The Economic Base of Accra Ghana PDF
The Economic Base of Accra Ghana PDF
Economic
Base of
Accra,
Ghana
Advanced Issues
in Development
Planning
Introduction
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Economic Base of Accra Ghana Advanced Issue in Development Planning
300
of the price at the beginning of 2005.
280
Figure 2: Gold and Cocoa Int. Prices, 2005=100
260
300
240
220 250
Gold
200
200
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
150 Cocoa
Source: World Bank Databank
100
50
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
The effects of this growth can be seen in the overall
improvement in the gross domestic product (GDP) Source: Bloomberg
per capita, even after adjusting for inflation (in
constant USD). As shown in Figure 1, GDP per
Ghana’s Growth and Poverty Reduction Strategy I
head went from USD 212 in 1988 to USD 329 in
(GPRS I), launched by the government in 2003, was
2008, equaling a 55 percent real increase over 20
years, or an equivalent compounded annual growth formulated to enable the country to benefit from
debt reduction under the Highly Indebted Poor
rate of 2.22 percent. Economic growth has
Countries Initiative (HIPC). GPRS I attempted to
accelerated in the last five years, with a 20 percent
increase, at current prices, in the GDP per capita, improve macroeconomic fundamentals and to
significantly stabilize the economy, thereby
between 2003- 2008, equivalent to a compounded
improving the general framework for the
annual growth rate of 3.88 percent.
implementation of poverty-reduction policies.
An important component of this rapid economic
growth has been the price increase of two of Although significant achievements have been made
as a result of these strategies, important indicators –
Ghana’s main exports – gold and cocoa. An increase
such as inflation – remain high by international
in the demand for raw materials (also known as
standards. High inflation, with its significant cost for
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Economic Base of Accra Ghana Advanced Issue in Development Planning
those possessing cash, can also result in important Remittances of Ghanaians working abroad, another
distortions to the decision-making and hedging important source of foreign currency for the
processes of both individuals and companies, with country, have also increased significantly since 2000.
regard to investment, setting prices and wages, hiring Although remittances are naturally difficult to
and foreign currency holdings. measure due to the informal means of transmission,
the World Bank estimates that Ghana received
Between 2005 and 2010 year-over-year (“YoY”)
USD125 million in remittances in 2008, equivalent
inflation has fluctuated between 10- 20 percent, as
to .8 percent of that year’s GDP.
indicated in Figure 3.
25% 120
20% 100
15%
80
10%
YoY Inflation
60
5%
40
0%
Inflation 2000: 27.2%
20
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
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Economic Base of Accra Ghana Advanced Issue in Development Planning
During the 1980s, Ghana, as well as many other themselves in the traditional business areas, in what
developing countries, adopted a large number of was long considered “the European Town,” others
structural adjustments, with the intention of have triggered the development of new business
transforming its economy by granting the private markets more closely located to the international
sector a more important role. This policy shift economy, both geographically – with closer access to
allowed international companies to increase their the airport – and ideologically, with areas almost
activities in Ghana, and also fostered the exclusively occupied by international companies.
nongovernmental organizations (NGOs) and other finance and the domestic import and export
businesses. While domestically-owned import and
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Economic Base of Accra Ghana Advanced Issue in Development Planning
Map 2:Geographic Distribution of Domestic Companies in the Export and Import Sector in Accra in 1999
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Economic Base of Accra Ghana Advanced Issue in Development Planning
by Grant (2009) with 68 returnees, 50 percent of For a number of years, the Mexican government has
these business owners reported themselves as self- entered into projects of common investment called
employed, and 30 percent of the total returnees “3x1 Tres por Uno (Three for One),” which triples
operated as international entrepreneurs. The specific every remittance dollar from migrants (or their
businesses they reported managing appear in Figure families), and commits the match to infrastructure
5, which also includes those countries with which and/or cultural projects in the migrants’ home
the companies run by international entrepreneurs in communities. These projects not only favor
had links. investment, but also create a sense of transnational
community, and consolidate efforts by different
This should give a less colloquial representation of
migrant organizations, thereby increasing their
the strong linkages between Accra and the rest of the
efficiency.
international community, one of Accra’s greatest
strengths. National, regional and municipal For such a program to be created in Ghana, more
government should consider taking this into account detailed information on migrants and returnees
when generating policy, for instance, through needs to be generated; while data from Grant (2009)
collaboration with these groups for mutual benefit. is valuable, it only represents a small fraction of all
Such examples exist in other countries, where returnees. Determining the income distribution of
remittances and returnees play key roles in economic this group, the specific neighborhoods to which they
development. are tied and their respective agendas is fundamental
for policy design. The program would also require
the allocation of matching funds, and an
environment of clear accountability, to foster
voluntary contributions.
Figure 5: Transnational Entrepreneurs in Accra and Countries for which Links were Stated
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Economic Base of Accra Ghana Advanced Issue in Development Planning
As the national capital and one of the largest cities in accompany their partners or for marriage (27
West Africa, Accra has a significant capacity to percent), or to pursue their studies (9 percent). This
attract migrants and business activity from across the underscores the importance of Accra as a regional
region. Kessides (2006) describes the potentially center of economic activity and for the formation of
positive cycles for economic development that can human capital. While playing a major role in the
emerge between urban and rural economies. Access economic development of their original regions,
to urban markets and services for non-farm migrants also represent a large fraction of Accra’s
production stimulates agricultural productivity and economic base, in terms of labor supply, housing,
rural income, which in turn generates demand and service requirements and consumption. (All data is
labor supply for more goods and services. In cities, from Ghana Statistical Service (GSS), 2008).
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Economic Base of Accra Ghana Advanced Issue in Development Planning
The analysis here regarding the local strengths and proportions of income and employment in Accra are
vulnerabilities of Accra’s urban economy is focused the same as the national level figures, this would
on two main areas: employment and housing. These mean that the informal sector has a share of around
areas were selected because of their importance to 32 percent of the total local income. If productivity
the general population, their dynamic nature and in the informal sector could be doubled, raising it to
their relevance for the urban planning process and about 25 percent of the per-capita productivity of
significant difference between the informal sector’s activity of individuals employed in the informal
share of overall employment, and of the national sector in Accra is difficult to come by, except
income, should allow us to hypothesize as to the through original field-based research. This makes
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Economic Base of Accra Ghana Advanced Issue in Development Planning
any analysis of the potential for industry and However, few sectors seem to pose such a
decisions regarding consumption, investment and conundrum in Accra’s urban landscape. Within the
migration difficult. Income information would allow last decade, Accra has seen a building boom of
a comparison of the options of urban informality as luxury housing in the form of condos and gated
opposed to rural work and afford a better picture of communities. Foreign and national companies have
the overall poverty rate of individuals in the informal also participated in the building boom, targeting the
sector. higher income segments of the population with
“western” style units, as opposed to the traditional
Map 4 shows the geographical distribution of formal
compound or family houses.
and informal businesses according to the inventory
performed by Farvatcque-Vitkovic (2008). The map An inventory analysis conducted in 2004 and
highlights the important concentration of informal reported by Grant (2009) shows the location and
businesses in the peripheries of Accra and the Korle price range of close to 4,000 units in gated
lagoon area. communities in Accra.
Housing is most likely one of the main areas of With units ranging in price from USD 25,000 to
interest for planners, city authorities and developers. USD 400,000, it is safe to say that the building boom
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Economic Base of Accra Ghana Advanced Issue in Development Planning
has come hand-in-hand with soaring real estate reports, as part of its Living Standard Survey 2008,
prices in the higher-end developments. This increase that 40 percent of households live in rented units,
in prices has not been limited to units targeted to the but that only 5-10 percent of these households’
higher-income segments of the population. income is spent on housing. These figures seem
Traditional compound housing is priced at more inconsistent with the cost of housing estimates made
than USD 8,800 per unit; earlier research on housing by researchers and international agencies.
in Accra already revealed that home ownership is
Consistent data and revisited notions regarding
largely available only to the wealthy (Konadu-
informal housing are needed to quantify the number
Agyemang 2001).
of people living in informal housing and their
This increase in price and the existing constraints in geographical distribution. As of today, the
supply of more affordable units has led basic population of informal settlements is unknown, due
housing conditions in Accra to deteriorate, to the to the large “floating population,” that is, the
point of situating it among the more inequitable tremendous fluctuations and movement of residents
cities, with a house price-to-income ratio of 14: 1 during the day and night. Information regarding
and a rent-to-income ratio of 21:1 in 2001 (UN informal dwellers’ sources of income and
Habitat 2003), pushing many to opt for informal employment is also unknown, making it difficult to
housing solutions. assess the potential of self-help programs, the
required housing needs, and the linkages between
Informal settlements have grown in different areas
location and livelihood strategies. Location becomes
of the city, either relying on traditional titles to land,
particularly relevant for informal housing settlers,
or building in spite of them. Policies designed to
whose mobility is generally limited to locations
succeed in large informal settlements will likely have
within walking-distance. This renders forced
to come from a discussion among the current
relocations, for instance, an effective termination of
residents and other stakeholders, through different
their sources of income.
dwellers organizations and different levels of
government. Another relevant factor not discussed in this
working paper is land tenure, which places a high
UN-Habitat estimates (2009) indicate that 58 percent
cost on most urban dwellers, limiting the potential
of Accra’s population lives in informal housing. UN-
availability of credit, incentives for investment,
HABITAT recommends a series of “slum”
potential for taxation and overall behavior.
upgrading programs, either through self-
improvement or joint investment. Although a large
proportion of the population would no doubt
benefit from such programs, official GSS figures
recognize only 15 percent of the total population of
Accra as living in informal housing. GSS also
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Economic Base of Accra Ghana Advanced Issue in Development Planning
25
resources, large public projects can rarely succeed
20
without financing. Therefore, it is essential to 15
institutions through 1) the recurrent expenditure revenues and foreign resources is about 1:1, although
transfers program, which fully covers salaries and recent improvements in local tax collection have
other remuneration of AMA staff, within the limit of increased the percentage of internally generated
an assigned manpower-ceiling, and 2) the Common revenues to about 60 percent of the total. Internally
Fund, which allocates a portion of the stool land generated revenue comes mainly from three sources:
royalties (from the tribal chiefs) and other sources of 1) property rates and a poll tax on every person aged
national revenues, to a fund to be distributed among 18 years or older; 2) fees, including those on
the different metropolitan assemblies. slaughterhouses, markets stalls, trading kiosks and
other commercial facilities; and 3) licenses, including
As indicated in Figure 6, AMA revenues have those issued on dogs, beer and wine sales, artisanal
significantly increased in the last decade. However, it and other vendor sales, gas stations and lorry parks.
is important to consider that this is at current prices Together, these three sources represent close to 80
in Cedis. Although total revenues almost doubled percent of the total internally generated revenues.
between 2005 and 2008, the real increase after Estimates by UN-Habitat (2009) indicate that AMA
adjustment by inflation is closer to 30%, a is only utilizing close to 30 percent of its total
substantial raise nevertheless. taxable base.
Figure 7:AMA’s Internally Generated by Source –
Percentage for 2005 IG revenues
Rates
Lands
Fees and Fines
Licenses
Rent
Source: AMA Ministry of Finance Investment income
Misc
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Economic Base of Accra Ghana Advanced Issue in Development Planning
Administration
Sanitation
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Economic Base of Accra Ghana Advanced Issue in Development Planning
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Economic Base of Accra Ghana Advanced Issue in Development Planning
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Economic Base of Accra Ghana Advanced Issue in Development Planning
Sources
Gerry, Chris (1987). “Developing Economies and
Accra Metropolitan Assembly (AMA) (May 2010).
the Informal Sector in Historical Perspective.”
Office of Budget and Logistics Presentation
Annals of the American Academy of Social Science. 493,
AMA Medium Term Development Plan 2006-2009 pp. 100-119.
(2007). Vol. 1, Accra Profile.
Grant, Richard (2009).Globalizing City: The Urban and
AMA Medium Term Development Plan 2006-2009 Economic Transformation of Accra Ghana (Syracuse,
N.Y.: Syracuse University Press).
(2007). Vol. 3, Annual Actions Plans.
Kessides, Christine (2006). The Urban Transition in National Development Planning Commission,
Sub-Saharan Africa (Washington, D.C.: Cities Alliance Ghana (2005). Growth and Poverty Reduction Strategy II.
Without Slums / World Bank).
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