Overview of the Manufacturing Sector in Ghana

The Ghanaian economy is made up of three main sectors; they are agriculture, industry and services sectors. The unimpressive performance of the industrial sector (comprising manufacturing, mining and quarrying, utility services and construction) was reversed in 2017 with a growth rate of 19.3%. This surge is largely attributable to the deferral of the FPSO Turret Remediation Project to 2018 as well as the increase in revenue from new production from the Sankofa-Gye Nyame and the Tweneboa Enyenra Ntomme (“TEN”) oil fields.

The manufacturing sector is a subsector of Industry. It covers 16 of the 33 sub-sectors in the international standard classification of industries (ISIC). Manufacturing Value Added (MVA) was 5.6313% of GDP in 2016. The sector has experienced a sustained decrease in its share of GDP throughout the past decade, losing more than 40% of its 2006 share of 10.2%. However, GDP from Manufacturing in Ghana averaged 2173.25 GHS million from 2006 until 2017, reaching an all-time high of 2543 GHS million in 2017. ‘The One District One Factory’ initiative by government brings exciting prospects for the industrialisation of the economy. This policy, among others would establish a factory in each of the 216 districts in Ghana and would build strong value chains around key industries such as automobiles and other high value products for exports.

In 2003, the last time an industrial census was conducted in Ghana, there were about 26,000 manufacturing establishments employing about 243,500 persons. About 55% of the establishments were micro-businesses, employing less than 4 persons; 40% were small businesses, employing between 5 and 19 persons; 5% were medium businesses, employing 20– 99 persons; and only 1% were large Diagnostic Study of Light Manufacturing in Ghana 6 businesses, employing 100 or more persons. Micro businesses accounted for 15% of manufacturing employment; small and medium enterprises contributed 51% of employment; large businesses accounted for 34% of employment. Most of the establishments were located in the Greater Accra and Ashanti regions; Greater Accra had 25.7% of establishments and 27.9% of employees while Ashanti had 24.7% of establishments and 24.3% of employees. According to the 2003 Industrial Census, almost 50% of manufacturing employees were apprentices or unskilled workers. About 5% were professional and managerial staff and 40% were skilled workers.

HEAVY MANUFACTURING

Heavy manufacturing is a sector that contributes immensely to the growth of the economy. Heavy industries often sell their products to other industries rather than to end users and consumers. Accordingly, when an economy begins to recover, heavy industry is often first to show signs of improvement. This makes the sector a leading economic indicator. Oil, mining, ship building, steel, chemicals, machinery manufacturing and similar industries are examples of heavy industry. They are very capital-intensive and as such require a lot of machinery and equipment to produce. Although an under-developed sector in Ghana, manufacturing is nevertheless an important contributor to the country’s GDP.

Until recently, the sector was characterized by a narrow industrial base dominated by agro- industries, limited diversification, reliance on imported inputs of raw materials and intermediates, relatively under-developed industry linkages, prevalent use of obsolete technologies and production that is mainly focused on the domestic market. Government recognizes that significant transformation of the sector is vital. In order to achieve this, it is necessary to promote and stimulate a change process which will make the sector exhibit a diversified structure of production; undertake processing of more of the natural resources with which Ghana is endowed; and become export-oriented. Ghana’s most important manufacturing industries include aluminium smelting, oil refining, chemicals and cement, and the processing of metals.

SUB-SECTORS

1. Metal Production

The metals, engineering and assembly sector comprises three distinct groups of firms.

• The aluminum sector Mining of bauxite, production of aluminium and aluminium products. Ghana has large deposits of bauxite, the main raw material for the aluminium industry. Ghana’s bauxite deposits, located in Awaso in the Western region, are mined by Ghana Bauxite Company, which has been in operation since 1941.There are also deposits of bauxite at Nyinahin in the Ashanti region (estimated deposit: 280 million mt), Kibi in the Eastern region (estimated deposit: 120 million mt) and Mount Ejuanema, also in the Eastern region (estimated deposit: 5 million mt). Ghana’s bauxite is exported to Jamaica for processing into alumina and then reimported into the country to supply the Volta Aluminum Company (VALCO). The main client of VALCO is Aluworks, a rolling mill which manufactures aluminum products from aluminum ingots or molten alumina. The company is the main source of supply to the downstream aluminum sector, which comprises 15–20 medium-sized companies that manufacture roofing sheets and about 150 small enterprises that produce a wide range of kitchen utensils.

• Iron and steel. There are currently four manufacturers of rebar from scrap: Tema Steel Company Limited, Ferro Fabrik, Special Steel and Western Steel and Forging. Western Steel and Forging also produces nuts and bolts. These four companies combined employ about 2,800 people. There are three producers of drawn wire products, including Wire Weaving Industries Limited, which is profiled in the next section. It is notable that no company is involved in wire drawing or in galvanizing (steel output volumes in Ghana do not justify the setting up of a galvanizing operation). All these companies import ready-coated wire as their raw material. United Steel makes hollow squares and round pipes from imported steel sheet sourced from the Ukraine, Russia and China. A few small firms make nails from imported drawn wire.

• Fabricated metal products. Many small informal enterprises are involved in metal fabrication. The biggest concentration of informal metal fabricators is the Suame Magazine Industrial Development Organization in Kumasi, in the Ashanti Region. Established in 1935, it is the largest artisan engineering cluster in sub-Saharan Africa occupying an area of 20 square miles. The cluster currently contains more than 200,000 fabricators, about 50% of which are engineering enterprises that are involved in the manufacture of metal products and in vehicle repair. The Suame Magazine is noted for having some of the most mature micro- and small-scale metal fabrication enterprises in Africa. It serves individuals and private and public corporate bodies from all over the country. It also serves customers from neighbouring West African countries, especially Burkina Faso, Nigeria, Togo, Mali and Ivory Coast.

2 . Chemicals

The chemical industry produces basic chemicals, petrochemicals, fertilizers, paints, gases, pharmaceuticals and dyes. The sector covers over 70,000 commercial products and employs almost 25% of Ghana’s industrial workforce. Almost all inputs are imported. The main imports include petroleum products, fertilizers, pesticides and chemicals for the mining industry. Over 70% of the chemicals are used in agriculture (fertilizers and pesticides), the processing/manufacturing industries (mining, cement, metal, soap, textile, etc.) and the petroleum industry (oil refinery products and lubricants). About 20% of the imported chemicals are processed or repackaged for sale on the local market. The chemical industry comprises seven segments.

1.   Polymers:  polyethylene;  polyvinyl  chloride;  polypropylene;  polystyrene;  man-made fibres including polyester, nylon and acrylic.

2.   Petrochemicals: bulk petrochemicals and intermediates made from liquefied petroleum gas, natural gas and crude oil. These include solvents (such as paint thinner), paints, drugs, fertilizers, pesticides, explosives, synthetic fibres and rubbers, flooring and insulating materials, compact discs, video tapes, electronic equipment and furniture.

3.   Inorganic chemicals: salt, chlorine, caustic soda, soda ash, nitric acid, phosphoric acid, sulphuric acid, titanium dioxide and hydrogen peroxide.

4.   Life sciences: chemical and biological substances, pharmaceuticals, diagnostics, animal health products and vitamins.

5.   Specialty   chemicals:   electrochemicals,   industrial   gases,   adhesives   and   sealants, coatings, industrial and institutional cleaning chemicals and cyanide for mining activities.

6.   Consumer chemicals: soaps, detergents and cosmetics.

7.   Organic and inorganic fertilizers.

3.   Construction

The share of GDP associated with the building and construction sector increased from

4.5% in 1975 to 8.5% in 2000. Over the next few years, the sector continued to grow rapidly, but the annual growth rate slowed from 15% in 2007 to 12% in 2008, and since then the sector has contracted somewhat. The government is the major sponsor of infrastructure projects (building and construction) and dominates the sector. The activities of the major construction companies comprise

•    heavy  construction,  including  civil  projects  such  as  dams,  sewer  systems,  roads, railways and infrastructure;

•   commercial buildings, including apartments, offices, retail, hotels,

•   schools and public buildings; and

•   Residential buildings.

It also includes remodeling, renovating, adding to existing structures and removing them. Foreign firms dominate the industry due to their size, capacity and technical expertise, which is well suited to large works such as major road building and infrastructure projects. Local construction companies are mostly medium or small scale. They are largely involved in the construction of feeder roads, urban roads and small and medium-sized buildings. Following  the  enactment of  the Public Procurement Act of  2003  (Act 663), all  public projects go through a local or international bidding procurement process. Cement, stones and bitumen are purchased mainly from local sources, while most fittings, furnishings and fixtures are imported from Europe, the US, Dubai and China.

4.   Cement & Quarrying

The rapid growth of the construction sector has led to increasing demand for cement over the past decade. GDP from Construction in Ghana averaged 2311.61 GHS Million from 2006 until 2017, reaching an all-time high of 3175 GHS Million in 2017.

Prior to the market liberalization of 2000, the cement industry was a monopoly, with Ghana Cement Works Limited (GHACEM) as the only domestic producer. There are now about five domestic producers. Two are based in the south of the country: GHACEM has two plants, at Tema and Takoradi, with a total production capacity of about 2.4 million mt; and Diamond Cement has a grinding mill located in the Volta region with a capacity of 1.2 million mt. Savanna Cement Ghana Limited, a fully integrated plant with a plant capacity of 300,000 mt, is located in the Northern region. Its clinker production unit began operating in

March 2012. Total cement output from GHACEM and Diamond Cement Ghana Limited increased from 2.4 million mt in 2003 to 3.9 million mt in 2007. A large number of small firms, cement distributors and individuals are engaged in the import of bagged cement into Ghana. There are also a few small to medium-sized companies, including Greenview International Co. Ltd (a subsidiary of the Dangote group), that are involved in the import of bulk cement for rebagging and distribution in Ghana.

Quarry dust and stones are used for road construction and estate development. The business  of  quarries  plays  very  important  roles  in  any  national  development  efforts. Eastern Quarries is one of the largest quarries in Ghana in terms of concession size and production volumes – it has an estimated resource life of over 150 years. The company is the market leader for precast and quarry aggregates. The quarry is located at Shai Hills, about 40km from Accra, and the headquarters of the company is in the Tema Industrial Area. The average turnover of the company is in excess of US$3.3 million per year and it has 150 employees. Eastern Quarries produces two broad categories of products: precast products and quarry aggregates. Precast products include pavement blocks, building blocks of sandcrete, concrete and rock mixes, road kerbs for domestic and industrial use and concrete pipes and culverts with C25 strength and above.

LIGHT MANUFACTURING Sub-sectors

1.   Pharmaceuticals

The Pharmaceutical manufacturing industry of Ghana is seen as robust as compared to its neighbours in the sub-region. The industry continues to outperform markets in the sub- region despite the fact that the country imports majority of its drugs. The market is made up of approximately 30% locally produced drugs and 70% imported products; the latter originating mainly from India and China.

Ghana is the regional hub for pharmaceutical manufacturing and distribution to the over 300  million  people  who  live  within  the  Economic  Community  of  West  African  States (ECOWAS). Compared to the other countries, Ghana has a relatively strong pharmaceutical industry with stringent guidelines, producing quality products and high production capacity.

Ghana’s pharmaceutical manufacturing sector currently comprises thirty-eight (38) registered firms, employing a wide range of professionals including pharmacists, chemists, engineers and technologists. More than 75% of the companies are owned by Ghanaian entrepreneurs, with three (3) listed on the Ghana Stock Exchange; i.e. (Starwin, Ayrton and PZ Cussons).

Some of the major players in the Pharmaceutical Manufacturing Sector in Ghana include Tobinco  Pharmaceuticals  Limited,  Ernest  Chemist,  M&G  Pharmaceuticals  Limited  and Dannex amongst others. The growth drivers of these companies  are as a result of the increasingly   urbanized   population,   which   means   better   infrastructure   and   greater household purchasing power. The sector in Ghana is recognised for potential benefits like job creation, improvement in household incomes, investment opportunities, industrial growth and advanced skills set development it offers to the Ghanaian people.

The Pharmaceutical Manufacturing Industry has seen substantial expansion with market revenue having doubled from $200m to $400m in the three years up to 2017. This growth in the sector can be attributed to measures put in place by government to encourage growth in the sector, and also foreign interest in buying into the local health care market.

2.   Wood Processing

The wood industry has not undergone any major transformation over the past two decades. Currently, there are about 100 sawmills in the country with 17 involved in sliced and rotary veneer. About 40 of these sawmills produce mouldings, profiles and machined wood. Six firms specialize in flooring products and doors while 10 are involved in plywood processing. The downstream segment of the wood industry (furniture production) is dominated by small enterprises that lack the capacity to produce export-grade furniture or to achieve the large volumes required to serve international markets.

The formal sector produces a wide range of wood products, such as lumber (kiln or air dried), sliced veneer, plywood, rotary veneer, mouldings, flooring, boules and furniture parts for export. Only a fraction of its products are sold on the local market. While most of the products of the formal sector are targeted at the export market, there is a large local market for furniture products and building materials that relies on local companies. Dominated by over 41,000 small and medium-sized carpentry establishments, the industry has seen an increase in imports of furniture from Asia generally and especially from China.

The biggest sources of local demand for wood are the furniture and construction industries, which account for 75% and 24%, respectively, of the market. The furniture industry satisfies a large demand from the growing middle class, while the flourishing construction industry satisfies a steady demand for wood for housing and commercial developments.

The trend towards importation of furniture has increased over the years and now accounts for a full 85% of the demand in the country. This has led the major furniture retailers; Casa Trasacco,  Simbin,  Una,  Life  style  Gallery,  Orca  Furniture  City,  Blue  Gallery,  Horizon Furniture, Kingdom all importing most of their furniture into the country. Ghana’s wood processors are currently seeking ventures with international partners in order to upgrade current plant and equipment, improve management practices, and increase the range of products offered.

Opportunities  for  investment  exist  in  the  following  product  areas:  Finished  and  semi- finished furniture and components; Mouldings and machined wood; Floor and deck blanks, strips and blocks; Door, window, and cabinet frames and panels; Dowels and tool handles; Peeled and sliced veneers; Kiln dried rough or machined lumber.

3.   Textiles

The textile industry is of tremendous importance to the country’s economy, as it creates jobs for especially people in the rural areas and generates revenue and income for both government and persons involved in the weaving and production of textile products. The industry has shown signs of potential growth prospects in promoting high-quality traditionally designed fabrics as “Made in Ghana” to niche markets, especially the US.

Today, Ghana’s textiles industry includes vertically integrated mills, horizontal weaving factories and the traditional textile manufacturing firms involved in spinning, hand-weaving and fabric-processing. Textile exports include:

  • Cotton yarn
  • Cotton fabric
  • Printed fabric
  • Polyester fabric
  • Blankets
  • Bed sheets

The industry is supported by National Vocational Training Institutes throughout the country. These institutes provide basic practical and theoretical training in tailoring and dressmaking. There are also a growing number of private fashion design institutes and internationally
acclaimed designers that teach latest techniques to aspiring textile designers. There are about 67 recognized textile industries in Ghana. These include; Tex Styles Ghana Limited (GTP), Juapong Textiles, Volta Star, Ghana Textile Printing Co. Ltd., Akosombo Textile Company Limited (ATC), Premiere African Textile, Bowman Kente Weaving Enterprise and Printex, among others.