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Resources-for-Infrastructure (RFI) deals between China and African countries are not always win-win as advertised. For example, the Angola-China deal trading oil for infrastructure spending did not pan out as conceived. However, this new RFI deal between China and Ghana should pan out differently because Ghana has negotiated a more favorable deal than other African countries have in the past.

In sum, Ghana has negotiated a deal with Sinohydro under which Ghana will receive $2 billion in financing for infrastructure—roads, railways, and bridges—in exchange for access to 5 percent of Ghana’s bauxite reserve. The deal, which is part of a $19 billion credit facility between both countries, also includes 100 vehicles to be donated to Ghana’s Police Service, $43 million in grants, and $37 million in debt waivers.

This deal has stirred controversy and debate within Ghana and across Africa concerning debt sustainability and the environmental degradation that could result from mining bauxite in the Atiwa forest. But considering the summary of the deal and information available in the public domain, Ghana appears to have negotiated a favorable deal with Sinohydro for three reasons.

First, this deal will not cause Ghana’s public debt to increase because China’s claim for repayment is not secured by Ghana’s general revenue. Rather, it is secured by revenues from aluminum sales. This distinction is important because it has implications for public expenditures. When loan repayment claims are against the general revenue, governments cannot prioritize other expenditures over the repayments. That is, if the indebted government desired to spend $1 million on building a new clinic, the government could not choose the clinic over repayment because that would lead to a default and higher borrowing costs in the future. But when a repayment claim is tied to a specific revenue stream, such as aluminum sales, the government is not obligated to use revenues from other sources to repay the debt. In this case, Ghana can spend the entire $1 million on building the hospital and not worry about debt repayment. This deal is similar to the revenue bonds that American and European municipalities issue to build toll roads and bridges; the repayments are tied to the tolls collected, not the general revenue. Thus, because Ghana’s obligation to repay the $2 billion is tied to aluminum revenues, Ghana will not face the dilemma of choosing between repayment and building schools or hospitals.

Second, Ghana remains in charge under this deal. Other RFI deals have made the Chinese responsible for both extracting and exporting the resources. Here, by contrast, Ghana remains responsible for extracting the bauxite, setting up the refinery to process the aluminum, and then exporting and selling the aluminum. Furthermore, this deal allows Ghana to build-up its industrial capacity through the value-added processing of bauxite to aluminum. In short, this will be a process setup by Ghanaians, run by Ghanaians, and owned by Ghanaians. China will simply receive its share of the sales.

Third, this deal will contribute to Ghana’s infrastructure. Specifically, Ghana negotiated the deal so that it will receive the $2 billion in infrastructure financing before it must begin mining bauxite or processing the aluminum. This will give Ghana the space to design an environmentally responsible bauxite mining process. Furthermore, these newly built roads, rails, and bridges will contribute to closing Ghana’s infrastructure gap. A recent World Bank report shows that Ghana needs to spend $2.3 billion per year over the next decade to close its infrastructure gap. This level of infrastructure spending will have the additional benefit of adding 2.7 percentage points to the GDP per year.

Despite these favorable points, mining for bauxite in the Atiwa Forest comes with serious risks to the environment. Atiwa is home to the sources for three rivers that supply drinking water to five million residents in Accra. It is also the habitat for rare and endangered species such as the West African White-naped Mangabey monkey, Mylothris atewa, and Anthene helpsi – the latter two being rare butterfly species found only in the Atiwa forest. The government, in consultation with environmental groups and stakeholders, therefore needs to formulate an effective environmental pollution mitigation plan to protect the forest ecosystem.

In conclusion, Ghana has negotiated well and received a better RFI deal that ensures it will develop necessary infrastructure, maintain control of the bauxite extraction process, and add value to the bauxite before selling it on the international market. For African countries to transition from being mere exporters of raw materials to also being value-added processors, they must trade the resources they have to acquire the infrastructure upon which a new economic model can be built. This deal accomplishes precisely this feat.

Francis Kiazolu is a Senior Derivatives and Securities Analyst at PRA Group, Inc.

IAEA
Empty chairs are seen in front of the logo of the International Atomic Energy Agency prior to a meeting in Vienna on August 1, 2019. (Hans Punz/AFP)

Ghana recently completed phase one of a three-part process to develop the infrastructure for producing nuclear power in coordination with the International Atomic Energy Agency. The focus of the first phase was on conducting a series of studies on the rationale for and feasibility of introducing nuclear power to the national and West African energy grid, a tall order considering the steep costs of constructing and maintaining nuclear reactors.

Ghana’s current installed generating capacity of 4,132 MW comprises hydroelectric power (38 percent); thermal power fueled by oil, natural gas and diesel (61 percent); and solar power (1 percent). Actual availability, however, rarely exceeds 2,400 MW due to various factors, including inadequate fuel supplies. To meet the energy demands of its growing population, currently at about 28 million, requires the country to rely on the broader West African energy grid to supplement the shortfall.

Phase Two of the nuclear plan will include meetings with potential stakeholders, developing a government financing scheme and a framework for nuclear waste disposal protocols, and determining suitable sites for construction. Dr. Robert B. M. Sogbadjie, coordinator of the Ghana Nuclear Power Program, confirmed during a press conference that four sites have already been picked out, but did not disclose their locations. Phase two is anticipated to begin in 2024, with construction to be completed by 2030.

 

South Africa has had a nuclear power plant since 1984

 

Should Ghana succeed in this endeavor, it would make it only the second country in Africa to have nuclear power, alongside South Africa, which has had a functioning nuclear power plant—providing 5 percent of the country’s total energy output—since 1984. Furthermore, Ghana’s initiative on nuclear power could incentivize other African nations to do so as well, moving the continent away from fossil fuels while meeting the energy needs of a growing population.

 

Samuel Ofosu-Ampofo
Samuel Ofosu-Ampofo (via Facebook)

Samuel Ofosu-Ampofo, chairman of Ghana’s opposition National Democratic Congress (NDC), has launched a salvo against the country’s electoral commission and the upcoming elections in early December. Speaking at a celebration of the NDC’s twenty-eighth anniversary, Ampofo encouraged NDC supporters to boycott a new voter registration scheme set to begin on June 30.

Other opposition parties have also taken to inciting their supporters against the electoral commission, partially in response to the Ghanaian parliament narrowly passing Constitutional Instrument 126. This legislation authorizes new methods for the electoral commission to create a voters’ register: Ghanaians can produce a passport or a National Identification Authority card, or have two already registered voters vouch for them. The opposition claims CI 126 is too cumbersome for millions of voters, risking disenfranchisement. This, combined with the electoral commission’s decision to void previous voter identification cards, prompted the NDC and other opposition groups to challenge its mandate to compile a new voter’s register in the supreme court.

 

It is now focusing on having the validity of the old voting cards reinstated

 

The NDC dropped one part of its lawsuit challenging whether the commission had the constitutional authority to compile a new register, and is now focusing on having the validity of the old voting cards reinstated. Judgment is set for June 23.

The general and presidential elections may be several months away, but such a court challenge and public dissatisfaction with the commission risk delegitimizing the electoral process.

 

moto
French soldiers confiscate a motorcycle found in a forest in northern Burkina Faso where jihadists have established themselves on November 9, 2019, during Operation Bourgou IV. The soldiers are deployed to Operation Barkhane in support of the G5 Sahel countries’ fight against armed jihadist groups. (AFP)

Last month, Burkina Faso and Côte d’Ivoire jointly conducted Operation Comoé along their borders. They captured thirty-eight suspected terrorists, killed eight, and dismantled training camps. The operation reflects growing concern in these and other West African coastal states about a spillover of violent extremism and the need to prevent attacks from being staged in their territories.

But the spread of attacks isn’t the only problem terrorism brings, and these operations shouldn’t be the only way countries address it. They need to also focus on the factors that allow these groups to function. Extremists are increasingly tapping into a terrorist economy, using Benin, Côte d’Ivoire, Ghana, and Togo as sources or transit zones of funding and logistics.

 

Motorcycles are valuable to extremists because of their robustness and mobility through difficult terrain

 

Institute for Security Studies (ISS) research shows that livestock stolen in Burkina Faso, Mali, and Niger is sold in Benin, Côte d’Ivoire, and Ghana at below-market prices. The profits are ploughed back through the networks of accomplice dealers. Various accounts point to terrorists being among the armed groups funded by this illicit trade. They use the income to buy arms, fuel, motorcycles, and food.

Motorcycles are valuable to extremists because of their robustness and mobility through difficult terrain. They are also easy to maintain, light on fuel, and can carry more than one person for combat and combat support operations.

 

Sahel Terrorists Draw Supplies from across West Africa
The terrorist economy affects West Africa’s coastal states.

 

Many motorcycles found in Niger’s Tillabéry region are trafficked from Nigeria through the Togolese border town of Cinkassé and Burkina Faso’s Boucle du Mouhoun Region. Some are also trafficked from Togo to Burkina Faso, and a few are trafficked further to Niger.

Both Tillabéry and Boucle du Mouhoun are hot spots for violent extremism. Although groups may not be directly involved in trafficking, they gain access to goods through vendors or criminal entrepreneurs who organize their procurement.

Evidence is also emerging of extremists sourcing materials to make explosives from Ghana. Ghanaian officials say fertilizer, a key ingredient for improvised explosive devices, is smuggled in sizable quantities to Burkina Faso. Police frequently arrest smugglers and seize consignments in northern border towns such as Hamile, Kulungugu, and Namori.

In July 2019, Upper West Region minister Dr. Hafiz Bin Salih said Ghana had lost US$12 million to fertilizer smuggling from Ghana to neighboring countries the previous year. Although terrorist groups may not be directly involved in the smuggling, an apparent rise in availability of the material in Burkina Faso means increased access and affordability.

Also, a 2018 counter-terrorism operation in Ouagadougou’s Rayongo neighborhood led to the seizure of an electric cord for making improvised explosive devices which was traced to northern Ghana. This suggests the involvement of trafficking networks from Ghana’s north where artisanal and small-scale mining is a long-standing economic activity.

Interviewees told the ISS that the northern Ghanaian town of Dollar Power has many West African illegal miners, including Ivorian former rebels and Burkinabe nationals, and is known for armed robbery. In eastern Burkina Faso, gold from some mining sites controlled by violent extremist groups is purchased by buyers from Benin and Togo. This may be providing valuable funding to terror groups, although the scale is unclear.

Leaders of coastal states are preoccupied with preventing a southward spread of attacks. This informed the February 2017 meeting of the presidents of Benin, Burkina Faso, Côte d’Ivoire, Ghana, and Togo in Accra. They had called for an extraordinary Economic Community of West African States (ECOWAS) summit on terrorism, and launched the Accra Initiative in September that year.

Attacks in southern Burkina Faso, close to the borders with Benin, Côte d’Ivoire, Ghana, and Togo, have deepened concerns among counter-terrorism officials. At an ECOWAS extraordinary session held on September 14, 2019, in Ouagadougou, leaders also decried the spread of terrorism in the region, although there was no specific reference to coastal states.

 

Extremists use Benin, Côte d’Ivoire, Ghana, and Togo as sources or transit zones for funding and logistics

 

Burkinabe officials have often alerted their coastal counterparts to suspected extremists crossing into their northern territories to avoid arrest. Such alerts followed the March 2019 Otapuana operation in southern Burkina Faso. In Ghana, extremists hide or rest in the north, counter-terrorism officials told the ISS, a situation that elicits complaints from Burkina Faso about the country’s commitment to countering terrorism.

Coastal states acknowledge the importance of addressing the root causes of violent extremism, including governance and developmental deficits. Extremists could exploit the lack of basic services, such as roads, health and education facilities, and socio-economic opportunities, to penetrate and implant themselves in communities. The 2020–2024 ECOWAS Priority Action Plan outlines steps to tackle these shortcomings.

But capacity to address the vulnerabilities that enable terror groups to source and move funds and logistics remains limited. These vulnerabilities include weak border surveillance and security; porous borders; and strong communal, family, and socio-economic ties. The content of cross-border trade transactions is largely untracked, as border officials do not have sufficient capacity and the necessary technology.

To prevent violent extremism, the various dimensions of the problem must be understood, particularly terrorists’ covert dealings. This will enable officials to strike a much-needed balance between counter-terrorism operations and breaking the funding and logistics supply chains used by violent extremists.

 

Border officials lack the capacity and technology to track cross-border trade transactions

 

West Africa’s coastal states must also address the weaknesses that allow these groups to operate. Capacity is needed to track trade consignments between countries, beef up border control and surveillance, enhance intelligence gathering and analysis, and garner the support of people living in border areas. This could help identify extremists who may be exploiting cross-border ties.

The disruption of supply chains could set the stage for more terrorist attacks. Violence could be used to protect hideouts, secure supply routes, or attack border posts that extremists believe are impediments to their supply of materials. This means that, to avoid generating community resentment, strategies aimed at disruption must be balanced with preserving the livelihoods of individuals and communities who rely on cross-border trade.

 

Sampson Kwarkye is a senior researcher at the Institute for Security Studies’ regional office for West Africa, the Sahel, and the Lake Chad Basin.

This article was originally published by ISS Today.

 

Accra
Accra, the bustling capital of Ghana, is home to many African embassies given the nation’s role in pan-African endeavors.

NAD chats to the Ethiopian ambassador to Ghana, Regassa Kefale Ere, about relations between the two countries, free trade, industrial parks, and the aerospace industry.

New Africa Daily: How would you characterize Ethiopian-Ghanaian relations?

Regassa Kefale: Ethiopia never was a colony of a European power. After Ghana received its independence in 1957, Ghanaian leader Kwame Nkrumah and Ethiopia’s Emperor Haile Selassie worked together on founding the Organization of African Unity, which later became the African Union. The two leaders worked closely together, and this political history is at the core of the relationship.

More recently, we have sought to expand economic ties between the two countries, too, building on the long-standing political ties. Ghanaian investors are interested in various Ethiopian economic sectors, from pharmaceuticals to animal hides. We have had trade events in the two capitals in the past two years to promote trade between our countries.

 

NAD: How does the signing of the African Continental Free Trade Area change the trade picture for Africa?

RK: Free trade is an important issue. The signing of the agreement establishing the African Continental Free Trade Area is an important turning point, and we are working to develop this opportunity to ensure the prosperity of Ethiopia.

A key part of our strategy is the development of industrial parks and free zones, offering large-scale employment opportunities for the citizens of our country. Indeed, some 60,000 people work at Hawassa Industrial Park (HIP). We have also developed Bole Lemi Industrial Park and other similar parks, which allow us to take advantage of new opportunities under the new trade agreement and other relationships. For too long, Africa’s trade relations have been focused externally, and not on the opportunities of intra-African trade.

 

The industrial parks will promote development and attract foreign direct investment to Ethiopia

 

NAD: Tell us more about the strategy behind Ethiopia’s industrial parks.

RK: These industrial parks offer exporters a one-stop approach, including customs, roads, and electricity. It’s not just the infrastructure, however; there are also incentives for companies who relocate to these zones, such as tax holidays. The government is committed to this policy. The industrial parks will promote development and attract foreign direct investment to Ethiopia.

 

NAD: One of the main economic components in the Ethiopian-Ghanaian relationship is in the aerospace industry. In December 2018, an agreement was announced to have Ethiopian Airlines play a key role in the relaunch of Ghana’s national carrier.

RK: Ethiopian Airlines, which has a strong brand and a solid history, will take a minority stake in the new national air carrier of Ghana. Ethiopian is a widely respected carrier and Africa’s most successful airline. It flies to more than 110 destinations around the world and operates about 1,000 aircraft, including the Airbus A380, the world’s largest passenger airliner. Above all, Ethiopian Airlines stands for unique quality and a high level of service. These were all factors in the Ghanaian decision. It is a win for both countries, as there are daily direct flights between Addis Ababa and Accra.

 

 

Undersea Cable

 

A multinational consortium of telecommunications companies—including Facebook, China Mobile International, MTN Global Connect, Telecom Egypt, and Vodafone—announced the construction of a new undersea fiber-optic cable that will connect sixteen African countries, Europe, and the Middle East. Named 2Africa, the 37,000 kilometer-long communications cable is scheduled to go live in 2023 or 2024.

 

Africans pay some of the highest data rates in the world.

 

In March, two undersea cables serving Africa experienced breakages that drastically reduced Internet connectivity for days as repairs were made. The addition of 2Africa will help improve Internet access for millions of Africans, and mitigate disruptions should other cables experience failures in the future. Such disruptions are not only frustrating for Africans, who pay some of the highest data rates in the world, but also have a negative impact on the African economy.

A 2017 report by the Collaboration on International ICT Policy for East and Southern Africa (CIPESA) concluded that intentional Internet shutdowns in twelve countries between 2015 and 2017 cost sub-Saharan Africa more than US$237 million. Unforeseen connectivity disruptions naturally can have far greater negative impact on national and regional economies.

 

 

Scientology Volunteer Ministers, distribute COVID-19 coronavirus information leaflets to taxi drivers at the Bree taxi rank in Newtown, Johannesburg, on May 7, 2020.
Scientology Volunteer Ministers, distribute COVID-19 coronavirus information leaflets to taxi drivers at the Bree taxi rank in Newtown, Johannesburg

 

Although virtually every African is aware of COVID-19, a May report from the Partnership for Evidence-Based Response to COVID-19 (PERC) found that one in five Africans believed they were immune to the SARS-CoV-2 virus. About 54 percent of the respondents also believed the myth that a hot climate would prevent the spread of the virus, and 29 percent were convinced COVID-19 could be contracted from any Chinese person in their country.

Results from this report come at a time when countries like Ghana, Nigeria, and South Africa have begun easing restrictions, coinciding with an uptick in cases.

 

There’s also the danger of a boomerang effect.

 

Misinformation (inaccuracies stemming from error) and disinformation (deliberate falsehoods) about the pandemic jeopardize the gains that health authorities have made in limiting the spread of outbreaks. To discourage disinformation, several African governments have enacted regulations that carry harsh penalties, including fines and imprisonment, leading to concerns that this criminalization could threaten press freedom.

There’s also the danger of a boomerang effect: by threatening to punish citizens for sharing information counter to government sources, even accidentally, trust in national and international institutions could weaken. And this could push people to turn to other sources of information and potentially into conspiracy territory, resulting in some of the responses noted by PERC.

 

Ghana Railway
Maintenance staff walk along the railway line that connects the Ghanaian capital Accra and the city of Tema. The 25-kilometer route reopened in late January 2020 after rehabilitation.

 

The government of Ghana believes that investment in railway infrastructure will put the country on the fast track to economic development.

Construction on the first railway line in Ghana started in 1898, when the country was under British colonial rule. The line—between Tarkwa, a gold-mining center, and Sekondi on the coast—opened in 1901, and in the next two years it was extended north from Tarkwa to Kumasi, the capital of the Ashanti region.

When Ghana gained independence in 1957, it had a rail network of nearly 1,000 kilometers, but today only about a sixth of it remains in operation. Derailments and slow speeds are a common occurrence.

 

Master Plan

In December 2013, the government of Ghana released a railway master plan, setting out six phases of development. Targets included the rehabilitation of the existing narrow-gauge network, and the construction of new lines—built to standard-gauge specification—to link all regional capitals and ultimately connect Ghana with its neighbors, Côte d’Ivoire, Burkina Faso, and Togo. This would add more than 4,000 kilometers of track to the network, at a projected cost of US$23 billion.

The plan has received the support of successive administrations.

In 2017, President Nana Akufo-Addo established the Ghana Rail Authority by removing the components of the Ministry of Transport related to railways. The newly formed Ministry of Railway Development has two implementing agencies, the Ghana Railway Development Authority (GRDA) and the Ghana Railway Company Ltd (GRCL), the owner of the rail infrastructure and the operator of the railway routes, respectively.

 

Progress

The first phase of the plan involved completing priority projects over a four-year period from July 2016 to July 2020. The rehabilitation of the line between Accra and the Port of Tema has been completed, and the route reopened in January with a passenger service for 600 people. The line also links free zones in the area to the sea port, with some facilities specifically designed to take advantage of the railway link between the two cities.

The Takoradi–Tarkwa line is currently in development.

Earlier this year, South African state-owned rail and freight operator Transnet signed an agreement with the GRDA and the GRCL to develop a 66-kilometer standard-gauge railway line alongside the existing line in the Western region, between Takoradi and Tarkwa. The line is crucial for transporting freight, mostly for the mining and agriculture sectors.

 

Financing Sources

Not all of the key investment in Ghana’s railway service has come from the government. Private sector initiatives, such as the completion of the first domestic facility for the production of concrete railway sleepers (as opposed to wooden sleepers) suggest that private companies are positioning themselves to take advantage of the railway boom.

Additional financing sourced through build-own-operate-transfer agreements, barter agreements, and public-private partnerships is integral to the success of the plan, says Richard Dombo, CEO of the GRDA. There has also been considerable international appetite for rail investment in the country. They have had discussions, for example, with steel producer ArcelorMittal about the right to extract iron ore at Sheini to a value equal to the cost of constructing a rail link between the mine and the coast for exporting the ore.

Ghana’s railway lines have historically been “engines of growth”, Dombo says, and the transport sector remains crucial for future development.

 

 

Accra Barber Shop
A barber shop in Accra, Ghana, is open for business after the COVID-19 lockdown was lifted.

 

Ghana has begun to ease some of the lockdown restrictions in the country’s two largest cities, Accra and Kumasi, which is a relief for the poor who faced deprivation as economic activity ground to a halt. Others worry that the process of opening up the economy is happening too soon.

 

Ghana has been a shining example of effective testing and contact tracing.

 

To date, 2,719 confirmed cases of COVID-19 have been reported, making Ghana the sub-Saharan African country with the second-highest number of cases, after South Africa. On the other hand, Ghana has been a shining example of effective testing and contact tracing, and even has a project using drones to deliver test samples to distant labs,. The thorough testing explains the high number of cases.

Government officials have pointed to this expanded testing as proof that the lockdown had fulfilled its purpose, giving health authorities enough time to monitor the spread of infection and determine which regions are the worst affected.

 

The informal sector took a heavy hit when foot traffic dropped abruptly.

 

Convincing at first glance, this justification becomes less persuasive when considering that most signs point to Accra and Kumasi as the epicenters of the country’s outbreak. Most of Ghana’s workforce is employed in the informal sector, which took a heavy hit when foot traffic dropped abruptly once stay-at-home orders and marketplace closures were enforced. This has taken an especially heavy toll on Ghanaian women, who make up the vast majority of the informal economy’s labor force.

 

Tema to Tangier: Policy vs Practice
The Port of Tema handles 80 percent of Tema’s annual container volume.

 

In 1995, both Ghana and Morocco introduced programs to develop free zones (FZ), also called special economic zones (SEZ), as a part of their industrial strategies. Nearly twenty-five years later, Morocco’s industrial success has become a model for other emerging economies, whereas Ghana’s efforts have produced unremarkable results.

Ghana embraced the free-zone model to bolster its economic performance in the mid-nineties. The Ghana Free Zone Programme (FZP), introduced with the purpose of making Ghana a “Gateway to West Africa”, was designed to promote the processing and manufacturing of goods. Located along the coast of the Gulf of Guinea with two seaports, Ghana is strategically placed to serve the landlocked Sahel countries and serve up to 300 million people in the ECOWAS market.

Ghana’s FZP offers a range of incentives, including tax holidays (ten years) and tax exemptions (withholding, income, and direct and indirect import taxes and levies), as well as relief from double taxation. The nature of the program is unique because, unlike many others, it uses both an enclave and single-factory approach, which earned it “one of the best designed, most flexible, and most innovative” FZPs in Africa, according to the World Bank.

Among many development projects, the Tema Export Processing Zone (EPZ), the 500-hectare multipurpose industrial park east of Accra, is the country’s only well-functioning free zone enclave. Located in the heart of Ghana’s industrial city, Tema hosts various companies in cocoa processing, prefabricated housing materials, and plastic household products. The enclave’s proximity to the largest port terminal and quality road links makes it an ideal location. Yet, after decades in operation, the Tema EPZ, like Ghana’s FZPs, has yet to develop world-class status or demonstrate exponential growth in promoting economic growth.

 

Tanger Med
An aerial view of Tanger Med Port Logistics Free Zone, a cargo port on the Strait of Gibraltar, 40 km east of Tangier, Morocco. (Photo courtesy of Wikipedia Commons)

 

The program has no doubt contributed to the Ghanaian economy, but it hasn’t lived up to its regional aspirations.

 

In 2017, up to US$172 million capital was invested in Ghana’s FZP. In the same year, Ghana’s FZP accounted for nearly 30,000 in employment, and yielded a total production value of US$1.3 billion, some 2.5 percent of GDP. Exports from the zones contributed some US$1.5 billion, an estimated 2.9 percent of the country’s GDP. The program has no doubt contributed to the Ghanaian economy, but it hasn’t lived up to its regional aspirations.

Morocco introduced legislation governing special economic zones (SEZ) in the same year Ghana launched its FZP. Morocco’s program made the zones exempt from customs regulations and foreign trade and exchange control restrictions, and provided a range of fiscal incentives in line with international best practices.

Morocco has a number of free zones across the country, but the Tanger Med Zones (TMZ), established in 2003, is often viewed as the jewel in its crown of SEZ success. Occupying 3,000 hectares, TMZ comprises a number of individual zones, including Tanger Med Port Logistics Free Zone, Tanger Free Zone, Tanger Automotive City, Renault Tanger Med, Tetouan Shore and Tetouan Park, and the Findeq Commercial Free Zone. The growth of the TMZ has been supported by the rapid development of the port to world-class standards as well as a complementary strategic infrastructure network that includes a large-scale container terminal, and high-quality roads and rail links to the rest of the country.

 

The success of Tanger Med Zones can be attributed to five pillars, one of which is clear political leadership.

 

Thus far, TMZ has attracted 750 companies, and created 65,000 direct jobs and an additional 30,000 indirect jobs through Renault Tanger Med alone. In 2016, the zone generated nearly US$6 billion, 25 percent of Morocco’s total exports. Since its inception, the zone has attracted US$3.8 billion worth of investments, totaling 8 percent of Morocco’s FDI inflows since 2003, with the majority of that investment through Renault’s establishment of its Melloussa factory in 2012. The ability of TMZ to secure a long-term contract with Renault has had a significant impact on the success of not only the zone but also the national economy and the country’s image as a global player in the automotive industry.

 

 

By 2018, TMZ was processing 3.5 million 20-foot equivalent units (TEU) of cargo capacity, whereas Tema was only processing 836,000. Both Ghana and Morocco introduced policies that conformed to international best practice on free zones in 1995, so why is Tema not Tangier?

In 2017, a comparative study of special economic zones by the Organisation of Islamic Cooperation provided an interesting analysis as to why TMZ has been so successful. According to the study, its success can be attributed to five pillars: one, clear political leadership; two, infrastructure investment; three, one-stop shop and the reduction of red tape for investors; four, market access, through its geographical location and strategic free trade agreements with the European Union and the United States; and five, a trained labor force with priority for technical skills geared to the specific needs of the various industries. In addition to these pillars, TMZ was able to benefit from a favorable macroeconomic enabling environment

The success of TMZ serves to highlight Tema’s inability, so far, to meet the criteria articulated by the Organisation of Islamic Cooperation in its assessment of the Moroccan port. Though both Tema EPZ and TMZ fall under the broad category of free zones, TMZ shows the modern trend of moving away from a single export processing zone toward a more multi-sectoral development approach.

In addition to differences in their policy thrust, Ghana faces a number of constraints to the successful implementation of its free zone program. The level of infrastructure to support the Tema EPZ is severely limited and part of the country’s larger infrastructure challenge. Ghana has experienced a prolonged energy crisis that has led to high energy tariffs and frequent power cuts, costing the nation an average of US$2.1 million in lost production daily. Even within the free zone, land rights and ownership remain an issue that has deterred investors and strained the development of industrial enclaves. Thus far, Ghana has been unable to create a competitive advantage, and many of the goods produced in Ghana face intense competition from less expensive imports. In addition to the more practical challenges of running a functional free zone program, there is little data on the specific EPZs’ operations, which makes it difficult to monitor and assess performance, and to present an updated source of information for potential investors.

 

“Investors are attracted by the integrity of government.” — Ngiam Tong Dow

 

As for the clear politics, Ghana’s FZPs have not always had the commitment of the highest level of political authority. As of late, things may be changing. The recent refocus on industrialization through the One District One Factory policy, which aims to generate some 350,000 jobs, for instance, presents a window of opportunity for Ghana to revamp its political will, and commitment, to ensuring the success of the FZPs as part of its industrialization efforts. Designating the Western region’s industrial park, The Westpark, to foreign investors for development and operation is likely an indication of more interest in this regard.

Similarly, the growing national consensus around the importance of technical and vocational education and training (TVET) may present opportunities for building a more trained and technically proficient labor force to serve the needs of FZPs.

Most importantly, as the renowned Singaporean top civil servant Ngiam Tong Dow noted, “Investors are attracted by the integrity of government.” Endemic corruption in Ghana at the state and private sector levels needs to be addressed. In addition, the cumbersome nature of state bureaucracies requires a major overhaul to allow for more efficient processes and procedures. Until addressed, the levels of investment needed to fill its enclaves and factories are unlikely to meet expectations.

Though initially lauded as an innovative policy, the Ghana experience shows that you need more than a sound plan to create large-scale change in the economic makeup of the economy. As seen in the Moroccan case, success is much more closely aligned with a coordinated effort to create a conducive environment that attracts and grows businesses, addressing the fundamentals of infrastructure, political leadership, and long-term strategy. With a solid implementation strategy, Ghana can narrow the gap between policy and practice, and clear the path from Tema to Tangier.

 

Marie-Noelle Nwokolo is a researcher at the Brenthurst Foundation. She writes in her capacity as an enthusiast and citizen of Ghana, a place she hopes to help create change for a better future.

Nchimunya Hamukoma is an Econonomist & Policy Strategist based in Johannesburg. She is passionate about African infrastructure investment and urban development and has worked in North, Southern and West Africa.

 

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