent in 2003 and to -7.7 percent in 2005.

5.1.3.7 Links Between the Macro-Framework and the Costing

The macro-framework determines the resource envelope available to finance the Medium Term Priorities of the GPRS. Invariably, a macro-framework that points to a stagnant or shrinking resource envelope implies fewer resources to finance the MTP and hence, a larger financing gap (i.e., gap between the cost of implementation and the resources available to effect implementation).

It is also important to note that the current composition of the discretionary budget poses a severe constraint to implementation of the MTP because it is heavily skewed towards financing personnel emoluments at the expense of investment expenditure. As shown below, however trends in projected Government expenditure (excluding donor funds) reveal a slightly growing share of investment expenditure in the GoG resource envelope and a corresponding decline in the share of personnel emolument. This shift, however subtle, is welcomed and represents a marked improvement in the effort towards re-directing the GoG resource envelope in support of national development.

Table 5.3.

Percent Distribution of Items 1 to 4 of Government of Ghana Only Expenditure*

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Excludes investment financed from HIPC resources

5.1.3.8 Underlying Assumptions

The macro-economic targets assume that there will be no sustained domestic or external shocks. Domestic shocks such as long period of drought will certainly destabilize the macro-economy. Likewise, external shocks such as a worldwide recession will adversely impact on economic growth through the effect on exports and the level of capital inflows.

5.2 KEY ISSUES & POLICY AREAS

To achieve the broad objectives above measures in the following three areas will be adopted.

  • Fiscal Policy Management

    • Debt Restructuring and Management

    • Expenditure Management

    • Resource Mobilisation

  • Monetary Policy Management:

    • Price and Exchange Stability

    • Institutional Legal and Regulatory Reform

    • Capital Market Development

    • External Shock Management

  • International Trade Management:

    • Export Competitiveness

    • Export Diversification

Fiscal measures will focus on improvements in expenditure management and more effective revenue mobilization. Monetary policy measures emphasize tight credit and open market operations to mop up excess liquidity and restrain inflationary pressures arising from debt monetization. It is also informed by measures to manage the impact of donor inflows on the domestic money supply by limiting the use of capital inflows to development projects and minimizing their application to recurrent expenditure. International trade measures focus on mechanisms to diversify exports and achieve a sustainable level of foreign reserves through increased international competitiveness. The measures also emphasise the importance of identifying and nurturing new areas of comparative advantage particularly in the area of data processing for export as well as the urgent need to form strategic partnerships with well placed foreign firms to exploit non-reciprocal access to US and EU markets offered under AGOA and the Cotonou agreements.

5.2.1 Fiscal Policy Management

Reducing the fiscal deficit (external and domestic) and consequently government borrowing is a key objective of the macro-framework. To this end, assessing the debt stock and its maturity profile is a prerequisite for designing an appropriate strategy for amortization.

The elements of the strategy to improve fiscal discipline are:

  • Improved debt management

  • Improved public expenditure management

  • Improved fiscal resource mobilization

5.2.1.1 Promoting Effective Debt Management

Improving the nation’s debt management capacity requires more effective mechanisms to monitor the debt stock, restructure the domestic debt to ensure a greater balance between short and long term debt instruments. It also focuses on measures to re-direct more resources to reducing the size of the domestic debt.

a) Monitoring the size of the domestic debt

A first step to monitoring the domestic debt requires a comprehensive audit of the stock of payment arrears including debts incurred by state owned enterprises and sub-vented organizations. Such audits will be routinely conducted to provide timely updates on the domestic debt stock and the rate of domestic debt accumulation.

b) Restructuring the Domestic Debt Stock

Currently, the bulk of the domestic debt is in the form of short-term (90 to 180 day Treasury) instruments. This places great fiscal pressure on government since the interest rates on Treasury Bills are currently prohibitive. Increasing the term structure of the government’s debt instruments will reduce the frequency of debt service payments and afford government more time to make good on its debt obligations. To this end, new medium to long-term debt instruments indexed to the rate of inflation are being developed to reduce government’s domestic debt service payments. In line with this proposal, the Ghana Linked Index Bond was introduced in September 2001. It is expected that more instruments of a similar nature will be developed in the future.

c) Reducing the Stock of Domestic Debt

Effective debt management also involves identifying opportunities to reduce the debt stock to manageable levels. The nation’s decision to join the HIPC initiative will be of assistance in reducing the external debt to sustainable levels. The domestic debt however, still remains a problem for reasons cited above because even though the domestic debt stock is only a fraction of the external debt, the high interest rates and short term nature of the domestic debt imposes a higher debt service burden on government than the external debt. This in turn reduces the quantum of available funds for other government expenditures including expenditure on the social and economic sectors. In effect, expenditures on health, education, feeder roads, rural water and sanitation that directly benefit the poor, are effectively constrained as debt service payments increase. Indeed, development expenditures have borne the brunt of reduced government expenditures. To alleviate the fiscal constraints imposed by the domestic debt, twenty percent of the savings from the Enhanced HIPC Initiative and ninety percent of the proceeds from the implementation of the divestiture process will be applied to reducing the domestic debt stock. Furthermore, government will intensify its effort to retrieve all arrears owed to it.

5.2.1.2 Improving Public Expenditure Management

Efforts to manage the existing debt stock must be complemented by measures that forestall an accelerated and unsustainable growth of the deficit. To this end, it is proposed that institutional structures and mechanisms that minimize the deficit by ensuring that expenditures keep pace with revenues must be created (where they do not exist) or strengthened where they are ineffectual. The reason is obvious, a growing deficit adds to the debt stock. Improving the management of public expenditure constitutes one mechanism for reducing the deficit. Achieving this objective will require improved forecasting and monitoring of commitments and cash transactions of Ministries, Departments and Agencies to ensure that such expenditures are within their allocated expenditure ceilings. It also requires that government expenditures pass the litmus test of cost-effectiveness to ensure value for money and reduce extravagance.

To this end, under the Budget and Public Expenditure Management System (BPEMS), a Cash Management module is being implemented. Bank Accounts of GOG are being restructured under this system to allow for improved Government Cash Position Visibility, provide for Government of Ghana Forecasting capability for committed expenditure, timely reporting on financial transactions at the National, Ministerial and District levels. This new Bank Account structure will become operational in 2003.

The system will also detail financial analysis of cash and banking transactions at all MDA levels, facilitate cash forecasting at the National level by MoF and provide for automated reconciliation of GoG accounts to ensure fiscal transparency.

The creation of the Economic Policy Coordinating Committee (EPCC) to monitor government expenditure is another example of the institutional reforms directed at improving expenditure management. The Committee (EPCC) comprises officials of the Controller and Accountant General’s Department (CAGD), the Bank of Ghana (BoG) the Ministry of Finance (MoF), the National Development Planning Commission and the major revenue generating agencies (VAT, CEPS and IRS). In line with its duties, the EPCC will produce a set of quarterly expenditure ceilings for each Ministry, Department and Agency (MDA).

Another committee, the Cash Management Committee (CMC) has also been established to assist MDAs prepare monthly Cash Plans, coordinate weekly revenue inflows and manage cash position of GoG in order to control its expenditures.

Generally BPEMS when fully implemented (approximately next three years) will provide features to enhance expenditure monitoring with the use of Oracle Financial Application Package. BPEMS will be operational in all eight pilot MDAs by end of 2003. Regional sites will come on board by 2004.

Meanwhile all MDAs from January 2003 will be utilizing the new broad based BPEMS Chart of Accounts and in effect BPEMS solution will be operational from 2003. Data will be collected from all the treasuries and captured at CAGD headquarters to generate monthly reports for ease of monitoring.

a) Tracking Expenditures for Poverty Related Projects

To ensure that allocations for poverty related projects are not misapplied it is proposed that expenditures at all levels are prioritised in accordance with the Poverty Reduction Strategy.

When emoluments and administrative costs are fully incorporated into the planning process in the next one to two years, it is believed that the systems of expenditure monitoring being implemented under BPEMS budgetary control features will facilitate closer tracking of poverty related expenditures including those under the enhanced HIPC initiative.

In the interim the HIPC Accounting Manual is being used to guide users in the utilization of HIPC and Poverty related funds and the HIPC Software is used to capture the related data and generate reports accordingly.

b) Commitment Control and Procurement

Government currently accumulates substantial payment arrears because expenditures are recorded on cash basis, thereby understating total payment obligation.

BPEMS seeks to address this problem by introducing modified accrual system and thereby taking cognisance of commitments and payables utilizing the Purchasing and Payable Modules.

In addition, the new Procurement Bill under PUFMARP will ensure transparency and value for money in public procurement.

This bill is expected to be passed by Parliament by the end of the first quarter of 2003. Training materials and manuals are being developed and training of all stakeholders is scheduled to start after the bill has been passed. It is anticipated that this new bill will become operational in 2003.

c) Transparency in Use of Special Statutory Funds

To ensure greater transparency in the use of Special Statutory Funds (e.g District Assembly Common Funds, Roads Fund, Education Fund etc), information on transfers into the fund and on the utilization of such funds will be published on a quarterly basis.

To this end BPEMS has provided a broad based Chart of Accounts to capture Fund Types, inter-fund transactions and account for the utilization of such funds. A special reporting tool will be utilized to generate needed reports to be reviewed by stakeholders.

d) Limiting of Domestic Borrowing

One of the Fiscal policies of Government is to limit net domestic borrowing in order to reduce interest rates thereby increasing access to capital for the private sector, to increase production, create more jobs and reduce inflation.

5.2.1.3 Improving Fiscal Resource Mobilization

Improvements in the use of government funds must be complemented by measures to strengthen the capacity of government to mobilize revenue. To this end, the strategy focuses on increasing revenues not by increasing taxes but by instituting measures that widen the tax base. This involves minimizing revenue leakages, reducing the incidence of tax avoidance, strengthening the capacity of revenue collecting institutions (including District Assemblies) and ensuring cost recovery pricing.

a) Minimizing revenue leakages in all revenue collection agencies

Achieving this objective requires a review of the incentive structure for all revenue agencies. In addition, the mechanism for setting revenue targets is being reviewed. To this end, revenue targets will be set in consultation with an independent body or research institute. This body will also be involved in a comprehensive assessment of the revenue generating potential of the economy. Furthermore, revenue targets must adequately control for or take into account expected inflation and exchange rate changes.

Revenue leakages will also be minimized through more effective monitoring and control of bonded warehouses. The tendency for bonded commodities to be removed from the warehouses without the requisite payment of duty results in substantial revenue losses. To improve the monitoring of bonded warehouses, a programme of automation of all such warehouses will be undertaken. Besides this, the Revenue Agencies Governing Board is currently considering the possibility of hiving off the operations of the Bonded Warehouses to a Private Sector Agency to be run as a profit center for CEPS.

The use of tax exemptions as an instrument for enticing investors has been a very contentious issue lately. Even where it is accepted as a desirable tool, it is very necessary to consider the scope both in terms of items and application and time. Most exemptions are determined by only the immediate economic activity it is going into, irrespective of its full impact on the country as a whole. It is necessary that exemptions be linked to the medium to long-term impact on the economy as a whole and not only the sector within which beneficiaries operate. Law on exemptions need to be critically reviewed and made more realistic and as much as possible help in reducing the negative impact of exemptions on revenue.

A common Taxpayer database for tax collection Agencies has been established to provide revenue-collection Agencies with a more accurate profile of eligible taxpayers. In furtherance of this, the Taxpayer Identification Numbering System (TIN) Law Act 632 (2002) has been passed by Parliament to facilitate the issuance of unique numbers for purposes of Taxpayer Identification, data gathering, selective cross-referencing of data among the Revenue Agencies and coordination to achieve greater tax compliance.

b) Reviewing and revising existing taxes, fees and user charges

The failure of most user fees, taxes and charges to reflect production costs has contributed to revenue shortfalls and consequently the growth in the deficit. In response to this problem, energy and utility pricing will be based on the principle of cost recovery. However, it is recognized that the indiscriminate application of the principle particularly in the area of health and utility pricing will result in undue hardship to the poor and undermine the very basis of the GPRS. To avoid pricing the poor out of the market for such essential services, a system of cross-subsidization measures will be enforced to mitigate the impact of cost-recovery on the poor.

c) Strengthening the revenue collecting institutions

Revenue collecting Agencies must be institutionally strengthened to improve their effectiveness in increasing government revenues. In line with this objective, a National Tax Audit Bureau to assist the revenue collection agencies has been created together with a Revenue Agencies Governing Board charged with the responsibility of coordinating the efforts of the various Revenue Agencies. As an incentive for increased revenue collection, the Revenue Agencies have been allowed retention of up to three percent (3%) of revenue collected to be re-invested for institutional strengthening.

Additionally, a Large Taxpayer Unit (LTU) is being created as a pilot site for the development of new approaches, new programmes and procedures for large taxpayers to enhance revenue through improved compliance and service to taxpayers.

d) Strengthening District Assemblies for improved tax collection

District Assemblies are ideally placed for revenue mobilization including the collection of taxes. Relative to central government their administrative size is smaller and relatively more manageable. Furthermore, they have closer contact with the community and hence have more reliable information about tax-payers. To exploit the strengths of District Assemblies in the revenue mobilization effort, the capacity of district level revenue agencies be strengthened. Furthermore, district level revenue agencies will be effectively linked or networked with national agencies for information sharing purposes.

5.2.2. MONETARY POLICY MANAGEMENT

One of the important lessons from the history of economic policy management in Ghana is the need to avoid conflict between fiscal and monetary policy. It is important to avoid fiscal dominance in the economy or a situation in which expenditure decisions would result in high inflation and a rapid currency depreciation, and would need to be countered with interest rates increases possibly to the point that this could become unsustainable and monetary policy would become ineffective.

The new Bank of Ghana Act:

  • Refocuses the central bank on the major task of inflation control and away from the developmental activities, which characterized the Bank of Ghana’s operations in the past. According to the Act the primary objective of the Bank is to maintain price stability “independent of instructions from Government or any other authority”.

  • Establishes a Monetary Policy Committee responsible for formulating monetary policy to bring transparency to the central bank’s operations and its communications with the public.

  • Stipulates that government borrowing from the central bank in any year shall be limited to 10 percent of its revenue.

These provisions of the Act are meant to ensure discipline in monetary management. In this regard, key indicators of monetary discipline will be the extent to which the objectives and procedures laid out under the Bank of Ghana Act are attained. These include:

  • Exchange rate stability

  • A transparent central Bank

  • Keeping Government Borrowing within prescribed limits, and

  • Effective functioning of the Monetary Policy Committee

5.2.2.1 Price and Exchange Rate Stability

The Bank of Ghana Act enshrines price and exchange rate stability as primary policy goals. It is important to note, however, that price and exchange rate stability can be attained at a very high cost to the economy in terms of high real interest rates, which would be detrimental to economic growth. In the framework of maintaining price and exchange rate stability at low real interest rates:

  • It would be important to place government spending in a disciplined fiscal framework, with hard caps on expenditures (including explicit budgetary allocations to cover subsidies to public enterprises and transfers of funds for quasi-fiscal operations).

  • Explicit guarantees to public enterprises have been a source of rapid growth of public debt, and very serious monetary implications when default occurs. The Bank of Ghana should use its statutory discretion only in cases that are truly exceptional in nature, and do not pose any risk to the financial position of the bank.

a) Establishing an Efficient Inter-bank Foreign Exchange Market

One legacy of the unstable economic environment has been the fragmentation of the foreign exchange market that has taken place over the years. This has been an important source of institutional weakness and problems for monetary and exchange rate policy. We now have in Ghana, a de-facto fully liberalized current and capital account, with transactions conducted in two segments of the foreign exchange market. Thanks to the legacy of controls, a large atomistic informal foreign exchange market operates side by side with the core inter-bank market, one for trading in currency notes, and the other for trading in forex and all other financial assets. Interbank trading in foreign exchange is very low in volume relative to external payments transactions. Trade is organized around preferred bank-client relationships in small segments of the market in which exporters and importers cluster as distinct groups around individual banks for transactions in a manner that leaves them vulnerable to small shifts in positions. The challenges are to develop an incentive-based and fully transparent system to pool and allocate resources in a well-integrated inter-bank market.

b) Ensuring a Greater Intermediation within the Financial System

To help develop an efficient financial system, it is important that the large amount of savings and financial assets, which are currently held outside the formal financial system be brought within the financial system to allow for efficient intermediation. Banks have a core responsibility to help attract depositors into the banking system. The mobilization of savings is the key to expanding and deepening the financial system. No amount of savings is too small. It is evident that banks are not encouraging a savings culture by students and the young and for that matter the general public, by imposing prohibitive minimum deposit requirements and charges on cheques. The Bank of Ghana should use moral suasion and other avenues available to it to encourage banks to accept and provide incentives to the placement of deposits. Furthermore, Banks should be encouraged to reduce the spread between savings and lending rates.

5.2.2.2 Improving the Institutional, Legal and Regulatory Framework for Monetary Management
a) Revising Laws and Procedures Governing: the Banking Sector

The legal and regulatory framework needs to be re-examined to allow for innovation and the development of strong institutions to support savings mobilization.

  • It is important to ensure speedy passage of key legislation governing the operation of the banking system. These include the Banking Bill and the Payments Systems Bill. The new Banking Bill is intended to strengthen the operational independence of the Bank of Ghana in its role as a regulatory authority and to ensure greater transparency in the regulatory framework for banking. The Introduction of the Payment Systems Bill is a response to the need to develop non-cash payment products and clearing systems in order to reduce the over-dependence on cash payments in the economy.

  • There is also the need to expedite the submission to Parliament and passage of the Anti-Money Laundering Bill. This Bill seeks to reinforce existing mechanisms for monitoring terrorist finances and money laundering within the global financial system. This is especially important in the context of the recommendation of the Investors Advisory Council to introduce off-shore banking in Ghana. It is important that the necessary safeguards be put in place.

  • In this regard, the Exchange Control Act (71) of 1961 needs to be reviewed to make it consistent with a liberalized foreign exchange market.

b) Banking Supervision

On the supervisory role of the Bank of Ghana, the regulatory framework should be applied fairly with the intent of maintaining a liberal arrangement rather than a control regime. Furthermore the licensing framework for financial institutions should be reviewed to allow for the speedy processing of applications and the licensing of high quality and large-sized institutions to provide depth to the financial market. At the same time rigorous supervision and enforcement of prudential regulations are essential to safeguard the soundness of the banking system and facilitate the exit of weak banks that pose systemic risks.

5.2.2.3 Deepening Capital Markets

The development of capital markets is a long-term measure that cannot be achieved over a two to three year period. However, measures need to be put in place to nurture the development of such markets. The proposed strategy focuses on tax incentives to promote long-term savings and also on regulatory changes to promote competition in delivery of pension schemes.

a) Implementing schemes to increase long-term savings/funds

Domestic money banks are not well suited for providing long term financing since their deposits are subject to withdrawal at short notice. The Social Security and National investment Trust pension scheme (SSNIT) on the other hand, is a potential source of funds for long term lending. Contributions to SSNIT are currently fixed at 17.5 percent of total compensation for all formal sector workers (i.e., those enterprises employing more than 20 persons). The GPRS recognizes that in-spite of its potential as a source of long-term lending; SSNIT has serious financial and administrative problems, which threaten its medium term functioning. Low rates of return on investment (2.3 percent in 1999), high provision for bad and doubtful debts (20 percent of assets) and high administrative costs (up to 22 percent of collected contributions) constitute some of the key problem areas. In view of this, the reform of SSNIT will be intensified to ensure improved internal control and audit systems, improved design and implementation in investment strategies and an investment portfolio that favours short term or inflation indexed government securities. As SSNIT’s financial health improves, the required percentage of SSNIT contributions will be gradually reduced to free up funds for supplementary pension schemes. To encourage patronage of such schemes, tax deferrals should be granted for participation.

5.2.3 International Trade

The underlying philosophy behind the proposed macroeconomic policy measures for international trade is the promotion of the international competitiveness of domestic firms within the framework of trade liberalization. Trade competition must however be fair and not unduly disadvantage domestic firms. Support will be provided to domestic firms to foster their competitiveness not only in the arena of traditional exports but to carve out new areas of competitive advantage in non-traditional commodities, particularly non-primary products.

5.2.3.1 Improving Export Competitiveness

At the macro-level, the competitiveness of domestic firms will be promoted through the adoption of competitive and credible exchange rate regime, and the implementation of a tariff and tax structure that expedites trade, minimizes tax avoidance and penalizes “dumping”.

a) Maintaining Competitive Real Exchange Rates

The acceleration in the rate of inflation together with external shocks have contributed largely to the currency volatility in Ghana. In a flexible exchange rate regime the observed (i.e. nominal) exchange rate will depreciate (in the absence of government interventions) if the domestic rate inflation is higher than the corresponding rate among Ghana’s major trading partners. Maintaining stable and competitive exchange rates will therefore require discipline and a harmonization in the monetary and fiscal policies of government to reduce inflationary growth and stabilize the value of the currency. Furthermore, it is proposed that both market and non-market interventions in the foreign exchange market be minimized. Non-market interventions distort the exchange rate by under-pricing the foreign currency. The resulting overvaluation of the exchange rate leads to a resurgence in parallel market activities and penalizes exports. Market interventions (i.e., the sale of foreign currency to reduce its value) on the other hand, are unsustainable especially because of the low level of the nation’s foreign reserves.

b) Improving the Import/Export Regime

Reducing the administrative bottlenecks associated with the export and import process will facilitate international trade. To achieve this objective, the cumbersome customs procedures will be streamlined to reduce transactions costs associated with clearing and exporting goods.

Although the new system of destination and transaction valuation adopted in April 2000 represents an improvement over the previous system, the valuation process is still inadequate and inspection rates continue to be high largely because of inadequate training for the implementing agencies. To address these issues, public education will be undertaken to inform the trading community about new customs procedures and processes. Such education will include the introduction of short courses, help desks and hotlines to assist importers. In addition, the process of destination inspection and transactions-based valuation will be improved by rigorously enforcing performance standards for the inspection companies to significantly reduce valuation times. To this end, the licensing requirements for freight forwarders and clearing agents will be revised to include proficiency in the new scheme. The performance of the duty drawback scheme has been hampered by delays in repayment of drawback refunds. In response to this problem The GPRS underscores the need to make adequate budgetary provisions to fund duty drawback payments. Firms that are not reimbursed by the deadline will be able to offset their reimbursements against their tax liabilities and all outstanding duty drawback arrears.

c) Minimizing the Incidence of “dumping”

Dumping is said to have occurred if a commodity is sold on the domestic market at a price that is less than the producer’s cost of production. Dumping constitutes unfair trade practice and unduly disadvantages import competing domestic firms. In recognition of the adverse effects of this practice, the World Trade Organization ruled that a country can initiate antidumping measures after it has established that (a) dumping exists (b) there is material injury or threat of material injury to the nation’s domestic industry (c) there is a causal link between the dumping and the injury. To the extent that the above conditions hold, the ultimate remedial measure against dumping will be the imposition of an anti-dumping duty equivalent to the full margin of dumping or less.26

To address the issue of dumping, the government will initiate the appropriate steps to seek redress for dumping and in the event that dumping is established, a surcharge will be imposed on “dumped goods”. Moreover, quality control standards for imports will be enforced to curtail the influx of shoddy goods. Furthermore, the trade liberalisation policy will be reviewed in the context of its impact on the economy and the environment.

5.2.3.2. Diversifying the Export Base

Diversifying the export base is a necessary imperative for reducing the nation’s vulnerability to shocks and increasing the sources and quantum of foreign exchange earnings. This objective will be achieved by identifying and exploiting new areas of competitive advantage, forming strategic partnerships to take full advantage of preferential access to foreign markets provided under current trade agreements.

a) Promoting New Areas of Competitive Advantage

To promote new areas of competitive advantage, firms engaged in processing of agricultural products for export will be supported. In particular processing of cocoa beans will be encouraged. Similar support will be granted to new promising areas such as data processing for external markets, starch, salt and shea-butter production for export.

b) Taking full advantage of Preferential Access to Markets (AGQA, EU-ACP)

While the AGOA and EU-ACP agreements offer market opportunities for developing countries including Ghana, their ability to exploit such opportunities has been constrained by supply-side bottlenecks. To capitalize on preferential access to foreign markets efforts to support domestic firms to access foreign markets will be complemented by measures that encourage domestic firms to forge strategic partnerships with foreign firms that do not enjoy similar market access.

6.0 PRODUCTION AND GAINFUL EMPLOYMENT

6.1 AN OVERVIEW

The strategy to improve production and generate gainful employment is based on creating an enabling environment to stimulate private sector activities. This will involve improvement of the capacity of the private sector to adopt an entrepreneurial approach to increase productivity and generate employment

6.1.1 Agricultural Development

The poverty diagnostics in Chapter 3 shows that the incidence of poverty among food crop farmers is the highest among economic groups. A survey of the agriculture sector presents a picture of the food crop farmer and provides pointers to why poverty may be high amongst this group and what can be done to reduce it. The average farm size is small (less than 1.2 hectares) and hired labour is hardly used by this group. The average food crop farmer has limited contact with the product market and is unlikely to use fertilisers, insecticides, high yielding seed varieties or irrigation-based techniques of production. Smallholder farms dominate the sector accounting for about 80% of total agricultural production.

An analysis of the structural roles of women and men also reveals that women are more active in agriculture than men, especially in food production. Men are predominant in cocoa farming, as this requires individualised land ownership, which is not easily accessible to women, though women also supply labour in cocoa farming27.

Crop production is largely rain-fed and traditional techniques of production tend to dominate. It is estimated that 6,000 out of approximately 2,740,000 farm-households nation-wide used irrigation services in the period 1998/99. The estimates also reveal that 20% of the households use fertilisers and about a tenth purchase seeds for planting. Fertiliser use is estimated at 8kg per hectare compared to an average for developing countries of 60 kg per hectare. Productivity in the crop sector is therefore quite low. Estimates of achievable yields, that is, yields that have been achieved in isolated cases due to more effective extension and other logistic support show that there is a wide gap between actual and potential yields.

Productivity in the livestock sector is also low by international standards. Despite production being widespread, output of livestock is only about 8% of agricultural GDP compared to 75% in many countries. It is estimated that the average production of milk from a cow in Ghana is 4 litres a day compared to a possible 30 litres a day internationally. The meat or carcass yield of local breeds of livestock is also estimated at about 20% of that of exotic breeds. An estimated US$100 million is spent annually on imports of livestock and livestock products. Generally, lack of access to high yielding breeds has been identified as the major constraint to the development of livestock in Ghana. Cattle production is mainly free range. More than 80% of the poultry in the country consist of the local breed, which produce 100 eggs per annum compared to 180 eggs per annum for the exotic breed. The current heavy reliance on imported frozen meat, dairy products and live cattle and sheep is a reflection of the lack of concerted efforts aimed at increasing productivity in the livestock sub-sector.

Marine fish production fell in 1997 and 1998 although inland fish production has been on the rise since 1994. The drop in marine fish production was a result of declining stocks of fish due to the proliferation of demersal trawling activities in the near shore waters, absence of a legal framework and an active fisheries resources management, and rising costs in fisheries operations.

A poor marketing and distribution network is a constraint on the expansion of production. In the cocoa sector there exists well-established marketing chains that transfer the produce from the farm to the final consumer. However, such well-established marketing chains do not exist for food crops. Most farmers are not part of these marketing chains and the cost of accessing them is high.

Many projects were implemented as part of the medium term agricultural development plan, MTADP, in the 1990s to address some of the issues discussed above. Unfortunately the performance of agriculture during the period of implementation of the MTADP was poor. The expected private sector response did not materialise. For instance, it was expected that about 40% of the cocoa purchasing would be done by the private sector. However the private sector currently does not handle more than 25% of domestic purchases as they have been limited by the required up-front payment. While some improvements in infrastructure occurred, targets were not achieved. Instead of rehabilitating 1200-2000 km of roads each year, annual achievements have ranged from 212 km to 1080 kilometres only.

In 1995, the government made a firm commitment to implement proposals aimed at reducing poverty in Ghana. Most of these proposals have been implemented at varying degrees of success. The Accelerated Agricultural Growth and Development Strategy (AAGDS) was formulated as a new agricultural strategy to improve human welfare and reduce poverty in the country.

Programmed for implementation over a ten year period 2001-2010, the AAGDS seeks to significantly increase the production of selected products by improving access to markets, developing and ensuring improved access to technology for sustainable natural resource management, improving access to agricultural financial services, improving the quality of agriculture-related infrastructure, and enhancing human resource and institutional capacity.

In the context of the Ghana Poverty Reduction Strategy, it is important to note that on-going AAGDS projects that are consistent with the GPRS will continue to be implemented. On the other hand, some projects such as the International Fund for Agricultural Development (IFAD) initiative in the Northern Region must be made completely consistent with the GPRS.

6.1.2 Non-Traditional Export Development

Non-traditional export development is seen as one of the critical areas for poverty reduction efforts as well as for growth. The range of products designated as non-traditional is large. All agricultural products other than cocoa, timber products other than logs and lumber, locally manufactured products including handicrafts and salt and processed gold constitute non-traditional exports when exported. Ghana can take advantage as a small country to increase production significantly. The broad strategy is to increase non-traditional exports by reducing transaction costs and increasing the productive capacity of exporters.

6.1.3 Manufacturing Industry

Productivity in Ghana’s manufacturing sector tends to increase with firm size. Value added per employee in firms employing more than 99 workers is four times the productivity of the micro firms that employ less than five workers. Studies show that efficient firms are the ones that export. However, most firms in Ghana’s manufacturing sector are not involved in exporting; and the proportion of firms that export some of their output is not more than a third of all firms. Firms that do export do not tend to export more than 35% of their output except for the few in the Export Processing Zone.

While support for large-scale industrial producers is important, such efforts must be complemented by measures that enhance the productive capacity of small-scale producers. This will have a more direct impact on poverty inasmuch as the majority of small-scale producers are poor. The National Board for Small-Scale Industries NBSSI is charged with the responsibility of formulating, developing and implementing a national programme that is aimed at accelerating the growth of small-scale industries. The objective of the NBSSI is to contribute to new business creation in order to alleviate poverty through the increased output of small-scale enterprises. The Management Development and Productivity Institute, MDPI, is expected within the strategy to undertake programmes to increase the productivity and output of these enterprises. Strengthening such institutions is therefore required.

6.1.4 Employment

The national employment policy framework is aimed at creating an enabling environment for accelerated growth and employment. A second objective is to create adequate wage and self-employment opportunities for entrants into the labour market. There is an emphasis on micro and small-scale enterprises and employment opportunities for women.

Several projects that have been implemented, have aimed directly at employment generation. Some examples of these are: Priority Public Works Project; Labour Intensive Projects; Feeder Roads Project; Food for Work Projects; Labour Based Feeder Road Rehabilitation and Maintenance Project and; and Special Employment Schemes. These schemes have tended to generate employment but only for the life of the project. The benefits of each project tend to be largely restricted to the project area and do not have much of an impact at the national level. An employment generation strategy in Ghana cannot be based solely on the existence of projects. What is needed is the creation of an enabling environment that will encourage investment and production nation-wide by the private sector.

There have been other schemes aimed at improving upon production conditions, thus contributing to employment generation. Some of these are: Credit schemes for small-scale enterprises and farmers; Enhancing Opportunities for Women in Development; Community Initiative Projects; and Ghana Regional Appropriate Technology Industrial Services, GRATIS, and the Intermediate Technology Transfer Units, ITTUs. A large section of the urban work force is self-employed in the informal sector. The sector is therefore very important to Ghana’s economic progress. Its features are addressed to increase production and productivity.

The strategy on production and employment will seek not only to improve the efficiency of public sector programmes but also provide sufficient incentives to stimulate private sector entrepreneurial development.

In the 1980s, the Programme of Action to Mitigate the Social Cost of Adjustment (PAMSCAD), had included a number of infrastructure projects which used labour-intensive production technologies:

  • - Priority public works programme;

  • - Labour intensive feeder roads project

  • - Hand-dug wells; and

  • - Sanitation projects.

An International Labour Organisation (ILO) study on structural adjustment and employment in Ghana estimated that these works created 20,000 person-work-years of employment during a five-year implementation period. Only a third of this employment would have been generated in the conventional equipment/capital intensive methodologies. Technical assessments have indicated comparable quality between the two methodologies. The construction and maintenance of civil infrastructure like roads and water supply systems, irrigation systems, erosion control and building works are areas in which labour based methods have equal financial advantages with equipment intensive ones. In the implementation of the GPRS the former will be the priority methodology wherever it is feasible.

In seeking to achieve the objective of increased employment, proper occupational risk identification and management measures must be undertaken through effective monitoring of work place health and safety.

6.1.5 Services Sector

The services sector is the fastest growing area of the economy. Ghana has taken on the features of a present day industrialised country with a large services sector without having gone through the prior stage of developing the agriculture and industry base of the economy. The tourism sector has emerged as an important earner of foreign exchange ranking third after gold and cocoa and fast expanding. Information provided by the Ghana Tourist Board on the purpose of visit shows that in the majority of instances, tourists come to Ghana to conduct business and or attend conventions (26.1%), for official reasons (10.7%), or to attend to family-related matters (31.7%). Ghana appears to have more success in attracting “conference” tourists rather than the traditional tourist. Less than a third of the tourist arrivals come to Ghana for a vacation. This is an area that can be explored and developed.

The Ministry of Tourism estimates that in 1995 about 17,000 were employed in the tourist sector. The sector also supported 45,300 jobs in the rest of the economy. Expansion of the sector therefore has the potential, through multiplier effects, to create employment opportunities in other sectors, for example the food industry.

The banking sector has gone through some transformation since the start of the financial sector reforms in the late 1980s. The number of banks has increased with the introduction of legislation that allows the establishment of private banks. In addition some of the new banks do not focus only on commercial banking but also provide merchant banking facilities.

6.1.6 The Formal Sector

The formal private sector is a key stakeholder for the implementation of the Ghana Poverty Reduction Strategy. Supporting the rural environment, for instance, as a catalyst for economic transformation will depend largely on the response of the private sector and especially those of the formal sector. The establishment of Accelerated Agri-business Zones for integrated and comprehensive development in the northern savannah, the Afram Plains and the northern part of the Western Region is indicative of formal private sector opportunities being provided within the GPRS.

The formal private sector is generally capable of seeking its own interests. What has been the problem is the extent of appropriate responses from government and sustainability of these responses. It is stressed in this strategy that umbrella organisations such as the Private Enterprise Foundation, the Trade Union Congress, the Association of Ghanaian Industries and the Ghana National Association of Farmers and Fishermen need to ensure that the activities of their members are consistent with the broad objectives of the GPRS.

To facilitate private sector entrepreneurship in both agriculture and industry, key issues have been identified in a number of policy areas. They include:

  • Promoting land administration reform to improve security of land tenure by addressing issues of land title and land security.

  • Providing incentives including tax breaks to attract entrepreneurs into agriculture and agro-industries.

  • Vigorously encouraging and supporting agro-industries targeted at both the domestic export markets.

6.1.7 The Informal Sector

Apart from its potential role in providing alternative employment opportunities to the formal sector, the informal sector provides other potential economic and social benefits in Ghana’s development efforts. These include the production of goods and services, the creation of activities that maximize both forward and backward linkages between economically and socially diverse sectors. Its flexible adaptations to labour market fluctuations and its provision of alternative employment opportunities for alleviating the negative consequences of the structural adjustment policies make the informal sector one of the most crucial in Ghana’s development efforts.

The urban informal sector has several features that need to be addressed. These include:

  • Low levels of education and training of the self-employed and other workers. Women and persons with disability in the informal sector are particularly disadvantaged in this regard

  • Limited access to credit

  • Lack of institutional framework (e.g. producer organisations) to overcome the disadvantage of extremely small size

  • Lack of effective contract enforcement

  • Low level of technology use

  • Limited vertical integration

In addition to equipping the workforce in the informal sector with financial and management skills and experience to improve their international competitiveness, efforts will be made to:

  • Develop systems and mechanisms to facilitate co-ordination and linkages between the formal and informal sectors of the economy

  • Promote technological proficiency and advancement of the informal sector labour force

  • Reform and strengthen the traditional apprenticeship system

  • Support organisations of persons with disabilities as organisations that enhance the capacities of the poor

6.1.8 Inter-Ministerial Co-ordination

Improving inter-ministerial co-ordination and collaboration for increased production is critical in the strategy. Investments in agriculture, for instance, can only succeed when there is close coordination between the economic and trade ministries (Ministry of Finance, MOF and Ministry of Trade and Industry, MOTI) to ensure convergence of policies that remove marketing and production constraints, and facilitate export marketing. For instance, while industries in the zones can import inputs duty-free from external sources, inputs from agriculture and other sectors from internal sources must pay VAT before they enter the free zone. This has been seen as unfair bias against domestic production and may have to be jointly addressed by MOTI, Customs, Excise and Preventive Services, CEPS, Ghana Export, GEPC and Ministry of Food and Agriculture, MOFA. The functional groups of infrastructure and economic services in particular must coordinate their activities in order to maximize benefits from their activities.

6.1.9 Environmental Protection and Natural Resource Management

Increased production and gainful employment through enhancement of infrastructure (feeder roads, storage facilities, and irrigation development) and mining activities will be strongly supported by environmental impact assessments and audits. Concerns about deforestation, land degradation through mining and farming activities, loss of coastal ecosystems and fisheries will be seriously addressed together with those from manufacturing industries. The empowerment of civil society including traditional authorities will be promoted to address issues on land degradation resulting from illegal mining, farming activities and chain saw operations. Laws on bush fires, illegal mining and chain saw operation will be reviewed and enforced. Fire plans must be integrated into large-scale agricultural projects.

Environmental standards will be enforced along with measures to sustain increased production. The Ministry of Environment Science and Technology, MEST, through the Environmental Protection Agency (EPA) will enforce all regulations as set out in their mandate. It is recognised in this strategy that there is a strong link in the natural resource and environmental conditions and poverty. Part of the poverty situation in the Upper East Region, for instance, is due to a natural environment that has become fragile due to insufficient protection in the past. Current land conservation and rehabilitation programmes are helping redress the situation in that region. Such programmes will be extended in the strategy to cover communities with similar conditions.

In addressing issues of increased agricultural production, the conservation and sustained use of biodiversity of plants, animals and microbes shall be encouraged. Threatened ecosystems and habitats of species shall be rehabilitated using the Ecosystem Approach. Every effort must be made to bring synergy of the implementation of all environmental conventions and protocols to which Ghana is a party.

The Ministry of Lands Forestry and Mines in collaboration with the Ministry of Energy, the Ministry of Environment, Science and Technology, Ministry of Local Government and Rural Development, Ministry of Food and Agriculture, Ministry of Trade and Industry and the Ministry of Tourism will develop programmes that both enhance environmental quality and provide incomes to reduce poverty in communities. To ensure sustainable levels of production, measures to protect the environment will be mainstreamed by integrating them into current production practices. Access to information on minimum environmental standards required for gaining entry into foreign markets, will be improved.

6.1.10 Gender Equity for Increased Production

Both gender categories are well represented in services, agriculture and the manufacturing industry. In agriculture, women’s contribution is immense and has been variously estimated as between 55% and 60% of total production. However, women continue to have problems with access to land. Male ownership of most lands mean that improvements through infrastructure provision may by-pass women. Women are involved in processing of most of the agricultural products - gari, shea butter, groundnut and palm oils, fish and cotton products. The main constraint here is marketing. The low prices received by these producers, including those products that have external and/or industrial markets, is mainly due to the lack of bargaining power. Another constraint to improvements in women’s activities is lack of access to credit facilities. It has been pointed out above in relation to the informal sector that women, who again dominate, are most disadvantaged.

The strategy in the GPRS is to target women activities with support programmes including credit, improved technological services and facilities, and skills upgrading in management and finance. Credit supply for production must be both adequate and long term. Winning entrepreneurs will be supported in each district with special emphasis on women entrepreneurs to serve as an encouraging factor.

6.1.11 Information and Communication Technology (1CT)

The creation of awareness in information access is recognised as being of prime importance. With respect to ICT usage and application, an information technology policy framework is currently being developed which recognises that the dynamics of global economic growth are changing at a very fast pace. The role of the Internet as a pervasive phenomenon and its implications for the traditional factors of production is taken into account. Economic potential is recognised as being increasingly linked to the ability to control and manipulate information. Within this policy context also, the need for an effective legal and regulatory framework is identified. A National Communication Authority is operational and a National Information Technology Agency is to be established as part of the regulatory and licensing environment. Also to be established is a national communications backbone facility to provide access throughout the country.

In the medium term, the intention is to support the development of electronic commerce to enhance production, productivity and to facilitate business transactions. Government intends to establish Information Technology (IT) parks and incubator areas equipped with the necessary infrastructure for ICT related businesses and to develop human resources that support the deployment and rehabilitation of modern ICT.

Government will re-negotiate the existing telecommunications agreements to introduce more competition and accelerate access to telephones, Internet and information technology in the country.

6.1.12 Science and Technology Application

The role that science and technology should play in Ghana has been stated in the National Science and Technology Policy (2000) document. The Ministry of Environment and Science will promote the development of science and technology at all levels to increase industrial production, employment, and natural resource production, enhance food security, sustainability, self-sufficiency and environmental health. Appropriate technology development will be promoted in particular to support agriculture and rural small and medium scale enterprises.

6.2 KEY ISSUES AND POLICY AREAS

Despite the fact that deprived areas have been identified for many years there has been no consistent attempt to allocate resources to assist and stimulate their development potential.

The programme on production and employment will seek not only to improve public sector delivery of programmes but also provide sufficient incentives to stimulate private sector activities in increasing and sustaining production of basic staples, production of selected export crops, expanding employment in sectors and geographical areas that employ the poor most, and enhancing skills of the poor.

Apart from health, education and other provisions made elsewhere in this strategy, a number of objectives have been defined to begin redressing the situation to reduce poverty and ensure growth. The general targets for production are presented in Table 6.1

Table 6.1.

Production Growth Targets

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6.2.1 The Rural Environment As A Catalyst For Economic Transformation

The rural environment, which is proportionally over 60% of the country, is seen as the point of leverage for national economic transformation. Transformation of the rural environment can be achieved through agro-based industrialization (i.e. agricultural processing), effective decentralization, private sector development and a changing role of the state. It will also require changing values for instance in relation to gender roles. Land reform is essential not only to rural transformation but for enhancing the production environment in general. The role of government in this strategy will comprise investment in transport infrastructure, concentrating in areas of high agricultural potential such as the Afram Plains and the onchocerciasis-controlled zone to make them attractive to formal private investment.

While commercial agriculture is emphasised, it is stressed that priority is given to smallholder agriculture. Indeed the GPRS, in support of production and gainful employment for poverty reduction favours: (i) labour intensive as opposed to capital intensive technologies, (but with simple tasks employing simple mechanised means to reduce the drudgery of the farmer) (ii) rural over urban locations for processing plants, and (iii) crops which can be produced by smallholders.

Provisions made in the strategy are not meant to run counter to the market mechanism. Support for resource poor farmers and groups and communities in terms of the supply of vital inputs such as fertilizer, improved seeds, improved breeds and credit facilities will be informed by successful market-based best practices from various projects around the country.

Table 6.2.

Targets for Production

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6.2.1.1 Increasing Agricultural Yields Through Infrastructure, Market and Extension Service Provision

In order to reduce poverty, the low agricultural yields especially of food crops must increase through infrastructure, market and effective extension service provision.

A. Infrastructure
a) Irrigation Development

Total area under irrigation in Ghana is very limited - just about 0.04%. This low proportion prevails despite the real need in the northern and coastal savannah due to both erratic and insufficient rainfall. Existing viable irrigation facilities will be rehabilitated to attract private sector management. The private sector will be encouraged to use the nucleus-out-grower schemes with groups of small-scale farmers and co-operative societies. At least fifteen percent of communities in Upper East Region where rainfall fails more often will be provided with access to dugouts to alleviate such extreme situations.

The approach to the irrigation sub-sector development can be viewed broadly in two categories, namely:

  • Micro and small irrigation. This will focus on:

    • The development of valley bottoms for irrigation, a relatively low cost harnessing of waterlogged river valley for the management of wet season soil water for cultivation of food and other crops.

    • Provision of small dugouts, bore holes, tube wells and other simple water harvesting structures especially in the three northern regions and the Afram Plains.

    • Rehabilitation of all viable irrigation facilities

  • ii Medium/large scale irrigation: These will involve the construction of major dams, pumping stations, diversion structures, canals and long distance conveyance pressure pipe systems to be provided purposely for commercial operators and investors

Construction of the small-scale irrigation facilities will utilise a minimum of machinery and more labour to generate employment and income to support agriculture production. Water for irrigation especially in the north, will be used for domestic purposes, watering animals, and for dry season farming. Irrigation development could be the basis for introducing some non-traditional exports (NTE), such as mangoes, pawpaws, cashew, ginger, and to generate both employment and income.

Heavy investments in irrigation in some of the few schemes that exist have failed to live up to expectation. An approach that recognizes that irrigation requires a new production culture is needed. A deliberate effort must be made to re-introduce irrigation to the Ghanaian farmer in a user-friendly manner. In each case, hands-on training in irrigation culture must first be delivered to farmers for a minimum of a year’s production cycle of at least two harvests before they are allowed to continue on their own.

Lessons from next-door Burkina Faso also point to the needless waste of water as rivers and streams run through heavy-cost bridges and culverts. The alternative to such waste should be the construction of dam walls for bridges and culverts. By this method an extensive system of small such as those built in India and Burkina Faso will not only boost crop cultivation, but also provide all-year round water supplies for human and livestock needs. It is recommended that MOFA and the Ministry of Roads and Transport collaborate to develop such a network of dam walls in the future. For the purposes of irrigation, water-harvesting schemes that combine drainage, run-off flood protection such as binding and contour farming should be extended to farmers and their adoption facilitated.

One way to speed up the delivery of existing projects such as the Social Investment Fund (SIF) and the Village Infrastructure Programme, (VIP) is to accept labour and land as part of community contributions. This removes the constraint of monetary contributions, which poor communities cannot afford. It is recommended that communities be supported by NGOs and other micro-finance institutions to access funds such as those from the VIP and SIF.

b) Storage Facilities

Post harvest loss management in Ghana is poor and season losses rise as high as 20-30% of harvested produce. For instance, storage structures are constructed from local materials and limited amounts of insecticides are applied to prevent insect attack. Indeed, storage losses currently range from 8% after one month of storage to 20% after four months. Although the state owned Ghana Food Distribution Corporation has 17,000 metric tonnes of steel silo space and large amounts of warehouse space, it is poorly managed and utilised. The high level of post harvest losses account for the six-month long price hikes that persist from February to June/July It is part of the strategy that the GFDC be revamped and its management privatised in order that its potential can be utilised.

Strategies for tackling post harvest losses will include:

  • The formation of producer groups by a strengthened Department of Co-operatives and NGOs interested in that activity. This will facilitate the cost effectiveness of transfer of appropriate technology for storage. To a large extent, such technological improvements must build upon existing local knowledge.

  • Supporting the development/establishment of agro-processing industries.

  • Abandoned industries such as the tomato, meat, sugar and others may be revamped with private sector participation.

  • Community warehouses to store grains and legumes especially in the northern regions will be constructed through community mobilisation to help attain food security.

  • Provision of warehouses as business opportunities for the private sector and NGOs.

  • Promotion of inventory credit schemes by NGOs to enhance grain storage.

c) Feeder Roads

An important objective of the GPRS is that of increasing physical or spatial access to markets through feeder roads and other vital road networks. Currently there are about 22,700 kilometres of feeder roads and only 40% of this network is classified as good. Due to inadequate infrastructure and high transport costs, ninety percent of farm produce is head-loaded at the village level mainly by women and children. The general lack of farm-to-village access roads and limited access to intermediate (i.e. bicycles, push-carts etc.) means of transport imposes significant drudgery on rural populations and contributes significantly to post harvest losses. It is a key objective of the GPRS that as well as maintaining the existing network, the total maintainable network will also be increased.

Feeder road improvement is the responsibility of government and strategies to address this issue are outlined below. A major obstacle to road maintenance is that capital costs for construction are not matched by provision for recurrent maintenance costs. In the strategy, budgetary allocations are to be made for road maintenance. This is especially important since labour-based maintenance programmes are a potential source of employment for agricultural labour during the off-season. Women’s labour will be particularly used. Additional feeder roads, particularly in productive areas of northern Ghana, Volta Region and the Brong Ahafo Region, will be constructed to link producers to marketing channels. Equally important, access to the accelerated agri-business zones will be ensured as part of efforts to facilitate investments by the private sector.

In addition:

  • Steps will be taken to expand revenue sources for the Road Fund. To augment the inadequate fund, corporate bodies will be urged to adopt feeder roads for maintenance. As an incentive, tax breaks will be provided to the extent that they spend on such areas. In addition, official recognition at the highest level will be given to such corporate bodies.

  • A regular and timely release of the Road Fund for the rehabilitation and maintenance of feeder roads and bridges will be ensured as part of the strategy to increase efficiency.

c) Trunk and Urban Roads

A complimentary network of about 14,000 kilometres of trunk and 3,000 kilometres of urban roads will be rehabilitated and maintained alongside feeder road construction and maintenance. The trunk road network constitutes the main vertical and horizontal axes of the transportation system in Ghana. For effective distribution of resources to farms and production centres some key trunk roads will be targeted under the GPRS. Some important examples include the Afram Plains and Northern Volta Region. Also to be targeted are urban road networks that serve vital marketing and industrial centres as well as the ports for regional and internal trade. In addition, urban roads will be maintained as part of a programme to improve poor income areas.

For the short to medium term, one major road to a productive area in every region that links the rural areas of the region to the urban area will be selected for rehabilitation or development to open up the country for investment, productivity expansion and job creation.

Road maintenance will be given priority not only to lower transportation costs, reduce food prices and increase the international competitiveness of manufactured goods, but also to generate employment.

B. Marketing
a) Marketing and Distribution of Farm Produce

Marketing and distribution of farm produce remains a major problem confronting the agricultural sector. Farmers sell about 80% of their marketed surplus within four months of harvest. In addition to the problem of feeder roads and storage facilities, the problem of how small farmers market their products is also pressing. These unorganised small farmers come up against well-organised monopolistic marketing channels run by market queens. This trilogy of market constraints - inadequate feeder roads, poor storage facilities and lack of effective organisation will be removed by.

  • Providing farmers with adequate funding and other resources as well as access to marketing outlets to break the existing well-organised monopolistic marketing channels

  • Reduction of the numerous taxes at roadblocks by the district assemblies, the GPRTU and others. These taxes get disproportionately transferred in the form of lower prices to producers and higher prices to consumers. The numerous taxes can be reduced by a regulation, which allows only originating districts to levy a district tax.

  • Using local radio stations to generate popular discussions on the effects of monopolistically organised marketing channels. In addition, district assemblies in collaboration with local NGOs will disseminate market information locally and through community based organisations.

The failure of government-run marketing systems such as the Ghana Food Distribution Corporation has left a vacuum. Producer organisations will be encouraged to fill that vacuum. The storage facilities of the Ghana Food Distribution Corporation (GFDC) will be utilized more efficiently than is being done now. Arrangements will be made for the private sector to use these facilities for a fee. The Plant Protection and Regulatory Services (PPRS) of MoFA will license warehouse operators to ensure that they abide by safety standards and keep proper custody of the goods they store for individuals or firms. The storage of grains will be linked to inventory credit schemes.

b) Standardization and Quality Control

Effective marketing includes raising the quality of products. An important weakness of the marketing system in Ghana is the issue of standardization and quality control. This is particularly critical for processing for export. All kinds of measures are used to sell raw agricultural produce and food in Ghana. There is the need to standardize the weights and grades for selling food and raw materials in Ghana.

  • Standardisation in marketing will be encouraged and promoted to improve the quality of production. Grades and standards that can be adjusted especially to meet changing requirements will be a key determinant of Ghana’s international competitiveness. Efforts will be made to create a general sense that quality does matter.

  • MoFA will liaise with the GSB to establish and enforce the legislation about using scales for selling food in Ghana. To facilitate compliance the appropriate scales should be ordered and sold to people who sell food commodities. A line of credit will be opened for an entrepreneur who would like to import the scales. Product marketing associations will be used in the sale of the scales. The Extension Services Directorate of MoFA and the Ghana Information Services Department will be tasked with assisting the public to understand the fair use of scales and measures.

  • The required resources will be mobilized in support of producers to improve quality including improvements in the system of grades and standards, plus vertical coordination needed to ensure high standards. All these activities are geared at creating reliable and profitable markets for the outputs of smallholder producers. Reliable market outlets will increase smallholders’ willingness to invest in particular crops. Smallholder response will also depend on the availability of supporting conditions such as competitive prices, research and extension services, public investments in feeder roads, information and so on to reduce marketing costs.

Helping producers undertake the following will enhance product quality:

  • Choosing excellent crop varieties to grow

  • Applying effective production and management techniques

  • Paying attention to the maturity stage at harvest

  • Undertaking packaging and presentation

  • Achieving desirable physical characteristics such as size, shape and colour, which are influenced by production and grading systems used.

C. Extension Services Provision
a) Performance-Oriented Extension Services

Effectiveness of extension services has been limited both by inadequate number of officers, lack of adequate mobility, and lack of commitment. Currently there is one extension officer to 2500 farmers. The level of services is inadequate to advise farmers to sufficiently improve their production methods. Performance-based extension service will be promoted to involve the use of extension officers who may be supervised by MOFA and in some cases by accredited bodies such as NGOs. Performance contracts will be signed with both supervisors and the extension staff. The target groups will have a role in the assessment of results of the implementation of planned activities.

The GPRS aims to promote performance-based extension services through;

  • Closely supervised and well-targeted delivery to make up for the limitation in numbers as much possible.

  • Training of more extension staff to augment the acute shortage of personnel

  • Linkage of research findings with extension to be intensified to improve effectiveness.

  • Use of NGOs to carry extension messages to farmers in the short term while extension and cooperatives officers are being trained.

  • The development of effective district extension services to integrate agriculture, health, education and environmental concerns

  • Ensuring equity in extension delivery by improving access to vulnerable groups

The messages in extension will be both technology and knowledge-based. It is intended to use Information and Communication Technology (ICT) as a tool for optimising agricultural extension services. In particular, promoting increased access to rural telephones will expedite agricultural extension services and facilitate the marketing of food crops by improving information flows among producers and between producers and buyers.

Furthermore, the use of ICT in the agricultural sector will facilitate the timely delivery of meteorological information to farmers and fishermen in all 110 districts and thereby promote increased yields.

The vital areas in which extension services could make a difference include crops, livestock and fisheries development, development of appropriate technology and formation of farmer-based organisations.

b) Crops Development

Under the GPRS, the crops sub-sector will focus on:

  • Development and multiplication of new improved varieties of seed and planting materials of selected crops including: maize, rice, sorghum, millet, plantain, cassava, yam, soybean, cowpea, tomato, pepper, exotic vegetables, cocoa, cashew, coconut, cotton, pineapple, pawpaw, mango, citrus etc.

  • Special emphasis will be put on encouraging the production of cash crops such as cashew for export

  • Crop improvement, adaptation and multiplication of introduced varieties

  • Improved soil fertility and plant nutrition management as prescribed in the National Soil Fertility Management Practices

  • Updating existing technological packages and promoting environmentally sustainable cropping practices in agro-forestry, land and water management in farming communities

  • Using bio-technological applications to boost agriculture - these processes hold the promise of increasing food production, reduce costs, fight crop diseases and reduce environmental damage caused by traditional methods of production and the use of pesticides. Productivity and quality gains can be obtained for the production of food, feed and raw materials.

  • Promotion of integrated pest management practices

  • Control of Cocoa Swollen shoot virus diseases

  • Improvement in farm level operations (cultural practices) and post-harvest handling

c) Livestock Development

The challenge to the GPRS is how to establish sufficient incentives and technological support to promote the development of improved breeds of livestock and sustainable control of animal diseases. Improved livestock production through mixed farming approaches in Ghana can meaningfully increase food security and reduce poverty in the country.

Under the GPRS, livestock development strategy will focus on:

  • Production of improved breeds

  • Production of good quality animal feed

  • Development/processing of meat and dairy

  • Control of local animal diseases and prevention of introduction of external diseases through effective surveillance and quarantine procedures

  • Improvement of husbandry practices

  • Discouragement of subsidised and cheap imports

d) Fisheries Development

There are two main sources of fisheries resources: marine and inland fisheries. Fish stocks from marine sources are increasingly getting depleted. There is thus the need to promote inland fisheries production, especially aquaculture. Aquaculture will be supported and corrective measures and policies formulated to prevent the use of prohibited gear to offset the practices leading to the depletion of both marine and inland fish habitats. Aquaculture fishing will involve among others:

  • The development of hatcheries, and production of finger-lings

  • Construction of ponds, pens and cages

  • Harvesting, control and distribution of water to the production facilities

  • Fish husbandry and Health

  • Harvesting and handling of fish

  • Storage, processing and marketing

The construction of ponds will require labour for digging and the development of the fisheries sub-sector will generate business and create employment avenues in the rural areas.

e) Development of Appropriate Technology

The age-long back-straining hoe and cutlass land preparation technology is unattractive to the youth and exhausting to the aged. Animal traction has always been recommended but has never really taken off in Ghana on a significant scale. Emphasis is made for this to be taken up more seriously especially in the three northern regions.

Under GPRS, credit will be made available to individual farmers or farmer groups to enable them acquire the appropriate tools and implements from the manufacturers. Where nucleus farmers are available they will be assisted to procure sufficient numbers of the implements to be hired out to out-growers. Where appropriate, initial funding should come from on-going agricultural programmes such as the Village Infrastructure Programme (VIP) for the purchase of farm tools and implements through national and international procurement.

Research institutions have developed many high yielding varieties of cereal and root crops. However, adoption and production by farmers has been limited. The on-going MOFA run Roots and Tubers Improvement Programme (RTIP) is addressing the issue of adoption in respect of roots and tubers. This programme will be made more effective through lessons learned and expanded to cover many smallholder producers. In addition, a similar focus to encourage farmers to patronize improved cereal seed varieties will be initiated.

MOFA will seek to improve appropriate technology generation, transfer and dissemination by both private and public sectors at all levels, while ensuring the sustainable use and management of the nation’s natural resources. Work on priorities determined under National Agricultural Research Programme (NARP) will be continued with a focus on profitability and acceptability of technologies and the relationship between agricultural production and maintaining the natural resource base. Some of these include:

  • An inventory of existing technologies and effective methodologies introduced for transferring suitable ones

  • Emphasis on intensification of land use rather than on extensive use;

  • Formulation and implementation of a national land use plan

  • Implementation of national soil fertility management action plan

  • Collaboration between the Ministry of Food and Agriculture (MoFA) and the Ministry of Lands, Forestry and Mines, (MLFM), to implement the Natural Resource Management Programme, (NRMP), plans to protect, rehabilitate and sustainably manage land use, forest and wildlife resources

  • Incorporation of aqua-culture and livestock watering in irrigation infrastructure development

  • Afforestation programmes that incorporate aqua-culture projects as well as minimize pollution of coastal areas and water-bodies

  • Water resources management strategies adopted to reduce waste pollution through community participation

f) Formation of Farmer Based Organisations FBOs)

With the large number of smallholder producers widely dispersed in the country, service provision and input distribution is costly. A cost-effective and proven way for increased efficiency of input distribution, production, marketing and hence enhanced farmer incomes is via the operation of sound FBOs. The Department of Co-operatives that must lead the way is itself much in need of reorganization and capacity building. The Ghana Poverty Reduction Strategy emphasizes that efforts must be made to enhance the productivity of this institution to enable it carry out its much-needed services.

g) National Strategic Buffer Stocks (NSBS)

The vulnerability of the entire country in terms of food security is due largely to the current situation where there is no national buffer stock. The proposed National Strategic Buffer Stocks (NSBS) will be implemented as part of efforts aimed at poverty reduction. It is important for the country to hold some levels of cereals and legumes to cater for emergencies like bad harvests, catastrophes or strife. This will comprise one-month supplies of maize, rice and cowpeas. In the medium term when the livestock project has produced appreciable volumes of stock and canned meat more available, this should be included in the NSBS. The stock will be kept in both public and private sector storage facilities. MOFA will be responsible for overseeing the establishment and management of the NSBS. A buffer stock facility will enable assistance to be coordinated quickly in times of disasters and emergency situations.

6.2.1.2 Creating the fight institutional environment for entrepreneurial development in agriculture
a) Accelerated Agri-Business Zones

The main objective of promoting the establishment of agri-businesses can be achieved by establishing accelerated agri-business zones. These zones will be for integrated and comprehensive development and are to be located in the northern savannah, the Afram Plains and parts of the Western Region.

Using the provision under Act 480, legislative instruments will be prepared for presidential approval for areas defined as suitable zones. The Joint Development Planning Boards to be established in each of these areas must benefit from appropriate donor programmes such as the SIF, VIP and the Integrated Human Development Programme, IHDP. For a government that emphasises private sector-led development, agri-business promotion through the creation of these zones will be a significant step.

The aim of establishing these zones is to speed up the process of agricultural modernization through the private sector. Reliance on the traditional farming systems and practices are responsible for the endemic low productivity and widespread poverty. Priority locations for such Accelerated Agri-Business Zones will be the existing irrigation sites, coastal savannah, oncho-controlled zone of the northern savannah and the Afram Plains. In general, the objective of land administration reform, to bring land into the national economy and its value made accessible to the farmers, will be implemented.

6.2.2 Production And Employment In Agro-Processing

While agro-processing is essential, the strategy will in general favour labour intensive technologies. It will favour rural locations over urban, for processing plants and favour crops which can be produced by the smallholder sector. Agro-processing firms will be encouraged within the strategy to develop contract-farming or out-grower schemes with smallholder suppliers.

Support for agro-processing must be particularly targeted to women who already are in the extraction of shea butter, palm oil, groundnut oil and many others. Suitable groups and cooperatives must be formed to facilitate such support. Support in the form of micro-credit will largely be market based. Training and entrepreneurial skills development may be the elements of support that could be free.

Table 6.3.

Targets on Agro-Processing

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6.2.2.1 Increasing Production and Employment by Promoting Agro- processing
a) Employment Creation Opportunities

Many industrial-processing activities can be strengthened based on agricultural products. A huge potential exists in cocoa processing for which only 18% is being processed. Further efforts will aim at supporting the private sector to add value to traditional crops such as cocoa and increase the proportion processed. Other agricultural products with enormous potentials for processing are cassava, maize, fish, sheanuts, oil palm, dawadawa and cotton. While medium and large units are encouraged, particular attention will be paid to micro and small-scale producers. Support will be given in the form of processing equipment, which may be owned and operated by groups.

b) Small-Business Enterprise Zones

Urban poverty is real. In order to accommodate the situation, Small Business Enterprise Zones will be established in municipal areas. These zones with support services infrastructure and ITTU advisory services will be established in profitable locations such as Tamale, Takoradi, Cape Coast, and Ho.

Acquisition of land within these zones will enable entrepreneurs obtain legality of tenure and hence the collateral that will enable them seek institutional credit support. Small enterprise zones will also eliminate the frequent harassment of all such enterprises within municipal areas. Services such as access roads, water and electricity that are denied such activities for their lack of legality can now be provided.

6.2.2.2 Improving Productivity In The Industrial And Service Sectors
a) Institutional Support for Industrial Productivity

Actions taken by the NBSSI to reduce poverty are the provision of training in technical and business skills, assisting in the access of low-income people to capital and bank services and assisting the creation of new jobs. The NBSSI has chalked some success in firm and employment creation: 900 new businesses established; 1500 additional employment generated; and 8000 businesses incorporated into the formal sector.

A special fund to finance industry based research and development in universities and major science and technology research institutions must be established. Such a fund is necessary because of the importance of the outputs of these institutions. Apart from the seed money that must be provided by government the fund must be mandated to access resources from other areas including:

  • Mineral Development Fund;

  • Energy Fund, and the

  • Road Fund

Other sources are proceeds from taxes on timber concessions, private sector tax relief, divestiture proceeds and a small portion of donor funds especially in direct support of poverty reduction research activities.

Priorities for research must be defined to include those that deal with:

  • Natural resource-intensive products,

  • Reduction in drudgery especially in activities designated as women’s work

  • Unskilled labour intensive products;

  • Local group participation and raw material use;

  • Technologies for products that are generally affordable; and

  • Technologies that have been demanded by the poor majority.

Research grants from the fund must be of such size and duration that can support postgraduate research including Ph. D. to completion. Other important areas in which support is needed include:

  • Management training for small businesses

  • Encouragement of R&D and innovative practices through grants and awards

  • Creation of an information base that assists firms with information on new technologies, materials and production techniques.

The departments of metropolitan and municipal assemblies and the division within the Ministry of Trade and Industry (MOTI) responsible for cluster and enterprise development will be strengthened to enable them play their roles effectively. The NBSSI, MDPI and ITTU are expected within the strategy to become more entrepreneurial in outlook and activities.

6.2.3 Energy

It is the objective of the GPRS to develop reliable and affordable energy delivery systems that promote the development of basic infrastructure to support economic activities especially in the rural areas to reduce poverty. The goal is to ensure reliable supply of high quality energy services for all (both urban and rural), Ghanaian homes, businesses, industries and the transport sector. The need to secure future energy supplies is recognised as critical to sustained economic growth and development. All necessary steps will be taken to ensure the availability of energy to boost industrial growth and production. This includes ensuring the completion of the West Africa Gas Pipeline project, the Bui Dam, expansion of the thermal plant at Takoradi, and promoting the increased use of solar energy.

The sector faces several challenges including a deterioration of the electricity distribution infrastructure, operational inefficiencies in the energy sector companies, over-reliance on and insufficiency in the supply of wood-fuels and hydro-power resulting in uncertainty in future supply, inefficient pricing of energy services resulting in the poor financial position of energy production and delivery companies and high levels of end-use inefficiency.

Consequently, to achieve reliable national energy delivery, the financial viability of utility corporations will be strengthened by improving technical efficiency in the energy sector and by implementing a policy of cost recovery in energy supply through efficient pricing of all energy services. This will go a long way in reversing the precarious financial positions of the utility companies (Volta River Authority, Electricity Corporation of Ghana, and Tema Oil Refinery). Technical efficiency will be improved through restructuring of the utility companies, the unbundling of the electricity supply system and the deregulation of the petroleum sector.

In addressing these developmental concerns particular attention will be given to the rural sector to foster equitable growth and accelerate agro-industry.

6.2.3.1 Improving energy provision for production in rural areas

Energy resources are very important in the production process. So far, the poor and rural communities rely heavily on biomass for their production energy needs. This is not sufficient in many cases and is environmentally harmful. The provision of electricity is essential for developing communication technology in the rural areas and establishes, where they exist, more reliable electronic communications access including Internet access. This will facilitate the expansion of local and regional markets and help in both job and wealth creation. Further, it will allow for the extension of basic services such as the provision of telephone and support productive enterprises.

In the first place, the financial viability of the Volta River Authority, the Electricity Company of Ghana, and the Northern Electrification Department will be strengthened to enable them expand services to poor, rural communities through the self-help electrification programme, SHEP. Part of this will be achieved by a more serious promotion of energy efficiency and conservation measures for domestic, commercial and industrial users.

Energy for domestic use is predominantly biomass based. These are hard to come by in some areas due to depletion. The following will be undertaken to increase availability of energy:

  • Assist communities to develop woodlots.

  • Introduce renewable energy technologies such as solar PVs and biogas

  • Introduce and promote energy efficiency technologies for domestic users.

The use of energy supplied to rural areas must be maximised given the difficulties involved. The situation where substantial funds are expended in overheads in order to introduce only single-phase power supplies that cannot be used in agro-processing is not cost-effective. As much as possible, three-phase supplies will be extended to rural communities to open up options for processing. Promotion of agro-processing will therefore be facilitated by the availability of such energy supplies.

The promotion of liquefied petroleum gas will be stepped up once the West African Gas Pipeline Project comes to fruition. Widespread fuel-wood extraction that is contributory to soil fertility depletion and reduced productivity can be minimized by the introduction of LPG into rural communities. In addition, a rural kerosene programme will be initiated and implemented to enable communities have easier access to the commodity.

Promoting and increasing these energy sources will contribute greatly to reduction in the amount of time and effort expended by women in the search and transportation of fuelwood. Freed time and energy for women will enable them expand activities such as in agricultural production or industrial processing and marketing.

6.2.3.2 Renewable Energy Technologies

The importance in securing future energy supplies is recognised especially with regard to minimising the environmental impacts of energy supply. The renewable energy sources to be promoted include solar, wind and biogas. The following will be undertaken to improve energy supply for production:

  • Introduce and support the development of renewable energy technologies.

  • Ensure that electricity supply to rural areas is capable of being used for production purposes.

  • Promote the productive uses of electricity by rural areas and the poor.

6.2.4 Environmental And Natural Resource Management

The country’s forest cover had been reduced from 8.2 million hectares at the beginning of the 20th Century to 1.7 million hectares in the 21st Century. Continued reliance on forest resources must be based on proper management to achieve low volume and high value production. The government’s on-going strategy to address the challenges in natural resource management are largely embodied in the National Environmental Action Plan (1990-2000), the 1994 Forest and Wildlife Policy, the Forestry Development Master Plan (1996-2000), the 1999 National Land Policy, the Science and Technology Policy (2000), and the Action Plan for Science and Technology Management. The Forest and Wildlife Policy of Ghana aims at conservation and sustainable development of the nation’s forest and wildlife resources for maintenance of environmentally quality and perpetual flow of optimum benefits to all segments of society.

In collaboration with the Ministry of Energy, the Ministry of Environment, Science and Technology and the Ministry of Local Government and Rural Development, the Ministry of Lands and Forestry is currently implementing a comprehensive ten-year sector investment programme, the Natural Resource Management Programme. This programme is to protect, rehabilitate and sustainably manage the national land, forest and wildlife resources through collaborative management and aimed at increasing the incomes of rural communities who own these resources.

Among others, successful implementation of this programme, being emphasised by the GPRS are:

  • Enhanced community involvement in the management of forest and wildlife and savannah woodland resources and improve benefit flows to communities from resource sales;

  • Increased community and farmer adoption of improved land and water management techniques.

  • Improved management of wildlife while increasing their contribution to local livelihoods and economic development.

These programmes are also very important for stemming further degradation that will exacerbate future poverty situations through decreased fertility, inadequate precipitation and lack of natural raw materials. Specifically, the following objectives and outputs in relation to lands, forestry and mines are aimed at supporting sustainable use of natural resources, protecting the environment, increasing employment and maximising the use of value added from these natural resources.

Table 6.4.

Targets for Environmental Protection

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6.2.4.1 Improving Environmental and Natural Resource Management for Health, and Increased and Sustainable Production
a) Natural Resource Utilization

The inefficient use of chainsaws for harvesting timber and the irresponsible use of undersized and outlawed fishing drag nets continue to put a severe strain on Ghana’s forest and water resources, respectively. To offset the later, the World Bank financed National Resource Management Project (NRMP) should be intensively pursued. Equally the on-going Fisheries Sub-sector Capacity Building Project and a rigorous regime of intensified joint Navy and MOFA surveillance must be continued to protect Ghana’s fish resources. The GPRS will support activities in aquaculture, shrimp production and marketing, to provide employment for the youth.

Current mining laws tend to disproportionately favour large-scale mining enterprises. To address this apparent imbalance, measures will be put in place to expand the scope and increase the support to the small and medium scale sub-sector with the view to making it the predominant means of exploiting minerals in the long term. These measures will include undertaking detailed geological field studies in identified areas that have been found to be unsuitable for large-scale mining operations and classifying areas as either suitable for either small, medium or large-scale mining operations on the basis of geological assurance.

b) Laws, Regulations and Programmes

There are a number of laws, regulations and programmes on natural resource utilization and environmental protection. The policy direction is for the review, harmonisation and consolidation of various legislations (on land,