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FACTORS MILITATING AGAINST THE GROWTH OF THE INDUSTRIAL SECTOR IN GHANA

LECTURER: DR. RAYMOND DZIWONU

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Learning Objectives

Definition of Industry.What is industrialization ?The sectors of Ghana's economy and their

Contributions.The sub-sectors of the industry and their

contributions to the economy.Factors that militate against the growth of

the sector.

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Introduction

What is industry ? The term industry refers to a group of firms which

produce goods or offer services. An example is all the firms producing cement belong to the cement industry.

What is industrialization ? . Industrialization is a deliberate policy by

government to create many industries in the country. The process of industrialization involves the production, increasing use of machinery and power tools as well as the use of improved technology in production all of which leads to higher level of output of industrial goods.

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Contribution of the industrial sector

The industrial sector is the second largest sector which contributes about 27.3percent to Gross Domestic Product (GDP). It grew by 7% in the year 2012. The service sector is the first largest which contributes 50% to Gross Domestic Product(GDP) and the agricultural sector the smallest contributor which contributes 22.7% to Gross Domestic Product(GDP).

50%27.3%

22.7%

contribution to GDP %

seviceindustryagriculture

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5The Sub-Sectors and their Contribution to GDP

SUB-SECTORS CONTRIBUTION TO GDP

Construction grew by 11.2% in 2012

Electricity grew by 11.1% in 2012

Manufacturing grew by 5.2% in 2012

Mining and Quarrying grew by 5% in 2012

Water and Sewage grew by 2.0% in 2012

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Inadequate raw materials

Inadequate raw materials compel industries to :import raw materials from outside the countryleads to high cost of productionExchange much of the local currency to facilitate

the purchaseChanneling of the cost of production to the

consumer by charging higher pricesLow patronage of the product as a result of high

pricesLow returns to the industryLimits growth E.g.. Steelco Ghana and wire weaving industry

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Unreliable or unstable power supply

The industrial sector suffers most during power crisis. The reason is that, out of 4,494,934,000 kw of energy produced, the agric sector consumes 0.02%,the service sector consumes 9.7% and the rest (90.28%) is consumed by the industrial sector.

Unreliable power supply forces industries to look for alternative source of power through acquisition of stand-by generators as well as fuel to generate power.

The result is, lower capacity utilization levels, higher production cost and loss of jobs.

Eg ,curently energy supply to mining and manufacturing companies has been reduced by 25%of their demand due to the on going energy crisis.

Valco has also laid off some of its workers to cut down operation cost due to unreliable power supply.

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Limited appropriate technology

Most of Ghana's industries are more of labour intensive than capital intensive.

The result is , work is done at a slower rate as compared to the use of machines.

This makes industries produce below capacity, at higher productivity cost and earn little revenue .

The inability of industries to get access to credit facilities due to high collateral demands limits the acquisition of machinery for expansion.

E.g., The rice industry where milling is done manually and the inability of farmers to afford the purchase of combined-harvesters to harvest and separate the rice from the husk.

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9Inadequate domestic and restricted foreign market

Low aggregate demand for domestically produced goods due to low income earned

A more flexible market created for foreign goods in the Ghanaian market coupled with the notion carried by Ghanaians concerning indigenous goods

Trade barriers establish by foreign market protecting their local industries and restricting the Ghanaian industry from penetrating into the international market

E.g. A typical example is the textile industry where statistics have shown that since the year 2000, about 20,000 employees in the industry has lost their jobs because of the collapse of the industry due to low patronage and invasion of foreign textiles.

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Conclusion

The factors discussed above which are lack of raw materials, unreliable and unstable power supply, limited or lack of appropriate technology and capital resources, inadequate domestic market and restricted foreign market explains their implication on the growth of the industrial sector. These factors need to be attended to or addressed else Ghana’s industrial sector will continue to face challenges respect to growth.

THANK YOU FOR YOUR ATTENTION