Issue 9 February - May 2002by David Tagoe - enquiries to Traders

Ghana appears to have learnt a useful if bitter lesson from its failure to process cocoa—the country’s main export earner—from its raw state. This failure has resulted in Ghana remaining more of an importer than an exporter, a factor which contributed largely to the harsh economic conditions experienced by its inhabitants in the past. President John Agyekum Kufour declared at his inaugural ceremony that Ghana has inched itself into a “Golden Age of Business” which aimed to create wealth and jobs for the jobless. This declaration has so far not been left at its mere rhetoric level, but rather has been given practical meaning with the launch of the President Special Initiative (PSI). Through this initiative the government intends to aggressively export garments, textiles and cassava starch under the ambit of the African Growth and Opportunity Act (AGOA).
David Tagoe investigates.

The PSI is a project that involves three platforms. The first platform is expected to bring about the relocation of ten large-scale manufacturing plants from Asia, the US and Europe to Ghana. This will help open doors for Ghana to the US market. Asian countries have become the focal point for the PSI, mainly because of the critical agreements these countries have in the US market. Also, many have exceeded their export quotas to the US and are looking for host countries to relocate to and operate in, in order to take advantage of these countries’ quotas.
Manufacturing plants that decide to relocate will be demobilised and re-assembled in Ghana. Within the next four years of the project, two or three such companies are anticipated to have relocated to Ghana to commence business. They will be expected to use their established and appreciable knowledge of the US market to help Ghana gain access to it.

The second platform involves capacity building of over 100% Local Agent Size Companies (LASC). These are meant to serve as the anchor and ensure the existence of a solid base in the Medium Scale Sector (MSS) owned and run by local entrepreneurs.

The third platform comprises development of Training Merchant Exporters who are entrepreneurs interested in taking the commercial risks associated with export but who do not necessarily want to run plants.

The Medium Scale Plants that will emerge from the second platform will be expected to train 50 small scale tailors and dressmakers per each Merchant Exporter. In essence therefore, the Merchant Exporter would place the order and the small scale operatives would fulfil it. Technical Support would be offered from the PSI to assist in organising the production and safe shipment of the garments.

The garments and textiles projects are expected to create 95 000 jobs and bring a targeted revenue of US$4.4 billion to Ghana. With the harsh lessons learnt from not being able to process cocoa for export, moves are under way to add value to humble cassava crops in order to promote economic growth. Cassava is produced by over 90% of Ghanaian farmers, either as a main crop or in combination with other crops. The President of Enterprise Africa, Mr. Alan Kyeremanteng, one of the masterminds behind this initiative, has explained that garments, textiles and cassava were chosen for strategic reasons. Reasons for Ghana’s decision to use cassava starch—alongside textiles and garments—as the catalyst for economic growth is its labour intensiveness, and multiple usages in the paper, textiles, food, pharmaceutical, oil drilling and petro-chemical industries. It is also a 10% derivative in Coca-cola. Added to this, cassava accounts for about 22% of the country’s agricultural Gross Domestic Product (GDP) and as such, has the potential to impact not only in the rural communities, but on the nation as a whole.

With this great potential in mind, Ghana has decided to go the extra mile and embark on a marketing campaign about the uses of cassava industrial starch, intended to improve general awareness about the product, and overcome problems experienced when marketing crops in the past.

The author of the African Growth and Opportunity Act, Mr Charles Williams, would no doubt commend the Ghanaian government’s focus on garments and textiles. He has noted that the total US value for import of garments is $66 billion. The entire sub-Saharan Africa region has only $587 million of this market, which accounts for less than 1%. Cambodia, according to Williams, has grown tremendously in the last 6–7 years and exports $540 million worth of textiles and garments to the US. Honduras, which is made up of between 4–5 million people, exports textiles to the US market to the value of $3 billion, while the Dominican Republic exports to the value of $2.3 billion. The production of textiles for export into the US market has generated hundred of thousands of jobs in these countries and market sales are growing on an average of about 7–8% a year. With Africa having been looked at in the past by developed countries as a place to give donor assistance to, Williams states that AGOA is an important piece of legislation that carries the idea of Growth and Opportunity for Africa, with the view to making it an economic partner rather than a receptacle for donor assistance. AGOA seeks to give African countries the opportunity to be competitive economic partners with the rest of the world, and says that African countries, like other countries, need an opportunity to compete in the global market.

African countries have been given a duty free opportunity to compete on the US market through AGOA for the next nine years. Without the Act, countries wishing to sell textiles and garments to the US would be required to pay duty of between 17%–33%. This explains the benefit to Asian countries who have exceeded their quotas. Already Kenya, Madagascar, Mauritius and South Africa have attracted interest from international investors. Ghana’s focus on textiles, garments and the production of cassava starch for export supports the principal of the AGOA strategy, which is the expansion and development of indigenous capabilities.

Support Structures
The Ghana Export Round Table (GERT) is an institutional support mechanism set up to ensure the initiative works. Its function is to provide extensive support to companies that are part of the initiative. The GERT is like a virtual company made up of critical service providers with a role to play in exports, eg financial institutions. There are at least two to three banks with an interest in export financing involved. The main objective for the formation of GERT is to ensure that everything possible is done for companies to succeed in their export missions.

In addition to GERT, there is also an Inter-Ministerial Facilitation Team which the President, who has a personal responsibility for the success of the programme, has put together. Key sector ministers have been assigned roles to play. Companies that participate in the initiative will be given free zone status and the Inter-Ministerial Committee will be spread countrywide with entrepreneurs selected from different parts of the country.

In his avowed aim to ensure the programme’s success, the President has commissioned the first company at Awutu-Bawjiase, in the Awutu-Efutu-Senya District, in the Central Region, to produce industrial starch from cassava for export. A board of directors will manage the Ayensu Starch Company, named after the River Ayensu, which passes through the West Akyem, Agona, Gomoa and Awutu-Efutu-Senya and Ga Districts. The five districts forming this first company were selected based on an objective assessment of their potential in cassava production. Ownership is by 2 500 farmers from the five districts. The President awarded a Certificate of Incorporation and a Certificate to Commence Business was presented to the directors. In so doing, he noted that the project is another step towards achieving government’s goal of improving the quality of life for Ghanaians by creating wealth and helping the private sector to flourish.

Nine other districts with equally potential cassava production capabilities have been identified and assistance will be given to establishing other companies for cassava starch production. 25 000 farmers will be involved on a nationwide scale.

Although the initiative is spearheaded by the government, it will be driven by the ordinary farmers in the communities that will grow the crops. Government will offer assistance to collectively owned starch processing plants. This agreement is based on a new farmer-ownership scheme entitled the Corporate Village Enterprise (COVE) Model.

The COVE model seeks to bring rural communities into mainstream economic activity by establishing Large Scale Export Oriented Enterprises owned by the farmers themselves, but managed by professionals with industrial experience—engaged on performance contracts.

In addition, a Resource Training Centre has been constructed, with assistance from UNIDO, to train people to sew to the standards required for the US market.

Even though the President’s claim that “the battle to eradicate poverty is a joint effort, the battle to bring back the smiles to the faces of our people has begun” sounds inspiring, Ghana still has to wait for a few hurdles to be overcome. Minister of Trade and Industry, Dr. Kofi Konadu Apraku revealed on December 18, 2001 that Ghana’s visa application for incorporation into the AGOA programme was returned for errors, which he said were typographical in nature and would be corrected. He added that preliminary approval had however been given to the country and receipt of the visa was expected in January. He blamed the delayed full incorporation of Ghana into the programme on the September 11th attacks on the Pentagon and the World Trade Centre in New York.

The two President Special Initiatives, which are in response to AGOA, have been targeted to earn the country an over all export revenue of about $4.4 billion over the next four years.

Author's Contact Details
Author: David Tagoe - enquiries to Traders
Tel: +27 11 465 8871
Fax: +27 11 705 2431
Email: editorial@tradersafrica.com