By TBY | Ghana | May 05, 2016
Current infrastructure levels fail to meet Ghana's middle-income aspirations, but new financing options are set to ameliorate this dilemma.
Ghana’s middle-income economic goals are threatened by its seriously underdeveloped infrastructure, with 50-55% of roads designated as being in “poor condition.” To address this deficit will require annual spending of more than $1 billion over the next 25 years, with investment needed in both laying new roads and in rehabilitating and maintaining existing ones. The government has identified public-private partnerships (PPPs) as one solution to its infrastructure problem, and with the recent global decline in commodity prices, investment in infrastructure may prove to be one of the most dependable investment strategies in the country.
Realizing that adequate and reliable infrastructure is key to economic growth, Parliament passed the Ghana Infrastructure Investment Bill (GIIF) in 2014, which provided money to manage and invest in a diversified portfolio of infrastructure projects throughout the country. With government spending no longer sufficient to meet infrastructure requirements, the GIIF launched an alternative means to finance infrastructure projects.
Subsequently, several large-scale PPP infrastructure projects have entered various stages of development. The 185km Accra-Takoradi road project will create a crucial link between the capital and Takoradi, transforming the latter into a hub for the country’s oil exploration. Takoradi is also home to Takoradi Port, the second largest port in the region, which accounts for close to 35% of all sea freight into Ghana and the greater region.
Ghana-based First Sky Ltd. is currently undertaking several other infrastructure projects throughout the country, reconstructing and upgrading major roads and buildings, and lighting internal roads. CEO Eric Seddy Kutortse explained to TBY that the country has made concerted efforts to improve technical training and educational institutions, which have increased the amount of qualified local manpower.
In the country, a demand for improved infrastructure stems from both environmental concerns and increasing congestion, and investment is needed in both public transportation and roads. The 47km of upgrades First Sky Ltd is undertaking on the Kete-Krachi-Buya road has improved the lives of nearby communities according to Kutortse. “These are farming communities, and the roads greatly facilitate the ease and speed with which they can get their produce to markets or procure supplies.”
In Ghana, however, such infrastructure projects face challenges. Materials such as cement and asphalt need to be sourced from Accra, and getting those materials to the worksites elsewhere in the country can be expensive. Equipment and machinery must also be returned to Accra for repairs and maintenance. Until other quarries open up and the infrastructure itself is improved, such challenges will remain.
International investors also play an important role in building Ghana’s infrastructure. Nana Kwame Bediako, CEO of Petronia, explained to TBY that, “it is more sustainable to invest in infrastructure.” Bediako stressed that completing the company’s development plans required bringing in “management groups from countries all across the world, such as Singapore and Portugal.” He added that, “due to the success of our partnerships, these kinds of projects provide profitable investment opportunities.”
The progress the government is making in infrastructure through PPPs is vital to the country’s continued economic development. In March, Parliament voted to establish the Ghana Export/Import (EXIM) Bank. The EXIM bank is intended to assist exporters in a country whose trade balance has long been in the negative. The government’s final objective is to position the country as an export economy.
Though Ghana is still far from having infrastructure that meets its aspirations of being a middle-income and export-led economy, PPPs provide a roadmap to meeting these goals in a manner that encourages good governance and makes the private sector a partner in the country’s success.