Industrialization and Inclusive Growth in Ghana
Posted by Eghosa Asemota on 10/4/18 2:37 PM
Eghosa Asemota is a second-year CIPA student studying international development, with a specific focus on agricultural and rural development in sub-Saharan Africa. This year she serves as the Senior Content Editor for CIPA’s online policy journal, The Cornell Policy Review. Her article below was originally published in The Cornell Policy Review during spring semester of 2018.
In response to increasing demand for Africa’s agro-processed commodities and the changing global sentiment towards its manufacturing, countries are rushing to shift capital, labor, and entrepreneurship away from informal employment and into the industrial sector.The one-district, one-factory policy in Ghana is one recent stride towards industrialization seen on the continent. Starting as a campaign pledge made by current president Nana Addo Dankwa Akufo-Addo, the policy aims to put a factory in each of Ghana’s 216 districts within the next four years, and to transform the structure of the economy from one dependent on production and the export of raw materials to a value-added industrialized economy, driven primarily by the private sector. The president purports that this initiative will create economic growth, accelerate the development of areas where the factories are located, and create jobs for the growing youth population. Akufo-Addo claims that unless Ghana takes to the path of industrialization with the goal of adding significant value to its primary products like cocoa, gold, and timber, the country will not be able to create the labor force needed to enhance the living standards of the masses. As Akufo-Addo stated in a press conference last August, “[r]aw material producing economies do not create prosperity for the masses.”
The rhetoric Akufo-Addo employs in defense of the one-district, one-factory policy frames intense industrialization as a prerequisite for rural development. Underscored in this view is the endorsement of a trickle-down approach whereby increasing the wealth and capacity of those who are well-off will gradually usher in benefits to the marginalized rural poor. Proponents of the one-district, one-factory policy who ground their praise of the policy on this view will argue that an increase in industrial output would generate formal employment opportunities and relatively higher incomes which would, in turn, raise the level of demand for both industrial and agricultural goods. Another facet of this view is the lack of faith in a ‘raw material producing’ economy as an adept avenue for development. In this view, development is essentially a part of the process of structural transformation characterized by diversification of the economy away from agriculture. Thus, indicators of success would be a significant decline in the share of agriculture to total employment.
While this view acknowledges the existence of wealth concentration and spatial inequality in Ghana, the belief that a growth in average incomes resulting from industrialization will improve the well-being of the country’s most dispossessed is misguided. In fact, similar structural initiatives implemented in Ghana’s regional counterparts point to the inefficacy of this belief and show how industrialization was unable to generate any significant trickle‐down flows. For example, Nigeria’s 2003 National Economic Empowerment and Development Strategy (NEEDS) was intended to accelerate the pace of industrial development by increasing value added at every stage of the value chain and funding the creation of industrial clusters. In doing so, the strategy was designed to alleviate poverty, create wealth, and generate employment.
This project ultimately ended in colossal failure, one graded by the UNDP’s Human Development Report as “very poor and lacking in accountability and equity.” In the case of Nigeria, a major reason for the failure of the program was the enduring disconnect between the government and the poor. By overlooking the necessity of a participatory approach to find the best means for achieving self-reliance, what was intended to be a humanitarian effort ended up being a paternalistic one. The respective ministries tasked with implementing the one-district, one-factory policy can take the lessons learned from NEEDS’ failure to address poverty reduction and incorporate it in the policy’s administration to avert furthering rural alienation.
Rather than waiting for the benefits of industrialization to trickle down to rural people, a more promising strategy is to address the problems of rural underdevelopment directly where representatives are included in the decision-making process and where the sustained improvement of the population, rather than just the transition from the agricultural sector to the industrial one, is the optimal outcome.
Rural Poverty and Spatial Inequality in Ghana
To understand the ramifications of the one-district, one-factory policy on Ghana’s rural community fully, it is important first to understand the breadth of rural poverty and spatial inequality.
According to the 2016 Ghana Poverty and Inequality Report, four of the ten regions (Western, Central, Volta, and Ashanti) in Ghana have seen their poverty depth rise since 2006. This signifies a deficiency in the number of initiatives geared toward improving the lives of the poor in those regions. While the Northern region has the largest proportion of poor people among the ten regions, the most extreme cases of poverty are found in the Upper West region where the poor live on average a third of the way below the poverty line. Overall, the number of people living in poverty has only declined by roughly 10% meaning that poverty reduction is not keeping pace with population growth.
The report also indicates the recent decline of urban poverty relative to rural poverty. As a result of this, the gap between urban and rural areas has doubled, and rural poverty is now almost four times as high as urban poverty compared to twice as high in the 1990s. The average consumption of the wealthiest group increased by 27% between 2006 and 2013, whereas for the poorest it increased by just 19%, meaning that growth for the richest group was over 1.4 times greater than for the poorest in this period. The report ultimately concluded that the poor’s growth rate has been lower overall than for wealthier groups who have benefitted more, which has exacerbated inequality. From these findings, UNICEF determined that Ghana has not achieved inclusive growth, since the most affluent have benefited the most.
One-District, One-Factory’s Ramifications for the Rural Poor
The societal stratification in Ghana is seen in the wealthy pulling far ahead, a large section of the country immobilized in the middle, and the needs of the rural poor routinely casted as peripheral. Although the one-district, one-factory policy is praised by Ghana’s federal officials as an avenue for improving the livelihood of the masses through increased access to jobs, in this existing context, this benefit may be subject to middle-class capture, and may exacerbate existing rural inequality.
Given that the one district, one factory policy is a private-sector-led accelerated industrial development strategy, it is important to consider that efficiency is the primary goal for the companies. This is reflected in the establishment of The Ekumfi and Juices Company Limited in the Central Region, the first factory created under Akufo-Addo’s initiative. With the technological capacity to process and package 80 tons of fruits daily, the factory is projected to process 25,600 tons of fruit per year. While the company’s increased yearly output and promise of creating 250 jobs show alignment with the initiative’s purported advantages, the use of skill-biased technologies will exclude the vast majority of Ghanaians with low human capital from enjoying the benefit of new employment opportunities.
Moreover, the location of these industrial facilities is bound to have an impact on access. According to the World Bank, 45% of the country’s population lives in rural areas. Factories are more likely to be situated in the urban areas of districts because of the relatively ready access to a skilled labor force, better infrastructure, and technological spillovers. This may exacerbate existing inequality between the urban and rural areas within a district.
Introducing a Pro-Poor Approach
Contextualizing the one-district, one-factory policy in a manner that considers rural poverty and the breadth of spatial inequality requires the embrace of a pro-poor approach to growth in its implementation.
Growth is pro-poor when it is accompanied by policies and programs that mitigate inequalities and facilitate income and employment generation for traditionally excluded groups. To make this policy pro-poor, there must be a focus on increasing economic returns to the productive factors that the poor possess. 80% of Ghana’s total agricultural production comes from its rural areas, in which a large majority of people are dependent on agriculture as the principal source for their livelihoods and employment. For these reasons, according a higher priority to agriculture will prove to avert the exacerbation of regional inequality and rural poverty.
Considering the predominance of smallholder, traditional and rain-fed agriculture, bolstering agricultural productivity as a means for growth can be done through the creation of outgrower schemes. Outgrower schemes are binding agreements that link networks of unorganized smallholder farmers with domestic and international firms to ensure the sustainable supply of needed agricultural inputs. These schemes foster sustainable sourcing practices and often provide benefits to all agents along the supply chain. While firms can improve their control over crop supply, often at predetermined prices, as well as their control over crop quality standards, smallholder farmers get to engage in mutually beneficial partnerships with large buyers and industrial firms, and can increase smallholder farmer incomes through the access of more secure markets.
In alignment with the indispensable participatory approaches embraced in rural development, outgrower schemes, which leverage the potential of smallholder farmers, require consistent dialogue with stakeholders and beneficiaries from the very beginning. These schemes would also require government monitoring to ensure transparency, continuity and the protection of all agents involved. The prosperity of agriculture that could result from scalable outgrower schemes would assist in raising the income of the majority of the rural population.
While the one-district, one-factory policy is championed by the Ghana’s current administration as a catalyst for industrialization in Ghana, it is important to reflect on the country’s existing realities, namely the issues of rural poverty and spatial inequality, along with the lessons of similar industrial initiatives in neighboring countries such as Nigeria. A refusal to acknowledge these realities and maintain the benevolence of a trickle down approach could exacerbate existing disparity as benefits are enjoyed by the well-off.
If Akufo-Addo and other proponents of the policy genuinely want to create prosperity for the masses, their conception of growth must be inclusive. Knowing the integral role of agriculture in the lives of the rural population provides an avenue for embracing a pro-poor approach. This can entail a move from ad hoc trade agreements to outgrower schemes or coordinated commercial relations between producers and firms working under the oversight of the government. More importantly, taking lessons from the failed NEEDS strategy in Nigeria, members of the rural community should participate in dialogue with government officials. This will allow them to vocalize their needs to achieve self-reliance, which is the optimal goal of any development strategy.
- “One District, One Factory Officially Takes Off,” Government of Ghana, August 26, 2017, http://www.ghana.gov.gh/index.php/news/3939-one-district-one-factory-officially-takes-off. ↑
- NIGERIA: National Economic Empowerment and Development Strategy, report, March 2004, https://dawodu.com/needs1.pdf. ↑
- Human Development Report Nigeria (2008 to 2009): Achieving Growth with Equity, report, United Nations Development Programme (UNDP), http://hdr.undp.org/sites/default/files/nhdr_nigeria_2008-2009.pdf. ↑
- Paul G. Adogamhe, “Economic Policy Reform & Poverty Alleviation: A Critique of Nigeria’s Strategic Plan for Poverty Reduction,” Poverty & Public Policy 2, no. 4 (2010): doi:10.2202/1944-2858.1125. ↑
- Edgar Cooke, Sarah Hague, and Andy Mckay, The Ghana Poverty and Inequality Report, report, March 2016, https://www.unicef.org/ghana/Ghana_Poverty_and_Inequality_Analysis_FINAL_Match_2016(1).pdf. ↑
- “One District, One Factory Officially Takes Off,” Government of Ghana, August 26, 2017. http://www.ghana.gov.gh/index.php/news/3939-one-district-one-factory-officially-takes-off. ↑
- “Rural population (% of total population).” The World Bank. 2017. https://data.worldbank.org/indicator/SP.RUR.TOTL.ZS. ↑
- Promoting Pro-Poor Growth, report, 2009. https://www.oecd.org/greengrowth/green-development/43514554.pdf. ↑
- Katharina Felgenhauer and Denise Wolter, Outgrower Schemes: Why Big Multinationals Link up with African Smallholders, working paper. http://www.oecd.org/dev/41302136.pdf.
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