Structural Adjustment Program in Ghana

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  • Topic: History of Ghana, Africa, Structural adjustment
  • Pages : 5 (1692 words )
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  • Published : January 26, 2011
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Like the economy as a whole, the industrial sector in Ghana has been the subject of much inquiry (in chronological order, see Birmingham et al., 1966/7; Steel, 1977; Page, 1980; Andrea, 1981; Ewusi, 1986; Meier and Steel, 1989; Steel and Webster, 1990; Mosley, Harrigan and Toye, 1991; Sowa et al., 1991 and Rothchild, 1991). As mentioned already, industrial output as a whole has been growing since the adoption of the Structural Adjustment Programmes in Ghana. Within the industrial sector, it is small and medium scale industry that are increasing in proportion, and large scale industry that is static. The increase in output of the small and medium scale portion has been primarily through increase in the number of firms; entry into Ghanaian industry has been very rapid in recent years, but once established, the firms tend to remain fixed in size and employment. Large scale firms in Ghana have shown little resilience under the Structural Adjustment Programme. The liberalization of imports has permitted increases in foreign products with which they compete, often with disastrous results for the local industries. A headline from a newspaper (the Weekly Spectator, number 1233, Saturday, 9 November 1991) is 'factories collapsing... over 120 out of business'. The beginning of the article reads as follows: Over 120 industries in the country have closed down since 1988 due to their inability to sell goods they produce. The industries affected include those of garment, leather, agricultural, electrical, electronic, metal and pharmaceuticals. Prominent among them are the Match Factory, Crystal Oil Mills, Ever Ready Battery, Ayrton Drug manufacturing, all the machine shops, Ghana Candle and Brush Company. Others are the Glamour garment factory, Ghana Umbrella Factory, Benya distilleries, Baston Terrazo Works, Akropong farm ltd. and African Motors. A spokesman of the Association of Ghana Industries who disclosed these in an interview on Thursday said that unfair trade competition from unchecked imported items into the country has contributed to this situation. Even allowing for journalistic exaggeration, the majority of large Ghanaian firms competing with foreign producers have not fared well. The few that have prospered are those that have been endowed with exceptionally talented leadership and foreign technology (Lall et al., 1994). It is a temptation to blame all of the business failures upon the Structural Adjustment Programme in general and upon the liberalization of imports in particular. What those who have studied the changes in Ghanaian industry since the adoption of the Structural Adjustment Programme, and those who are employed within industry, are coming to realize is that the industrial structure of a country cannot be changed overnight. Embodied in the law, in custom, and in the behaviour of Ghanaians, as well as others in Sub-Saharan Africa, are elements which prevent the quick and easy transfer of resources from one line to another, or from one sector to another, or from one type of enterprise to another. Take as an example the legal requirements on payment of redundancy, for those whose employment is terminated, and for retirement, for those whose working life is ended. Laws passed by the Ghanaian parliament in the late 1950s and early 1960s entitle employees who are declared redundant to payments amounting to approximately five years' wages or salary. Payments to those retiring are, upon their retirement, approximately twice as large. To reduce employment, a large firm, which would be expected to conform to legislation, would incur substantial costs, with no immediate return. It is no surprise that large firms when faced with these costs of retrenchment, prefer to operate for some period and then to close down permanently. The choice for them is not between running at a profit and running at a loss, but between incurring a substantial loss in the short period, through...
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