Lack of Factories major cause of Unemployment in Ghana

 
By Lisa Bogler and Felix Schmermer
Industries in Central Region are facing a lot of problems but mainly financial problems. These problems are obstacles for the industrial development of the Central Region. The development of Industry would also benefit students and people seeking for employment by creating work places.
The industrial revolution started in 18^th century in England, was reinforced in the 19^th century and was one of the biggest developments in the history. This development created a lot of changes in production, by increasing the productivity and efficiency. It shifted the production from handcraft enterprise and manufacture to the industrial mass production, through factories. The further development of production was also imported to Ghana and included the establishment of Komenda Sugar factory in the 60’s, Pomadze and Cape Coast Citrus factory and these factories generated employment for the residents.
However in recent years industrial development seemed to have missed out in the Central Region. Big smokestacks the noise of workers and meshing gear wheels are almost absent in Central Region. Nowadays factories are the basis of a lot of workplaces and are associated with a prospering economic. Even though a lot of small scale and middle scale industry is located in the Central Region bigger factories are rarely seen. Exactly these bigger factories would create employment for a lot of people and would move the region forward in becoming richer. Now the question comes up why are bigger factories so rare in central region?
Certain factors are important for setting up a business based on industry. Those factors will influence the attractiveness of regions. If a region does not fulfil important factors, industry will stay absent or will go dormant after a while. Central press spoke to the Central Regional Director of Trade and Industries Simitt Barimah to evaluate if those factors are given in Central Region and which are causing the problems for industry in Central Region.
Land accusation seems to be a gig problem in Ghana, because of the partitioned land. But in the case of factories it is mostly easier. Chiefs and local governments are willing and trying to get land for the location of a factory. They are aware industry will create job opportunities for the people living in the area. So at the regional capitals the acquisition will cause problems but a factory can also be located in more remote areas, where enough land exists. Land acquisition might be a problem in some cases but the support is given
Environmental restrictions are always going hand in hand with the setup of new businesses and the acquisition of land. They are important but also delaying the process to set up a business. Mr. Simitt Barimah told Central press there are still projects in the pipeline but at first they need to fulfil all the environmental restrictions to set up their business. Though these restrictions are there a committed entrepreneur should be able to overcome that obstacle, because they are important to preserve the nice environment of Ghana and are not established to avoid the setup of factories.
Road Network in Central Region is one advantages of the Region. Even though some roads are not in the best shape, in general the Region has a good road network and is still improving on it. Transport of goods from a factory should not give any problems to an on-going entrepreneur of a factory. A bigger problem is faced in advanced long distance cargo transport over sea or by air. At the moment there is no possibility in Central Region to move goods abroad so the factories are dependent on the domestic market.
Loans and financing are one big problem. To get a loan facility in most cases it is required by the bank that some work is already done. They need to have a proof of commitment. The curiosity is the fact that, to make a beginning it is necessary to have some money so where can the money come from to make the beginning? The private financial resources are mostly not enough. That is already the point where a lot of businesses cannot continue because of lack of money and the inability to apply for a loan without any advance. But on the other hands the trust of loaner is also eroded because the willingness of some entrepreneurs to pay back the loan (a loan is no gift it is supposed to be paid back) is very little. A lot of entrepreneurs in the Central region apply for loans but never pay them back. This will discourage the loaner to give any other entrepreneur the opportunity to apply for a loan.
Taxes in Ghana are not well placed to create an appealing environment for entrepreneur. Tax reliefs are small and only granted for some agricultural product. The financial support by tax reliefs or granted funds for entrepreneurs needs to be increased. It is also necessary to educate the people on such matters, so that they can get support from EDIF or other Funds to set up a business.
Energy is one big issue in Central Region. Factories need energy to produce and in most rural committees they are not connected to the national grid. With light off 5 or 6 times a day a factory cannot work efficiently. It will also result in unusable workforce and the employees need still to be paid even when light is off. This will raise the expenses of the factory and reduce the winnings. A generator might be the best solution but to power a bigger factory a very efficient and big generator is needed. Such generators cost a lot of money.
Utility costs are expensively in Central Region. The operating expenditures, due to the increasing cost of water and electrify are misbalancing the profit and loss account of industries, which are highly dependent on these operating supplies. They will also increase the cost for the product to compensate the expenses and so the competitiveness of the product will be reduced.
Raw materials in Ghana are exposed to a very high competition. Competitors from Ivory Coast or Togo and even other Regions in Ghana come to buy the raw material in Central Region and they compete on a very high level. Competitors from other countries are often able to pay more for the raw material. Due to that the raw material prices are increasing so a lot of companies are forced to buy raw material somewhere else. To meet the production capabilities a lot of Companies in Ghana have to buy raw material from outside that will also increase the price of products and the cost and involved in producing.
Managers of a factory are burdened with responsibility for their business and those people dependent on their business. It requires a lot of commitment and skill. Efficient business plans are needed for running a business. Entrepreneurs in Central Region are mostly not aware of their responsibilities. The attitude of the entrepreneurs is to make fast money and got the easy way even by risking the livelihood of their employees. Winnings are rather spent on prestigious elements like cars or clothes instead of reinvesting it to improve the business. The prevailing opinion is profit should benefit the business men not the business.
Work force is also one advantage. Workforce is cheap compared to other countries. So a good basis to produce competitive products, because in other countries the labour cost are one of the biggest expenses of a business. Research and educational facilities are also nearby to recruit skilled employees. The overall job market also benefits entrepreneurs, with a lot of people looking for jobs the possible basis for recruitments is big.
Domestic market in Central region is available and also quit big. Now only the attitude of consumers incapacitates the selling of goods. Consumers rather buy cheap without considering how the product could be produced so cheap. Bigger factories are bound to a production with standards, like the testing of products in laboratories. The small scale not registered micro factories located in someone’s private house doesn’t have to watch any standards and will produce cheap but also dirty products. Consumers need to be educate to also watch their health by considering what they are buying
Maintenance is one key point for a long term successful business and is also neglected by a lot of entrepreneurs. It is important to upgrade old machines as well as to repair them. It is always necessary to go with the time. There is no point in buying old machines where spare parts are not any longer available. These are also current cost every factory has to deal with. A lot of entrepreneurs try safe on such expenses, a danger for the future of a factory.
Further development is necessary for a competitiveness product. Standards and the needs of the market will change, to fulfil those needs it is important to research and develop the product. Packaging needs a lot of development to make it attractive for buyers. The packaging is also important for the preservation of the product. A lot of businesses miss out on the development of packaging.
Seasonable production causes also problems for factories. Production of a factory will create capital, but some products are only seasonable products like citrus. In these cases a good planning is necessary. If a factory processes a seasonable raw material it needs to find a possibility bypass the off season of the raw material. Shutting the factory down is not a good solution it will create losses. Importing raw material is the only opportunity to keep a factory running, but that will cost money and a lot of factories cannot afford to do so. Such factors will also create pressure on a business and a lot of businesses in Central Region cannot withstand that pressure.
Agglomeration does nearly not exist, only in the citrus business there might be a little bit of a agglomeration area. But due to the missing densification of factories the region lacks on suppliers, service potential and more. On the other hand prices of rents land and workforce are still cheap, an advantage of the region. But the government should try to create settlement stimuli (industrial subsidies) to encourage the location of factories in Central Region. By doing so the numbers of suppliers, cooperation forms and service potential would rise and encourage even more industry to locate in Central Region.
Competition on the international market is also very high. Especially because of the high production cost involved in producing in Ghana the products cannot compete with products from abroad where the production costs are lower and so the product will cost less. Even though over 50% of the produced products having a good quality the competitiveness will be not given because of the high production costs.
One factor to set up a business especially a factory is money. Without the capital there is no way a business can succeed and this is also where the major problem is located financing. Over 90% of the factories need funds to upgrade their machines and to keep them working. The lack of money also causes that 60-70 % of the factories are underperforming, because of lack of modern machines, generators or other things that need to be financed. The fluctuation of power and the attitude of some entrepreneurs are also bearing part of the blame. Some bigger factories are relocating and employing now only 10% of the original employees in the Region. All those factors result in high production cost, reduced winnings and in the unattractiveness of the Region, even though advantages for factories are existing the problems are outweigh them big.
It is now important to promote industry in Central Region. To do so it is also necessary to inject money in that sector, stabilise power supply and to educate the entrepreneurs, so the injected money will benefit the business and not the business men. The natural resources are given like Citrus Pineapple Cassava Lime Salt Wood and more. With the new discovered oil the situation might improve over time. That would also benefit the situation of students in Central Region.
Deeply affected by the lack of industries in Central Region are the graduating students at the University of Cape Coast, University of Education, Cape Coast Polytechnic and the technical Institutions. All of them who were interviewed by Central Press agree that after their graduation, they will have major difficulties to find employment. It is already problematic to find places for internships that are required for their studies, in and around Cape Coast. Places for attachments have been promised but nothing happened.
Some of the students say a reason for the lack of factories is the land. They demand the chiefs to open up and release the land for industrial purposes so that factories can be constructed. Other students hold the view that there is enough land, but the focus should shift from the regional capitals to other parts in the districts. At a distance from the capitals, just along the roads connecting the major towns is sufficient land that can be developed.
However, according to the students, the government focuses on the capitals and mainly Accra. That is where the graduates are heading after finishing their education. Thus, being a good place for higher education, Central Region and especially Cape Coast produces a tremendous human resource base which it then loses to other regions or even other countries. The people are educated in Central Region but the region is not able to retain its graduates due to the lack of employment opportunities and so they have to move although many would prefer to stay.
The students therefore appeal to the government to look at what there is in Central Region and invest in them. The government should set up factories in the region to give the students the opportunity to stay there after their graduation. Being able to find work here, they would cut short on travel costs and rent.
The Dean of School of Engineering Yaw Osei pointed out the hopes that lie on agriculture. He said foreign investors should bring their equipment and start developing the country, thus creating jobs and helping the youth. On the other side, Ghana cannot copy the industry of other countries, but has to find its own way to develop.
The Vice President of the Students’ Representative Council Evans Ababioo, interviewed by Central Press highlights, the required hands and brains do exist in Central Region. The government could work with this and much could be achieved. However, instead of relying on the government to change the situation, these hands and brains could not only be used by the government or foreign investors but start developing their region and country on their own initiative.
This is again where the main problems of factories in Central Region start. To establish new industry, land is required and above all capital. Even if the government listens to the students’ appeals and invests more in this sector, another obstacle is the work attitude of people. Missing business plans show that entrepreneurs often aim for quick money rather than the establishment of a long-lasting industry which provides graduates with employment opportunities. It seems that it will take long for the situation to improve and different parties need to work on it.