By Michael INSAIDOO (Ph.D)
In the field of economic development studies, it is typically anticipated that nations progress from an agricultural base to industrialization, and subsequently shift towards a service-oriented economy.
This approach, adopted by many developed nations, involves establishing a robust manufacturing sector prior to transitioning into service industries like banking, education, and information technology. Ghana, nevertheless, has taken an alternative path.
The economic structure has transitioned from primarily agricultural to focused on services, with only modest industrial development. Although this might appear as an accelerated path toward progress, bypassing the industrial stage creates significant worries regarding long-term viability, job creation, and equitable expansion.
The Classic Development Trajectory
In the past, nations like the United Kingdom, Germany, Japan, and lately China experienced a clearly ordered shift in their economic structures. Farming was gradually replaced by a robust industrial sector, usually focused on manufacturing and production, which employed significant numbers of workers.
The transition toward service-based economies emerged from improved industrial efficiency and excess capital. In these scenarios, industrial growth was essential as it generated large-scale jobs for unskilled laborers, boosted revenue from exports via finished products, supported small and medium-sized businesses within the production network, and spurred progress in technology and invention.
The Situation in Ghana: Jumping Ahead Prematurely?
Agriculture accounted for roughly 40% of Ghana’s GDP during the early 1990s but has gradually decreased to under 20% at present. In contrast, the service sector has grown significantly, now making up more than 45% of total economic output. Areas like telecom, finance, education, and commerce have experienced substantial expansion. Nonetheless, the industrial segment—particularly manufacturing—has remained stagnant. As per data from the Ghana Statistical Service, the contribution of industry to GDP fluctuates within a narrow range of 25–28%, largely supported by resource-based activities (such as petroleum and gold mining) rather than high-value production processes. Manufacturing continues to play a minor role, with minimal participation in international or local supply networks.
Consequences of Skipping Industrialization
Jobless Growth
In Ghana, many service sectors require significant investment or focus on urban areas, resulting in limited job creation compared to their impact on GDP. Additionally, young people continue to face high levels of unemployment and underemployment, as these services struggle to accommodate the increasing number of workers moving from rural agricultural activities.
Limited Export Diversification
Industrialization plays a vital role in expanding export options. Ghana’s ongoing dependence on unprocessed goods like cocoa and gold makes it susceptible to fluctuations in global prices. Moreover, the lack of a strong manufacturing sector limits progress in promoting alternative exports.
Weak Linkages
A robust manufacturing industry generates both upstream and downstream connections. It’s easy to envision how cacao cultivation might foster agricultural processing, packaging, transportation, and export activities. However, in Ghana, these supply chains are still disorganized or not fully developed.
Urban-Rural Divide
With no manufacturing positions available to close the gap between rural and urban regions, migration puts pressure on city facilities while countryside areas continue to lag behind. Historically, industrial growth has contributed to more balanced geographic progress, something absent from Ghana’s economy.
Why Didn’t Ghana Develop Its Industries?
Various structural and policy-based elements account for Ghana’s early advancement. Among these is ineffective execution of industrial policies. Programs like the Ghana Industrial Policy (2010) and One District, One Factory (1D1F) have had minimal effect because of funding limitations, inadequate infrastructure, and fluctuating governmental backing. A further reason is the elevated expenses involved in manufacturing.
Insufficient power availability, weak transportation systems, and unstable utility services have rendered Ghana’s manufacturing industry less competitive. Moreover, the effects of global integration and imported goods also play a role. Low-cost imports coming from Asian countries and other regions have undermined domestic industries, particularly within sectors like textiles, electronic products, and food processing. Furthermore, expansion in the service sector driven by information communication technologies and finance has contributed to this scenario. The swift economic deregulation seen in Ghana during the 1990s enabled the services domain to grow rapidly, backed by technological advancements and increased consumer spending among city-based middle classes.
Moving Ahead: The Importance of Industrialization Remains Relevant
For Ghana to attain equitable and robust growth, the manufacturing industry should not be overlooked. Essential policy recommendations involve:
Enhance Facilities: The electricity network, roadways, and harbors should be improved to facilitate manufacturing operations and transportation systems.
Enhance Vocational Training and Technical Education: For Ghana to aid industrial growth, it needs to focus on developing practical skills, which form the foundation of production processes.
Enhance financial accessibility for small and medium enterprises: Production-based businesses require sustainable and cost-effective loans, which remain a persistent challenge within Ghana’s private industry.
Implement regional content regulations: Extraction activities, petroleum operations, and major infrastructure initiatives must incorporate domestic production and purchasing.
Safeguard emerging sectors: Limited, temporary support for developing domestic industries could be essential to help them grow and develop.
Final Thoughts: A Side Road, Not a Cul-de-sac
Ghana’s current economic structure is not inherently flawed, but it is imbalanced. Services alone cannot solve the country’s employment and export challenges. A renewed focus on industrialization, particularly value-added manufacturing, is essential if Ghana wants to join the league of emerging economies with diversified and resilient economies. The time to revisit Ghana’s economic strategy is now. A services-led economy built on a weak industrial base is like a house built on sand—promising, but precarious.
The author is affiliated with the Department of Economics and Actuarial Science at the University of Professional Studies, located in Accra.
michael.insaidoo@upsamail.edu.gh
Supplied by SyndiGate Media Inc. (
Syndigate.info
).
