Government-run initiative partners small-scale manufacturers in Ghana with private sector investors

 

The One District, One Factory (1D1F) initiative was launched in 2017 as part of the government’s 10-Point Industrial Transformation Agenda released in the same year. Aimed at developing local industry through small and medium-sized enterprises (SMEs), the strategy hopes to establish a factory in 110 of Ghana’s 275 districts. By developing local capacity and facilitating private sector growth, the 1D1F initiative has the potential to create new employment opportunities, reduce reliance on imports, and ensure higher export earnings from processed and refined raw materials.

Ghana has significant potential for manufacturing and the basic processing of agricultural products. The country currently imports goods that it has the capacity to produce, while its chief exports consist primarily of unrefined gold, crude oil and unprocessed cocoa. In addition to boosting industrial development, moving from resource-based exports to an industrialised economy would provide new employment opportunities.

Organisation & Funding

The 1D1F initiative is managed by the Ministry of Trade and Industry (MoTI) through the 1D1F Secretariat. Applicants are required to submit a business plan to the Secretariat, which will appraise credit, conduct due diligence and evaluate the project’s potential to meet the initiative’s objectives, including job creation and import substitution. If successful, the Secretariat will facilitate access to private sector funding and support, provide tax incentives and reduce import duties. By coordinating functions across government departments and agencies, the initiative reduces red tape and fast-tracks administrative matters such as land acquisition and environmental compliance.

The programme does not include state financing, nor does it guarantee a source of funding; it is designed to provide support to private sector initiatives that secure private sector funding. With backing from commercial banks and international lenders, the MoTI issues letters in support of successful applicants to investors who, in turn, provide project financing at affordable rates.

Notable sources of funding include China’s National Building Materials Corporation, which provided a $400m loan to support 22 enterprises under the initiative. In addition, the Ghana Export-Import Bank entered into a cooperation framework agreement with the Export and Import Bank of the US (EXIM Bank), under which the former will secure $300m for Ghanaian SMEs to purchase inputs from US suppliers. Under this arrangement, a $10m facility will be provided for companies to purchase equipment or services from the US, subject to the EXIM Bank’s due diligence of the SMEs.

Other funding sources are also in the pipeline. “With support from the World Bank, the Venture Capital Trust Fund (VCTF) is expecting to receive about $47m over six years to support start-ups and SMEs operating in transformational sectors. In addition, the VCTF will launch an industrial support fund for the 1D1F policy. Venture capital, as a long-term form of investment, is an ideal financing tool for industrialisation,” Yaw Owusu-Brempong, CEO of the VCTF, told OBG.

Projects

Since the start of the programme, more than 900 applications have been received by the 1D1F Secretariat and around 200 are at various stages of implementation. Of the projects in progress, 58 were operating and 26 were under construction as of December 2019. The projects cover 112 districts, although they are largely concentrated in the Ashanti, Eastern, Central and Greater Accra regions.

As the initiative is still in its infancy, its real impact on the Ghanaian economy has yet to be measured. One of the most significant challenges is the lack of access to infrastructure in less developed regions, where the ability to transport goods is limited. This is likely to improve as a result of the significant investment being channelled into transport infrastructure. For example, in July 2019 the Ministry of Information announced that GHS3bn ($581.1m) would be allocated to repair roads leading to cocoa farms, helping to support one of the country’s major exports (see Agriculture chapter).

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The Report: Ghana 2020

Industry & Retail chapter from The Report: Ghana 2020

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