An agricultural economist at the University of Ghana, Dr Kwadwo Tutu, is worried that the country’s declining agricultural sector poses serious threat to economic development.
Economic growth, he explained, would be stunted with a structure that had agriculture’s share of Gross Domestic Product (GDP) declining from 50 per cent about a decade ago to 19 per cent in 2015.
“If the share has gone down so much and service sector has increased from 20 per cent to over 50 per cent, then we are a ‘kwashiorkor’ economy because basic development theory will tell you that you first grow with agriculture and when productivity goes up, it transfers into manufacturing before services sector comes in. Now suddenly, agric is primitive and clearly it is not a priority and that is dangerous,” he said at a post budget analysis forum in Accra.
The Ministry of Finance (MoF) and the Institute of Financial and Economic Journalists (IFEJ), organised the forum aimed at giving media and civil society organisations some perspectives on the budget statement.
State of agriculture
Agriculture grew at -0.1 per cent between April and June 2015. Data from the Ghana Statistical Services (GSS) on the contribution of the various sectors to GDP for the second quarter of 2015 shows that the services sector maintained the lead in its contribution to GDP, 59.6 per cent and was seconded by industry, 29.6 per cent. Agriculture contributed 10.6 per cent.
The GDP measures the value of final goods and services produced in the country. Developing Ghana’s agricultural sector has generated debate since the 2016 budget was presented.
In the 2016 budget, an amount of GH¢501.5 million has been allocated for the implementation of programmes and activities in the agriculture sector. Out of this, GH¢322.1 million is Government of Ghana (GoG) funding, GH¢4.1 million is internally generated funds and GH¢175 million is from development partners.
Development constraints
According to Dr Tutu, the lack of a national long term development strategy had contributed to the decline of the agric sector, saying that it was only such a plan that would inform the kind of share the economy would have in the next 10 years.
“So now if you have an aggregate of several projects and at the end of it you say rice is going to grow this much, what tells you the kind of growth that you are expecting from agric is going to fit into a plan which in the next 20 years will give you what you want. So we are like somebody in an ocean without a compass,” he said.
Dr Tutu said Ghana was developing under energy and attitudes (incompetence, mediocrity, inefficiency, indiscipline and corruption) constraints that were borne out of lack of enforcement of law and order, and which translated into the achievements of budget targets.
“Unless these are addressed all that we are talking about is useless because there is no way you can hold what you put in the budget as real,” he said.
He said it was important that Ghana took a critical look at production and productivity, storage and marketing, processing and technology.
“The vision of agric is using science and technology to modernise agriculture. For instance, what proportion of cocoa is being processed to know if it is increasing our processing capacity or not. These things we don’t find it in the budget and unless we do that, we get a congregation of programmes and projects and outputs which doesn’t tell us where we are going, whether we are making progress or not,” he said.
Mechanisation
A Principal Agriculture Engineer at the Ministry of Agriculture, Ms Catherine Amegatcher, said the reduction in budget allocation was a worrying trend.
She said efforts by the ministry over the years to source funding to procure machinery for farmers along the entire value chain had been a challenge.
“One of the things that the ministry is trying to do now is to promote mechanisation and machinery. This is one key thing that is necessary but as we speak now, some of these things are not possible because funding has not been available because the entire allocation has been slashed,” she said.
She said though in a rudimentary stage, plans were advanced to make mechanisation services available to farmers, especially those who could not afford to buy machinery.
The ministry, she said, had instituted Agriculture Mechanisation Service Enterprise Centres (AMSECs) in all the 216 districts, where there would be a range of machinery to cover the whole value chain – starting from land preparation to harvesting.
At the moment, there are 89 of such centres in 62 districts.
A Director at the Real Sector Division at the MoF, Dr Oku Afari, said agriculture was basically a private sector affair so government’s role was to facilitate and create the right environment for it to thrive. GB
Pull Quote
The lack of a national long term development strategy had contributed to the decline of the agric sector.
Key Note
Experts have said that government should make it mandatory for banks in the country to set aside a proportion of their assets to support the growth of the agricultural sector.
Tuesday, December 8, 2015
VALCO’s debt cripples VRA’s operations
A US$ 95 million debt owed the Volta River Authority (VRA) by the Volta Aluminium Company Limited (VALCO) is crippling the state hydro power producer’s ability to pay for gas supply for power generation.
VALCO, over a period had accumulated so much debt, which as at October this year stood at US$95 million, to which the government was supposed to pay US$42 million as per VALCO’s agreement with the government.
A highly placed source told the GRAPHIC BUSINESS that although VALCO’s debt may be significant, other debtors, including metropolitan, municipal and district assemblies (MMDAS) and ministries, departments and agencies (MDAs), had contributed to the current state of VRA and subsequently, the power crisis being experienced.
Although VRA does not sell power directly to MMDAs, it sells to the Electricity Company of Ghana (ECG) and the latter distributes so they are supposed to pay the ECG,which will in turn pay the VRA and other power generation companies.
The VRA is currently indebted to Nigeria Gas (N-gas), which supplies gas through the West African Gas Pipeline Company (WAPCo) to the tune of US$180 million and the Ghana Gas Company Limited, a total of US$148million, for gas supplied to power the VRA’s thermal plants for power generation.
“We are shedding power because the VRA has no money to buy crude or gas they need to power the plant. So if the VRA had all these money it is being owed you can imagine what it can do. It owes the West African Gas Pipeline Company (WAPCo) about US$180 million which has resulted in a cut of supply to Ghana. If all these debts were settled it could have defrayed if not all part of the cost,” the source said.
Impact on VRAs operation
According to the source, the major problem of VALCO’s debts and other debts to the VRA is the kind of agreement the country signs with some of these companies.
The power rate given to the various power generation companies vary and that the VRA is being less than what it costs to produce the power.
“This Kar Power thing they have brought, they are going to pay them about 55 pence or pesewas per kilowatt hour. If the VRA distributes and you are giving them about 12 or 14 pesewas per kilowatt how would it survive? Is it because it’s public? If the VRA or ECG were private companies they would have closed down 30 years ago,” it said.
The source said even if the VRA was not for profit at least they should be able to pay for the cost of production.
Power generation
Ghana has installed a capacity of 2,884.5 megawatts (MW) of power which is more than what the country needs yet it is unable to generate up to that capacity.
About 1,000 MW of thermal generation has been added in the past 15 years, bringing the country’s generation capacity to 2,125 MW, which is made up of about 50 per cent hydro and 50 per cent thermal plants.
However, inadequate and unreliable power supply remains a major challenge to economic growth.
The government has procured a 250 MW power barge by Kar Power from Turkey to augment the country's electricity shortfall.
The move has attracted several criticisms. The paper’s source said that the idea of going for the power barge was not a smart one because the barge would add just about 250 MW of power.
“How much are we spending to bring that barge and how much are we to pay for the gas so we can have power. The problem is that we are not able to generate up to our installed capacity,” it said.
Recommendation
The source explained that privatising of the power producing countries was not the solution to the country’s power crisis, but instead managers of the economy must focus on signing agreements that would protect the interest of the nation.
“Privatising these companies is not a solution, because the private man will not send power to the rural areas where they know people cannot afford to pay for the power supplied, and he cannot recoup his investments,” the source said.
Instead, the nation he said must set the right priorities when it comes to signing agreements and prevent politics from dominating the discussions.
“I think as a nation we should have a holistic approach, to set our priorities right. We should not easily give in so much in signing these agreements. If the VRA or ECG was a private company, it would have closed down 30 to 40 years ago, because you cannot operate like that. You buy it and sell it at a lower rate, who pays for the difference?” it further quizzed.
It added that, “let’s assume they are not there to make profit but just to deliver service, at least they should be able to break even, or pay for the cost of producing the thing. Our interest should be well taken care of. We should find a way of supporting the social intervention programmes that help power supply such as the rural electrification programme.” - GB
writer’s email: ama.baafi@graphic.com.gh
PULLQUOTE
We are shedding power because the VRA has no money to buy crude or gas they need to power the plant. So if the VRA had all these money it is being owed you can imagine what it can do.
KEYNOTE:
- The VRA is an electric power utility corporation whose primary function includes power generation, transmission and distribution for industrial, commercial and domestic use.
- VALCO, located in Tema is a major producer of primary aluminium for the world market. Its establishment was a result of the vision of the first President of Ghana, Dr Kwame Nkrumah, to establish an integrated aluminium industry in the country.
VALCO, over a period had accumulated so much debt, which as at October this year stood at US$95 million, to which the government was supposed to pay US$42 million as per VALCO’s agreement with the government.
A highly placed source told the GRAPHIC BUSINESS that although VALCO’s debt may be significant, other debtors, including metropolitan, municipal and district assemblies (MMDAS) and ministries, departments and agencies (MDAs), had contributed to the current state of VRA and subsequently, the power crisis being experienced.
Although VRA does not sell power directly to MMDAs, it sells to the Electricity Company of Ghana (ECG) and the latter distributes so they are supposed to pay the ECG,which will in turn pay the VRA and other power generation companies.
The VRA is currently indebted to Nigeria Gas (N-gas), which supplies gas through the West African Gas Pipeline Company (WAPCo) to the tune of US$180 million and the Ghana Gas Company Limited, a total of US$148million, for gas supplied to power the VRA’s thermal plants for power generation.
“We are shedding power because the VRA has no money to buy crude or gas they need to power the plant. So if the VRA had all these money it is being owed you can imagine what it can do. It owes the West African Gas Pipeline Company (WAPCo) about US$180 million which has resulted in a cut of supply to Ghana. If all these debts were settled it could have defrayed if not all part of the cost,” the source said.
Impact on VRAs operation
According to the source, the major problem of VALCO’s debts and other debts to the VRA is the kind of agreement the country signs with some of these companies.
The power rate given to the various power generation companies vary and that the VRA is being less than what it costs to produce the power.
“This Kar Power thing they have brought, they are going to pay them about 55 pence or pesewas per kilowatt hour. If the VRA distributes and you are giving them about 12 or 14 pesewas per kilowatt how would it survive? Is it because it’s public? If the VRA or ECG were private companies they would have closed down 30 years ago,” it said.
The source said even if the VRA was not for profit at least they should be able to pay for the cost of production.
Power generation
Ghana has installed a capacity of 2,884.5 megawatts (MW) of power which is more than what the country needs yet it is unable to generate up to that capacity.
About 1,000 MW of thermal generation has been added in the past 15 years, bringing the country’s generation capacity to 2,125 MW, which is made up of about 50 per cent hydro and 50 per cent thermal plants.
However, inadequate and unreliable power supply remains a major challenge to economic growth.
The government has procured a 250 MW power barge by Kar Power from Turkey to augment the country's electricity shortfall.
The move has attracted several criticisms. The paper’s source said that the idea of going for the power barge was not a smart one because the barge would add just about 250 MW of power.
“How much are we spending to bring that barge and how much are we to pay for the gas so we can have power. The problem is that we are not able to generate up to our installed capacity,” it said.
Recommendation
The source explained that privatising of the power producing countries was not the solution to the country’s power crisis, but instead managers of the economy must focus on signing agreements that would protect the interest of the nation.
“Privatising these companies is not a solution, because the private man will not send power to the rural areas where they know people cannot afford to pay for the power supplied, and he cannot recoup his investments,” the source said.
Instead, the nation he said must set the right priorities when it comes to signing agreements and prevent politics from dominating the discussions.
“I think as a nation we should have a holistic approach, to set our priorities right. We should not easily give in so much in signing these agreements. If the VRA or ECG was a private company, it would have closed down 30 to 40 years ago, because you cannot operate like that. You buy it and sell it at a lower rate, who pays for the difference?” it further quizzed.
It added that, “let’s assume they are not there to make profit but just to deliver service, at least they should be able to break even, or pay for the cost of producing the thing. Our interest should be well taken care of. We should find a way of supporting the social intervention programmes that help power supply such as the rural electrification programme.” - GB
writer’s email: ama.baafi@graphic.com.gh
PULLQUOTE
We are shedding power because the VRA has no money to buy crude or gas they need to power the plant. So if the VRA had all these money it is being owed you can imagine what it can do.
KEYNOTE:
- The VRA is an electric power utility corporation whose primary function includes power generation, transmission and distribution for industrial, commercial and domestic use.
- VALCO, located in Tema is a major producer of primary aluminium for the world market. Its establishment was a result of the vision of the first President of Ghana, Dr Kwame Nkrumah, to establish an integrated aluminium industry in the country.
Tuesday, November 24, 2015
AMA's STORIES: Govt to expand LEAP coverage - Graphic Online
AMA's STORIES: Govt to expand LEAP coverage - Graphic Online: Govt to expand LEAP coverage - Graphic Online
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