‘Sowing the Seeds for Growth and Jobs’ (3)
Ghana’s economy has maintained its structure since 2012 driven largely by the Services sector with a contribution of 54 per cent to GDP in 2016.
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The agriculture and industry sectors have consistently contracted marginally each year, reducing their contribution to the economy from 23 per cent and 28 per cent respectively in 2012 to 20 per cent and 26 per cent respectively in 2016.
The 2017 Budget Statement is heavily skewed towards growth enhancing initiatives in the agriculture and industry sectors aimed at accelerating growth and job creation. Some of these initiatives which include the “planting for food and jobs” and IPEP are expected to propel growth within the agriculture and industry sectors. However, we do not expect the structure of the economy to change significantly as the Services sector is also expected to grow concurrently. To ensure effective implementation of these initiatives, the government should provide a roadmap and clear timelines for the rollout of the various sectoral initiatives to support the forecasted growth in the various sectors.
Agriculture sector
From Figure 2, the agriculture sector expanded by 3.6 per cent in 2016, exceeding its targeted growth of 3.5 per cent for the same period. The crops subsector (including cocoa) accounted for over 70 per cent of this sector’s contribution to GDP and was on target with a growth rate of 3.3 per cent in 2016. Forestry and logging and livestock sub-sectors exceeded their targeted growth, registering 4.1per cent and 5.3 per cent respectively.
The government has projected a growth of 3.5 per cent in Agriculture for 2017 and has introduced various initiatives to drive this growth - key among which is the ‘Planting for Food and Jobs’ initiative- an initiative designed among others to encourage individuals to take up farming either full-time or part-time.
The government has identified the agriculture sector as a key area for job creation and is keen to involve the private sector in its initiative of ‘Planting for Food and Jobs’.The government expects agriculture to register a 3.5 per cent growth in 2017, consistent with the 2016 target. The sector growth is projected to be driven by the crops subsector (including cocoa). The expected growth, though modest given the numerous initiatives, can be affected by the world market price of cocoa which is projected to decline from US$2,890.00/tonne at the beginning of 2017 to US$2,600.00/tonne by the end of 2017.
Government’s “One-Village, One–Dam” and the “One-District, One-Factory” initiatives are closely linked to the Agricultural sector initiatives and must be aligned in a manner that will have both backward and forward linkages with each other, specifically, ensuring that the raw materials produced locally serve as inputs to the factories. Beyond theses policy initiatives, Government should put in place practical implementation steps in the Agriculture sector to enable the economy achieve the full benefits associated with these initiatives.
Industry sector
The projected growth in the Industry sector is expected to be driven by a 30.2 per cent growth in the mining and quarrying subsector, coupled with marginal growth across all other sub-sectors in the industry. The growth in the mining sector has been predicted based on an expected rise in upstream petroleum activity and the SGN fields, while other subsectors have been predicted to grow based on the expected normalisation of the power supply situation in the country, as well as the implementation of proposed business-friendly policies.
The mining and quarrying subsector was the only subsector to decline in 2016. This decline was attributed to the reduction in upstream petroleum activities which are expected to pick up in 2017 following efforts by the government and Jubilee Partners to address the shortfall in production [resulting from the damage to the turret bearing on FPSO Kwame Nkrumah in 2016] and also the coming on stream of the SGN and TEN fields.
In 2016, there was an improvement in the power supply situation in the country with the electricity subsector growing by 12 per cent. The 2017 budget predicts a growth in the manufacturing subsector based on the expectation that the power supply situation will remain stable. This re-emphasises the importance of implementing deliberate strategies to fix the electricity supply challenges resulting from the lack of funds for the purchase of fuel for power generation.
The government must be cautious of the impact the reduction of certain taxes such as the “abolishment of the one per cent special import levy” could have on the economy as this could cause an influx of cheaper finished goods which could, in turn, stifle the growth of less mature local businesses including the “one district one factory”.
Services sector
The Services sector is expected to continue to be the largest sector in 2017 with a projected 5.1 per cent growth. From figure 4, current projections for 2017 indicate positive expected growth rates across nine out of the 10 subsectors with the highest projected growth of 10.7 per cent expected in the Information and Communications subsector. The Community, Social & Personal Services industry is the only subsector expected to decline by 0.5 per cent.
The government intends to invest in the growth of the Services sector by investing in various projects such as the development of railway lines across the country to aid in the transportation of goods and people. These measures are expected to encourage private investment into subsectors such as trade, repair of vehicles, household goods, as well as the transportation and storage subsectors.
