Home BUSINESS Too ambitious! 1D1F target won’t be achieved this year – EIU

Too ambitious! 1D1F target won’t be achieved this year – EIU

The Economic Intelligence Unit (EIU) has predicted that the Akufo-Addo government is not likely to fulfil its pledge to establish 181 factories under the One District, One Factory (1D1F) initiative by the end of this year.

The forecasters explain that Ghana’s regional imbalances coupled with broader issues of a poorly trained workforce and weaknesses in the business environment are among the reasons the 1D1F target for this year will be missed.

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The Minister of Trade and Industry, Alan Kyeremanten said in May this year that the 181 factories were at different stages of completion across the country.

According to him, the factories under the 1D1F project will not be built by the government, explaining that the initiative will be private investor-led.

“This initiative is for business people who have their monies to establish factories in the various districts and then the government will only support them to create those factories in the districts”, he said during a meet-the-press encounter in May this year.

In its latest report on Ghana, the EIU makes the following points regarding Ghana’s policy trends:

“The NPP administration will continue to prioritise industrialisation, in line with its election pledges. As part of this strategy, it aims to establish at least one factory in each of Ghana’s 260 districts by 2020 under the One District, One Factory (1D1F) initiative.

“The government aims to have 181 projects operational by end-2019, although we believe that this is unlikely, given limited progress over the year to date. There are stark regional imbalances—with development hampered by a lack of supporting infrastructure—combined with broader issues of a poorly trained workforce and weaknesses in the business environment.

“The authorities are also keen to develop domestic refinery capacity to allow the upstream oil industry to improve value-added and revenue generation. However, poor data quality reduced investor interest in the licensing round announced in July.

“On a positive note, the administration continues to focus on the need to improve the business environment in order to boost private­sector investment—achieving some success, with investments across industries—although we believe that the government’s industrialisation strategy is too ambitious, given broader barriers to growth.”\

Gas boom

The report also observed that Ghana’s gas boom has become a fiscal burden and explained in the following paragraph:

“Ghana started producing gas in associated form in 2011, when the Jubilee oilfield came on stream, with capacity for around 120m cu ft/d to be sent first to the Aboadze Power Enclave, near Takoradi.

“Production increased by some 50m cu ft/d when the TEN oilfields development was commissioned in 2016, in the same year in which WAGPCo cut supplies to the VRA over unpaid debt—both events strengthening the rationale for the TTIP, which had been launched by the government the previous year.

“However, long delays ensued, blame for which has been traded by the New Patriotic Party, which is currently in government, and its predecessor, the National Democratic Congress. Strained relations with WAGPCo over continued payment issues also hindered progress. These tensions have eased since late 2018, following the settlement of more than 50% of arrears and regularised reimbursement for ongoing consumption.

“The commissioning in June 2018 of the country’s first field producing solely gas—Sankofa—with capacity of 180m cu ft/d rendered even more egregious the lack of a means to deliver the gas to the main demand centre. According to a joint announcement, the pipeline interconnection was ultimately completed by means of collaboration between GNPC, WAGPCo and the foreign shareholders in the upstream project—Eni, Sankofa’s Italian operator, and Vitol, a Swiss­based commodity trader.

“Completion of the TTIP will probably reduce costs at the Tema thermal power plants by replacing liquid fuel used when gas runs short by all but one of the facilities, while increasing the predictability of gas supplies. The project is also—like the relocation of the 470­MW Karpower floating power plant from Tema to Sekondi, near Takoradi, which belatedly began in mid-August —aimed at monetising some of the gas currently “stranded” at Sankofa.

“The so­called “powership” was commissioned in 2015 from Karadeniz Holding, a Turkish company, but has been running on liquid fuel, partly defeating the object of its procurement is it not being leased. The twin developments will mitigate rather than resolve the chief financial weakness currently afflicting the country’s gas and power sectors—namely the “take or pay” contracts in place with suppliers of both resources.

“On a “take or pay” basis, GNPC is contracted to offtaking 154m cu ft/d of the Sankofa output, without any means to deliver the gas to Tema. Around 60m cu ft/d is sent to help to feed generation facilities at Takoradi, which is already supplied with gas from the Jubilee and TEN fields, but the state firm is nonetheless facing the prospect of wasting hundreds of millions of dollars annually paying for unused gas, a situation causing local consternation, not least because consumers are paying higher fuel prices in order to help the government to clear its energy debts.”

Source: Myjoyonline.com

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