SOO Annex E - USAID Ghana PSLA Report.pdf

This publication was produced for review by the United States Agency for International Development. It was prepared by Resonance under the USAID Center for Transformational Partnerships (CTP) Promoting Excellence in Private Sector Engagement (PEPSE) program.

PRIVATE SECTOR LANDSCAPE

ASSESSMENT

USAID/GHANA

April 2020

USAID WEST AFRICA TRADE AND INVESTMENT HUB

CONTENTS

LIST OF ACRONYMS 1

EXECUTIVE SUMMARY 2

GHANA PSLA REPORT 10

INTRODUCTION 10

PSLA BACKGROUND 10

PRIVATE SECTOR CONTEXT 10

APPROACH AND METHODOLOGY 13

PRIVATE SECTOR PERSPECTIVES 14

ANALYZING QUALITATIVE DATA 15

OVERVIEW OF PRIVATE SECTOR’S CROSS-CUTTING CHALLENGES 15

DETAILS ON PRIVATE SECTOR’S CROSS-CUTTING CHALLENGES 17

REFERENCES TO REGIONAL DISPARITIES AND CONFLICT 27

PERCEPTIONS OF AND EXPERIENCE WITH USAID 28

PSE OPPORTUNITY AREAS: WHERE SHOULD USAID ENGAGE? 32

HUMAN CAPITAL 33

ENABLING ENVIRONMENT 35

ACCESS TO FINANCE 36

PRIVATE SECTOR AND SME CAPACITY 37

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LIST OF ACRONYMS

ACRONYM NAME

ADVANCE Agricultural Development and Value Chain Enhancement Project

BAS Business Advisory Services

BDS Business Development Services

CLA Collaboration, Learning, and Adaptation

CSO Civil Society Organizations

DFC United States Development Finance Corporation

DOS United States Department of State

ECOWAS Economic Community of West African States

FinGAP Financing Ghanaian Agriculture Project

GDP Gross Domestic Product

GHS Ghana Health Service

GNI Gross National Income

GOG Government of Ghana

J2SR Journey to Self-Reliance

LPI International Logistics Performance Index

MNC Multinational Corporation

MSI Multi-stakeholder Initiative

NEET Not in Education, Employment, or Training

NGO Non-governmental Organization

PEPSE USAID Promoting Excellence in Private Sector Excellence Program

PSE Private Sector Engagement

PSLA Private Sector Landscape Assessment

RSPO Roundtable for Sustainable Palm Oil

SME Small and Medium-sized Enterprises

STEM Science, Technology, Engineering, and Mathematics

UNDP United Nations Development Programme

USAID United States Agency for International Development

USG United States Government

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EXECUTIVE SUMMARY

PSLA BACKGROUND

USAID is undertaking a cultural and operational transformation to expand engagement with the private sector and to achieve outcomes of shared interest and shared value. The USAID Private Sector Engagement (PSE) Policy is an Agency-wide call to action. The Policy’s mandate is to work with the private sector to design and deliver development and humanitarian programs across all sectors and to harness resources to open markets and opportunities for U.S. businesses. The PSE Policy signals an intentional shift to pursue market-based approaches and investment as a means to accelerate countries’ progress on their Journey to Self-Reliance (J2SR).

To implement the PSE Policy and its PSE Plan, USAID/Ghana aims to integrate private sector perspectives into its strategic priorities and deepen its engagement with the private sector to enhance the impact of development programming. As such, USAID/Ghana requested support from the Promoting Excellence in Private Sector Engagement (PEPSE) mechanism to conduct a private sector landscape assessment (PSLA). To assist Ghana in moving “Beyond Aid” and advancing in its J2SR, the PSLA explores opportunities to engage the private sector in cross-cutting areas as well as in the specific sectors of agriculture, health, education, democracy and governance, and energy.

PRIVATE SECTOR CONTEXT

After years of consistent economic growth, Ghana’s economy continued to expand in 2019, with real gross domestic product (GDP) growth estimated at 7.1%. High growth momentum since 2017 places Ghana among Africa’s ten fastest-growing economies.1 This has made Ghana an attractive market for local, regional, and international private sector companies, which often see the country as a gateway to Africa.2 Macroeconomic improvements have increased domestic demand and private consumption.3

However, businesses in Ghana continue to face major hurdles, including challenges related to a financial sector plagued by high interest rates of 23–30%, bad loans, and significant collateral requirements. In addition to these financial issues, companies in Ghana face an unfavorable enabling environment, infrastructure and energy obstacles that prevent growth, competition from regional neighbors, resource gaps, and social disruption. Some of these challenges have been exacerbated by the country’s ongoing economic transformation as it moves from dependence on extractives and agriculture to a greater focus on knowledge, consumption, and services. The private sector shares USAID/Ghana’s interest in facilitating and enabling economic transformation while mitigating its destabilizing effects. Ghana’s private sector is ready to collaborate to narrow the gap between Ghana’s legacy development deficits and the needs of an evolving economy.

APPROACH AND METHODOLOGY

The PSLA process began with desk research to understand the context in which the private sector operates, particularly challenges and barriers toward private investment and growth. Following desk research, a team of ten technical experts conducted 169 targeted interviews in October and November 2018 with a wide range of actors operating in and with the private sector in Ghana. These included private sector actors themselves (local companies, multinational corporations [MNCs], and business phieronimus Comment on Text Let's remove "beyond aid" references throughout the document--just using Journey to self-reliance instead phieronimus Comment on Text Phrasing awkward. please re-phrase

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associations), technical experts, government officials, donors, and civil society organizations (CSOs). The interviews focused on understanding the challenges that the private sector faces, where private sector interests align with USAID/Ghana’s development objectives, and how USAID/Ghana can engage the private sector around aligned interests. Interviewees spanned various sectors, sub-sectors, and industries in seven major Ghanaian cities (Accra, Tema, Takoradi, Kumasi, Tamale, Bolgatanga, and Wa).

The team applied a structured approach to interpret the interview results: They used coding to identify and track common themes in the qualitative data collected through interviews, and then analyzed how those themes appeared across the data. The PSLA team uploaded notes from the 169 interviews conducted in Ghana into a qualitative coding software program. Following the upload, PEPSE attached descriptors to each interview, which enabled the team to label each organization by type (e.g. for-profit, non-governmental organization [NGO], etc.), size (number of employees), industry, and reach (local, national, regional, or international). Once the descriptors were applied, PEPSE isolated the interviews conducted specifically with private sector organizations by filtering for for-profit companies and industry associations or apex organizations,a resulting in a sample size of 97 private sector organizations.

The team then applied a rigorous and structured approach to analyzing the qualitative data from the 97 private sector interviews. Analysis involved organizing two primary types of information into two ‘code trees’: 1) challenges the organizations were facing; and 2) experience with and perceptions of USAID.

The team applied labels (or ‘codes’) to data within each of these code trees to summarize the main points conveyed by interviewees. These codes were checked by more than one team member to mitigate possible bias in the analysis throughout the coding process.

As similar codes started to be applied to more and more interviews, themes emerged from the qualitative data and codes were grouped together under high-level categories. Lastly, PEPSE utilized analytical tools within the coding software to disaggregate data by organization size, industry, and reach, which helped test the strength of the findings and determine whether certain results were more common among organizations of a specific size or industry.

PRIVATE SECTOR PERSPECTIVES

CROSS-CUTTING CHALLENGES

Through the PSLA’s rigorous analysis of qualitative data, six challenge areas emerged as the most critical from the private sector perspective: human capital, enabling environment, access to finance, infrastructure and logistics, energy and the environment, and the capacity of the private sector and small and medium-sized enterprise (SMEs). These areas offer entry points for USAID/Ghana to explore opportunities to leverage and/or enhance private sector resources and expertise in support of Ghana’s J2SR. Each of these challenge areas is explored in further detail below.

a An apex organization is a second-tier organization, e.g., a federation of cooperatives or associations.

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HUMAN CAPITAL. Of the 97 private sector organizations interviewed, 66% highlighted human capital as a constraint to operations and growth. This challenge area was consistently cited as critical by private sector actors across sizes and industries. The majority of these organizations highlighted education and workforce development challenges (64%) as particularly significant hurdles, but the challenge area also included themes of youth and social instability, as well as women’s economic empowerment (WEE).

EDUCATION AND WORKFORCE DEVELOPMENT. Private sector actors reported a lack of access to qualified staff due to a ‘talent gap’ between market needs and what Ghana’s workforce offers. They argued that this results from Ghana’s inadequate education and training systems, which place greater emphasis on theory than on practical skills. Private sector interviewees decried the lack of professional and practical skills such as critical thinking, communication, and basic business acumen (e.g. financial management). Across industries, interviewees reported that weak managerial and entrepreneurial skills reduce firms’ productivity. Some interviewees also highlighted a lack of technical skills in the workforce, especially for industries such as medicine, where the high cost of training medical professionals leads to a low supply of doctors.

YOUTH AND SOCIAL INSTABILITY. Related to workforce development challenges, private sector actors are also concerned about Ghana’s ‘youth bulge.’ The high share of youth in Ghana’s population creates social and economic challenges, especially due to high unemployment and underemployment among youth. Many youth struggle to obtain and retain formal jobs in Ghana’s new high-skilled labor market, yet they often lack the skills required for successful entrepreneurship or profitable commercial agriculture. Frustrated by their limited economic opportunities, unemployed and underemployed youth can lead to social instability.

WOMEN’S ECONOMIC EMPOWERMENT. WEE and gender inequality were cited among human capital challenges. Private actors recognized that women are underrepresented in industries like science, technology, engineering, and mathematics (STEM). Also, although women make up a significant portion of agriculture and apparel workforces, they are typically concentrated in lower-paying positions and are not involved in the business or management side of the industry.

ENABLING ENVIRONMENT. Ghana’s challenging enabling environment emerged as the second most critical challenge area faced by the private sector, with 63% of private sector organizations highlighting it as important. The Ghanaian enabling environment is marked by delayed government payments that hurt business processes and result in significant loss. Businesses also experience an inadequate regulatory environment with unclear government directives and policies, as well as a lack of implementation of policies that are otherwise strong ‘on paper.’ Customs and tax issues were also reported as challenges.

ACCESS TO FINANCE. Difficulty accessing affordable financing was cited by 60% of private sector organizations as a current challenge, as well as a constraint to future plans. Interviewees highlighted high collateral requirements, high lending rates, delays in receiving loan disbursements, and financing that is generally unsuitable for private sector needs. They also mentioned systemic banking issues, such as bad loans and instances in which banks do not hold sufficient deposits to lend.

INFRASTRUCTURE AND LOGISTICS. According to 31% of the private sector organizations interviewed, infrastructure and logistics is also a key challenge area, though far less important than the previous three. The organizations that cited infrastructure and logistics as a key challenge span sectors including agriculture, healthcare, and general industry. Interviewees highlighted problems with Ghana’s

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road, transportation, water/irrigation, and sanitation systems. They lamented the fact that infrastructure issues often increase the overall cost of production or hinder the delivery of products and services.

ENERGY AND THE ENVIRONMENT. Energy emerged as a challenge for private sector actors across industries. Private sector actors commented on unreliable and inconsistent power supplies, especially in rural areas, and on the poor management of electrical power systems. Interviewees also perceived the cost of oil, gas, and solar to be high and reported that this restricts day-to-day business processes and practices. Businesses pointed to a need for renewable energy and more reliable power structures. In addition, some private sector organizations are concerned about environmental issues, though these tended to be involved in agribusiness and thus more acutely affected by problems like climate change.

PRIVATE SECTOR AND SME CAPACITY. Only 14% of private sector interviewees cited the capacity of the private sector and/or small and medium-sized enterprises (SMEs) as a challenge; however, it is included here as a key cross-cutting challenge area because of its large impact on private sector performance. In addition, there was likely overlap with human capital references in the data, as some interviewees may have been reluctant to admit their own weaknesses and instead pointed to general human capital challenges. Capacity was particularly highlighted by investors and business advisory firms, which discussed low investment readiness. Some entrepreneurs and SMEs also recognized their internal hindrances, especially a lack of business acumen.

PERCEPTIONS OF AND EXPERIENCE WITH USAID

Of the 97 private sector organizations interviewed, 23% discussed having collaborated with USAID in the past through the Financing Ghanaian Agriculture Project (FinGAP) and other programs, participation in co-creation mechanisms, or as implementing partners. These private actors included financial service providers, business advisory services, manufacturers, and businesses working in education, health, agriculture, and logistics. Many of these interviewees relayed positive perceptions of USAID or its projects but questioned the sustainability of the services and impact delivered during the projects. Some of the interviewees shared unfavorable perceptions or experiences involving USAID.

FINGAP. About one-third of organizations that had worked with USAID in the past had specifically been involved with FinGAP. Banks and agribusinesses involved with the project consider it to have been successful because it helped firms process investments, provided capacity-building services to agribusinesses, and enabled investment in agricultural value chains. However, FinGAP’s sustainability was a concern: Some interviewees wondered how the gap that was left when the project ended will be filled.

OTHER SUCCESSES. In addition to FinGAP, private sector actors—such as Impact Hub and Ashesi University—relayed their connection to and collaboration with USAID, highlighting the positive outcomes of that relationship. Impact Hub is a collaborative working space funded by USAID that scales entrepreneurship skills-building and provides growth support services to innovative start-up businesses, including accelerator programs for entrepreneurs, as well as pitch and leadership workshops. Impact Hub maintains relationships with multiple MNCs and is on a positive trajectory. Ashesi University (a private, nonprofit Ghanaian university) and the Massachusetts Institute of Technology (MIT) D-Lab partnership, funded by USAID, is also moving in a positive direction.

UNFAVORABLE EXPERIENCES WITH USAID. Some private sector organizations criticized USAID bureaucracy, pointed to a lack of awareness of USAID activities outside of its role as a donor phieronimus

If it is not so for solar as Mark suggests, is this addressed later--noticed you use word perceive here

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organization, and complained about inadequate USAID support at critical times during previous engagements. This anecdotal evidence points to a need for USAID to better adapt to how the private sector operates. It especially highlights a need for USAID to ensure regular communication, support, and follow-up throughout the course of any engagement with the private sector.

PSE OPPORTUNITY AREAS: WHERE SHOULD USAID ENGAGE?

Determining alignment between an individual private sector actor’s interests and development objectives is an important part of exploring the potential to partner with each company or organization.

Understanding common private sector interests will equip USAID/Ghana with necessary background information to develop or strengthen relationships with the private sector and will help USAID/Ghana prioritize its PSE ideas. PSLA field research revealed the private sector’s vested interests in helping to address the major challenges it faces and in converting these challenges into opportunities for innovation and growth.

Based on the rigorous and structured analysis of the interviews conducted with private sector actors, the team recommends that USAID/Ghana engage the private sector around the critical opportunity areas of human capital (including youth and women), enabling environment, access to finance, and private sector and SME capacity. Human capital, enabling environment, and access to finance were each mentioned by at least 60% of private sector actors interviewed during the PSLA and have therefore been prioritized for PSE recommendations. Other challenges were mentioned by far fewer private sector organizations and have therefore not been prioritized for PSE recommendations, with the exception of private sector and SME capacity. The team decided to include this as a key challenge area because of its connection to youth-focused workforce development (a key part of human capital issues in Ghana), the fact that the interviewees who mentioned it felt that it strongly impacted their business specifically and the private sector generally, and its significant potential for sustainable cross-cutting impact. In addition, there may have been overlapping data with human capital, as some interviewees may have preferred to describe general limitations in Ghana’s workforce instead of their own internal challenges.

The specific cross-cutting PSE recommendations that follow were selected based on a combination of criteria: aligned interests between the private sector and USAID/Ghana’s development objectives, the potential for sustainability and catalytic or systemic impact, and how feasible they would be to achieve.

Annex 1 contains more detailed explanations of the recommendations below.

HUMAN CAPITAL

WORKFORCE DEVELOPMENT AND YOUTH

SUPPORT AND STRENGTHEN YOUTH SKILLS DEVELOPMENT AND CAREER GUIDANCE

Foster collaboration to tackle the skill mismatch in the labor market. USAID/Ghana can use its convening power and cross-sector visibility to promote dialogue and collective actions aimed at building marketable skills of students and recent graduates across sectors. Specific activities can include:

Launch or support public-private dialogue around workforce development priorities. USAID/Ghana can convene universities, other youth training institutions, business associations, large firms with large and growing workforce needs, and government actors such as the Ministry of Education. Cross-phieronimus Comment on Text Is this only for youth--what about older Ghanaians looking to re-tool? Given that Human Capital is rated a high priority, it seems that non-youth should also be included.

phieronimus Comment on Text Not youth specific but as universities are listed first it appears to be phieronimus

Pull this emphasis up a bit and if you have an additional rec to make on it great--youth is a great emphasis but i think there is a) general HC development b) youth development and c) women's HC develoment as well captured in following section

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sector dialogue can help highlight critical skills gaps and identify opportunities for workforce development focused collaboration.

Bolster private sector involvement in curricula development. USAID/Ghana can facilitate cross-sector discussions and collaboration to adjust curricula to better align with business needs.

Co-create and co-invest in industry-led training initiatives. USAID can help employers, universities, and training centers identify opportunities to co-create and co-invest in multi-stakeholder initiatives (MSIs) designed to promote market-oriented skills building.

Scale existing and privately funded initiatives. For example, SEO Africa identifies, trains, and mentors high-potential future African leaders and links them with corporations looking for talent.

Support and build upon entrepreneurship initiatives targeting youth. Not all youth will choose or have access to formal employment, so entrepreneurship is an important part of youth-focused programming. USAID/Ghana can support existing youth-focused entrepreneurship initiatives.

WOMEN’S ECONOMIC EMPOWERMENT

SUPPORT EXISTING EFFORTS TO ADVANCE WEE AND EXPLORE THE POTENTIAL FOR A

NEW MULTI-STAKEHOLDER INITIATIVE

Leverage the current efforts of private firms and other organizations. USAID/Ghana can support efforts that strengthen entrepreneurship, SMEs, and capital mobilization among women or that give women the skills and encouragement to enter traditionally underrepresented sectors (e.g. technology).

USAID/Ghana can also encourage broad-based, SME-focused initiatives to target women with tailored services.

Encourage corporate leaders to begin or scale efforts to identify and build women leaders.

Collaboration can involve joint activities and experience sharing across multiple corporate partners, internship programs focused on future employees and emerging women managers, fellowship programs to help women entrepreneurs, and mentorship programs for women employees.

Partner with corporations and apex organizations to fund scholarships and job placements in areas where women are underrepresented. These initiatives can focus on both technical and management skills so that women will be better positioned for higher-paying positions and promotions.

Identify and connect women-led enterprises to capital mobilization resources and activities.

There are various activities and organizations focused on access to finance that USAID/Ghana can leverage for efforts specifically tailored to women and the barriers they face.

Convene corporations, financial institutions, and educational institutions to explore opportunities for collaboration. USAID/Ghana can facilitate discussion to help stakeholders identify possible opportunities to collaborate. USAID/Ghana can also gauge stakeholder interest in developing an MSI to advance WEE in the workforce and/or in entrepreneurship.

phieronimus

This is not youth specific but kind of gets lost in the way this section is presented--youth are a great focus, but should not be the exclusive focus of filling the talent gap phieronimus Comment on Text phieronimus Comment on Text youth oriented but not necessarily youth exclusive phieronimus

Is this previously spelled out?

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IMPROVE WOMEN’S ROLES IN SECTORS ALREADY ENGAGING MANY WOMEN

Engage anchor buyers in agricultural supply chains that employ a large number of women to augment women’s roles. USAID/Ghana can help raise the profile of women as employees and farmer suppliers through individual partnerships or MSIs with large buyers/employers, supermarkets, and associations.

Co-create a women’s empowerment initiative that generates jobs in the apparel sector.

USAID/Ghana can target the apparel sector’s high concentration of women workers in order to increase women’s employment, provide skills training specifically aimed at professional advancement, and leverage factories for workplace interventions to improve women’s well-being.

ENABLING ENVIRONMENT

CONTRIBUTE TO IMPROVED PUBLIC-PRIVATE RELATIONSHIPS

Build a business advisory forum to advise USAID/Ghana. USAID/Ghana can lead by example by providing a platform for private sector leaders to communicate with USAID/Ghana leadership and staff.

USAID/Ghana has taken steps toward this by including individuals from the private sector on the Mission’s Strategic Advisory Board, including representatives from chambers of commerce.

Improve public-private relationships. USAID/Ghana can leverage its convening power and neutral third-party status to establish or strengthen dialogue processes that involve the private sector early and often in policy formulation and implementation. This would focus on shaping a facilitative conversation around common objectives between the public and private sectors. As appropriate, USAID/Ghana can attend policy discussions with the GoG and associations, assess and strengthen existing dialogue platforms, and co-organize public-private discussions.

STRENGTHEN PRIVATE SECTOR ADVOCACY CAPABILITIES

Strengthen Ghana’s existing coalition of business associations and chambers of commerce.

USAID helped create the Private Enterprise Federation (PEF) to provide private sector advocacy and leadership, with key business associations and chambers as members. USAID/Ghana can explore how to strengthen PEF, including through an impact evaluation of the support PEF has already received.

Improve the capacity of the private sector to effectively engage the GoG. Programs can provide training and support to chambers and associations to improve their member services. USAID/Ghana can also collaborate with large chambers to mentor and support smaller ones.

HELP ADDRESS SPECIFIC ENABLING ENVIRONMENT ISSUES

Collaborate with the World Bank, GoG, and technology partners to promote e-governance solutions for greater transparency, accountability, and efficiency. USAID/Ghana can help seed a movement aimed at promoting the use of e-governance solutions, including the development of payment systems that infuse more transparency into government payments and procurement, limit opportunities for corruption, reduce human influence, and create efficiencies through payment automation. This could drive ICT market development through the GoG’s own demand for e-services while improving access to services and reducing costs.

phieronimus previously spelled out?

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Collaborate with the GoG and the private sector to tackle specific problems. USAID/Ghana can help the PEF and other representative private sector bodies tackle priority issues, including longer-term efforts, like improving GoG procurement systems, payment terms to private sector service providers, and tax rolls.

ACCESS TO FINANCE

HELP CONNECT SMES WITH FINANCING AND CAPITAL SOURCES WITH INVESTMENT

OPPORTUNITIES

Stimulate the creation of a revolving SME loan fund. USAID/Ghana can work with donors, the GoG, and investors to design a revolving loan fund in which financial institutions would be 100% responsible for the funds they mobilized. Creating this type of mechanism would increase an SME’s options for funding and would add diversity to an investor’s portfolio. In addition, a sidecar technical assistance (TA) facility could facilitate due diligence and risk assessments. There would be two core objectives: build financial institution capacity to work in new business segments/regions; and support SMEs to assemble complete loan packages and documentation, lowering the risk of investment.

Structure a new private sector-led investment platform that connects capital sources with investment opportunities. If the revolving SME loan fund were to be proved successful, USAID/Ghana can work with leading investors and business advisory service (BAS) providers to build a private sector-led investment platform. The platform would aim to address the needs of both SMEs and investors:

SMEs’ needs for BAS, access to finance, and information; and investors’ needs regarding pipeline development and the reduction of risks and transaction costs via TA. Sustainability would be a critical design objective.

PRIVATE SECTOR AND SME CAPACITY

EXPLORE THE POTENTIAL FOR A MULTI-STAKEHOLDER SME LEADERSHIP INITIATIVE

Convene stakeholders that support or work with SMEs. USAID/Ghana can convene chambers, industry associations, financial institutions, universities, and incubators/accelerators to identify collaborative opportunities to support entrepreneurship and SMEs. Through this effort, USAID/Ghana can gauge partner interest in co-creating an MSI to nurture a cohort of current and future SME leaders.

The following activities could be undertaken separately or by the MSI: 1) supporting the creation of business leadership curricula; 2) developing a mentorship initiative with financial institutions to help entrepreneurs understand investment readiness; 3) helping to launch an internship program to place Masters of Business Administration (MBA) students within SMEs; 4) tailoring peer-to-peer networks curated by business associations to support entrepreneurs; 5) highlighting the business benefit for large firms to sponsor entrepreneurs in their supply chains; and 6) partnering with existing enterprise incubator or accelerator programs.

phieronimus Comment on Text "could" phieronimus a or "an"?

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GHANA PSLA REPORT

Introduction

PSLA BACKGROUND

Ghana is one of the fastest-growing economies in the world and features a robust and rapidly maturing private sector primed to become a development partner. The country is a vital global supplier in several high-value agricultural, mineral, and energy value chains, and—bolstered by capable governing institutions and a stable regulatory environment—is an important and growing market for regional capital, goods, and services.

However, the private sector points to significant challenges it faces in Ghana, most notably in terms of human capital, enabling environment, access to finance, infrastructure and logistics, energy and the environment, and the capacity of the private sector and small and medium-sized enterprises (SMEs) capacity. These challenges limit the success of private sector actors, and they also represent key obstacles in Ghana’s Journey to Self-Reliance (J2SR). Addressing these challenges opens opportunities for USAID/Ghana to align private sector interests with development objectives. Targeting these aligned interests will help the Mission determine the most effective ways to engage the private sector, build and strengthen partnerships, and improve the sustainability of development outcomes.

This private sector landscape assessment (PSLA) is intended to help USAID/Ghana understand the challenges faced by the private sector from the perspective of private sector actors themselves and to identify opportunities for engagement accordingly. The PSLA process aims to help the Mission as it implements USAID’s Private Sector Engagement (PSE) Policy, released in December 2018.b The PSE Policy—structured to align with and contribute to the J2SR—advocates a broad shift from procurement-focused models to collaborative solutions and proposes a new approach that convenes, influences, and mobilizes others to achieve enterprise-driven outcomes. This report aims to inform USAID/Ghana’s efforts to engage the private sector in order to achieve stronger and more sustainable development outcomes.

PRIVATE SECTOR CONTEXT

Ghana has experienced significant economic growth in the past two decades, outperforming the average growth of members of the Economic Community of West African States (ECOWAS) for 11 out of the 15 years from 2000 through 2015.c (See Figure 1.) This overall economic growth has been partly driven b USAID’s PSE Policy is available at https://pages.usaid.gov/sites/default/files/usaid_psepolicy_final_signed.pdf c The Economic Community of West African States (ECOWAS) is comprised of Zone A members (Cape Verde, Gambia, Guinea, Guinea-Bissau, Liberia, Mali, Senegal, and Sierra Leone) and Zone B members (Benin, Burkina Faso, Ghana, Côte d’Ivoire, Niger, Nigeria, and Togo).

phieronimus awkward phrasing please re-phrase

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by strong growth in the mining and petroleum sectors due to their significant share of gross domestic product (GDP). However, the oil and gas industry is highly sensitive to global prices, and low prices since 2015 have led to fluctuations in oil’s contributions to Ghana’s GDP. For example, in 2018 the oil and gas industry in Ghana grew by 80.4%, but the following year the industry grew by only 3.6%.

Nonetheless, the World Bank forecasts that Ghanaian economic growth will increase in the coming years, driven by both the oil and non-oil sectors.4

Ghana’s exports are concentrated in extractives and agriculture. According to the World Bank’s World Integrated Trade Solution database, Ghana’s top export products in dollar terms are gold, petroleum, cocoa beans, and cashew nuts. In 2018, total export value was comprised of 51.2% raw materials and 42.8% intermediate goods, followed distantly by consumer goods (5.4%) and capital goods (0.5%).

Ghana’s economic growth has translated into material dividends for its citizens. According to World Bank research, every 1.0% increase in GDP in Ghana has led to a 2.5% reduction in the incidence of poverty, which is far better than the Sub-Saharan average of 1.6%.5 Today, 46.0% of Ghanaians are classified as middle class, compared to an Africa-wide average of 34.3%.6 This emerging segment of consumers—households earning more than $5,000 but less than $20,000 per year—is driving consumption growth in Ghana,7 making it an increasingly attractive market for local, regional, and global brands and a natural gateway into West Africa. AT Kearney’s 2019 Global Retail Development Index

-5%

0%

5%

10%

15%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

G D

P G ro w th

Ghana ECOWAS Average

FIGURE 1: GROSS DOMESTIC PRODUCT (GDP) GROWTH IN GHANA VS. ECOWAS AVERAGE (2000–2015)

GLOBAL CONSUMER INFLUENCE ON THE GHANAIAN ECONOMY

Multinational corporations (MNCs) are facing risks and losses due to climate change, increased legal accountability, and consumers that increasingly consider social and environmental factors in their purchasing decisions. As a result, corporations are investing more in the sustainability and transparency of their supply chains, with ripple effects throughout the Ghanaian economy.

For example, Unilever (producer of Skippy, Hellmann’s, Omo, and other household brands) has committed to sourcing 100% certified sustainable palm oil and most MNCs are following suit. In Ghana, palm oil producers have had to work toward industry certification standards by increasing efficiency, reducing waste, improving transparency, and reducing deforestation. Norpalm, a palm plantation and mill near Takoradi that supplies Unilever, is one such producer, making investments that allowed it to achieve Roundtable for Sustainable Palm Oil (RSPO) certification in 2017.

phieronimus maybe write at "1%" for ease of reading

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ranks Ghana as the fourth most attractive retail market in the world, “an easier and less risky place to do business than its larger neighbor Nigeria.”8 Companies are adapting to this evolving market in a way that impacts domestic value chains (see the Global Consumer Influence on the Ghanaian Economy box), as well as a with an ecosystem of support services, including marketing, advertising, and media; trade;

distribution and logistics; and finance.

Despite its economic successes, Ghana also faces significant hurdles. Pervasive corruption, an opaque and cumbersome land tenure regime, weak application of commercial laws, and other enabling environment issues significantly inhibit private sector expansion. Interest rates of 23–30% and high collateral requirements make bank financing impractical or unattainable for many businesses.

Competition from neighboring countries, particularly those with better port infrastructure, threatens Ghana’s status as a regional trade and economic hub.

Furthermore, while the transformative economic change taking place in Ghana is lifting millions of Ghanaians out of poverty, it also disrupts traditional lifestyles and customs, shifts social patterns, and creates the potential for unrest. Ghana’s urbanization rate is now higher than its population growth rate, with 57.3% of the population living in urban areas in 2020,9 driven largely by young Ghanaians flocking to Accra, Kumasi, and Sekondi-Takoradi in pursuit of education and employment. This has not only stretched urban capacity but has also widened socioeconomic disparities between urban and rural areas.10

Income, infrastructure, and other resource gaps between rural and urban Ghana have widened due to structural changes in the Ghanaian economy. Once dependent on agriculture, Ghana has successfully expanded its services sector to become the largest contributor to GDP (accounting for 43.0% of GDP in 2018).11 Although this shift is part of an agenda of economic transformation, it has also exacerbated the divide between northern and southern Ghana, as jobs have become more concentrated in higher-skilled sectors that are often located in urban centers in the south. According to a United Nations Development Programme (UNDP) briefing paper on inequality in Ghana, between 1992 and 2006 the number of people living in poverty in southern Ghana decreased by 2.5 million, whereas the number of people living in poverty in northern Ghana increased by 900,000.12 Growing urbanization and its associated pressures on housing and employment, coupled with increased conflict in the northern areas of the country, could jeopardize Ghana’s overall stability.

Ghana’s private sector is affected by these social and economic conditions, which can present obstacles to growth, reduce profitability, and negatively affect private sector competitiveness and export potential.

During interviews conducted in 2018, private sector organizations highlighted six critical challenge areas in particular as the most significant for their businesses: human capital (including workforce development, youth, and women’s economic empowerment); enabling environment; access to finance;

infrastructure and logistics; energy and the environment; and the capacity of the private sector and of small and medium-sized enterprises (SMEs).

Given the challenges that Ghana’s private sector faces and its desire for continued growth, USAID and the private sector have key interests that align: Both parties want to support and contribute to Ghana’s economic growth while also smoothing the social disruption that results from economic change.

Together, they should seek to anticipate negative externalities and work proactively to minimize the impact on key populations and on the economy. USAID/Ghana’s PSE strategy can be structured to support Ghana’s transition from a pre-industrial economy based on extraction and low-value agricultural phieronimus Comment on Text harmonize syntax so not a mix of commas and semi-colons phieronimus Comment on Text Did you address James' comment in the feedback version we provided? To my eye you did not, but maybe I'm missing it. Here is his comment from the other document for your reference to cross check: "In the below box, are you saying that multinational corporations in Ghana are facing legal accountability for human rights violations? Is there an example that you can cite? If not, then I suggest removing it that phrase."

phieronimus strike redundant words

13 | USAID/GHANA PRIVATE SECTOR LANDSCAPE ASSESSMENT USAID.GOV

production, toward an economy based on knowledge, consumption, and services. The sections that follow describe the most significant challenges that private sector interviewees highlighted (see Private Sector Perspectives section), as well as opportunities to engage the private sector around a shared interest to address these challenges (see PSE Opportunity Areas section).

Approach and Methodology

The PSLA process helps Mission staff understand the challenges, dynamics, and trends that influence the private sector, and it provides staff with discrete insights into specific partners or partnering opportunities. The process is a forward-looking exercise that does not assess the effectiveness of past partnering efforts but rather aims to analyze interviews with private sector actors to identify high-potential PSE opportunities across sectors, inform the Mission’s PSE Strategy, and inform how the Mission might integrate PSE into future programming.

The methodology for USAID/Ghana’s PSLA began with desk research to develop a knowledge base regarding key challenges and barriers affecting the private sector in the country. A PSLA team of ten technical experts then conducted targeted interviews in Ghana with Mission staff, experts, and private sector stakeholders. This fieldwork focused on understanding the challenges that the private sector is facing (i.e. its pain points) and how USAID/Ghana might help address these challenges, encourage investments to drive productivity and innovation, and—where interests align—engage the private sector around development objectives.

During three weeks in October and November 2018, the PSLA team interviewed 169 entities, including companies, associations, multinational corporations (MNCs), donors, nonprofits, civil society organizations (CSOs), and public sector bodies. Interviewees spanned various sectors, sub-sectors, and industries in seven major Ghanaian cities (Accra, Tema, Takoradi, Kumasi, Tamale, Bolgatanga, and Wa).

Figure 2 disaggregates these entities by type of organization and by organizational size and reach.

The team applied a structured approach to interpret the interview results. They identified and tracked common themes in the qualitative data (i.e. interview notes) by using coding to track themes and then analyzing how those themes appeared across the data. The Private Sector Perspectives section summarizes the results of the rigorous analysis of in-depth interviews with the private sector. In particular, the section describes the top six cross-cutting challenge areas identified by private sector organizations during interviews: human capital (including workforce development, youth, and women’s economic empowerment); enabling environment; access to finance; infrastructure and logistics; energy and the environment; and private sector and SME capacity. These challenge areas informed the PSE recommendations for USAID/Ghana that are outlined in the PSE Opportunity Areas section. Further recommendations and insights are included in the annexes.

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Private Sector Perspectives

Ghana has a fast-growing and dynamic private sector that has driven the country’s recent economic growth and structural transformation. Different industries and organizations have unique priorities for their business strategy, operations, and future investments. However, private sector actors are all acutely aware of the social, economic, environmental, and political issues in the country, since these pose challenges and opportunities that significantly influence business strategies and operations. The private sector’s vested interests in addressing these challenges and transforming them into strengths presents USAID/Ghana with avenues for engagement. This section provides insights into the private sector’s priorities and perceptions in order to help USAID/Ghana understand where private sector interests align with development objectives.

FIGURE 2: DEMOGRAPHICS OF THE 169 ORGANIZATIONS INTERVIEWED BY THE GHANA PSLA TEAM

For-profit companies

Apex & industry organizations

Government NGOs Academia & research

Bilaterals & multilaterals

Other

1–50 employees

50–100 employees

100–1000 employees

1000+ employees

Local National Regional International

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ANALYZING QUALITATIVE DATA

The PSLA team uploaded notes from the 169 interviews conducted in Ghana into a qualitative coding software program. Following the upload, PEPSE attached ‘descriptors’ to each interview. The descriptors enabled the team to label each organization with their organization type (for-profit, NGO, etc.), size (in number of employees), industry, and reach (local, national, regional, or international). Where necessary, descriptors were confirmed using information from LinkedIn, Bloomberg, business directories (e.g.

Kompass and Hoovers), and organizations’ own websites. For example, descriptors for Barclays Bank were for-profit corporation (organization type), 1000+ people (organization size), financial services (industry), and international (reach). Once the descriptors were applied, PEPSE isolated the interviews conducted specifically with private sector organizations by filtering for for-profit companies and business associations or apex organizations, resulting in a sample size of 97 private sector organizations. This section provides an in-depth analysis of the interviews conducted with these private sector organizations, 84 of which were for-profit corporations and 13 of which were business associations or apex organizations.

The team then applied a rigorous and structured approach to analyzing the qualitative data from the 97 private sector interviews. This involved applying specific codes to two primary types of information organized into two ‘code trees’: 1) challenges the organizations were facing; and 2) experience with and perceptions of USAID. The team applied labels (or ‘codes’) to data within each of these code trees to summarize the main points conveyed by interviewees. These codes were checked by more than one team member to mitigate possible bias in the analysis throughout the coding process.

As similar codes started to be applied to more and more interviews, themes emerged from the qualitative data and codes were grouped together under higher-level categories. For example, when analyzing challenges described by the private sector, the lower-level codes of education and workforce development, health of individuals, high labor costs, and empowerment of women/youth were grouped together under a single challenge area, called “human capital,” due to their interrelatedness and the frequency with which these lower-level codes appeared together in interviews. Similarly, codes such as high collateral for loans, cost of financing, and inappropriate type of financing were grouped together in one challenge area, called “access to finance.”

Lastly, PEPSE utilized analytical tools within the coding software to disaggregate data by organization size and industry. This helped the team test the strength of the findings and whether certain results were more common among organizations of a specific size or industry.

OVERVIEW OF PRIVATE SECTOR’S CROSS-CUTTING

CHALLENGES

Despite strong economic growth in Ghana over most of the last 20 years, the private sector faces significant challenges as it seeks to expand in national, regional, and global markets. Through the PSLA’s rigorous analysis of qualitative data, six challenge areas emerged as the most critical from the private sector perspective: human capital, enabling environment, access to finance, infrastructure and logistics, energy and the environment, and private sector and SME capacity.

These challenge areas offer multiple points of entry for USAID/Ghana as it considers ways to facilitate, leverage, and/or enhance private sector resources and expertise to support Ghana’s J2SR. Figure 3

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demonstrates strong evidence supporting the conclusion that human capital, enabling environment, and access to finance are the top challenges that Ghana’s private sector faces, since more than half of private sector organizations cited these as critical issues for their organizations. In contrast, infrastructure and logistics, energy and the environment, and private sector and SME capacity were not as widely discussed by private sector interviewees. However, the PSLA team also included this second group of challenges in this analysis because the organizations that do face these challenges view them as significant obstacles to growth. The team also recognizes that there is significant overlap with development programming in the country.

FIGURE 3: CHALLENGE AREAS IDENTIFIED BY PRIVATE SECTOR (PS) ORGANIZATIONS

The private sector’s prioritization of human capital, enabling environment, access to finance, and energy and environment remained fairly consistent regardless of organization size or industry.

However, infrastructure and logistics were more commonly cited by organizations with fewer than 100 employees than by larger organizations and were also more commonly cited by agribusinesses.

This may be explained by the fact that…