Alan Kyerematen: Industrial transformation is our priority

By: Anthony Sedzro

It is still very fresh in the memory of Ghanaians the attractive promises that NPP made while asking for their mandate to manage the affairs of the nation. One of the promises that still stand out and has been continually refreshed is that which promised one district-one-factory. As the time has come to put their action where their mouth is, government’s chief industry executor, the Trade and Industry Minister, Alan Kyerematen, chose his recent meeting with the American Chamber of Commerce (AMCHAM) in Ghana to give real insight into government’s plans in fulfilling that important promise.

Alan Kyerematen was on time. He adhered strictly to the 12:30pm time given to him to speak, so much so that the organisers kept him waiting for a few minutes outside the auditorium of Alisa hotel, venue for the event. The Trade Minister came across as a man on a mission. He had been invited by to speak on the topic: “Creating an Enabling Environment for Industrialization, Trade and Investment,” on April 26.

Dressed in a nicely-sewn African fabric top, he shared broad smiles and shook hands firmly. He was to share with AMCHAM members, one of the most vibrant trade associations in the country, the government’s plans and policies to improve the business environment, trade, investment and industry in Ghana. Specifically, he was to address the operationalisation of the One-District-One-Factory (or the District Industrialisation Policy), strategic anchor initiatives and export development.

Once invited to take the podium, he looked serious, saying vision must always go with action. The Trade Minister, who occupied the same position the last time the NPP was in power, said for over 30 years, we have seen China move from what one could describe as just another developing country to one of the best economic powers globally.

Industrialisation to create jobs

Kyerematen said the one-district-one-factory is the New Patriotic Party (NPP) government’s flagship policy to create jobs and accelerate development.

The NPP’s 2016 Manifesto is entitled “CHANGE: Agenda for jobs.” On page 31 of the manifesto, the industrialisation agenda is captured under the heading “FLAGSHIP INDUSTRIAL DEVELOPMENT INITIATIVES”. It reads: “One District One Factory Initiative”: In collaboration with the private sector, the NPP will implement the “One District, One Factory” Initiative. This District Industrialization Programme will ensure an even, spatial spread of industries.”

Now in government, Alan Kyerematen said it will be implemented and will not remain a campaign promise.

“So it is about vision, it is about action and that is what the new government of the New Patriotic Party (NPP) is about. I think if there is one thing that we have it is this. Now our whole development agenda as a government is predicated on one – creating jobs – and we believe that it is possible to create jobs in different sectors of our economy,” he said.

The minister said Ghana will be copying the industrialisation model of China and Asian countries in actualising the government’s district industrialisation policy.

“…That is what China did, that is what most of the Asian countries did. Even the old matured economies, that is what they did before graduating into tertiary services sector so, for us, we want to make sure that our development agenda is predicated on an extensive program for industrial transformation,” Kyerematen, who is also a former Ghanaian ambassador to the United States of America (USA), explained.

Although the one-district-one-factory project is considered an effective strategy to diversify and grow the economy and, ultimately accelerate development, after all Nkrumah’s efforts in the same direction is still felt today, critics and analysts insist that caution and better preparation should be a pivotal principle.

Professor Newman Kusi is the Executive Director of the Institute for Fiscal Studies (IFS), a Ghanaian economic Think Tank. At the institute’s pre-budget press conference held at Alisa Hotel earlier this year, he reminded government that “there are certain fundamental requirements that you have to put in place in order for a particular factory or manufacturing industry to be located in a particular area.”

He explained: “The government will have to undertake a comprehensive study and assessment of these districts so as to be able to determine the potential in terms of raw material base, availability of power, availability of water and all the requirements that will make all these factories successful and be able to locate that.

“During Nkrumah’s time, a factory was established in every region of this country. In fact, in Bolgatanga we used to have a Corned beef factory, there was a tomato factory in Sunyani or somewhere else; this Komenda sugar factory that we are talking about was established…but, somewhere along the line, when we launched into an IMF program and the issue of privatisation became the order of the day, some of these factories were sold,” Kusi, who at one point consulted for the Ministry of Finance and Economic Planning said.

“So,” he concluded, “it is not a new policy that is being introduced. Experience indicates that we can analyse the impact [of these failed factories] to guide us as we go back to do some of these things,” he added.

Early last month, the trade minister announced at the opening of the Ghana International Trade and Finance conference in Accra that the government had released Gh¢465 million for the commencement of the one-district-one-factory project. As if conceding to critic’s opinion, he admitted that the one-district-one-factory project may be considered ambitious since independence but that it was being given all the seriousness it deserves.

“Because we are growing at a time when the world has moved on so far and has become so competitive, taking little steps and adopting a lazy approach to development will only end up agonising it further. So, in actual fact, don’t suggest to me that we should prioritise because for us everything is a priority,” he added.

10-point industrialisation agenda  

The trade minister said the government’s industrialisation programme has been broken down into 10 key agenda as follows:

1. Stimulus package of support for existing distressed companies: The government has set aside a seed fund of US$50 million to support existing private companies that have undergone significant challenges in the las few years.

“We are doing this because we believe that many of our industries and enterprises have gone through significant challenges over the last couple of years and if we are serious about transforming our industrial landscape then the starting point is to look at those that are already existing and then try and support them,” he said and explained the rationale behind the stimulus package as being a deliberate strategic action intended to provide a comprehensive range of support to companies that are facing operational challenges, and those of them in distress but are deemed to be potentially viable.”

The minister further added: “So we’ve already embarked on a process of screening over 100 companies and, hopefully, the first phase of this stimulus fund would be able to support about 50 of them. Now, we are developing a very comprehensive diagnostic tool which we will use to access each of these potential beneficiary companies.”

Not stopping there, he said the government was leveraging an additional US$100 million debt and equity financing to bail out these distressed businesses.

2. One-district-one-factory project: This will do a number of things but, one key aim of the project is to add value to the natural resources in each of the 216 districts, Alan Kyerematen revealed. This means private companies setting up Medium and small-scale enterprises (MSMEs).

“First is to add value to the natural resource endowments of each of our 216 districts. So, under this program, at least every district will have one medium to large scale industrial enterprise established. And these are not state enterprises, these are enterprises to be promoted by private sector operators but supported and facilitated by government,” he said.

Contrary to what many believed during the election campaign period that the government will actually set up these enterprises, Kyerematen debunked that assumption and said: “In each of these enterprises, we (only) need to identify and promote a private sector entrepreneur that is interested in establishing a commercial activity in a particular district.”

Investment size

Questions have been asked about the size of the district enterprise investments and the amount one needs to partake in the one-district-one-factory project. The Minister says it is not any kind of investment and explained thus: “The size of this enterprise must be such that it can fundamentally affect the economy of the district so…we are not talking about micro enterprises. In terms of investment size, we are looking at a range between one US$1million and US$5 million.

That is not necessarily the peak as the figure could even go higher, depending on the type of enterprise.

“…This is only intended to be a range…depending on the nature of the enterprise…you could go as high as US$30 to US$50 million. In cases where there is an existing enterprise in a particular district that responds to the criteria that we’ve identified to qualify for a district enterprise, then you may require such-indexed amount because, all they need is just to support a company to be able to qualify as a district enterprise,” he explained.

Members of AMCHAM sought to know whether this investment size ranges will not be discriminatory, given that Reginald Yofi Grant, the Chief Executive of Ghana Investment Promotion Centre (GIPC) says the government will remove capital limits on investment to attract both the small and the big investor.

“I didn’t talk about micro-enterprises’ support, but there are a number of other interventions that are supporting different levels of enterprise engagement,” Kyerematen sought to justify his position and explained further saying “but one thing that we do know is that as soon as you come out with a program, in people’s minds, they want you to extend it to suit different interest groups which, sometimes, is very difficult. That is why we’ve defined the criteria for selecting or identifying the one-district-one-factory potential beneficiaries,” the minister, who is an Economics graduate of the University of Ghana, said.

He went on: “I mean let’s face it, if you want to do any serious commercial project that will fit into our basic paradigm, fundamentally affecting the economy of a district, for US$1million by the time you buy two trucks and you buy any serious machine, obviously the US$1million is gone”, he argued.

“And let us also remember that we are talking about being able to do this as the basis for diversifying our [currency] exchange and then also being able to do import-substitution. If you don’t have the right process technology, how are you going to be able to export?”

Rapid urbanisation is a major problem which sees young people migrating from the countryside to the cities in search of non-existent jobs. The district enterprises project is meant to reduce this trend, according to the former presidential aspirant of the NPP.

“The second reason is for us to stem the rural-urban drift. I mean, can you imagine [what will happen] within the next 2-3 years, if we have major industrial establishments spread all over Ghana in each district? He asks.

“That alone will signal a new direction for Ghana, in terms of our industrial economic growth. And we are talking about, at least one, so it means that we can have a situation where we have more than one or two in a particular district. Because these are targeted district-level enterprises, we assume that most of these enterprises are agro-processing industries,” Kyerematen, who once headed EMPRETEC, an entrepreneurial capacity building agency, added.

3. Strategic anchor industries: Strategic anchor industries will be established to reduce Ghana’s over-reliance on cocoa, gold, oil and timber.

Petro-chemical industry

This is specifically meant to avoid the Dutch disease (over-dependence on oil and gas to the detriment of other economic sectors). Petrochemical industry will lead to a lot of spin-off industries, Kyerematen said.

Iron & Steel industry

“…We have the iron in terms of quality. We also have manganese which we are currently shipping out without being able to convert. Now, if we have iron, and we have manganese, we should be looking for a very dynamic programme of developing a steel industry in Ghana,” he said.

Integrated aluminium industry

With Ghana having large deposits of bauxite and with the Volta Aluminium smelter, the country will pursue an aluminium industry.

Automobile industry

The minister revealed that Morocco earns US$10 billion annually from its automobile sector. Once Ghana is able to build its aluminium industry it will make Ghana a competitive hub for automobiles, just as it was in the 1970s.

Industrial salt

Kyerematen said industrial salt is the basis for a chemical industry. “There are over 140 spin-offs that you get from mining industrial salt, and many of you may not be aware that Ghana and Senegal are the only countries that have industrial salt deposits but unfortunately, we are not making much use of it,” the former ambassador revealed.

Textiles & garments

This sector will be supported to benefit from what the African Growth and Opportunity Act (AGOA) offers.

4. Industrial parks: The government will support the private sector to establish at least one major industrial park in each region. Already, interests have been expressed for four regions – Western, Ashanti, Greater Accra and Northern. These specialised industrial parks and zones will have access to amenities just as pertains in China.

5. Export diversification: Ghana will work to develop and implement a comprehensive, project-based export diversification action plan; Ghana will also restructure the operations of the Ghana Export Promotion Authority (GEPA) to enhance export diversification to take advantage of programmes like Economic Partnership Agreement (EPA) and AGOA.

6. Continental free trade: The African Union has agreed by the end of this year, Africa will become a Continental Tree Trade Area (CFTA), meaning goods produced in Ghana can be exported to every African country with little restriction. “However, we need to develop our domestic market infrastructure to take advantage of this,” the trade minister cautioned.

7. Develop SME sector: A number of interventions have been developed to support different levels of enterprise engagement.

8. Industrial sub-contracting exchange: According to Kyerematen, the government will enforce local content provisions by developing efficient and competitive local supplier chains for the goods and services that industry needs and that can be sourced locally. This will be done through a National Industrial Sub-contracting Exchange to link SMEs with large-scale enterprises.

9. Improve investment destination:

The trade minister further assured the AMCHAM members and the business community present that his ministry and the government was bent on improving the investment climate. This will help boost Ghana’s rankings on the international investment rankings.

“By the end of May/June you will start seeing an improvement [by Ghana] on the [World Bank’s] Ease of Doing Business ranking. We have a programme which is developed in three phases. The first phase which ends up in May or June is going to focus on three main indicators: Registering your business, securing construction permits and getting electricity,” the minister assured.

Although Ghana is the number one place to do business in West Africa, the country has dropped places and now occupies the 104th position on the World Bank’s Ease of doing Business ranking. The minister said that will change within a year.

“These three indicators alone through the first phase of business regulatory reform is going to take us to about 40th [position] on the ranking in those areas. So, there are very little things that we can do very quickly that will significantly change our business environment.”

“In the second phase by mid-2018”, Kyerematen continued,  “a different set of indicators would also be addressed, and then by May 2019, I am sure that we can commit that Ghana will be one of the best performing countries in terms of business regulatory environment in Africa. So it’s about the program that we have to improve the regulatory environment. It is not just talking about it that you’re an investment destination.

10. Ghana Business Summit/Public-private dialogue:

Public-private partnership has been touted as the best mechanism for infrastructural development. This fact has not been lost on the new government as the trade minister explains.

“Last, but not least, is, we want to be able to improve the dialogue between government and the private sector. We are not going to leave it to chance, we are going to have a public-private mechanism that offers the private sector an avenue to consult with government on a continuous basis,” the former ambassador to the USA said.

To maintain this continuous dialogue between the public and private sectors, a dedicated avenue has been created, according to Kyerematen.

“The flagship component of this is that every year, we will have a Ghana Business Summit which will bring together private sector operators and government, and all the Key Performance Indicators (KPIs) that the government and the private sector will be committed to will form the basis of a compact to be entered into between government and the private sector,” he indicated.

“This will regulate the conduct between government and the private sector throughout the rest of the year until we come to the next business summit,” the minister promised.

However, after everything is said, and expectations are anticipating fulfilling actions, the words of Professor Kusi come in handy again: “…We must also understand that when the government says one-district-one-factory, it does not mean that it is going to happen overnight. This should be done in a very meticulous, proper manner such that the country will benefit from that.”

 GB&F

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