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The Politics of Government-Business Relations in Ghana

Author(s): Roger Tangri

Source: The Journal of Modern African Studies, Vol. 30, No. 1 (Mar., 1992), pp. 97-111
Published by: Cambridge University Press
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Journal of Modern African Studies.
The Journalof ModernAfricanStudies,30, I (I992), pp. 97-I II

The Politics of
Government-Business Relations
in Ghana

T HE emergence of a consensus that the performance of the public sector

in Ghana had been poor, and that there were limits as to what it could
achieve in terms of economic growth, led the Provisional National
Defence Council (P.N.D.C.) to implement various policy reforms. As
the Governor of the Bank of Ghana argued in 1984: 'Given the dismal
performance of the public sector, there is need for greater reliance on
private investment in the Government's efforts to resuscitate the
economy'.' At the same time, the P.N.D.C. began to reassess the
economic role of the public sector. According to a recent document
prepared by the National Commission for Democracy, 'changed
national policies' in Ghana include 'the reduction of the state's role in
the economic life of the nation through shifting of more responsibility
to the private sector'.2
In order to promote national recovery and reverse years of decline,
the P.N.D.C. launched its far-reaching Economic Recovery Pro-
gramme (E.R.P.) in I983, including market-based reforms intended to
enhance the development of the private sector, as well as to promote
foreign investment, and thereby contribute 'to the achievement of the
Government's economic goals'.3 Writing in 1988, P. V. Obeng stated:
'An important assumption underlying the macro-economic framework
for I988-9I is that the share of the private sector in Gross Domestic
Investment (G.D.I.) will exceed that of the public sector by I991'.
According to this senior member of the P.N.D.C., only if private
investment increased as projected (i.e. from around one-third to just

* Associate Professor,
Department of Political and Administrative Studies, National University
of Lesotho, Roma.
1 J. S. Addo, 'The Role of Private Investment in Ghana', Ghana Manufacturers'Association,
Accra, 24 February I984.
2 The National Commission for
Democracy, 'Evolving a True Democracy', Accra, 25 March
I991, p. 5 3 Addo, op. cit.

over one-half of G.D.I.) would the targeted growth in Gross Domestic

Product (G.D.P.) be realised, as well as other goals of the programme.
The 'success' of the E.R.P. 'will consequently be determined by the
extent to which the private sector responds to the challenge to improve
investment and production activity'.4
In the words of one financial correspondent, the continuing E.R.P.
represents a 'shift': 'Basically, the public sector is to move away from
economic dominance towards greater support for private sector
development instead .5 Certainly, the plan was for more reliance to be
placed on private initiatives to pursue development objectives, while a
reorientation of activities in the public sector would entail 'the
divestiture of some and the improvement in efficiency of the remaining
state-owned enterprises',6 as well as a general reduction of pervasive
state intervention in Ghana's economic life. However, the anticipated
changes have been far less than expected.
For the goals of the E.R.P. to be achieved, the share of investment
in G.D.P. would need to rise from I2 3 per cent in 1988 to about
19 per cent in I992, and much of this increase would have to be in the
private sector.7 But despite an improved macro-economic environment,
private investment in the formal sector only rose from 2g9 per cent of
G.D.P. in 1983 to 4-I per cent in 1988, as against a corresponding
increase in public investment during the same 5-year period from less
than one to more than io per cent.8 Moreover, state-owned enterprises
remain a prominent feature in the life of the nation, because only
limited divestiture has taken place, and the Government continues to
make significant interventions in the economy.
Most African governments have agreed to implement major policy
changes via the introduction of I.M.F.-backed Structural Adjustment
Programmes (S.A.P.s). But economic reforms cannot be considered in
a political vacuum, and public/private sector relations are shaped by
a host of domestic political factors. Hence the need to examine the

4 P. V. Obeng (P.N.D.C. Member and Chairman of the Committee of Secretaries) to Chief

Executive, Ghana Investments Centre, Accra, 14 March 1988.
5 'ERP, Private Sector and the New Agenda', in Businessand Financial Times (Accra), 5
December I990, p. 2.
6 William Adda, 'R6le of the State Restructuring of Public Enterprises', World Bank,
Economic Development Institute/Ghana Institute of Public Administration Seminar, Accra,
March I99I. 7 Obeng, op. cit.
8 Ghana Investments Centre, 'The
Dialogue Between Government Members and the Private
BusinessCommunity in Ghana on 2 February I990', reprinted in TheInvestor(Accra), I, I, I990,
p. 23. World Bank figures differ slightly: private investment was estimated to be 3-3 per cent of
G.D.P. in 1988, with public investment at 8'o per cent, according to members of the Bank's
Resident Mission in Accra.
politics of private investment and the politics of the economic role of the
state in Ghana under the P.N.D.C. In exploring the supply responses
of private investors, it will be argued that these are conditioned by
political factors, and that the state's changing developmental role is the
product of internal constraints and conflicts.
Studies of S.A.P.s, especially those prepared/sponsored by the World
Bank and the I.M.F. on the public and private sectors, often emphasise
the economic conditions appropriate for development. This article
maintains that it is also necessary to examine domestic political
conditions for a more complete assessment of the possibilities of
promoting economic change.


The market-based reforms introduced under the E.R.P. notwith-

standing, the P.N.D.C. has not been perceived by Ghanaian business
as being a strong and unequivocal supporter of the private sector.
Actions taken in mid-1979, when Flight-Lieutenant Jerry Rawlings
first came briefly to power, remain deeply etched on the memories of
local entrepreneurs. A number of mainly small, private manufacturing
firms were confiscated at that time on the grounds that their owners
had engaged in various financial or economic malpractices, although
suspicions remained that political motives were paramount. The anti-
capitalist rhetoric that accompanied the so-called 'Second Coming' of
Rawlings in December 1981, and which persisted for much of the
following year, has also not been forgotten.
Businessmen continue to bemoan the stigma attached to private
profit and entrepreneurship by various P.N.D.C. leaders, and object to
being publicly reviled as exploiters. At a rare meeting between private-
sector delegates and government officials held in December I989, one
area of concern identified by the former was

the need for officials at the highest echelons of the government machinery to
acknowledge the efforts of the private sector through their pronouncements
and actions, and to give due recognition of the role being played by the private
sector in Ghana's economic recovery efforts ... [private entrepreneurs]
observed with great concern that the harassment of investors by organs of the
revolution/security agencies has not changed much.9

9 Ghana Investments
Centre, 'Discussion Paper on Private Sector Development Issues,
1989/90', 1990, p. 3.

A leading executive could still claim in I99o, after eight years of

P.N.D.C. rule, that 'the morality of profit motive is not as acceptable
to Government as it should be'.10
The revolutionary judicial, investigative, and mobilisational organs
established by the P.N.D.C. early in I982, subjected businessmen,
amongst others, to questions, searches, arrests, and punishment. At
times, industrial disputes precipitated 'interventions by revolutionary
organs', obviously to the displeasure of many in the private sector who
felt that in such situations 'it should be possible for the interested
parties to seek redress under the provisions of the industrial law for
settling disputes'. The fact, however, that 'harassment' had still not
ended by the end of the decade 'obviously has a negative impact on the
attractive investment image-building which the government is under-
taking .12
Private capital still has misgivings about P.N.D.C. leaders, not least
because of the perception that they wasted no time before acting
politically and vindictively against important entrepreneurs with close
connections to previous regimes, notably C. A. Appenteng.13 Since
then a number of other prominent businessmen have been brought
before the National Public Tribunal (established by the P.N.D.C.
outside the normal judicial system) and charged with committing acts
intended to sabotage the economy, including B. A. Mensah of
International Tobacco (Ghana) Ltd, and Kwame Safo-Ado of
Imperial Chemical Laboratory Ltd.14 Inevitably criticisms have been
aired not only about businesses being confiscated or closed down
arbitrarily, but also that the due process of law was not 'resorted to in
addressing economic crimes by investors'.15 Moreover, entrepreneurs
- both Ghanaian and resident foreigners -have been detained for
extended periods without formal charges being proferred, and some
have had to pay out large sums of money before being released. Not
surprisingly, business representatives have continued to advocate that
those incarcerated for alleged commercial illegalities ought to be
brought before impartial courts for formal trial, and that otherwise,
such state actions will continue to create uncertainty regarding the
security of investment and property rights.

Private interview, Accra, February 99go.
1 Ghana Investments Centre, report preparedfor ' Think Tank on Private Sector Development
Issues', March 1988.
12 'Discussion Paper on Private Sector Development Issues, 1989/9o'.
1 It is also
alleged that P.N.D.C. leaders interfered in the affairs of the Association of Ghana
Industries by influencing the removal of its president, A. Appiah-Menkah, an ex-government
minister, from office in I982. 14 Africa Confidential (London), 32, 7, I991, p. 8.
15 'Discussion
Paper on Private Sector Development Issues, I989/90'.

The confidence of entrepreneurs and their willingness to invest has

been affected negatively in various other ways. In the Ig6os and I970s,
the private sector had to operate within a publicly regulated
environment characterised by extensive state controls. This govern-
ment-determined framework generated market distortions and ineffici-
encies which had reduced private investment to insignificant levels by
I983. Since then policy reforms have been premised on the estab-
lishment of a more market-oriented economy. Deregulation has
taken place in foreign-exchange transactions, trade, and pricing, and
administrative controls have been substantially eased under the E.R.P.
But existing rules and regulations as regards employment of the
workforce, administration of taxation, approval of investment, pro-
cedures for imports and exports, etc., provide private capital with
continuing evidence of strong state intervention in the business sector.
Most attempts to control imports (most recently, fish in 1990 and 199 )
and to determine prices (including, for example, soap, beer, and
petroleum products) have been viewed as unpropitious for new
investment, especially since informal and unpredictable enforcements
have affected the viability of many businesses. They have also created
uncertainty among entrepreneurs regarding the Government's pricing
policy, as well as its overall attempts to deregulate the economy.
Private investment has further been adversely affected by some of the
policy reforms implemented under the E.R.P. Changes in the exchange
rate have proved to be particularly detrimental to a number of local
firms. Massive devaluations of the cedi - from approximately 2 75 to the
dollar in I983 to over 390 in 1991 - created a severe liquidity crisis, as
well as rendering it difficult for importers to find so much 'up front'
local currency to purchase foreign exchange. The problem was
compounded by attempts to achieve positive rates of interest in an
inflationary environment. In recent years, what indigenous business
could be viable when borrowing at rates of over 30 per cent? In
addition, an exceptionally tight credit policy did not favour long-term
investment at a time when the need for working capital was increasing
sharply due to the price rises of imported inputs in cedis. As the
Association of Ghana Industries (A.G.I.) complained in I989, 'many
establishments are currently starved of cash resources and face, in
consequence, the real prospect of closure'.16
For some import-substitution manufacturing firms (garments,
leather-processing, cosmetics, plastics), the situation was exacerbated

Speech delivered by J. K. Richardson, president of the Association of Ghana Industries
(A.G.I.), at the 29th Annual General Meeting held in Accra on 23 February 1989.

by the competition from imported goods under the liberalised system of

trade. A number of them closed down, and declining production in
others led to mounting protectionist pressures on the Government. The
A.G.I. called 'for realistic measures, at least in the medium term to
protect local industries from the ravages of an open, uncontrolled and
unfair competition from cheap imports5.17 The growers of rice and
cotton were amongst agricultural producers also voicing complaints
about their sales being undermined by low-priced imports.
The generally negative reaction of the P.N.D.C. to the plight of
indigenous enterprises brought it into sharp conflict with sections of the
business community. The regime was not perceived as sufficiently
supportive of the economic interests of domestic capital, let alone
aiding those hurt by the operational consequences of the E.R.P. policy
reforms. Indeed, it was viewed as destroying Ghanaian capital by not
assisting local concerns to stand up to the rigours of international
competition. In i990, the A.G.I. acknowledged that 'a significant
change in attitude towards the problems facing industry today has
taken place', but felt that the Government had been unduly slow to
respond to the financial distress recently suffered by many companies.18
In all the years of economic reform since I983, the private sector has
not felt adequately consulted. Only occasional discussions have taken
place between spokesmen of the business community and the key public
officials concerned with fiscal and monetary policies, including the
Secretary/Minister for Finance and Economic Planning and the
Governor of the Bank of Ghana. Business representation on the
advisory councils and boards of government ministries and state-owned
enterprises has been virtually non-existent. Indeed, institutional
mechanisms for promoting communication between the various sectors
of the economy have either been largely absent or remained moribund.
Business groups wishing to press their views on the central authorities
have been hard put to find any regular channels of access. The highly
bureaucratic nature of the on-going programme of state divestiture has
reinforced business in its view that the regime intends playing the
major, even dominant, role in economic decision-making.19 To be sure,
there are informal contacts as individual entrepreneurs exploit ties with

17 Statement issued by the Council of the A.G.I., reprinted in BusinessWeekly(Accra), 26

December I988, p. 8.
Speech delivered byJ. K. Richardson, president of the A.G.I., at the 3oth Annual General
Meeting held in Accra on 23 May I990.
Roger Tangri, 'The Politics of State Divestiture in Ghana', in AfricanAffairs (London),
90, 361, October 1991, pp. 523-36.
P.N.D.C. leaders to obtain favours. But, generally, the owners and/or
managers of business feel that they are not respected, and that they are
not part of the decision-making process.
Foreign private investment in Ghana has been very limited. Inflows
between I979 and I989 totalled a mere $90 million, the bulk of which
went into extractive industries.20 Criticisms of foreign capital by
Rawlings, both at the beginning of P.N.D.C. rule (when he spoke of
exploitative foreign investment agreements undermining national
sovereignty and plundering Ghana's natural resources),21 and also
more recently (when he condemned the 'abuses' and 'malpractices'
associated with foreign investment),22 have doubtless made overseas
companies wary of investing in Ghana.
In the first months of 1982, foreign corporations were subjected to
much anti-imperialist rhetoric, with the Volta Aluminium Company
(Valco) being singled out for the heaviest condemnation. Its U.S.
shareholders were informed the following year that the P.N.D.C.
wanted to renegotiate the agreement under which Valco operated in
Ghana. This was subsequently achieved in 1985 but only after some
bitter wrangling. Although not a direct result of this early confrontation
with multinational enterprises, a few foreign firms divested mainly
because the attitude of the P.N.D.C. was not considered conducive to
the effectiveness of their operations. Much of this concern stemmed
from the anti-capitalist sentiments expressed by radical elements in the
country and its leadership, and when their influence waned, especially
from the mid-Ig80s, other disincentives to overseas investors became
more prominent, including the reservation of enterprise areas exclus-
ively for Ghanaians, as well as the requirement that large amounts of
capital had to be invested by foreign operators.
Net foreign direct investment declined from an average of $I6
million a year during 1980-2 to $4 million in g987. Although this rose
to about $20 million in i988,23 largely because the International
Finance Corporation and a number of commercial banks formed a
consortium designed to increase the profitability of Ghana's well-
known gold mines, there has been little overseas investment elsewhere
in the economy. And with indigenous entrepreneurs continuing to

20 FinancialTimes
21 A
(London), II July i989, 'Survey on Ghana', p. 3.
Revolutionary of Flt. Lt. J. J. RawlingsDecember
31, g8i-December3,
i982 (Tema, n.d.), pp. 7 and 89.
Speech by the Chairman of the P.N.D.C. at the National Investment Promotion Conference,
Accra, 26 February i990, reprinted in People'sDaily Graphic(Accra), I March 1990, p. 5.
23 World Bank Resident Mission, Accra.

display caution, foreign businessmen, who often prefer co-operating

with local partners, are unlikely to drop all their reservations about the
general investment climate.


Ambiguity and equivocation have been marked features of the

attitudes of P.N.D.C. leaders towards local entrepreneurs. Public
affirmations of support for their key role in the economy have been far
fewer and more begrudging than statements emphasising the dishonest
and exploitative nature of the private sector. In Ebo Tawiah's opening
address to the 'First Dialogue between Government Members and the
Private Business Community in Ghana' in February 1990, this leading
P.N.D.C. member focused on various 'improprieties', including recent
financial irregularities in the timber industry (in 1989, nine companies
had been closed down, their assets seized, and their directors
imprisoned), which had resulted in the loss of a great deal of revenue
for the state. Continuing, he argued: 'These observations usually stand
to make the Government waver in its confidence in the Ghanaian
business community', and he called upon the private sector 'to institute
a code of ethics among its members'. At the same meeting, Kwesi
Botchwey, the Secretary for Finance and Economic Planning, alluded
to the 'corrupt business culture' prevailing in Ghana under previous
regimes, when firms engaged in 'influence-peddling', profiteering, and
corruption. Similar concerns about 'crookery in business' have been
voiced frequently by the Chairman of the P.N.D.C.24 In public remarks
about supporting local enterprises, government leaders pointedly
declare that such assistance is intended solely for 'well-intentioned
businessmen and investors'.25
Initially, the P.N.D.C.'s economic thinking revolved around in-
creased state intervention, central economic planning, and the urgent
need for the assets of the privileged few to be redistributed.26 A residue
of this early statism and populism has remained. According to Tawiah,
Government still sees wealth as something undesirable, especially in a
society where the mass of people are very poor, and 'deprived sections
of the community' need to be protected from exploitative capital.
'Business must improve its concerns for labour' and 'management
should not lead too affluent a life-style in an environment of hardship'

24 For one
example of such criticism by Rawlings, see People'sDaily Graphic,3 May 1990.
25 Ibid. 12 January I991.
for Reconstruction
26 Notably formulated in PJVDC'sProgramme andDevelopment
(Accra, I982).

are sentiments widely held and articulated within the higher echelons
of the P.N.D.C. As explained by Botchwey, when introducing a super
sales-tax from 50 to 500 per cent on such items as mineral water and
spiritous liquors in January I990, 'The Government continues to view
with concern the amount of resources being devoted to luxury
consumption ... because they deprive the majority of Ghanaians their
fair share of national resources'.27
Within two years of coming to power and advocating radical
economic policies, P.N.D.C. leaders were speaking of reducing the
participation of the state and encouraging the growth of the private
sector. At a meeting of the Consultative Group for Ghana in Paris in
I984, it was reported that the 'Government recognises that the private
sector has a distinct role to play in successfully implementing the
ERP'.28 Such a statement had been absent when the country's
economic programme had been presented to donors the previous year.
Obviously the sheer weight of evidence that previous statist policies had
been unsuccessful had prompted some economic rethinking within the
P.N.D.C. The direction of this reassessment was strongly shaped by the
policy advice emanating from the World Bank and other external
donor agencies, which emphasised the necessity for enhancing private
economic activity. 'Admittedly', as was explained to the Consultative
Group by Ghana's representatives in I984, 'a credibility gap exists vis-
a-vis the private sector but we intend to fully restore mutual
confidence'.29 Since then, World Bank studies have identified ways to
generate a supportive business climate, and, indeed, the P.N.D.C. has
followed closely such proposals for improving the atmosphere for
private investment in the country.
P.N.D.C. leaders have accepted the need to promote the private
sector by reducing state intervention in the economy. With World Bank
prompting, a number of policy changes have reduced the previous
constraints exercised by a variety of individuals and institution@. The
administrative discretion of public officials has been significantly
curbed under the E.R.P. Moreover, the Government's state-owned
enterprise divestiture programme - launched with World Bank en-
couragement in 1987 - has promised a reduction in the state's r6le in
27 Kwesi
Botchwey, 'The Budget and Highlights of Economic Policy for 1990', Io January
I990, Accra, pp. 4-5.
See Thomas Siebold, Ghana, 1957-I987. Entwicklungund Riickentwicklung, und
IWF-Intervention(Hamburg, i988), p. 247, and 'Economic Recovery Programme I984-86.
Review of Progressin I984 and Goals for i985, 1986', a report prepared by the Government for
the second meeting of the Consultative Group for Ghana, Paris, December I984, p. 7.
29 Ibid.

economic production and trading activity, as well as an enlarged scope

in these areas for private capital. In the words of the head of the State
Enterprises Commission, the 'state sector is crowding out the private
sector', and one of 'the objectives of divestment' is 'to motivate' the
In addition, through financial assistance from the World Bank and
various bilateral sources, funds have been obtained to support business
concerns. Timber processing companies have received government-
guaranteed loans of over $60 million to rehabilitate saw-milling plants
and equipment, while support has also been provided for several small-
and medium-scale manufacturing and agro-processing enterprises.
Actions to develop capital markets have also been taken, including the
I990 opening of a stock exchange. And the Government is being
assisted by the World Bank to undertake studies of the financial needs
of, and the impact of trade liberalisation on, manufacturing industry.
In a I984 report, the World Bank had pointed to the harm that the
People's and Workers' Defence Committees were causing to the
P.N.D.C.'s efforts towards economic recovery.31 Activists had not only
harassed business managers, but also initiated several worker takeovers
of firms, including some owned by foreigners. After these P.N.D.C.
organisations had been reconstituted as Committees for the Defence of
the Revolution, with a revised mandate to help raise productivity and
not to interfere in management, the World Bank reported with
satisfaction in November I984: 'The need to improve private sector
confidence has been clearly recognised, and there has been a steady
reduction in the number and frequency of arbitrary actions that might
affect the private sector'.32
A consultative committee was established in March 1988 to enable
entrepreneurs to meet with officials drawn from state ministries and
government organisations whose activities affect the private sector. In
February I990, the importance of improving working relationships
between the Government and the business community was further
recognised by the inauguration of a bi-annual dialogue to provide
opportunities for more effective interchange of ideas and information.

30 Memorandum to the P.N.D.C. by the P.N.D.C. Secretary and Chairman of the Divestiture

Implementation Committee, Accra, 30 May I989, p. 2.

31 World Bank, Ghana-Policies andProgram
for Adjustment(Washington, D.C., I984), p. 51.
32 Cited in Siebold, op. cit. p. 247.



Although the P.N.D.C. has adopted various macro-economic policies

which have improved the business climate in Ghana since 1983, its
recovery programme is being threatened by inadequate private
investment.33 This increased, it is true, from 5*7 per cent of G.D.P. in
I989 to over 8 per cent in I990,34 albeit mainly attributable to the
aforementioned foreign investment in gold mining. From 1990, further
reforms have been advocated by the World Bank to create a more
favourable business environment and thereby enhance investor
confidence. Their key recommendations, which have been accepted by
the Government, involve improvements in the financial sector, in
taxation and investment incentives, and in the legal and regulatory
framework. Some mention is made in World Bank documents of the
need to reform state-owned enterprises (via commercialisation and/or
divestiture), as well as to improve dialogue with the private sector.
However, given that a more propitious business environment needs to
be promoted through various economic reforms it must not be
forgotten that entrepreneurs are also sensitive to the prevailing political
If the private sector is to play a greater role in Ghana's economic
recovery it must become an integral part of the relevant decision-
making process. In the formulation of the E.R.P., the extent of
consultation with representatives of the business community was
minimal, and has remained so in the various phases of structural
adjustment. To be sure, mechanisms have been introduced to promote
more active communication, but these have failed to become
institutionalised. Only one of the scheduled bi-annual dialogues has
taken place, and the work of the consultative committee, after a spate
of meetings, suddenly came to an abrupt end, being replaced by a
temporary advisory group to discuss World Bank recommendations for
further reforms. The business community has no direct voice in the
leadership of the P.N.D.C., is not adequately represented on important
boards and committees, and does not feel 'respected' let alone

33 'Overall, the speed and strength of the private sector response so far have not been
satisfactory', according to Ishan Kapur et al., Ghana:adjustment
andgrowth,i983-9i (Washington,
D.C., I99I), I.M.F. Occasional Paper 86, p. 15. See also ibid. p. Io: 'domestic savings and
investment in Ghana have not yet reached the levels required to sustain a satisfactory rate of
economic growth'. 34 World Bank Resident Mission, Accra.

The continuing ambivalence of the Government stems from the

populist and socialist views of many of its leaders, especially as they find
it difficult to speak out on behalf of the poor and disadvantaged while
being perceived as trying to cultivate those regarded as 'capitalists'. It
has been almost impossible to reconcile the rhetoric of the 'Revolution'
with respect for the profit motive, apart from fears that a viable private
sector may create a new centre of power, or underwrite the emergence
of an alternative political force, or even finance another coup d'e'tat.A
regime as unsure of its own support as the P.N.D.C. is bound to regard
such an eventuality as a dangerous threat.
According to James Ahiakpor, 'It was the failure of Ghanaian
Marxists to devise ways of preventing any further deterioration in the
economy that led Rawlings to opt in 1983 for market liberalisation'.35
Thereafter the P.N.D.C.'s economic thinking evolved from radicalism
to liberalism, not least because the survival of the regime seemed to
depend on the adoption of a reform programme designed to gain
essential financial support from the World Bank and other external
Similar practical calculations have led Ghana's leaders to believe
that the private sector has an invaluable contribution to make in the
nation's economic recovery, and this has recently begun to be
acknowledged much more forthrightly. The concluding of a credit
agreement with the World Bank in April Ig99 to promote private
investment attests to the seriousness of the P.N.D.C.'s decision to create
a more secure and friendlier climate for business. The following month,
in its report to the Consultative Group for Ghana, the Government
stated that 'private sector investment promotion will be accorded the
highest priority',36 and the Secretary for Finance claimed that Ghana
'will be seeing a much higher profile for poverty alleviation ... mainly
through the reactivation of the private sector and concentration of
public investments, especially in agriculture'.37 It remains to be seen if
this new supportive attitude is perceived by private investors to be
irreversible, and therefore both reassuring and attractive.
The P.N.D.C. has not been constitutionally elected, and continues to
remain unaccountable to the people. Decision-making is a restricted
affair and few persons outside the higher echelons of the central
administration are consulted. As businessmen frequently claim: 'There

35 See James C. W. Ahiakpor, 'Rawlings, Economic Policy Reform, and the Poor: consistency
or betrayal?', in TheJournalof ModernAfricanStudies(Cambridge), 29, 4, December I99I, p. 59o.
36 Ghanaian Times I8 May I99I. 37 People's Daily Graphic, 24 May I991.
is government by decree'. Public debate on the E.R.P. has hardly been
permitted, the press is by no means free, and opportunities to question
key decisions are virtually non-existent.38 Information about the
operations and transactions of departments/ministries/parastatals is
rarely disseminated or made public. Nor can the judicial system be
relied upon to protect personal and property rights. Arbitrary actions
against businessmen, including investigations, detentions, and con-
fiscations are not subject to the due process of the law. And the public
tribunals are too closely identified with those in power to be seen as
impartial bodies.
In sum, the authoritarian and arbitrary character of P.N.D.C. rule
is not consonant with the kind of 'governance for development'
advocated by the World Bank. In terms of accountability, trans-
parency, openness, predictability, and the rule of law, the regime is far
from providing the political environment now widely deemed to be
indispensable for a dynamic economy.39
It is not yet clear if the democratic system that the P.N.D.C. is
currently promising to evolve will meet the political and legal
preconditions desired by private investors. For them, 'good govern-
ance' is not necessarily equated with the existence of western-style
multi-party constitutionalism. Rather, the call is for the rectification of
constraints which have limited private investment, including (i) the
excessively suspicious attitude on the part of some P.N.D.C. leaders
towards private capital; (ii) the failure of the regime to consult
adequately with representatives of the private sector; and (iii) the
justifiable fears among entrepreneurs regarding the security of their
By commencing a form of dialogue, the P.N.D.C. has evinced its
willingness to permit business associations to become more actively
involved in the processes of decision-making. In May 1991, the
Government stated that 'active consultations with the private sector
have been initiated to remove the remaining obstacles' to private
investment,40 and the chairman of the largest multinational organ-
isation, U.A.C. Limited, was included as a member of Ghana's
official delegation to the sixth meeting of the Consultative Group in

38 In October I990, the

Liquor Manufacturers'Association prepared a full-page advertisement
about the damaging effects of the super sales-tax on certain local industries, as well as its limited
impact on government revenues. Despite its moderate tone, the editor of the newspaper decided
it was not politically prudent to publish such criticism.
39 See World Bank, Sub-Saharan Africa.FromCrisistoSustainableGrowth:a long-term study
(Washington, D.C., I989), pp. 5-6, I5, 6o-I, and I92.
40 Ghanaian Times, I8 May I991.

Paris that same month. As explained by I. E. Yamson, president of the

Ghana Employers' Association, 'The promotion of private enterprise
would presuppose Government acceptance of the principle of partici-
patory development in ... policy formulation particularly if these
policies will affect the success of the private sector'. For private
investors, their supply response will be affected by the extent of
opportunities made available for consultation and participation, as
well as the creation of an 'enabling environment which will make
private investment safe and profitable'.41
For some years, the World Bank has been pressing the Government
to reduce its direct responsibilities for productive and trading activities,
and to devote its resources to building a supportive environment for
stronger private investment. Hence the argument advanced in 1985
that 'the public sector must limit its role, to the extent possible, to areas
that will most benefit the economy'.42 The 'vital tasks' that needed to
be done included 'rehabilitating physical infrastructure, in health and
education and in providing support services to farmers'.43 It was
expected that the transfer of assets under the divestiture programme
would enable the state to concentrate its resources on a narrower range
of concerns, as well as signalling the P.N.D.C.'s commitment for the
private sector to play a greater role in the economy. But between 1987
and the end of i 99 , only 49 state enterprises (out of a total of nearly 350)
were divested, most of them being liquidations of non-viable
Political constraints have been foremost in limiting the extent of
divestiture, mainly due to the lack of consensus within the
Government as to what public enterprises to sell, as well as to whom
and on what terms. At the end of 1990, the State Enterprises
Commission felt obliged to designate 17 (in transport, energy, water,
posts and telecommunications, and cocoa marketing) that would be
retained as 'core' enterprises in the public sector, as well as another 2 I
that would be part of an 'extended core' on grounds of serving
important policy purposes. As a World Bank report noted generally:
'where to draw the boundary between the private and public sectors
remains controversial'.45 The economic boundaries of the state are

41 Address
by I. E. Yamson, president of the Ghana Employers' Association, at the 3Ist
Annual General Meeting held on 17 May I99I.
42 World Bank, Ghana.TowardsStructural (Washington, D.C., I985), p. 63.
43 Ibid. p. 38.
44 InternationalHerald Tribune(Paris edn.), I8 December I991, Advertisement Section on
Ghana, p. 12. 45 World Bank, Sub-SaharanAfrica,p. 54.

contested terrain for groups and individuals who see their interests' as
served by different patterns of state-economy relations'.46
The president of the Ghana Employers' Association recently
expressed 'concern at the slow pace of the divestiture programme', and
lamented 'the continued over-involvement of the state in the economy'
whereby 'state-owned industries still remain a predominant part of
Ghana's economy'.47 Although at least another 25 were scheduled to
be privatised in I991, including some of the larger mining companies,
unless the political obstacles are removed there is not likely to be much
further progressin this direction (only I I were, in fact, divested), with
discouraging consequences for the private sector.
Given strong vested interests, certain ministries (with the backing of
P.N.D.C. leaders) have chosen to retain control of much more than had
been initially anticipated, including, for example, not only state-owned
commercial banks and financial institutions, but also the Ghana Food
Distribution Corporation and two national daily newspapers. Yet a
number of these enterpriseswere in fields in which local entrepreneurs
were either already operating or seriouslyconsidering. The point is that
so long as state personnel dominate the demarcation decisions regarding
the economic boundaries of the state, so will the scope of activity for
private business remain circumscribed. And a sizeable public sector
will have a restraining impact on private capital venturing beyond
specific economic areas.

The various economic measures being adopted in Ghana are

considered sufficient for the creation of a strong private sector. A clear
'means-end' relationship is being posited; namely, that the
implementation of these reformswill resultin greaterprivate investment.
But without placing what is being undertaken into the particular
political context in Ghana, many of the impediments inhibiting the
desired investor response are being left out of consideration. A fuller
appreciation of the local circumstances restraining the development of
the private sector is required to devise more appropriate strategies for
achieving the desired ends.

Ernest J. Wilson III, 'Contested Terrain: a comparative and theoretical reassessment of
state-owned enterprise in Africa', in Journalof Commonwealth
Politics(London), 22,
I, I984, p. 5. Yamson, op. cit.