The political economy of reform in Africa : Ghana´s economic recovery programme and the performance of the medium- and small-scale manufacturing sector political economy of reform in Africa

THE POLITICAL ECONOMY OF REFORM IN AFRICA: GHANA'S ECONOMIC RECOVERY PROGRAMME AND THE PERFORMANCE OF THE MEDIUM- AND SMALL-SCALE MANUFACTURING SECTOR As a result of the economic malaise that has engulfed many an African country, attention has been focused, for more than a decade, on how African countries can reform their economies so that they might begin to grow again. Toward this end, adjustment policies to reverse the economic decline and reform fundamental economic institutions have been championed by the World Bank, the International Monetary Fund (IMF), other bilateral donors, and African governments themselves. It is against this background that Ghana embarked on a comprehensive reform programme in 1983 with support from western financial institutions, notably the World Bank and the IMF. The reform programme has been labelled 'Economic Recovery Programme (ERP)'. The focus of the study is on the medium- and small-scale manufacturing sector (MSSMS) of the Ghanaian economy. The main objective of the study has been an attempt to examine the extent to which the ERP, mainly controlled by the World Bank and the IMF has, directly or indirectly, contributed to the reported distress of the MSSMS. The other objective has been to try to link the problems faced by the MSSMS to the behaviour of the political actors in the Ghanaian political system. Thus, an attempt has been made to establish a nexus between macro-economic problems, external financial influence and the role of Ghanaian political actors in discussing the ERP and the demise of the MSSMS. Ghana's ERP was designed to transform the economy by adopting an industrial strategy of export-oriented industrialisation. The programme also recognised that the present state-of-the-art technology based on large-scale industries might not be in the best interest of the country. Based on the theory of exportoriented industrialisation, the ERP seemed to be in line with the Brandt Report which recommends export-oriented industrialisation based on manufacturing as the long term solution to the persistent problems of sub-saharan African countries. Referring to the recognition given to the MSSMS by the ERP, the government announced it was determined to nurture the sector as the dynamo of growth, development and modernisation. As the ERP was implemented, it soon became clear that its impact on the MSSMS was mainly negative. The dramatic fall of the national currency, the Cedi, became a serious problem for most firms, especially those firms whose input requirements included foreign components. Instead of promoting export growth in manufacturing, the ERP seemed to have rather perpetuated the postcolonial syndrome of boosting export growth in primary products such as cocoa, timber and gold. In this regard, the ERP has failed to meet the expectations of the Brandt report. The strict conditionality attached to the loans Ghana contracted seemed to have made it impossible for the Ghanaian government to adjust the programme with a view to addressing the problems facing the sector under focus. Thus, the World Bank and the IMF, acting like any commercial bank, used conditionality as a collateral security to ensure that the Ghana government is able to pay back the loans it had borrowed. In the light of this, the MSSMS has not been able to play its role as the dynamo of growth, development and modernization as the government promised. Apart from the macro-economic and external dimensions of the problem, the past and present behaviour of the political actors in charge of the programme has generated an atmosphere of uncertainty in the business environment which in turn has adversely affected existing and new investments in the sector under focus. The Ghanaian leaders, unlike their South-East Asian counterparts, appear not to have taken development seriously. Instead of co-operation, there appears to exist an atmosphere of antagonism between the private sector and the government, a situation which may assume serious consequences for the country's future development as the new democracy becomes a stage for the government and the domestic private sector to quibble and bicker