USITC STUDY ON SUB-SAHARAN AFRICA: EFFECTS OF

UNCLAS ACCRA 001352

STATE PASS TO USITC
USITC PASS TO MICHAEL FERRANTINO AND BRENDAN LYNCH

SIPDIS

E.O. 12958: N/A
TAGS: ETRD OTRA ASEC GH
SUBJECT: USITC STUDY ON SUB-SAHARAN AFRICA: EFFECTS OF
INFRASTRUCTURE CONDITIONS ON EXPORT COMPETITIVENESS

REF: STATE 85109


1. SUMMARY: GhanaQs physical infrastructure is adequate between the
capital and the countryQs two major seaports, but can be less
comprehensive in other parts of the country. There are ample areas
for Ghanaian government and international donor collaboration and
coordination in order to enhance the viability of infrastructure
upgrades. Infrastructure issues significantly affect the
competitiveness of GhanaQs non-traditional exports. Issues include
limited surface area of roads and substandard road conditions,
rising fuel costs, police roadblocks, where bribes are often
solicited, traffic congestion, a lack of alternative routes,
unsuitable trucks, and a limited rail network. A major impediment
in the maritime sector is the lack of a direct shipping line from
Ghana to the U.S., which results in high shipping costs and a long
turnaround time. In addition, export volumes lead to fewer
scheduled vessels calling at the port, which makes planning
difficult for exporters. The rising cost and limited availability
of power in farming areas significantly increases production costs
and reduces the shelf life of perishable fruits. High interest
rates and credit tightening discourage companies from engaging in
investment and capacity building on their own. END SUMMARY

ROAD AND RAIL TRANSPORT
--------------


2. The current physical infrastructure conditions of land transport
(road and rail) range from adequate to weak, depending on the sector
and region. The roads in southern Ghana, particularly from Accra to
Tema/Takoradi (the two primary seaports) are considered
exceptionally good. Likewise, the major roads from Tema, Lome,
Ouagadougou, and Bamako are also considered relatively
well-developed. In the hinterlands, however, where many goods are
produced, particularly in the agriculture sector, road transport
conditions tend to decline. This is also true in the less-developed
north, where there are fewer paved roads and the distances between
communities are greater. Throughout the country, the cost of moving
cargo by land has risen with rising fuel costs.


4. Road transport is the major mode of transport of export
commodities. The limited rail network in Ghana is used to transport
of bauxite, manganese, timber and cocoa in the western part of
Ghana. Road transport impediments include substandard roads, delays
at police roadblocks, and bribe solicitation at the roadblocks. Due
to serious delays at the border, the movement of goods is
economically inefficient. Traffic congestion and lack of
alternative routes cause delays, while non-refrigerated and open-top
trucks leads to increased fruit spoilage.


5. The GoG has plans to expand its rail network, but current efforts
have focused on passenger transport rather than cargo haulage.
There are ongoing efforts by the GoG and donor countries to improve
conditions of road and rail transport. Under GhanaQs Millennium
Challenge Account Compact, some farm roads will be improved and a 14
km segment of a major highway leading to the Tema port will be
reconstructed.


6. The West African Trade Hub and Ghana ShippersQ Council have been
working closely with truck drivers, truck owners and customs
officers to reduce the costs of land transport and border crossing
time throughout West Africa. They also seek to reduce corruption
while looking for more efficient ways to facilitate trade, including
the use of new infrastructure hardware (ports, cranes, etc). The
World Bank has implemented a number of projects to support export
competitiveness. In the 1990s, they sought to diversify agricultural
exports by improving roads to the major pineapple growing areas of
the country.


7. Roads to tourist attractions in the southern part of Ghana are
relatively good, but those in the northern part are poor. There is
no public transport network accessing major tourist attractions, so
tourists are faced with renting vehicles. Rental charges are
increasing due to higher fuel and vehicle maintenance costs.

MARITIME TRANSPORT
--------------


8. Maritime transport is considered to be suitable, although a
number of soft infrastructure conditions produce impediments. The
major impediment in the maritime sector is the lack of direct
shipping lines between Ghana and the United States, which drives up
trading costs between the two countries. The apparel export sector,
which is currently producing under capacity, mentioned the lack of
direct shipping lines, among other factors, as the cause of a 90-day
turnaround time for U.S. orders.


9. Relatively few scheduled vessels call on Ghanaian ports because
of the low volume of exports. According to the Ghana Shippers
Council, only two shipping lines do direct shipment to Europe, so
most exports have to be consolidated and trans-shipped, which leads

to longer transit days. Recently, the two scheduled reefer vessels
calling on the port of Tema have been halved, reflecting a similar
reduction in the volume of pineapple exports. Some exporters have
reported spoilage of fruit at the port because they have to wait for
unscheduled vessels. Export shipments are also examined manually,
which leaves room for bribery and is very time consuming.

ELECTRICITY
--------------


10. In Accra and in more developed areas of the country, electricity
supply is consistently available. However, the rising cost of
electricity has decreased profitability significantly. The doubling
of electricity tariffs in November 2007 to 14 cents per KWh, shot up
the cost of production for users such as apparel manufacturers. In
more remote parts of the country, where electricity is unavailable,
fruits and vegetables cannot be pre-refrigerated before transport.
Even if goods are pre-refrigerated, they are not refrigerated during
transport due to a lack of cooling trucks within the country,
therefore increasing spoilage during transport. Recently, the World
Bank is working with the GoG to build a cold storage facility at
Tema and may do the same at Kotoka International Airport. Farmers
are now looking at ways to increase their yield and efficiency to
offset the rising costs of electricity and fuel.


11. Working capital is insufficient. Across the board, all
manufacturers and producers complained of a lack of support from
local financial institutions. Even if exporters receive loans, they
have trouble paying them back because of high interest rates. In
all areas, technical knowledge of the export industry is lacking
within Ghana. Many companies contend that this is an area where
the government should step in and take action, either by creating
tax incentives for manufacturers or by providing technical knowledge
for banks, employees, and companies within the export sector.


12. COMMENT: The export sector in Ghana has much room for
improvement because a lack of infrastructure hampers the countryQs
competitiveness, especially in the non-traditional export sector.
There is a need for more involvement on the part of donor
organizations and the GoG in order to augment ongoing projects
currently being conducted by organizations such as the Millennium
Challenge Corporation (MCC) and Trade and Investment Program for
Competitive Export Economy (TIPCEE),to better understand the
impediments that are reducing export competitiveness within the
country. It is important for donor partners to work in conjunction
with the GoG to avoid duplication of local initiatives, increase the
reliability of their data, and enhance the sustainability of
infrastructure projects. In addition, it would be effective for
donor partners and the GoG to implement their export sector programs
in tandem with the Ghana Export Promotion Council to improve host
government human capacity building. END COMMENT

BROWN