Agriculture is fast losing its image as the backbone of the economy, as many rural folks are abandoning the sector for trading and hospitality jobs in the cities.
Agriculture has for decades been acknowledged as the mainstay of Ghana’s prospects, but recent data compiled by the World Bank Group suggest the sector that once employed about two-thirds of the Ghanaian population has lost its appeal as the structure of the economy transforms from an agri-based economy to a service-oriented one.
Commerce and hospitality are now the in-thing for many people who have moved from the rural areas to the urban centres.
According to the World Bank Group, about 21 percent of the Ghanaian population has moved out of agriculture to other more productive economic sectors over an 18-year period between 1992 and 2010.
At the same time, employment in industry and services grew from 38 to 59 percent — making the reallocation of labor the reason for more than one-tenth of all of Ghana’s GDP growth over this period — a share similar to that in China over 1980–2010, and an even greater share in more recent years.
These findings come at a time the contribution of agric to the economy has also gone down over the years. In 1992 the share of agric to GDP was 23.6 percent growing to about 41 percent in 1995. But the Ghana Statistical Service reports that the contribution of agric to GDP declined from 29.8 percent in 2010 to 22 percent at the end of last year.
The World Bank in a new report, Ghana Urbanisation Review, launched on Thursday also found that while employment in the agric sector has taken a southerly turn, commerce — be it wholesale or retail — had within a decade since the new millennium increased from 14.5 percent to 18.9 percent.
Within that time-frame, employment in the hospitality sector (hotels, accommodation, restaurants, and food services) almost doubled from 2.9 percent to 5.5 percent.
Manufacturing employment however witnessed a slight reduction from 11.1 percent in 2000 to 10.8 percent in 2010, said the report — done in collaboration with the Ministry of Local Government and Rural Development and supported by the Swiss State Economic Secretariat (SECO).
These developments, the World Bank Group noted, are not ideal for a country that has seen its urban population increase more than three and half-fold from 4 million to 14 million people over the past 30 years, and growing more than 4.4 percent every year without the necessary accompanying jobs and social amenities.
It explained that many problems associated with rapid urbanisation arise naturally from dynamic economic forces when the supply of services, infrastructure, and jobs cannot keep up with growing demand, leading to inequality, slums, and declining productivity.
“When the supply of services cannot meet the growing urban demand for services, and when urban economies do not sufficiently generate job opportunities, slums develop — with declining health outcomes, growing poverty, and increased levels of insecurity. These and other challenges will emerge if urbanisation continues apace without changes to current policies and institutional structures,” it said.
Already, the government has noted that the rapid urbanisation has brought in its wake a weak urban economy, inadequate urban infrastructure and services, poor urban investment and financing, land-use disorder and unplanned urban expansion, urban poverty, slums, and squatter settlements among others.
The World Bank says there’s a greater need now for Ghana to neutralise the negative effects of urbanisation by seeking new sources of productivity-growth that are more sustainable.
This, the Bank accepts, could be achieved by ensuring that the beleaguered manufacturing sector and industries are made the engine of economic growth and job-creation — a recommendation comes as a slap in the face for the popular mantra in government circles that agriculture is the backbone and engine of growth for the Ghanaian economy.
“Much of Ghana’s productivity growth has been facilitated by urbanisation as workers have moved out of agriculture into more productive economic sectors, but productivity gains based on labour reallocation are not a sustainable source of long?term growth…“Global experience shows that the manufacturing sector is the engine of growth for large to medium?size cities with good access to markets, yet Ghana’s cities have failed to develop robust industrial sectors. They have instead become services?based ‘consumption cities’.
“Globally, as countries urbanise, their manufacturing sectors tend to grow as a share of GDP until urbanisation reaches 60 percent, with manufacturing as a share of GDP peaking at over 15 percent on average. In Ghana, however, manufacturing has declined as a share of GDP to just 5.8 percent — well below global as well as sub?Saharan Africa averages, given Ghana’s urbanisation and income levels,” it said.
Currently, Ghana’s industrial sector is still dominated by informal and small?scale household enterprises amidst erratic power supply, difficulty in accessing financing and unfair competition from cheap imported goods, stunting its further development.
In previous decades, Ghana witnessed the collapse of many industrial establishments as a result of structural adjustment policies and competition from globalisation. The bulk of the manufacturing industry in Ghana is now made up of small?scale establishments, often engaging less than 10 workers and typically comprising proprietors and their non-paid family employees, as well as a few paid employees.
Within Ghana’s urban areas, the informal economy is the main source of employment for the majority of residents. About 70 percent of Accra’s workers — and up to 85 percent in other large cities — are engaged within the private informal economy in small enterprises often organised around the household: but these informal enterprises are often not productive.
Their lagging productivity is partly because of a lack of enabling regulations in the urban areas where they operate, which adds to the cost of doing business and pushes them into informality.
Source: Business & Financial Times