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Opinions Thu, 8 Feb 2018

Making the one district one factory concept work

Introduction

I have been observing this government for the past one year and I am worried about the implementation process of the one district one factory concept. I foresee darkness instead of light at the far end of the tunnel with the current approach adopted by this government in view of the following reasons:

Implementation Committee too Distant from the District Levels

The implementation committee set up by the government to ensure that this all-important dream come to pass is seated at the Flagstaff house and are inviting proposals from potential investors. But my question to this approach is that, is there any government in the history of Ghana who in trying to attract investors into this country has closed the door of access to the central government, Trade Ministry or Ghana Investment Promotion Council? To me the answer is no.

Almost every government has used almost the same strategy but for sure could not attract the required number they wanted and this, therefore, should guide government to think outside the box and adopt a more innovative approach that will not only make the vision see the light of day but also guarantee its long-term sustainability.

Suggested solution

Decentralize this committee to the district and municipal level, let them identify existing local businesses within the district which have potential for growth, select between five and ten of them for final interview after which one will be selected.

Government will then give the chosen business the needed tools, training and all the resources needed to set up a factory and I can tell you most of them will survive. This will also give birth to a new crop of entrepreneurs spread across virtually every corner of the country.

High Cost of Energy

The high cost of electricity tariffs in this country has always been a threat to the survival of businesses especially during the teething stages (early stages). Every business be it services oriented or production base requires cheaper source of energy to survive for both the local and international competitions.

Unfortunately, electricity prices and the cost of fuel are still very expensive making the cost of doing business in this country at extreme high. Businesses, therefore, die at the early stages before they get to five years. The reason is simple, the production cost plus others taxes are just too much.

Over-reliance on generators to produce power has become the most lucrative business in Ghana and that has seen consumers pay astronomically for power to the benefit of the various power producers. The process is quite simple, get your generators, lobby through the government and they will guarantee it for you.

Even if we are unable to consume what’s produced, we will pay you by force. |THIS IS NONSENSE!! An example is the Early Power Deal which this government guaranteed with one billion dollars for the generation of 400mega watt of power.

Solution

The way forward to solving this problem I have mentioned it severally on several platforms but it has fallen on death ears, unfortunately. If I may repeat myself here; stop relying on fuel to generate electric power through generators and let’s turn to hydro. PSPP and others are the way forward to solving power issues in this country and not the expensive generators we are relying on. They are expensive to maintain.

Additionally, energy producer should compete so that price competitiveness determines who we buy from: we cannot give guarantees and bind ourselves to expensive electricity supplies that will end up eating our industries.

Decentralizing our power production and developing mini hydro dams, solar or wind based on the strength of each area is also another option. Transportation of power over a long distance contributes not only to losses for the producer but increase in the cost for the consumer because, at the end of the day, the price will be passed on to the consumer.

One district one factory needs cheaper source of energy to survive in the long-term

Overly Reliance on the Foreign Direct Investors (FDIS)

Foreign Direct Investment may be good in view of the volumes of employment they bring on board and the initial capital injection into the economy at a time. Unfortunately, under the circumstance it may seem to be a threat rather than an opportunity to the realization of this all-important vision when it is over-relied on in view of the following reasons:

Time constrain; In a democratic governance, time is of essence in your deliverables knowing that you have a maximum of four years to deliver your promises. Time, therefore, is of major constraint and I see this government falling victim to if care is not taken. They will have no excuse to give to Ghanaians if this fails them because they were so much aware of the time at their disposal before making those promises.

Continuity: beyond elections, continuity isn’t guaranteed in this country once you are no more in power so if you deliver midway through and get booted out of power, the project, however good it is will suffer.

Credit Repatriation: We also want the profit made from the factories’ operation to not only be used to expand them but reinvented in other sectors of the economy and this is not possible if a greater chunk of the factory owners are foreigners. We know the effect of changing Cedis to Dollars on the economy.

Solution:

Government needs to use this project as the opportunity to raise a considerable number of local entrepreneurs. Majority of the top 100 CEOs in Africa and non-Africans. The same applies to Ghana. Every once Third country that has developed did so by developing top entrepreneurs within. The factories will benefit us the more if the Ghanaian is the major player.

This is not to say we close the door to FDI, we need to blend but local content should always be prioritized.

There’s also the need to be strategic and use project management tools and techniques to achieve the setup goals.

Use the entrepreneurs in this country to achieve your goal Mr. President and stop looking outside for the non-assisting FDIs.

Macro Economy

The cost of doing business in this country currently is still on the higher side. Though this government have shown some positive signs in terms of reduction in interest rate, stabilization of the dollar to Cedis, and some few others it still very expensive running business here.

High cost of interest rate, high duties paid at the various ports and harbours and other taxes are enough to kill businesses during the teething stages like earlier on mentioned before they attain the age of five years.

I don’t still understand why interest rate should still be hovering at around 25%-30% and still believe that we can grow small businesses.

To me the MACROECONOMY is like a soil we want to cultivate our plant on, the plants are the businesses while the soil is the Macro Economy. If the soil is barren and without any nutrient no matter how well the plant is nursed, when it is cultivated in the barren soil, it can't germinate to gain the necessary roots, stem, and leaves to bare the required fruit.

Our current macro economy is like a vast desert land, it is only able to sustain a few businesses like the financial institutions with difficulties for most sectors. Just as some few plants survive in the desert. Hardly can a forest of businesses be planted here as this current leadership is dreaming about if nothing is done about it.

Solution

The solution to this problem is to practically reduce the interest rate charged on business as well as some import duties on raw materials. Corporate Tax remains too high, special funds should be set up to support local businesses with reasonable interest so that they don’t fall on commercial banks and collapse paying 30% interest rate annually.

With the paperless port system guaranteeing efficiency, there’s the need to look at taxes because loses inform the amount of taxes imposed so once they are dealt with, the consumer must be given a breather.

Conclusion

In conclusion, I will urge the government to still be strategic in it policy implementation process. The saying that it is easier said than done is very true. Make use of the local entrepreneurs to see this vision through and stop relying on the FDIs. Most of these foreign investors will come will come with demands that will skew the benefit one sided but a local businesses man getting this support will be grateful and not see it as doing us a favor by collaborating with government to create job. This is how to win at both sides of the spectrum.

The selected Entrepreneurs should be trained and given the periodic on the job training and operational guidelines to help these businesses flourish.

Additionally, the program must be depoliticized because we know what politics does to great ideas. The affordable housing project by President Kufour should always be a reference point. The Free SHS is encountering similar challenges.

Let us free the One District One Factory Initiative from this cancer and set it on the path of growth.

Finally and more importantly, promote technical and vocational education to provide the needed manpower resources to man these businesses and see Ghana grow industrially.

Long live Ghana and God bless us all.

Columnist: Kofi Anokye