Revisiting Ghana’s Second Medium Term Private Sector Development Strategy 2010 – 2015

Background:

Five years ago, Ishmael Yamson & Associates under the auspices of the Ministry of Trade and Industry and supported by Ghana's development partners, co-authored a policy document to serve as a framework for the transformation of the private sector in Ghana and the contributions that the sector makes to the economic fortunes of Ghana.  The policy was intended to be fully implemented by the end of 2015.  With eleven months remaining, I am sharing the highlights of Ghana’s Second Medium Term Private Sector Development Strategy (PSDS II) 2010 – 2015 that were first published in December 2010. 

“A vibrant, globally competitive private sector must play a key role in the economic transformation and social development of Ghana.”

 – President J.E. Atta-Mills, 2009 Sessional Address to Parliament

1. The context of PSDS II 

”Given the importance of this, the private sector development agenda will be driven and monitored at the heart of Government business at the Presidency.  This is a promise I made to the private sector and the government will translate it into action.” – President J.E. Atta-Mills

The development of Ghana’s Second Medium Term Private Sector Development Strategy (PSDS II) 2010 – 2015 is in fulfilment of the commitment given by the President, His Excellency Prof. J.E. Atta-Mills.  In his first address to Parliament, he launched the agenda to create “A Better Ghana” in which there is “Prosperity for All” powered by a “vibrant, globally-competitive and profitable private sector” in Ghana.  The over-riding focus of the private sector development strategy for Ghana is to develop a thriving private sector that creates jobs and enhances livelihoods for all.  Recognising the urgent need for action across all sectors of the economy to make this happen, he promised that the private sector development agenda would be driven and monitored from the Presidency.

2. Where are we now?

The private sector in Ghana faces many challenges though progress has been made to improve the operating environment.  The challenges come from the fact that our economy does not perform well regularly, the support our public sector gives to private sector operations is ineffective and the lack of concerted effort by all stakeholders to act and collaborate in ways that make Ghana an attractive place to invest.

The structure of the economy has not changed for decades and the growth of the economy has been too low for the country to achieve the prosperity to which we aspire.  The rural economy remains under-developed especially in the three northern and Central regions.  Economic activities have stayed away from rural Ghana and widened the income gap between rural and urban Ghana.  Yet, the number of people this economy must support continues to grow.  The result of all the above issues is the shortage of sustainable, well-paying jobs and high un-employment especially among young people. 

The ineffectiveness of policies, rules and regulations and the processes by which the public sector should support private sector activities have created many barriers to operations in the private sector.  Infrastructure such as roads, energy supply and ICT are not enough to support the breadth of private sector expansion that the country needs and those that exist are not of right quality.

The Private Sector has focused investments very narrowly on mining, oil, finance and telecommunications industries.  Outside of these areas, appropriate credit especially for manufacturing is limited.  As well, the small and informal firms that dominate the private sector have not invested enough to develop the right skills and knowledge needed to make them efficient and able to compete locally and abroad with their products and services. Therefore, the return on their investments tends to be low because of the high cost of operations. 

3. Where do we want to be?

The prize, if we overcome these challenges, will be a ‘better Ghana’ economy with many opportunities for communities to engage in and prosper from profitable businesses.

4. What will we do to get there?

“We want this partnership to be built on a shared responsibility where Government provides the conditions necessary for private sector growth and where the private sector becomes a pro-active partner in development;”

 
PSDS II will enable us to do three things.  The first is to make Ghana an attractive place for local and international entrepreneurs to start up and expand businesses.  The second is to encourage investors to put money in areas of the economy other than mining, oil, telecommunications and finance.  The third is to give incentives to businesses to create more secure, well-paying jobs.

To make Ghana attractive for investments, Government and the public sector will focus on improving the level and quality of roads, power supply and ICT, and encourage banks to be business-friendly and offer the right kinds of credit in to reduce the costs and risks of doing business in the country, especially in our underdeveloped regions.

To encourage investments in other parts of the economy, PSDS II will identify and give special support to businesses that are creating and investing in new sectors of the economy. It will also highlight opportunities and promote new areas for investment. More importantly, it will encourage and assist the Private Sector to increase the outputs of businesses especially amongst small ones. Industry groups will be strengthened and supported to work together as business partners so that they can improve the way they supply and distribute their products and services. This will be under-pinned with available, affordable and good quality business training and development services.

The incentives to create secure, well-paying jobs in both urban and rural Ghana will focus on simplifying the rules and regulations that govern employment in Ghana and changing the ways in which labour institutions work.  PSDS II will help tertiary and technical and vocational training institutions develop in their students the right skills that the Private Sector needs.  These incentives will also help the poor in underdeveloped regions by increasing the size and quality of agricultural output across Ghana whilst promoting businesses and jobs that do not depend on farms.

5. How will we know when we arrive?

We will know we have arrived if by 2015, Ghana has a vibrant, globally competitive Private Sector powering the strong and sustainable growth of the economy and jobs.  The economy will be re-structured, diversified and less dependent on mining, cocoa and oil and able to attract high levels of investment into the country. 

The Private Sector would have created 500,000 new, well paid, SSNIT contributing, secure jobs.  Rural incomes especially in the three northern and the Central regions will be growing at a minimum of 20% a year. 

6. How will we implement PSDS II?

“the strategy would be achieved by developing a strong partnership between the government and the private sector and other stakeholders, to consolidate the gains achieved under PSDS I (2004-2010).”  Hon. Hannah Tetteh, Minister for Trade & Industry at meet the press series, Oct 2010

The Private Sector Development Strategy will allow bottom-up participation from those players closest to the issues, challenges and opportunities and facilitate access to funds and support to help businesses and entrepreneurs implement their ideas and innovations.   

The policy solutions designed to support private sector initiatives and ideas will be flexible so they can respond to changing needs and circumstances and maximise the benefits to the Ghanaian economy.  Additionally, the partners will establish a Fund to exclusively support the initiatives.

The Secretariat will engage professionals with strong record of accomplishment in implementing labour and business environment policy reforms and in managing investment funds to design initiatives that will assist the private sector and labour.

7. Who will manage PSDS II?

A partnership of the stakeholders will manage the implementation of the Second Private Sector Development Strategy.  This partnership will bring together the capabilities of the public and private sectors, the Government of Ghana, and Development Partners.  It will ensure that leadership comes from the very top and that those responsible for implementation have the right level of authority to make things happen. 

There will be three key levels in the organisational structure designed to hold the partners accountable for the delivery of their commitments.

The first layer will be a PSD Council formed and chaired by the President. The Council will be made up of leaders and champions from the Private Sector, Government of Ghana representatives and Development Partners and will be like the shareholders of an organisation

The PSD Council will appoint an independent PSD Board to exercise overall strategic oversight for PSDS II and hold those responsible for implementing PSDS II to account.  It will comprise of people appointed from the Private Sector, the Government of Ghana and public sector, and the Development Partners and will be chaired by a representative from the Private Sector.

The PSD Board will appoint and work with a Secretariat, which will be responsible and accountable for co-ordinating the implementation of PSDS II.  It will advise the Board on where the best opportunities for delivering the outcomes of PSDS II are.

8. What will implementation of PSDS II mean to the stakeholders?

For entrepreneurs investing in Ghana, PSDS II implementation will bring about a lower cost of doing business, improve access to credit, increase efficiency and competitiveness; improve access to sustainable domestic and export markets, and reward innovation.

Firms operating in Ghana will benefit from expanded opportunities to operate enterprises profitably in a less bureaucratic environment.

Job creation is a priority for the Government of Ghana and the benchmark of success is the creation of 500’000 well paying, SSNIT contributing private sector jobs that will increase the proportion of the population with formal jobs. The youth and jobseekers in general will be major beneficiaries.

The strategy will help to cement the status of Ghana as a middle-income economy that is growing well and creating national wealth for social investments.

The incomes of rural people in Ghana will have increased appreciably, especially in the three northern and Central regions. Agricultural outputs will also have increased and they will be jobs in these rural areas even beyond the ones created on the farms.

9. What will it cost to make PSDS II happen?

The PSD Board will establish a GH¢1 billion Private Sector Development Fund, which will receive money from the Government of Ghana and attract funding from the Development Partners and the Private Sector, to spend exclusively on the implementation of the strategy.  The PSD Board will manage the fund and will operate outside the normal Government of Ghana disbursement channels.

10.  Budget

The PSD Board will oversee the PSD Fund to spend to create the new Ghanaian private sector as ff:

·         Component One: Investment Climate Reforms

Business Environment Reforms                                           = $  75 million

Financial Innovation                                                             = $150 million

·         Component Two: Economic Transformation

Business Innovation and Linkages                                       = $150 million

Training and Advisory Services                                            = $  30 million

·         Component Three: Jobs and Livelihoods

Labour Market Reforms                                                        = $  30 million

Regional Investment Climate Reforms                                 = $140 million

Regional Economic Diversification                                       = $   75 million

11.  Key Indicators of Success

Below is how the Stakeholders (i.e. Government of Ghana, the Private Sector and the Development Partners) will jointly measure the success of the Second Private Sector Development Strategy.

INDICATOR	CURRENT STATUS	TARGET 2015
Non-oil growth	5% – 6%	10%
Investment as % of GDP     Private Public	32.9% 18.5% 13.8%	40% 25% 15%
Private credit as % of GDP	30%	50%
Income growth in lagging regions		20%+
Formal job creation		500,000+
Productivity (value added per worker)		25% - 30%
Export Diversification (NTEs as % of total non-oil exports)	30%	40% - 50%
GCI Rank	114	25% improvement
DB Rank	92	25% improvement

AUTHOR

Michael Harry Yamson is the Chief Operating Officer of Ishmael Yamson & Associates; a strategy consulting and investor advisory firm that helps organizations improve their performance and profitability. He is a thought leader with interests in economics, governance and investment issues. To see more from Michael, visit Ishmael Yamson & Associates.