“There is no easy fix for youth unemployment. Partnership between the public and private sectors can make a big difference” – Ellen Johnson Sirleaf.
One of the policies this government established that resonated so well with the Ghanaian populace is ‘One District, One Factory’ (1D1F) – it’s just that I am not sure if all stakeholders understood clearly how this policy was going to be successfully implemented. Although the implementation has not gone that well in my opinion, it is still one of the critical policies that will change the landscape of business for this economy, and all must be done to make it succeed. In this article I try to compare the policy with Dr. Nkrumah’s policy of setting up factories across the length and breadth of this country to exploit natural resources. There is no doubt that the successful implementation of this policy will go a long way to reduce the high unemployment rate and give a boost to the economy.
Dr. Nkrumah’s Model of State-owned Enterprises
Speaking to Mr. Kwame Jantuah, CEO of African Energy Consortium and a staunch Nkrumaist, recently on the motive behind Dr. Kwame Nkrumah’s objective of setting up the State-Owned Enterprises (SOEs), I could only arrive at the conclusion that it is not very different from the 1D1F policy. The only difference is that the former established the policy to be fully run by the state whilst the latter seems to be falling on the shoulders of the private sector.
Dr. Nkrumah strategically established factories close to the source of raw materials and sought to cart the goods to the urban centers via rail and other means of transportation. The Pwalugu tomato canning factory was set up ‘amid’ tomato farms; the Zuarungu meat processing factory was set up because of the large herds of cattle and livestock available in the Northern Region; Bolgatanga rice mills in the Upper East Region; the Komenda Sugar factory established because of the abundance of sugarcane in that area etc.
Several reasons have been attributed to the collapse of these factories, including inadequate funding and bad policies. It makes business-sense to revisit the blueprint of these established but collapsed factories and just review the funding and governance structure for all of them to be revived. I will explain that a bit more in detail in the paragraphs below.
One District, One Factory policy
The One District, One Factory initiative, according to President Nana Addo Dankwa Akufo-Addo, is a policy set to ignite Ghana’s industrialization and set it on course for socio-economic development. It is aimed at establishing at least one factory or enterprise in each of the 216 districts in Ghana as a means of creating economic growth poles that will accelerate the development of these areas and create jobs for the youth.
While Dr. Nkrumah’s initiative targetted specific areas where raw materials were abundant before establishing processing factories to make use of those materials, the 1D1F seems to generate a ‘think-and-search’ culture in all the 216 districts in Ghana; the population in that area must necessarily find a raw material in their district and create a factory to process such raw materials into value-added products for export and local consumption. The result is that where raw materials abound in small quantities, there should be a crossover to other districts with similar raw materials to make it work. Whichever way one looks at it, factories will spring up across the country and jobs will be created.
Two key challenges have emerged since this laudable initiative kick-started; funding of these factories and a ready market for end products. Whereas markets have been well-developed for some products both locally and internationally, others may need an entire market development programme to bring viability. Presently, the issue of funding is foremost when it comes to the challenges. Interested banks including those assigned by government to support the process are nowhere near agreeing to affordable interest rates for the private sector.
When loan facilities for such an initiative sits within commercial rates, it is a disincentive to the entire programme. Moreover, most of these companies are being asked to provide collateral as part of the loan agreement. There may be viable projects that should have taken-off already, but the cost of credit has stalled most of such. There are some products that need an export market to boost growth and profitability. Although a ready market sits as the second challenge, it is very important for the survival of any company with a long-term aspiration of continuity.
A Workable Proposal
It is obvious that some companies will be able to meet the requirement from the banks to fully participate in the 1D1F initiative, but that would be very few compared to the number of 216 minimum factories to be established based on the policy. I believe that a combination of Dr. Nkrumah’s SOEs and the private sector-led 1D1F would work. The government should be a key stakeholder in the 1D1F when it comes to the issue of funding.
A scenario of this hybrid would play out as below: Government should invest in brilliant, viable projects with equity, say 50%, while the private sector participant takes the other 50%. Government appoints someone on the board of this company to ensure governance structures are put in place and working. Each year, government gives the private participant an opportunity to increase its equity – and over a period of 10 years, the private sector takes over completely.
In the contract document, the private sector should be given a certain minimum equity to reach each year to ensure a defined period is targetted for government’s complete exit. The advantages of this hybrid approach would include among others; the funding issue being partially resolved; market development becomes a concerted effort with strong contribution from government agencies like GEPA and the GIPC; and good governance structures.
The 1D1F policy will transcend generations, and there’s everything to give to make it work. If government will not take the first step of getting into a public-private partnership in the real sense of it, the private sector can engage government and push this hybrid agenda. The unemployment situation sits on the headache-list of every government, and hence job-creation should not be delegated entirely to the private sector. There should be an active intervention from government to actualise this target. One shining example is the National Buffer Stock policy of empowering local producers by purchasing a large chunk of whatever they produce. If nothing else, the hybrid system would open doors in the local market for some of the products from the 1D1F factories.
There should be a deliberate effort for both the present government, through the Ministry of Trade & Industry, and actors in the private sector to have a roundtable discussion on this hybrid proposal to make it work.
Johnson Opoku-Boateng is the Chief Executive & Lead Consultant, QA CONSULT (Consultants and Trainers in Quality Assurance, Health & Safety, Environmental Management systems, Manufacturing Excellence and Food Safety). He is also a consumer safety advocate and helps businesses with regulatory affairs. He can be reached on +233209996002, email: firstname.lastname@example.org.
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