Ghana’s post-independence experience in development is one of many typical stories of Sub-Saharan African nations that had the luxury of avoiding protracted civil wars (with its own slight variations, of course). These countries share a collective experience, in that they “revolted against foreign rule, or negotiated with foreign rulers to gain political and economic independence, and undertook far-reaching development programmes in the attempt to improve their welfare, with widely differing results” (Frimpong-Ansah 1992, 1). Together, these newly independent states witnessed a socialist state capital
development period in the 1960s and 1970s. Subsequently, from the mid-1980s to date, they started adopting, with varying degrees, a gradual shift towards a more market- oriented style of development.
Ghana gained her independence and broke away from the British Empire in 1957, and three years later, in 1960, Ghana became a republic. During the administrations of Nkrumah (1960–1966), Busia (1969–1972) and the Supreme Military Council (1972– 1979), Ghana pursued a development plan that largely depended on domestic
construction and growth. During this period of time, development was “inward-looking with an emphasis on eradicating spatial inequalities inherited from the colonial era,” and “global concerns were not at the core of development practice in the era of big ‘D’ development in Ghana” (Yeboah 2006, 51–52). The state assumed the role of guiding economic growth through massive projects and ambitious attempts to provide universal coverage of services (e.g., utility provision) to the population—a typical example of state
capitalism, or “statism.” Underlying this Keynesian approach was the belief that the new political leaders and economic managers of the post-colonial nation would make rational choices in economic decisions that would serve and enhance the welfare of the majority, if not all, of the population. In practice, such high involvement of government in
economic activities was reflected in the proliferation of state-owned assets and enterprises, whose public ownership was justified by arguments of social equity, economic independence and self-reliance—idealistic, but important labels for any post- colonial regime and population.
Edjekumhene, Amadu and Brew-Hammond (2001, 1–2) offer an excellent account of the early state-led development years in Ghana. Starting from the first
president Kwame Nkruma until the coup d’etat on New Year’s Eve in 1981, the idea and practice of state-led economic activities and state-owned enterprises set up as “statutory bodies or companies to carry out specific tasks” were “the development paradigm then in vogue”, and the private sector was seen as “unable or unwilling to undertake such venture at the time.” It was an imperative for the government to “own, operate, and control the ‘commanding heights’ of the economy,” and to provide “vital public services or utilities such as the provision of electricity, water and telecommunication.” In the 1960s and 1970s, “moderate successes” were recorded for the state “as the engine of economic growth.” Jobs were created, import substitution industries proliferated and massive infrastructure projects were carried out.
For example, in the electricity sector, Asante (2006) gives a detailed account of the growth of the state-owned assets and state-controlled utility provision in Ghana’s post-independence history. In 1914, the central region of the capital city, Accra,
witnessed the first public electricity supply in the country under the colonial rule. Isolated, small electricity supply systems appeared in different parts of the country throughout the first half of the twentieth century. Prior to the eve of independence, public electricity supply systems were already providing for many towns and communities; however, these providers and networks were largely isolated. It was only after Ghana gained its independence that a nation-wide electricity-generation and provision network was brought to the agenda and ambitiously carried out.
In 1961, four years after Ghana gained its independence and one year after the attainment of republic status, the Ghanaian government passed the Volta River
Development Act (1961), which established the Volta River Authority)—a state-owned entity responsible for the generation and transmission of electricity in Ghana. The construction of the Akosombo Dam formally commenced in 1962 and was completed in 1967—a project that echoed the Hoover Dam, in its own scale of course. Between the 1960s and mid-1980s, state-owned electricity infrastructure grew steadily and reached its peak when another giant undertaking, the Kpong Hydroelectric Project (another dam), was successfully commissioned in 1982, a year before the invasion of structural adjustments in 1983. Both projects continue to supply electricity to the majority of the county to this date. The government, in particular the Volta River Authority, was the architect of these projects and was in charge of the planning and execution throughout the whole processes. No private sector entity was involved except for studies commissioned and outsourced to Western consultants. At approximately the same time that the
Akosombo Dam was being built, in the water sector, the Ghana Water and Sewerage Corporation (GWSC) was established in 1965—another one of the many elements of
such state-guided and controlled development (to be elaborated in later parts of the chapter).
When Ghana became independent in 1957, the nation was hailed as the first to rid itself of colonialism in Sub-Saharan Africa. It was widely believed that the new nation would embark on a journey of rapid economic growth, accompanied with social equity and justice, as she had “a considerable head start over many countries” in the region (Dzorgbo 2001). It was exactly with this optimism that the Government of Ghana
assumed responsibility of guiding the state into a social-economic blossoming during the immediate two decades following the nation’s independence (the 1960s and 1970s). Ghana became “one of the first countries in Africa to make a bold attempt at planned economic development” with new programs of modernization that generated their own momentum and dominated decision-making processes regarding the running of the country (Frimpong-Ansah 1992, 2–3). However, “by the end of [the] 1970s Ghana paradoxically became the first country in twentieth century Africa to have experienced socio-economic decline” (Dzorgbo 2001). Ghanaians became “the first on the African continent to suffer real failure in economic development, and to resign themselves to the humiliating disintegration of a post-independence political economy” (Frimpong-Ansah 1992, 3).
At the dawn of the 1980s, the previous “three decades of euphoric adventures in development” came to a halt (Frimpong-Ansah 1992, 4). Ghana was facing multiple difficulties as national debt was accumulating and the economy was on the verge of collapse. The negative impact of the drop of the cocoa price on the international level certainly played a direct role in exacerbating the situation. However, multiple sources
point out that the inability and incompetency of the state as the conductor of the development orchestra were the root causes of the crisis. On the domestic level, on the one hand, the accumulated economic burdens and bad policies in the economic realm overstretched the government’s ability to its breaking point. On the other hand, the “vampire state” of the Government of Ghana intrinsically damaged the economy that it was supposed to lead in growth.
On the enterprise/firm level, Ghana’s state-owned and managed enterprises were trapped with poor financial results and low productivity for many years prior to the crisis of the 1970s and 1980s. As a result, to sustain these state enterprises, the government had to continuously subsidize them by using tax money or borrowing, which led to an
increasing debt burden and the diversion of resources that could be better used in other domains. During the first half the 1980s, it is recorded that between eight to ten percent of government expenditures went to support under-performing state-owned enterprises (Edjekumhene, Amadu, and Brew-Hammond 2001). On the national level, the successive administrations of the Ghanaian government, civilian and military ones alike, were accused of failing or being unable to “develop consensual politics and a clearly specified long-term development objective that could be widely understood, accepted and have relevance for policy making” (Dzorgbo 2001). In addition, the “vampire state” of Ghana, hijacked by a small group of people who took advantage of their power in the state to seek private benefits for themselves or their cronies, was intrinsically undercutting the economy in both the short and long run (Frimpong-Ansah 1992).
As a result, between 1980 and 1983, Ghana registered negative GDP growth rates, and the Provisional National Defense Council (PNDC) government, which came into
power after a coup d’etat in late 1981 and inherited an economy on the brink of disaster, was forced to launch the Economic Recovery Program, which was guided by the World Bank and IMF, and to unleash three successive Structural Adjustment Programmes (Edjekumhene, Amadu, and Brew-Hammond 2001; Kapur et al. 1991; Parfitt 1995; Tangri 1991).