Washington, DC — Ghana's Minister for Private Sector Development and the President's Special Initiatives, Kwamena Bartels, discusses the role and importance of the private sector to Ghana's economy as well as the support that his ministry offers to entrepreneurs in this interview with AllAfrica's Gaddiel Baah.
What inspired the creation of your Ministry?
The president right from the beginning of the first term espoused this vision of creating and ushering in the golden age of business. The goal is to achieve sustainable, equitable and widespread private sector-led growth in Ghana and for us to achieve middle-income status by the year 2015. To do that we have been quite clear in our minds as a political party that the private sector should be the engine that will drive growth to achieve this vision.
The private sector in Ghana, like any other country, faces a lot of difficulties and all these difficulties were being addressed by various ministries. If you take agriculture, the Ministry of Agriculture is principally dealing with the private sector, trade, the private sector, industry, the private sector, mines the private sector, forestry, it is private sector. All these activities were not being coordinated, so the president decided to set up the Ministry of Private Sector Development and the President's Special Initiative to serve as the focal point for coordinating and harmonizing all this private sector activities in the various ministries into one coherent whole.
The ministry was set up to address the impediments that affect the private sector, to act as the voice of the private sector in government and to get the private sector to influence various policies that government intends to come up with so that at the end of the day there will be that kind of elbow room for the private sector to boom, so that in the end there will be the kind of accelerated growth that will bring us to the middle income status by the year 2015.
From pre-independence -- the colonial time -- to post-independence, we have relied on cocoa, timber and gold as our main export earners. We don't control the prices of these commodities and their prices keep fluctuating. For any government, you find it becomes so difficult to plan, so to diversify the export base of the economy and also to get the nation earning foreign exchange income from other diverse sources, [President John Kufuor] came up with the President's Special Initiative. The initiatives are for government to facilitate the accelerated growth of production and export of certain selected commodities.
He has currently added sorghum and cotton which will be launched this year particularly in the northern parts of the country because all these other ones are southern Ghana-based, except textiles and garments which you can manufacture anywhere. These are the two pillars which come together to form the Ministry of Private Sector Development and the President's Special Initiatives and the policy behind their setting up.
What exactly is the President's Special Initiative (PSI) about?
Let me start with oil palm. We are financing the Oil Palm Research Institute (OPRI) to give us the best planting material. We don't have the best, so we've given support to OPRI to increase its production from about half a million seedlings a year to four million, and the target is to reach six million this year. These are then nursed into seedlings and sold to farmers and we are even prepared to give out seedlings to peasant farmers on credit for them to start paying when their trees start fruiting and they start harvesting. We give them support also for clearing the land and we are giving financial support for the maintenance of their farms. The idea is that every year we should have a minimum of ten thousand hectares of land being planted with palm oil trees.
In the case of garment and textiles, what we're doing as government is funding the construction of the structures -- big factory buildings -- and supporting the private sector to take loans from the banks to buy their equipment, machinery and the fabrics for manufacturing. We support them with access to the market. Last two years we supported some operators to come to Vegas for shows and to get orders. We have set up what we call the Gold Coast Collection as a merchandising unit in the PSI to try and get these orders for the operators. We as a government are also funding the training and the building of capacity. Government is funding all the training of factory hands, so operators will be able get access to people who know how to sew trousers, shirts, etc. Then we're bringing experts to help each and every factory with expert advice so that they will be able to produce qualitatively and timeously and in the right quantities for the market outside.
In the case of salt, what we're doing is we've been producing salt all these years but we've not been producing very efficiently so our costs are very high. We've brought experts who are helping the various individual private sector operators to be able to improve on the quality of their production processes and also assisting them to access funds from the various banks and financial institutions to be able to expand their production.
In the case of cassava starch, the Ministry of Agriculture together with the Ministry of Private Sector Development and PSI are collaborating in getting the best planting material. In the past all our research had been towards getting cassava for food, but we have not been doing our research to try to get cassava that will give us the highest possible yield in starch. We've given support to the ordinary farmers in terms of funds for clearing their lands, funds for planting, funds for maintenance and helping them to evacuate their cassava to the factories. Government has supported the four banks which have set up a processing factory which is processing cassava starch and Ghana's cassava starch has been acclaimed top grade cassava starch. Now we've got a market which is far in excess of the capacity of even that single factory to produce, and now four other factories are coming on stream in the next two years. We'll have a situation on our hands where our export of cassava starch will be rising phenomenally.
What dictated the selection of these commodities?
These are commodities which our people knew how to handle from centuries back, so it's easy to pick these. Our people will be able to take it up and grow it. The second point is that we believe because it has export value, it will create a chain which would mean that a lot of people are going to get involved by way of employment. The demand in ECOWAS for processed palm oil is two million tons a year. We are currently producing 200,000 tons, just about 10 percent. Nigeria, for example, takes about 1.5 million tons of various grades of edible oil and most of this is imported from Malaysia. That's a huge market.
Don't those two arguments apply to rice?
Rice is not a special initiative because the Ministry of Agriculture has been taxed to increase our yield of rice as an import substitute, different from one which is targeting exports. We are importing over $110 million of rice a year. How can we increase our production to reduce our import of rice? That is what is being done but that is a task that is given specifically to the Ministry for Food and Agriculture.
Ghana's textile industry has come under a lot of strain. The second-hand clothes market is flourishing and cheap imports from Asia have flooded the market. A number of companies have actually collapsed. How can you ensure the survival of the textile initiative?
Those companies that have collapsed, Juapong Textiles?, GTMC is still operating except that they are operating at a smaller level, but you will be shocked to find that GTMC is in trouble because the equipment they bought 40 years ago is the same equipment that are being used today. In this modern world, you cannot be competitive if you are operating with 40-year-old equipment against China and the others which are operating with equipment which was manufactured two, three, four years ago.
In the case of Juapong Textiles, the problem really was that the workers literally priced themselves out of the market. The persistent demand for a salary increase... you will be shocked to find that some of the workers were earning US$10 a day but part of the problem was also that they themselves were not being efficient.
I will admit that smuggling of cheap imports from China is part of the problem, [but textiles is a special case.] In China, the cost of production is so low because their workers are prepared to accept low salaries. In the textile business if you are expensive, you are out. In the textiles business the margins are so small that you have to be very efficient to be on the market. It is not like other areas like the sellers market where at whatever prize you get somebody to buy. No. The competition is keen and unless your technology is high and your skills are high and your costs are low you are likely to be priced out of the market and that's precisely what is happening.
Part of the problems facing some of the textiles companies is the prices at which they are getting their cotton. They are either getting it from those heavily subsidized by the West, like America which subsidizes its cotton farmers up to around 46 percent, or they are getting it from local sources which are too high. What we are trying to do is support our farmers to also be competitive in producing it as close as possible to what other countries like the U.S. and Egypt and the others are able to produce for our textile businesses and factories so that they will also in the end be competitive.
Are there any concrete results that the Ministry could point to?
A lot of these activities are inter-sectoral so it is not going to be easy for the ministry to say that this is what we have achieved, because our role is harmonizing and coordinating all inter-sectoral activities that affect the private sector. If you take, for example, doing business in Ghana, it is purely a private sector that we've been pushing, but we've been pushing it through the ministry for Trade and Industry, the Ministry for Finance.
We were just ranked 82 out of 155 countries for ease of doing business and that is a great achievement. If you look at that study, you will find that Ghana ranked 82 out of 155 countries in over 10 categories. In the ECOWAS region we were ranked as the easiest place to do business. Ghana is number one. Out of ten categories we were number one in eight, and first five in the rest. These are as a result of various reforms which are spread in various ministries and which are coordinated and harmonized by the ministry through the private sector development strategy.
Does the Ministry seek a niche for Ghana?
We are determined to make Ghana the ICT hub. First of all the overall vision is to make us the gateway to the rest of West Africa. The gateway more for tourism and ICT, because we have various advantages. We believe that the stability, the democracy, the peace and the security of person and property, is such that it should be possible for us to be the hub for manufacturing for the rest of the ECOWAS sub-region.
Is there a policy for private sector involvement in energy?
As regards energy, we have been pushing for private sector investment in energy generation and distribution. At least one company is coming to Ghana to refine crude oil for export, and private companies to generate power for domestic consumption and for export into the West Africa power pool. The West Africa Gas Pipeline is coming on-stream and others want to come and set up power generating plants within Ghana to take advantage of the gas to generate power for export. There are plans to set up a 1000-megawatt power plant in Tema for Valco and also for export.
What about water?
The Ministry for Water Resources, Works and Housing is inviting private sector participation for the delivery of water in the urban areas. In the rural communities, their water is controlled by themselves. It is a very interesting thing. I used to be the Sector Minister. They own it, they run it, and they sell it to themselves.
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Any good news for Ghanaian business people?
Yes. They will realize that this government has successfully stabilized the economy. We have gotten to the point where we believe that it should be possible for the country to grow quickly. Stability is assured, democracy is assured, and security is assured. There are various forms of support we are giving particularly to Ghanaians to try and get into their own businesses. The African Development Foundation has increased their funding. Government is increasing its funding, so they will be able to give small and medium-scale entrepreneurs a lot more funds.
We are helping them with a lot more training. The Italian government has given us funds we are giving to Ghanaians to set up their own businesses and those who already have businesses, to expand. The idea is that from now until the end of the term of the president, we want to see a lot more accelerated growth, so a lot more support is going to be given to the private sector by way of capacity building, by way of access to funds. The venture capital fund is in place right now and is likely to start being operated in February. So far we have about $21 million which will be leverage for the private sector. Government has also supported Exim Guaranty Company to increase its guarantee fund for them to be able to give a lot more guarantees to the private sector so that they will be in a position to borrow from the banks with the guarantee of Exim Guaranty. So the future for the private sector is beautiful.
What attempts are being made to get Ghanaians in the diaspora on board?
It is so difficult to get them. What we have are these small, disjointed groups either based on tribe, etc. It has not been easy getting Ghanaians in the diaspora along professional business lines like Ghanaian doctors in New York or Washington as a club. It will be lot easier to help a group like that, or businessmen who want to come and set up processing plants and therefore need the Ministry's help by way of access to land, registration of their businesses, any problems that they may confront, getting them help to be able to access funds. That has not been the case for now. It should be possible for us to encourage them to come together along those lines for us to be able to give them that kind of support.
Your final words?
The government has been very successful in terms of stabilizing the economy. But stability and market reforms alone are not enough. We believe that growth can be encouraged with investments, particularly in the productive sectors, and certain selected service sectors such as ICT. Government is going to invest a lot of its resources and its energy into promoting and supporting investments in these areas using the private sector.
