Ghana - Economic report

RETURN S1N RICTED REPORTO DES FILE ReportN0. EA-72b FILE COYOEWK This report was prepared for use within the Bank. In making it available to others, the Bank assumes no responsibility to them for the accuracy or completeness of the information contained herein. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT ECONOMIC REPORT Z W Fn xJ ON c O Z m Cn X< -4 GHANA r O z > \. 9 -4i JI 2 1- 0 0 -.C-> z - Cn) CO, Department of Operations Europe, Africa and Australasia CURRENCY EQUIVALENTS Unit: West African i 1 West African i . f 1 Sterling = U.S. $2.80 TABLE OF CONTENTS Page No. BASIC STATISTICS . . . . . .............. . i I. THE SETTING. . ........... . . . . . . . . 1 The Country . . . . . . . . . . . . . . . . . . . .1 The People . . . . . . . . . . . . . . . . . . . . 2 Politics . . . . . . . . . . . . . . . . . . . . . 4 II. GROWTH AND STRUCTURE OF THE ECONOMY . . . . . . . . 5 Growth of Exports . . . . . . . . . . . . . . . . . 5 Present Structure of the Economy . . . . . . . . . 8 III. INTERNAL AND EXTEPNAL FINANCE . . . . . .. . . . . 10 Currency and Banking..... . . . . . . . . . .. 10 The Cocca Marketing Board..... . . . . . . . . 12 Cocoa Pi-ce Policy and Stability...... . . . .13 Public Fiance.......... ....... . . . 14 Local Finance.....17 Tho Development Plan. .......... . . . . .18 The Outlook for Government Finance ........ 21 Balance of Payments and Sterling Assets .. . . . . . 22 IV. PRODUCTION_PROSDECTS.......... . . . . . . 24 Exports . . . . . . . . . . . . . . . . . . . . . 24 Domestic Food Production . . . . . . . . . . . . . 35 Land Tenure . . . . . . . . . . . . . . . . . . . 37 Industry . . . . . . . . . . . . . . . . . . . . . 40 Transportation............. . . . . . .42 Public Utilities. . ........... . . . 46 V. THE VOLTA RIVER PROJECT . . . . . . . . . . . . . . 49 History of the Project . . . . . . . . . o . . . 49 The Capital Required . . . ..........50 The Return on the Project . . . . . . . . . . . 51 Effect on the Economy during Construction . . . 51 Effect on the Economy during Operation . . . 52 Summary . . . . . . . . . . . . . . . . . . . ... 52 VI. ECONOMIC POLICY . . . . . . . . . . . . . . 54 The Objectives of Development . . . . . . . . . . . 54 Subsidies and Capital Formation . . . . . . . . . . 56 Economic Advice . . . . . . . .. ..... . . . 57 STATISTICAL APPENDIX - 1 - BASIC STATISTICS Area: 91,800 square miles Population (1956 estimate): 4,700,000 (of which 11,000 non-African) Of which: Colony 2,580,000 Ashanti 970,000 Northern Territories 1,150,000 195 National Product: £234 million 1955 Product Per Capita: About £50 ($140 equivalent) 1955 External Trade (0 million): Commodity Area Exoorts Inorts Egorts imports Cocoa 66 Durable producer : Sterling area Gold 9 goods 23 : (minus gold) 35 47 Time?r 8 Textiles 20 : C-old 9 - Diaron-s 6 Fc:d, drink and. : Dollar area 18 5 Manganese 5 tcbacco 14 : Non-sterling OEEC 30 22 Other 2 Fuel & lubricants 5 : Other 4 14 Other 26 : 96 88: 96 88 Central Government Finance (E million): 1955/56 1956/57 (Estimates) Total Revenue 51 47 (of which cocoa duties) (21) (14) Total Exponditure 59 70 (current account) (34) (42) (capital account) (25) (28) Surplus (4) or Deficit (-) -7 -26 Sterling Assets (E million): 1955 (Dec. 31) Government 84 Cocoa Marketing Board 63 Other Official Institutions 12 Banks (net) 14 Currency Reserves 42 215 - ii - Public Debt, Less sinking Funds: (Q million) - June 1956 Internal 19 Of which, debt to Cocoa Yarketing Board (13) External 1 20 I THE SETTING 1. Ghana is one of the row of countries which stretch north from the Guinea coast of West Africa towards the Sahara. As a British colony, it was called the Gold Coast, a name given it by traders of the fifteenth and sixteenth centuries who found gold in use among the inhabitants and engaged in its trade. On March 6, 1957, when the country became indepen- dent, it was renamed Ghana, recalling an old African emire centered around Timbuktu in the twelfth century. The Country 2. Ghana is a tropical country. The southern tip of the coast is 5 degrees north of the equator; the 11th parallel is its northern border. About 400 miles long and 225 miles wide, it covers an area of some 92,000 square miles. There are no high mountains in the country, half of which is less than 500 feet above sea level. One range of hills runs from half- way along the western border in a south-easterly direction to a point some sixty miles north of Accra. At this end the bills, whch go up to 2500 feet, are known as the Kwahu scarp. Another somewhat higher range comes down to meet it from the eastern border in Southern Togoland. These two ranges of hills mark a sharp and important division in the country's climate and vegetation. 3. Through the gorge at Ajena which cuts between the Togo hills and the heel of the Kwahu scarp flows the Volta River, much the largest in the country. Its various branches rise in surrounding French territory and it drains the entire area north of the hills, nearly two-thirds of the surface of Ghana. The north is lightly wooded savannah country, hot and dry with a single rainy season from April to September; during the rest of the year a dusty north-easterly wind (the Haarmattan) blows off the Sahara. 4. Southwest of the Kwahu scarp is the Closed Forest Zone, a warm humid region originally entirely covered by dense virgin forest with trees up to 200 feet high. Here there are two rainy seasons, April- July and September-November; rainfall varies from 83 inches at Axim in the southwestern corner to 59 inches at Kumasi, compared with 43 inches at Tamale in the north. The lowest rainfall of all, however, is found around Accra, the capital (29 inches). A strip of dry scrub land, comparatively narrow near Accra but widening around the mouth of the Volta, runs along the eastern end of the coast. The coastline is dotted with lagoons formed by sandbars at the river mouths; there are no natural harbors. 5. The Closed Forest Zone contains virtually all the exportable wealth of Ghana. In most of it the cacao tree thrives; cocoa, its product, is the key to the economy. The forest also yields hardwood timbers. And it so happens that all the mineral deposits now exploited are also found in this part of the country. The forest zone is tsetse infested and cattle cannot be raised there. Although the north is poor in comparison with the forest zone, it is less tsetse infested and sup- plies some cattle to the south. 200。 ，抑， JUNE 1957 20 00 IBRD一乙31 2 The People 6. The population of Ghana is estimated at about 4.7 million who are all Africans except for a minority of 11,000 which includes Levantine traders and European employees of the government and the large European companies. There are no European settlers. Ghana does not have the race problems of other parts of Africa. The rate of increase in population is not known at all accurately, but it is believed to be about per annum. 7. Historically, tl- e country has been rHvided into three main areas. The Gold Coast Colony in the south came under British administration by stages diiring the latter half of the nineteenth century. At the end of the century Ashanti, in the center, was annexed and the Northern Terri- tories in the north was declared a protectorate. In 1901 for the first time there was a unified administration over the whole country. British Togoland, which became a mandated territory after World War I but is now amalgamated with Ghana, has administratively been part of the Colony in the south anO the Northern Territories in the north. S. The Colony, which has over half the population, has a long history of contact with European trar3ers and inis5ionaries. A small group of fami- lies on th-- coast has been educated for several generations back and has come to forTr a professional cadre. The first African was appointp.d to 7 the i-egislative Council, one of the principal organs of British Colonial 4 Government., as far back as 1888. Durina Uhe twentieth century, represen- tation or, the Legislative and Executive Councils by local chiefs and educated Africans in the Colony was Fra6ually extended. 9. The process of "detribalization" has acne far in the Colony. Traditionally, the various tribes have been split into native states which., with one eXception, are snall; the principal unifying cr.- aniza- tion, tYie joint Provincial Council of Chiefs, was introduced by the Colonial Government. Leadership of the people was constantly disputed between the chiefs and the professional classes. The -Iecline in the authority of the chiefs first too'k nlace in the main towns, where munic- ii: al authorities were set up. More recently the process has gone further with the introduction throughout the country of local authorities on the British inodel to -replace the old Fative Authorities. The chiefs,, thereby, were shorn of most of their administrative functions. The authority that a chief now has is an intangible ancl often a personal thing. The Colony, today, is politically sophisticated and the chiefs' position is much reduced. 10. in one large tribe in the Transvolta-Togoland Rerdon of the south- east, the Ewes, tribal feeling is still comparatively strong. This is because a large bloc of the tribe lives orn the other side of the border in French Togoland. Yany Ewes, perhaps a ma ority, favored unification with the rest of the tribe rather than with Ghana. 11. Although, in Reneral, the tribe and the native state retain little of their former significance in the Colony, the family is still an impor- tant unit. As in many other parts of Africa, the idea of a family is an extensive one and the family imposes widespread obligations on its members. - 3 - This "extended" family system has certain advantages. It provides a rudi- mentary kind of social security. Common effort may be exerted at consider- able sacrifice, for example, to give higher education to a promising boy. But, at the same time, the tradition that the richer members should always help the poorer is a drag on personal enterprise for both richer and poorer. The system can, also, lead to conflict between obligations to a man's family and those to his employer. Even among the westernized families in the Colony, the system still exerts its influence. 12. In contrast to the Colony, Ashanti has always had a closely-knit tribal organization. Except in Western Ashanti, most of the people belong to the Asante (or Ashanti) tribe. The chiefs of its various divisions acknowledge a supreme chief, the Asantehene, who has a traditional advis- ory body, the Asanteman Council. Although the same detribalizing influences are at work in Ashanti as in the Colony, the Asantehene still has great authority; tribal loyalty, though by no means universal, is still strong. 13. The tribal feeling in Ashanti is bound up with a warlike tradition. During the 19th century, the Ashantis were an efficient and expanding mili- tary power. They waged a succession of wars against the coastal peoples and whatever British administration there wes in the area. These culminated in 1896 in the deportation of the Asantehene and, in 1901, the annexation of Ashanti. It was not until the 1930's that the title of Asantehene was revived and only in 1946 was a new constitution adopted extending the jurisdiction of the Legislative Council to Ashanti. Until then it was administered directly by the Governor. 14. The Northern Territories had little contact with the outside world until they became a British protectorate around the turn of the century. They were administered directly by the Governor until the first African Government was formed in 1951. This part of the country is very different from Ashanti and the Colony which, despite their differences, are climati- cally and racially similar and which have much the same standard of develop- ment. The Northern Teiritories are much poorer. The center of the country is comparatively empty and most of the people live in the extreme north, which is overcrowded, dry and remote. They are simple people living on the edge of subsistence and their principal outlet has been to traval south periodically as manual laborers on the mines and cocoa farms or in the army and police. The proportion of literates (above the age of 14) is of the order of 1%, compared with about 20% in the rest of the country. 15. As might be expected in the more primitive society of the north, the chiefs retain more of their traditional authority than in the south. There is, however, no chief in the Northern Territories in a comparable position to that of the Asantehene. The situation is, moreover, complicated by the fact that the more important chiefs belong to small tribes, which in the distant past invaded the country from the north and subjected the indigenous peoples to their rule. 16. Ghana is surrounded by the French administered territories of Ivory Coast, Upper Volta and the French Trusteeship of Togoland. The frontiers are historical rather than physical or racial and there is a large inflow into Ghana (perhaps several hundred thousands) of Africans from French territories, especially Upper Volta, who come as seasonal workers in cocoa farms or are employed in the mines in the sane way as the people of the Northern Territories. A smaller number of Nigerians also has emigrated to Ghana. Politics 17. Since the end of the second World War, Ghana has moved swiftly to political independence. A new constitution was granted in 1946 with, for the first time in British Africa, an African majority in the Legislative Council. As a result of riots in kccra in 1948, an all-African committee (the Coussey Committee) was created to propose further reforms. In the first election held in 1951 under the new constitution a large majority of the seats contested on a party basis were won by a new party which denounced the Coussey Committee's recommendations for being too slow an advance towards independence. This party, the Convention Peoples' Party (C.P.P.), was led by Dr. Nlrumah, who forthwith became "Leader of Government Business" and,shortly afterwards, Prime Minister. 18. In two subsequent elections in 1954 and 1956 the C.P.P. obtained over two-thirds of the parliamentary seats. In September 1956, after the last election, the British Government announced that the Cold Coast would become independent on March 6, 1957. Dr. Nkrumah, who continued in office throughout this time, is the Prime Minister of the new independent state of Ghana. 19. The opposition derives its strength from Ashanti and the Northern Territories; except for a few among the Ewes in Togoland, it won no parli- amentary seats in the Colony at all. The opposition is, in fact, more regional than ideological in character. Before independence it strongly advocated a federal form of constitution; threats of secession were even made. Certain concessions have been made in the new constitution. The country will have five regions, each with a Regional Assembly: the Northern Territories, Ashanti and three subdivisions of the Colony, the Western Fegion, the Eastern Region and Transvolta-Togoland. All amend- ments to the constitution require a two-thirds majority in the Central Parliament and those affecting certain basic clauses in it must also be approved by four out of the five Regional Assemblies before becoming law. The Regional Assemblies' powers are, however, limited and the state retains its central character. The achievement of political harmony in the various regions of the country will demand prudence and forbearance from the government. 20. Independent Ghana now has the status of a dominion within the British Commonwealth of Nations and stays within the sterling area. In keeping with its independent status, it is opening a Bank of Issue and is to have a cur- rency of its own. It will have to support its army and the cost of diplomatic representation abroad. An important aspect of the recent political changes is their impact on the civil service. Many British officers have already left. The Government has offered the British employees in the permanent service generous separation terms but, in the case of men in the late thirties or older, the compensation terms act as an incentive to leave by 1959. The process of "Africanization" of the Public Service, which has been rapid in recent years, is thus lilely to continue at an accelerated pace. -5- II GROWTH AND STUCTURE OF THE ECON7IKY Growth of Exports 21. Although in 1900 the Gold Coast had a long history of foreign trade behind it, the potentialities of the country were as yet virtually untouched The most important exports then were wild rubber, palm oil, palm kernels, timber and kola nuts. Except for timber, none of these has subsequently been of great significance; palm oil is now imported. 22. The general picture of growth in production for export since the turn of the century may be summed up as follows: (a) Production of cocoa, which had been introduced in the latter part of the 19th century, expanded rapidly. Together with gold it has dominated the economy for the last 50 years. The proportion of cocoa and gold to total exports exceeded 85% in the thirties and forties. With some diversification of exports (man- ganese, diamonds, timber) it still was about 80% for the period 1951-55. The relative importance of gold to cocoa varied because the course of the production and the price of cocoa has often been the opposite of those of gold. (b) The ueneral tendency has been for increased production, although this has been uneven. In the case of cocoa, production has slipped back from its prewar peak. In general, the rate of increase in production, insofar as this can be measured, has become sloier and slower. Because of price changes, however, the real value of exports has moved in just the opposite direction. The accompanying table shows that between 1936/40 and 1951/55 the money value of exports has increased over seven times, the real value about 21 times and the volume only about 15%. The change in the terms of trade has been spectacular, being now at least double the prewar level. The main cause for improvement in the terms of trade has been the dramatic rise in the price of cocoa after World War II from L18 a ton in 1938 to R200 in 1948 and P4OO in 1954. It is now below £200 a ton. (c) The resources so far developed were located in the southern part of Ghana within relatively short dis- tances (50-200 miles) from the sea, unlike some of the crops and minerals in the Rhodesias, East Africa, the Belgian Congo and Northern Nigeria. To that extent, they could more easily be exploited. -6- Table I Growth of Exports 1906/10 19212 1936/A0 1951/55 Average Annual Value (j million) Cocoa 0.60 6.53 6.36 65.12 Gold 0.97 0.86 5.04 9.23 Manganese - 0.33 0.89 6.92 Diamonds - 0.04 0.52 5.11 Logs 0.13 0.23 0.10 3.35 Sawn lumber - - - 2.56 Other 0.65 0.51 0.28 1.94 2.35 8.50 13.19 94.23 Approximate Index of Real Value Around 10 15 to 20 About 40 100 Average Annual Quantit. Cocoa (th. tons) 15 186 263 226 Gold (th. o7.) 251 225 664 732 Yanganese ore (th. tons) - 155 415 c-69 Diamonds (mill. carats) - 0.04 1.2 2.1 Logs (mill. cu. ft.) 1.4 2.4 1.1 11.3 Sawn lumber (mill. cu.ft.) - - - 4.0 Approximate Ouantity InAex (1921/25 prices) About 15 50 87 100 - 7 - As an illustration of point (c), figures for capital investment in railways, which created the main need for external borrowing, may be compared with the value of exports in a number of African territories before the war. The following table shows (in a rough way) that it was much less expensive per unit of exports to develop the railway system of Ghana than many other territories: (a) (b) Railway Investment Average Exports (a) as Percent of to 1934* 1937-38 (b) in round firures (9 million) (9 million) Sierra Leone 1.4 2.6 55 Ghana 9.0 13.6 65 Rhodesias 26.0 21.6 120 Nigeria 23.0 14.4 160 Belgian Congo 38.0 15.5 250 Kenya/Uganda 22.4 9.1 250 N%rasaland 5.0 0.9 450 * Source: "Capital Investment in Africa", by Professor S. h. Frankel. 23. In brief, the history of the growth of the various exports was as follows: Heavy cocoa planting took place before the first World War. As the cacao tree takes fifteen years to come into full bearing, this resulted in greatly increased production in the twenties. Production then progressed throughout the thirties, although at a slower rate and reached a peak be- fore World War II. In the following fifteen years production declined to a large extent because of disease. In the last 5-10 years, new planting has been taking place extensively in Western Ashanti under the stimulus of the profitable world prices for cocoa and production should start to rise again. The price, however, is not likely to be more than two-thirds of the 1951/55 average. Improved methods of gold mining and better transport facilities enabled production to expand rapidly up to the first World War, when exports exceeded 400,000 ounces. But after the war, for the familiar reasons of high costs and static price, gold production was scarcely half of what it had been before. A striking revival took place in the thirties after the abandonment of the gold standard, production rising to 850,000 ounces in 1940. A second reprieve for the industry came with the devaluation of sterling in 1949, but production in 1954 was still below the prewar level and is now falling again. Manganese ore production has continued at a single open cast mine at Nsuta (near Tarkwa) since 1916. It has been peculiarly sensitive to market conditions, suffering very severe relapses in 1921 and again in 1932. Otherwise output has steadily increased. The peak of 800,000 tons was reached in 1951 and 1952 (the Korean boom) but it has fallen off considerably since. Diamond mining started in 1920 and has expanded steadily ever since. There is one large mechanized mine and several smaller ones. A feature of the postwar period has been the emergence of thousands of independent African diggers. The most striking increase in the last 15 years has been in the production of timber. This was formerly limited to mahogany logs and production was fairly static. Since the war, many other species have been exported, a substantial proportion in the form of sawn timber. Production is still increasing. While the future of export production will be analyzed later on in this report, it should be noted at once that in Ghana as elsewhere the easiest-won resources have been exploited first and progressively less accessible ones gradually brought into production as a result of changes in world markets and the development of transport facilities. Although there is always the possibility of new changes in world demand, it does look as if the yields from some of these resources are due to turn down; in certain cases - like gold and manganese - they have done so already. 24. Export production had been greatly encouraged by the continued development of transport. The first railway, 50 miles long, from the coast at Sekondi to the gold mines at Tarkwa, was completed in 1901. It is said that this line brought transport costs down from £25 to E2 a ton. The Tarkwa line was extended to Kumasi in 1903. This was followed by a line from Accra to Kumasi, interrupted by the war and completed in 1923. The long branch line from Tarkwa to Kade in the central part of the Colony was completed in 1927, a year before the opening of the new deep-water port at Takoradi. Road building also went ahead rapidly during the 1920's. 25. Another spurt of activity took place after World War II when Takoradi Harbor was expanded to take care of the greatly increased traf- fic (mostly timber and manganese) and the line from Takoradi to Tarkwa was double-tracked. The export traffic through Takoradi increased from 680,000 tons in 1937 to 1,420,000 in 1951. The road network has also been greatly improved. Present Structure of the Economy 26. National product (at factor prices) was estimated at E234 million in 1955. The average product per head would thus run at about 450. Personal disposable income was about 140 per head. The level of income, however, varies greatly according to regions: in large parts of the Northern Territories income can hardly be half the national average, possibly much less in overcrowded areas. In Ashanti and the Colony personal income must be between P40 and .50, which exceeds that of several countries in the Western Hemisphere and a great number in Africa and Asia. - 9 - 27. The accompanying charts indicate the main sources and uses of income in 1955. Two-fifths of production is accounted for by the tradi- tional activities such as food farming (including distribution), collec- tion of firewood and African-style building. These are pursuits in which techniques have, in the main, not changed much in the last 50 years. The creation of towns, the building of roads and the presence of law and order have, of course, greatly altered and, no doubt, improved distribution. The value of production for export is now nearly as large as that of food and other traditional products. The bulk of the remainder was accounted for by the production of goods and services for the government and the distribution of imports. There is little manufacturing for domestic consumption except for handicrafts on a very small scale. 28. Government revenue, and therefore government expenditure, depends almost entirely on the export-import business. It gets its income on the export side from export duties on cocoa and income tax on the mining and timber companies, and on the import side from customs duties and income tax on a few large European trading companies. Ghana remains very much an export-import economy. 29. People's expenditure has in recent years diverged little from their income. Consequently, the balance of payrents is to a large extent a reflection of the actions of the government and the Cocoa Yarketing Board, a statutory body, which sets a fixed price to the farmer and sells the crop on the world maret. Then the revenie of the government and the Cocoa Iarketing Board exceeds their expenditure, the balance of payments is usually in surplus by about the same amount (with suitable adjustments for changes in stocks of imports and exports and the comparatively small effect of investment by foreign companies). 30. Government is much the largest single employer. About half the 250,000 men in recorded employment work for central government, local government, or government agencies. Employment in private enterprise is mainly in the mining and timber industries, commerce and contracting. Roughly 250,000 more are cocoa farmers. There are about 1 million more men over the age of 15. The great majority of these are farmers, but a quarter of them, perhaps, follow miscellaneous occupations on their own account or in small units as traders, lorry-drivers, tailors, fishermen and so forth. Few women are wage earners, but very large numbers of them engage in petty retail trade in the marlets; a few of them have a very large turnover. GHANA GROSS NATIONAL PRODUCT AND EXPENDITURE - 1955 (PERCENT OF GROSS NATIONAL PRODUCT AT FACTOR PRICES) ...... .......... ........................ SOURCE OF INCOME.EXPEND\TURE ~~~~~......RE.F........UR PRODUCTION AND DISTRIBUTION OF CONSUMPTION OF LOCAL FOOD LOCAL FOOD AND AND TRADITIONAL PRODUCTS TRADITIONAL PRODUCTS (41%) (ABOUT 40%) - PRODUCTION FOR (100/0) OTHER CONSUMER GOODS EXPORT AND INTEREST (30°) FROM ABROAD (35-40/o) ................GOVERNMENT CURRENT GOVERNMENT EMPLOYMENT (ABOUT 9°%) FNXED INVESTMENT (ABoUT 6°/, (15°/) Ur "ABROAD (2%) CENTRAL GOVERNMENT INCOME AND EXPENDITURE* (PERCENT OF GROSS NATIONAL PRODUCT AT FACTOR PRICES) NCOME .EXPENDITURE S.. ...... FROM EPORTS URRENT EXPENDITURES (170/0>a [ - TRANSFERS (2%)& CAPITAL EXPENDITURES AND RECEIPTS FROM TRANSFERS (10/o) ....... IPORTS T7% FINANCIAL SURPLUS OT HE R(3 3°/)' %)/~ Including gross profits and capital expenditure af railways and harbors 5/5/57 1272 IBRD- Economic Staff - 10 - III INTERAL AND EXT3RN/I FINANCE Currency and Banking 31. In this predominantly export-import economy most of the import trade is carried on by large huropean companies ihich finance their operations outside Ghana. The Cocoa harketing Board handles the cocoa export trade. Apart from the Levantine traders in the main urban areas, only a minor section of the population is f:amiliar with modern credit institutions. Money-lending takes place at high rates. 32. ; comparison with the Federation of Rhodesia and Nyasaland illus- trates the rudimentary financial structure of Ghane. While in the Federa- tion bank deposits six times exceed currency in circulation, in Ghana in 1955 the average volume of currency in the hands of the public (about £30 million) was half again a.s large as that of deposits (E20 million). Loans and advances amounted to only about £h million, compared with assets of £16 million in cash and balances or investments held abroad. 33. Until a few years ago the only commercial banks were branches of Barclays (D.C. & 0.) and the Bank of British West Africa. Loans were made mainly to finance the imports of Levantine or Indian traders and purchases of cocoa by the licensed agents of the Cocoa Marketing Board. Lending is highly seasonal with a pronounced peak in the last quarter of the year. It is becoming slightly less so as cocoa farmers begin to spend their money more evenly during the year and as the banks have entered into more construction loans. Hitherto, the banks have made few loans to Africans, but they are now beginning to do more. Both banks have also opened many new offices in small towns; these are pioneer efforts to provide banking services and to attract deposits since there are few lending opportunities. 34. In order to provide greater opportunity for credit to Africans, the government-owned Bank of the Gold Coast was created in 1953. By April 1956 it had made loans or advances of more than £500,000. An interesting experi- ment started under its auspices and managed by it is the Guerantee Corpora- tion. Preference shares are held by the government and common shares by Africans (mainly traders). Loans to shareholders are issued on the authori- zation of local committees of shareholders in the principal towns and are limited to a multiple of the applicants' shareholding. The bank is consider, ing the establishment of other institutions to encourage African traders. 35. Currency has hitherto been issued by the West African Currency Board, a joint organization for the British West African territories, under the usual sterling exchange system. Preliminary legislative steps have been taken in March 1957 to establish a central bank, which would have a depart- ment of issue and a banking department. - 11 - 36. The statutes of the proposed bank stipulate that the Ghana pound would be issued at par with sterling. Its backing would be gold, sterling (no "convertible currency" is mentioned) and Ghana Treasury Bills and securities up to a ceiling of P12 million, of which not more than E6 mil- lion would be in securities with a maturity exceeding two years. These amounts would respectively represent about 40% and 20j: of the currency presently in circulation at the low point of the year. 37. The banking department of the central banll would be initially the banker of the government and later on also of the commercial banks. These might be required to observe some reserve quotas which., however, might be held in the form of currency or sterling securities in London. The effec- tiveness of credit controls on branches of the British banks, whose opera- tions are only a small share in the parent bank activities, would not be great, but because of the rather cautious lending policies of these banks in Ghana the practical danger of credit inflation appears to be remote. 38. Even if the central bank will not have much opportunity for the exercise of monetary policy, it will have considerable scope for econo- mizing in the needs for liquidity in various sectors of the economy. The liquidity of the economy revolves around the cocoa crop. Holdings of currency outside the banks, for example, follow this pattern: Crrency in the Hands of the Public (9 million) April August December 1954 28 24 36 1955 28 25 39 39. Payments to cocoa farmers are made from September to December faster than they are spent; from December onvayds they spend more than they earn. The liquidity of the Cocoa Earketing Board follows precisely the opposite pattern, the low point coming at the end of the year after it has made substantial advances to cocoa buyers and some payments for export duty; thereafter it recoups from its export receipts. 40. The funds of the government and of the banks follow another pattern, being lowest in October/November and highest towards the end of the cocoa season. In the case of the government, this is because the main tax receipts, from import duties and income tax as well as export duties, fall within the cocoa season. Importers stock up at the beginning of the cocoa season to meet the denand. Hence deposits with the banks are lovest and loans highest in October/November. As deposits increase and loans are repaid towards the end of the season, the banks'liquid holdings go up. - 12 - 41. In the past, each sector has held its own liquid assets in sterling./ If they were all pooled with the Central Bank, part of them could be invested Long-term, because there is, in fact, always a hard core of liquid holdings within the economy. The Cocoa Marketin& Board 42. A local successor to the West African Produce Control Board, the Cocoa Marketing Board has marketed the cocoa crop since the 1947-48 season. At the beginning of the season, the price to the farmer is fixed for the whole season. The difference between the net export proceeds (after pay- ment of export taxes and various trading charges) and the amounts paid out by the Board to farmers and buying agents is placed in or paid out of the Board's reserves. 43. With the high world cocoa prices prevailing since the Board was established, it piled up impressive assets which stood at ES7 million as of September 1956. The bulk of these assets were earmarked for stabilization (Z.51 mil3ion). The Board also set up funds, which then stood at E13 million, for the rehabilitation of cocoa, scholarships, grants for local development in the cocoa areas and the University. About £22 million were left for general and trading purposes (including an insurance fund). 44. A great pert of these assets are invested in U.K. Government secur:- ties. Substantial amounts are also lent long-term to the government of Ghana. Large liquid balances are kept to finance trading operations. Cocoa Marketing Board's Assets as of September 1956 (E million) U.K. Government securities (at or under par) 36 Local loans to Government 17 Liquid balances 28 Others 6 87 45. A year earlier the Board's assets were £3 million higher. But during the 1955/56 season it sustained a trading loss of -1{ million and paid out E3-3/4 million from its various funds; these were only partly offset by investment income of over :F2 million. 1/ People, of course, do this via the Currency Board; so, to a limited extent, do the banks. - 13 - 46. Until recently, the break-even price for the Board's trading operations was E235 a ton f.o.b. Takoradi*, the price to the farmer being £149, export duty (at this price) E67:F and expenses E18. During the 1956/57 season trad- ing losses will certainly ensue; additional disbursements, including E2± million paid to the government for cocoa rehabilitation, could bring the loss (net of investment income) up to 28 million. The price to the farmer has recently been reduced to £134 a ton, but this will still mean a trading loss of about .10 a ton at an f.o.b. price of £185. 47. Furthermore, it will be necessary to write off some of the Board's assets. This would be true of the sterling securities, if it should become necessary to realize any of them since their market value is below book value. It will certainly be true of part of the Board's £5 million invest- ment in its subsidiary, the Cocoa Purchasing Company (C.P.C.). The C.P.C. was set up to act as a buying agent and also to make loans to indebted farmers. A public enquiry revealed irregularities in its operations and it is now to be liquidated. 48. The Board's prime objective is stabilization of income to the farmers. This is a difficult task since cocoa prices are volatile and their long-term future is uncertain and the weather can cause crops to vary from 210,000 tons to 270,000 tons. During its early years the prices fixed by the Board changed abruptly from year to year, causing swings of income which attracted much criticism to the Board. During the last five or six years, houever, the Board's prices have been much more stable. 1hile cocoa exports flucr:an- ated from £50 to P85 million, farmers' incomes were kept within a range of E30 to 135 million. Cocoa Price Policy and Stability 49. Sharp increases in the price of cocoa to the farmer during the early postwar years were accompanied by large increases in the price of food, as the following table shows: Cocoa Price Local Food Price Index (per load of 60 lbs.) : Accra Kumasi 1947/48 40/- : 1948 100 100 1948/49 65/- : 1949 126 158 1949/50 45/- : 1950 128 153 1950/51 70/- 1951 200 157 1951/52 80/- : 1952 197 170 50. The increases in the price of food have been attributed to the in- creases in the cocoa price. However, there is plainly no simple correlation, since the rise in Kumasi was much larger than that in Accra during the first price increase and was negligible during the second. Moreover, there was no corresponding drop between 1948/49 and 1949/50. In fact, the rise in 1949 is probably due as much to the failure of the maize crop, 75% of which was lost because of rust disease. Furthermore, there seems to have been virtu- ally no reaction to wage increases of over 25% in 1952 as a result of the * f.o.b. price corresponds to a London price about £10 a ton higher. - 14 - so-called Lidbury-Gbedemah award. Vages in total were quite as important as cocoa incomes. There is, in fact, no xeally convincing explanation of the behavior of prices in these years. The prices set by the market women through whose hands most of the produce passes may well not have followed the normal principles of supply and demand. 51. From 1952 to 1956, both cocoa prices and wage rates have been fairly stable. There has, however, been a rapid increase in government expenditure. Food prices have changed very little. It would appear that with the wide- spread development of feeder roads and improvement of transportation, staple food supplies have been very responsive to demand. Public Finance 52. External trade provides the main sources of government revenues. Of the -43 million estimated revenues in the 1956/57 budget, £17 million were expected to come from import duties and E12 million from export duties. Direct taxes, the bulk of which are mineral duties and corporate income taxes assessed on the nines and the large trading companies, would bring £6 million. Various other revenues, including investment income from the reserves, account for the balance. 53. Corporate tax rate is high, 9 shillings in the pound (versus about 7 shillings in the Rhodesias and 5 shillings in East Africa) and can hardly be raised further without impairing investment prospects, With the 0eclin- ing profitebility of the gold mines, this source of revenue is unlikely to expand in the immeiate future. Personal income tax revenues are rising, but are still below £1 million per annum. 54. Import duties amcunted to 16% of the value of imports in 1950. After various upward adjustments in the rates, they now amount to over 20%. Duties on textiles, drinks, tobacco and lubricants provide the bulk of revenues. The individual rates vary, of course, considerably according to products, being higher for such consumer goods as drinks and tobacco. In spite of the recent increases, the tariff on textiles and lubricants is still low by comparison with that of other countries. 55. Apart from small amounts collected from timber and diamond exports, export duties are derived from cocoa exports. Cocoa duties produced very large revenues during the cocoa boom, reaching a peak of &49 million in 1954/55. These windfalls enabled the government in spite of a rapid in- crease in current expenditures to achieve large current budget surpluses which were earmarked for development. Government savings amounted up to 19% of the gross national product in 1954. Together with the savings of other public authorities (including the Cocoa I1arketing Board) they accounted for more than 80% of the total savings generated in the country for the period 1950-1955. This is illustrated in the accompanying chart. 56. With the declining cocoa prices, cocoa duties were estimated at 11 million in the 1956/57 budget. The current rate of the duty is half of the excess of the f.o.b. price of cocoa above 2100. On the basis of these rates revenues in the order of z10-12 million might be expected in the years ahead. GHANA RATE OF CAPITAL FORMATION AS PERCENTAGE OF GROSS NATIONAL PRODUCT 30% 30% 25% 25% TOTAL ..%..20% 11 55 PULIC S AVINGS. 5% 0 0 1950 1951 1952 1953 1954 1955 1956 5/5/57 1273 IBRD- Economic Stoff - 15 - 57. On the expenditure side of the budget, the main development since the war and especially since 1951 has been the fast rise of both capital and current expenditures. In spite of these increases, up to and includ- ing 1954/55 not only could capital expenditure be paid for out of the current surplus, but reserves were accumulated which were mostly invested in London. In the current fiscal year, current expenditure which has now mere than trebled since 1950 has nearly caught up with revenue, and capital expenditure must be met from reserves. Government expenditure must be about 30% of the gross national product in 1956/57. Government Accounts* (E million) 1950/51 1954/55 1956/57 ________lestfl Current Revenue 25 78 43 Current Exenditure 12 30 A2 Current Sarplus 13 48 1 Capital Expenditure 10 16 20-25 * Aiustments have been made to the original 1956/5 estimates shown in the Basic Statistics and in Table XXI to take account of lower revenue from cocoa and a probable short fall in capital expenditure. 58. Since the nature of the administration has changed since 1950/51 and the headings in the budget with it, a precise comparison is impossible. The accompanying Table II shows the nature of the changes under broad headings. 59. The sixfold increase in military expenditure is one of the costs of independence; the major part of the burden was previously borne by the British Government. Apart from this special case, the largest increase is in education. This is the result of a general program to provide more education and the 1956/57 budget includes not only large sums for primary education but grants amounting to £1.3 million to the new University College and Kumasi Lchool of Technology. GHANA CENTRAL GOVERNMENT REVENUES AND EXPENDITURES (MILLIONS OF POUNDS) 100 TIOO 90 .90 80 s0 TOTAL REVENUES 70 70 60 / .60 / CURRENT 1 REVENUES 50 50 40 04 TOTAL EXPENDITURES 30 .* 30 /l ..*** .. 20 ~.*CURRENT EXPENDITURES 20 20 /10 O1 O 1949/50 '50/51 '51/52 '52/53 '.53/54 '54/55 '55/56 1956/57 5/5/57 (Est.) 1271 IBRD- Economic Staff - 16 - Table II Annually Recurrent Exenditure 1950/51 and 1956/57 (U million) 1950/51 1956/57 Increase more than 4 times Defense 0.5 3.2 Information and Broadcasting 0.1 0.6 Education 1.6 7.3 Public Debt Charges 0,. 1.9 13,0 Increase 3 to L times Pensions and Gratuities 0.6 2.1 Agriculture 1.7 5.6 Housing 0.2 0.8 Trade and Labor 0.2 0.7 Conmunications and Works 2.3 6.9 Health 1.0 3.0 6.0 19.1 All Other _-4 9.7 13.0 41.8 Notes: (a) The classifica+ion of current expenditure in this table, which follows that of the budget, differs from that on page 15, which is on a national accounting basis. (b) Because of basic changes in the government machine, the figures for 1950/51 and 1956/57a-e not fully comparable. - 17 - 60. Publ_c debt charges have increased mainly as a result of borrowing from the Cocoa hrketing Board on behalf of the railways. As the contri- bution of the railways to the servicing of this debt has been reduced, much of this represents a genuine increase in charges on the budget. 61. Apart from these special categories and information services, which have scored a noteworthy increase, expenditure under the principal minis- teriel headings has increased between three and four times. The increase in the category "Pensions and Gratuities" reflects the increase in the general wage and salary bill, the gratuities now payable to expatriate officers and a change in the basis of payments. Cocoa cortrol and rehabili- tation account for most of the expenses under "Agriculture", amounting to over Z1 million in 1950/1 and z4 million in the 1956/57 estimates. 62. The remaining category "All Other" includes a variety of services including regional organizations and local government (now E2.7 million), police and prisons (now £2.0 million) and an across-the-board item of El-3/4 million for overseas allowances and temporary increases in pay. 63. The wage and salary bill of government employees carried on the budget and of teachers whose salaries are for the most part indirectly paid for by the government has increased from E6.6 million to about £20 million or around three times. Apart from the recent addition of the army, there has been little increase in numbers of the lowest-paid em- ployees who number about 50,000 (apart from the army). Their average pay has, however, doubled from about F60 to £100. The largest increase in numbers has been in teachers and higher-rated employees, whose numbers went up from 27,000 in 1950/51 to 43,000 in 1955/56 (1956/57 figures are not available). The pay of this group has not increased as much as that of the lowest grades. Local Finance 64. Following the reform of local government in 1952 which established local councils to replace the old native authorities, central government brought an increased help to local finance. Current grants rose from 0.7 million in 1950-51 to E1.8 million in 1956-57. Capital grants from development funds amount to £1.3 million in 1956-57. 65. The grants were apportioned in proportion to the money raised by the local authorities as an incentive to fiscal effort. Population and local needs were two other criteria taken in consideration. The follow- ing table gives a breakdown of revenues by region for the fiscal year 1954-55. - 18 - Revenue of the 276 District, Urban, Local Councils and Two Native Authorities in 1954-55 Money raised locally Grants 1 000 Sh. per capita £ 000 Sh. per capita Northern Territories 326.L 6 512.3 9 Ashanti 641.4 14 424.3 9 Colony 1118.8 9 663.9 5 Total 2086.6 9 1600.5 7 66. Local revenues come mainly from the "annual rate". This is a flat direct tax per male adult (and in some localities also female) which varies with the localities. There are also fees and licenses paid in markets and lorry-parks. In the north there is a cattle tax and a bicycle tax. From the above figures, it would appear that the fiscal effort in the Colony is low in relation to its income, which is undoubtedly much higher than that of the north. 67. Local authorities have shown a tendency to incur capital expenditures with high recurrent costs, not only for themselves, but also for central government finance. Education is a case. A local authority would vote funds for the establishment of a primary school, the recurrent costs of which are supported, according to the formula currently used, by central government for 95 in Ashanti and the Colony and the full amount in the Northern Territories. 68. The government is currently concerned with both the increasing gaps in local government finances and the indirect recurrent charges to the budget from local government expenditures. A commission is investigating the protlem of local government finance. It will inter alia consider the possibility of raising rates, setting up new taxes, establishing local services on a more self-supporting basis and also regrouping local coun- cils under bigger administrative cells in order to economize expenditures. The eventual reorganization would be framed within the regional provisions contained in the new constitution. The DeveloDment Plan 69. To a large extent, the increasing recurrent costs of the central government have been a direct result of capital expenditure on the country's Development Plan. In 1956/57 and 1957/58 it is estimated that new recurrent costs following the completion of projects in the plan will amount to an additional 93 million each year. 70. The Development Plan started in 1951. Originally conceived as a plan for spending 975 million in 10 years, the term was subsequently changed to 5 years. The Plan was then several times modified in the course of its execution. Expenditure at this rate proved physically impossible and the term was extended. It is estimated that allocations would amount to about £88 million by the end of the fiscal year 1956/57. In addition to the Plan itself, the government has various other - 19 - development projects in hand, most important of which is the construction of Tema Harbor and Township, which will provide Ghana with a second deep water port. Total allocations for the plan and the allied development projects would amount to about R117 million by June 1957. 71. A remarkable feature in the financing of the Development Plan and the other development projects is that practically all of the funds were raised locally with, moreover, only a small part of them in the form of loans. Finance also always led actual expenditures and until very recently never was a bottleneck in the execution. About £136 million were set aside for development during the five-year period from 1951/52 to 1956/57 with the following breakdown by origin: z Millions Budgetary allocations 117 Loans from the Cocoa Marketing Board 13 Local loans 2 Colonial Development & Welfare & other grants 2- Other sources 1 136 72. A direct consequence of this predominant financing by revennes is that the public debt of Ghana is small. As of June 30, 1956, total public debt net of sinking funds arounted to E20 million. Of this, external debt (net) was less than El million. 73. Because of various shortages mostly of technical staff and to a certain extent building capacity the execution of the Plan took a rather slow start. The rate of development expenditures was only £7 million in 1951/52 but then caught up and now runs at about R20-25 million per annum. It is estimated that by the end of the 1956/57 flecal year about E98 mil- lion will have been actualli- spent. Development reserves would thus stand at about .38 million, of which R27 million would be allocated on various still unfinished projects (mostly Tema Harbor). Only £11 million of the development reserves would thus remain unallocated. 74. The building up of a modern government machinery, communications and social services (mostly education) received more emphasis than the development of directly productive services. After various modifications to the Plan, which somewhat reduced social services and increased communi- cations, the breakdown by economic category of the identifiable allocations for the Development Plan and Tema is: Communications 37% Utilities, agriculture and industry 17% Social services (education, health, housing) 23% Law & Order. Administration & general services 23% 100% - 20 - 75. In achieving its main objectives, the Plan has been reasonably successful. Capital works for the establishment of government machinery (construction of ministries, courts, barracks, residences) are now mostly met and should not grow much with the expansion of the economy. As a result of the Plan, the country will be well equipped with a basic network of communications to meet trade requirements ahead (except for those of the Volta Scheme). 76. School enrollment has increased from 212,000 in primary schools (grades 1-6) and 60,000 in middle schools (grades 7-10) in December 1950 to 444,000 and 117,000 in February 1956, i.e. it has about doubled. The Northern Territories is still poorly equipped, having less than 20,000 children at school, but in Ashanti and the Colony the goal of universal education at the primary level must nearly have been achieved as far as boys are concerned. 77. Except for certain roads and additions to the University, the Plan is nearing completion and does not entail further large commitments. It leaves, however, a few gaps to be filled in like secondary education. Tema harbor, which is outside the Plan, will not be completed before 1960. 78. Nevertheless, the Plan was more a "shopping list" of the individual projects of each department than a plan. Development was conceived of more as capital expenditure per se than as expenditure designed to raise the national income. Little attention was given, moreover, to the effects the Plan might hav3 on such aspects of the economy as external trade or, in spite of warnings, government revenue and recurrent expenditure. More- over, the sheer effort to increase the rate of expenditure must have led to excessive costs in a number of cases, especially at the beginning when there were a limited number of contractors established in the count2y. 79. There is evidence of lack of coordination, even between projects in the same field. A typical case is education. Large amounts are ear- marked in the Plan for higher education, mainly the new University College. At the same time, expansion of secondary education received less attention thus creating a recruiting bottleneck to the University, which is only half filled and which is competing with the Cocoa Marketing Board's scholarships for study abroad. In spite of this, the government has recently decided to allocate more funds for new works on the University. Similarly, there is a large new hospital at Kumasi which also cannot be filled because of the shortage of doctors. This hospital has also been criticized on the grounds that the money could have been better spent on more economical rural health centers. 80. The Plan did not contribute much in the short run to the expansion of productive capacity. An exception might be local food production, which benefitted from the construction of roads, but more especially from feeder roads many of which were built with Cocoa Marketing Board grants. Moreover, many goods or services made available (water, electricity, housing) were often sold at subsidized prices. These subsidies a6d to the large trail of recurrent expenditures from the expansion of government machinery and social services like primary education to which only a small contribution is made by local authorities. With the decline in revenues from cocoa, the increased recurrent expenditures now equal income and leave nothing over for investment. - 21 - The Outlook for Government Finance 81. The need to apply financial brakes has now been recognized for some time. Various cuts to the development plan were made in the fall of 1956. The idea that public utilities ought to be financially self-sustained is making its way. In order to pay for the new recurrent costs resulting from development and those connected with the achievement of political indepen- dence (for example, defense and diplomatic representation), economies are contemplated in the government machine and certain tax rates (mostly import duties) are to be raised. Even so, there will be little, if anything, left over for development and, in the present shaky condition of the cocoa market, there is always the threat of still further reduced revenue from that source. 82. The government is thus likely to draw on its reserves which are still large. As indicated earlier, the unspent development reserves will stand at about £38 million at the end of the current fiscal year, that is on June 30, 1957. In addition, the government could borrow from various funds and insti- tutions which now hold their assets in sterling, for example, the Post Office Savings Bank. The Cocoa Maiketing Board, which has already lent it substan- tial sums, might be willing to lend a further £5 million. In all, the avail- able capital (exclusive of certain "second line" reserves discussed below) might amount to OL6 million. Obviously, the present rate of expenditure on development of 920-25 million a year would only last for two years. In fact, the rate of. expenditure is being reduced and the reserves will thus be spread out over a longer period. One aspect of this reduction in the rate of development expenditure will, of course, be to increase the short teri budgetary difficulties because of the adverse impact on revenues from the resulting decline in various branches of economic activity. 83. In addition to the reserves described above, there are certain "second line reserves". In the first place, there might be a possibility for the government to obtain still further money directly or indirectly from the Cocoa Marketing Board. Between £15 and £20 million of the Board's reserves is at present kept liquid in sterling to market the cocoa crop. As pointed out earlier, this degree of liquidity is from the point of view of the economy unnecessary. Part, at least, might become available for capital investment locally especially if more recourse was made to seasonal borrowing to market the cocoa crop. The Board, however, is, now more than ever, anxious not to tie up its funds in this way, especially while it can earn interest at high rates on its idle funds during the off-season. Depending upon the stabilization policy to be pursued, an issue on which there is considerable variance of opinion and which is to a large extent political, small additional amounts from the stabilization reserve itself might also be lent to the government. 84. Another second line reserve would come from government borrowing from the central bank, within the £6 million ceiling of assets in mid-term or long-term government securities which the proposed central bank legisla- tion could authorize. Possibilities of borrowing from the local capital market are, of course, limited.Fdur issues have been floated sincel953,. totalling £2.5 million. Probably no more than P0.5 million per annum can be raised. Yore, however, could normally be expected from the London mar- ket where, as a member of the Commonwealth, Ghana would have regular access. - 22 - Balance of Payments and Sterling Assets 85. As already noted, the balance of payments has been determined to a large extent by the actions of the government and the Cocoa Marketing Board. Surpluses on current account were particularly large during the period of tho cocoa boom. They amounted to about 220 million in 1951 and reached £34 million in 1954. Only a small surplus of R4 million was achieved in 1955 and for the first time since the end of the war a deficit in the orfer of -18 million was incurred in 1956. 86. Fluctuations in the balance of payments are reflected in the sterling assets which increased particularly rapidly in 1954: Sterling Assets (Nominal Value) (U million at December 31) 1952 1953 195L 1955 Government & Official Institutions 41 49 83 96 Cocoa Varketing Board 60 63 66 63 Banks & Currency Reserves 47 49 52 56 148 161 201 215 The principal increase has been in the assets of the government. The Cocoa Marketing Board's sterling assets have not risen as fast as its total assets because of its loans to the government. Figures for 1956 are not available, but already in the first six months government assets had fallen by E0 million. 87. Movements of long-term private capital were relatively unimportant (as opposed to the situation which prevailed in the Rhodesias). Foreign companies brov.ght in a gross amount of R5 million per annum, which is probably not greatly in excess of depreciation of existing assets. 88. About half of Ghana's foreign trade is done with the U.K. and ster- ling area, and 25-30% with OEEC countries (mostly Germany and the Nether- lands, which are important purchasers of cocoa and timber). The dollar trade balance is extremely favorable. The U.S. buys large quantities of cocoa, the greater part of man-anese production and some timber, mostly mahogany. Few dollar goods are imported in Ghana. It is difficult to say what would happen, if dollar imports were left completely free. A substan- tial increase might be expected in cars and trucks, but there would be stiff competition in most other lines. - 23 - Direction of Trade,.1955 (9 million) Imports Exoorts Sterling area 47.3 44*5* OEEC Countries and Possessions 21.9 29.6 Dollar area 5.1 17.8 Other 13.6 4.3 87.9 96.2 89. In the absence of a developed local industry, imports of manufac- tured consumer goods (especially textiles) are high: In 1955, together with food, they account for about 50% of Ghana's imports; raw materials are about 25% of the total, and capital equipment only 13%. The balance is mainly accounted for by vehicles and lubricants. Exports will be analyzed in connection with their conditions of output, present and prospective. * Including gold exports of F9.0 million. - 24 - IV PRODUCTION ?RCSP!CTS Exports Cocoa 90. Cocoa is a tree-crop which thrives in the warm humid regions north and south of the equator. About two-thirds of the world's crop comes from West Africa and most of the rest from Latin America. The seeds of the melon-like fruit of the cacao tree are fermented and dried before they are shipped to the main consuming areas, Europe and 1orth America. The cocoa bean yields two intermediate materials, cocoa liquor and cocoa butter, which are combined in different proportions for different purposes. The principal, though not the only, end-product is chocolate for confectionery. Storage is unsatisfactory in the tropics and most of the manufacturing is done close to the market. Ghana is the world's biggest single producer. Since the war the crop has varied between 210,000 and 270,000 tons or roughly 30% of the world output. Cocoa can be grown in almost all the closed forest zone except for the exceedingly wet South-Western corner. 91. Cocoa-farming is entirely a peasant industry in Ghana. There are supposed to be between 200,030 and 300,000 farmers, or about one-sixth of the male population over the age of 15. Ferhaps as many workers come down from the Northern Territories and French Upper Volta to help with the har- vest. To an increasing extent, farms are naintained by caretakers on behalf of absentee owners. 92. The size of farm varies. Popularly 5 acres is what one man and his family are supposed to work, but since there are now 5 million acres under cocoa (about one-quarter of the entire forest zone), either this figure of 5 acres or the number of farmers is under-estimated. 1any working farmers have several farms and much of the acreage is in small plots with old trees which probably do not receive much care. 93. Table III shows the growth of production from the end of the nine- teenth century. Peak production was reached in the late nineteen-thirties, when Ghana's share of the world's crop was nearly 40%. Since then there has been a steady decline with exceptionally good or bad crops from time to time. In the latest crop-year*, 1956/57, production is expected to be one of the best in the last 20 years, a fact which is not entirely explained by good weather. 94. The decline since the 1930's is due to several things. In the first place, there is the life-cycle of the cacao tree itself, which in the Amelonado type of West Africa is more or less as follows: practically no bearing in the first 7 years; rapidly increasing bearing up to a maximum at about 15 years; maturity up to around 30 years; from then on tailing off in production. In the 1930's a large block of trees planted before the first Uorld !-ar was approaching the point of middle-age when their output would start to decline. At the same time there was somewhat less * The crop year is Septenber/August. The "main" crop season is from September to March. The much smaller "mid" crop comes later. - 25 - Table IIT Average Annual Exports of Cocoa from Ghana Long Tons Five-Year Period 1891-95 5 1896-1900 230 1901-05 3,000 1906-10 15,000 1911-15 52,000 1916-20 106,000 1921-25 186,000 1926-30 219,000 1931-35 236,000 1936-40 263,000 19/1-45 193,000 1946-50 232,000 1951-55 220,000* Cro-Year 1956/57 (est.) 275,000 * Plus 6,000 tons (average) of cocoa products. - 26 - new planting during the 1930's, when prices were low, very much less during the war as a result of the Asantehene's embargo on new planting in Ashanti and only the beginnings of a recovery immediately after the war. Other things being equal, the new planting from 1932 onwards would, by 1955, have probably more than counterbalanced the aging of the older trees, but not a great deal more. 95. But other things were not equal. Late in the 1930's a disease known as swollen-shoot appeared and the cause came to be recognized as a virus. Under pressure of war, little was done about it. After the war it was realized that the only remedy was to cut out diseased trees, for there was no effective way of attacking the vector, a mealy bug.* Politics unfor- tunately bedevilled the cutting-out campaign, which was interrupted twice. Even now it is impossible to cut out "contact" trees, many of which are infected without showing symptoms. An area in the east which used to pro- duce more than 100,000 tons a year now produces only 10,000 tons largely as a result of this disease. To combat it, the Department of Agriculture keeps an army of 20,000 men in the field and spends f4 million a year, including grants to farmers for cutting-out. 96. Another pest of apparently increasing virulence is the capsid bug. The capsiO kills young twigs, which kills young trees or sets them back several years, and which reduces the vield of mature trees. The capsid, however, can be controlled by chemical spraying. The beginnings of a spraying campaign may baar some responsibility for the big 1956/57 crop. 97. Several things may lead one to expect higher production in the future. In the first place, heavy new planting has been going on for the last seven or eight years, especially in the Yest (Area 1 on the map), the "FesUmed Area", which is a small part of the area badly affected by swollen-shoot (area 5) and also in the northern part of Southern Togoland (Area 6). About one-quarter of the present acrea7e is believed to be in young non-bearing trees. This new planting should have cumulative effect in the years to come. However, this new cocoa will not do much more than replace the output from aging trees in other areas. Area 4 is an old and declining area with little new planting because of the absence of forest land; Area 3 has much forest land but pro- duction is likely to be static because of climate and soil conditions and because in certain areas most of the forest is under Reserve. Other things being equal, an increase of some 15,000 tons might be expected by 1970. 98. But again, other things are not equal. The Department of Agriculture has been distributing seedlings of the Amazon variety which yield earlier and more heavily. This might add another 15,000 tons by 1970. Secondly, if the capsid spraying campaign is successful and becomes general, over 40,000 tons a year might be saved. On the basis of the 1955/56 crop of 228,000 tons (including "mid" crop"), crops might average 300,000 tons by 1970. However, since the 1956/57 purchases were 275,000 tons, this could be an under-estimate, even discounting the exceptional weather, possible smuggling from French territory to take advantage of the C.M.B.'s price and the effects of anti-capsid spraying so far. The mealy bug is protected by symbiotic ants, which build a tent over it and thus make spraying ineffective. GHANA COCOA AND FOREST AREAS 0 10 20 30 40 50 MILES BBU$H AREA (6 TOGOLAND; NEW PLANTING IN NORTH BUSH \L; AREA 5 AIRRE RE4A0 HEV E nch STATICNTNGOL AREA TEFRS LEFT~RE 4VIALEAE AREA 2L RA RAIN~~~ORS FO ET;N GLGBLLOC AA E -S O O Corsod ruhy60AR E A CO3 AREYE4A RCR JUNEARE 297IR-3 - 27 - 99. There are, of course, many hazards in predictions of this kind. So far as new planting in the future is concerned, the estimate is con- servatively based. But how much the Amazon variety yields on the farms and how well farmers themselves do their capsid spraying remains to be seen. Furthermore, certain areas of new planting are somewhat marginal: Yorthern Togoland and Northern Ashanti are on the dry side and might be badly affected by drought; the Resumed area is old cocoa land, which is generally believed not to yield so well as virgin forest. 100. In the not so distant future Ghana must reach the point where there is no new cocoa land available. From that point on, cocoa production would be likely to start a long secular decline as trees age and such new planting as there is takes place on old land. Soil experts believe that, during its life, the cacao tree milks the soil of essential minerals, which must be replaced if fertility is to be maintained. So far, not much is known about the reaction of the cacao-tree to particular fertilizers (including trace- elements) and particular soils. This is a field of investigation apparently of great importance in the next 10 to 15 years to prepare for the future. 101. Altogether it appears as though the eventual future of the cocoa industry lies along different lines from the present. In the old days cocoa was an easy crop. Ample forest was available and the tree grew and yielded with little attention. 'isease was not much of a problem. It was par excellence a peasant crop. Now the prospect is that continu- ous care will be necessary in fertilizing and disease prevention. The farmer will need more education and will have to make cocoa-growing a full-time occupation. The future seems to be with the plantation or the small estate rather than the caretaker for the absentee landlord. 102. If this is the prospect, far less land would be necessary than is presently used. At present 400 lbs. per acre is considered a reasonable yield for Amelonado in bearing under peasant conditions although in fact the average is far less. This could be raised to 480 lbs. an acre assum- ing only a 20% better yield for Amazon. Taking into account the land necessary for young trees, the yield could well exceed 400 lbs. per acre for both young and bearing trees. At this rate a crop of 300,000 tons could be produced on 1.7 million acres or about one-third of the present area under cocoa. Obviously with greater care and better yields, the acreage could be reduced still further, especially if it were concentrated on the best soils. 103. This raises the question how much it is desirable for Ghana to produce. Ghana is in somewhat the same position in relation to cocoa as Brazil is to coffee. It produces so large a proportion of the world's output that a comparatively small proportionate change in its production can seriously affect world markets. 104. In 1949, cocoa was released from international allocation. At the prices prevailing in 1950 (R200-250 a ton) world demand exceeded supply. Consumption reached a peak of about 800,000 tons in 1953 when the United Kingdom took chocolate off the ration. Prices had been going tip all the time and in 1954, when manufacturers' stocks were down to about three months' supply (compared with seven months' before the war), the London price at one point rose to 12560 a ton. The average e.ort price il 1954 from - 28 - Ghana was Z400 a ton, compared with P42 in 1937 and £18 in 1938 and 1939. 105. The reaction of the manufacturers in the United States was to reduce the size of the standard nickel bar and to rilute chocolate coatings on candy bars or use substitutes. Much the same reaction took place in the United Kingdom and elsewhere. In 1955, consumption fell to 720,000 tons. Efforts to find a synthetic substitute for cocoa butter and to start new plantations in places such as Malaya and New Guinea were intensified. 106. The present position is that manufacturers' stocks are now back to five months' supply and the price has fallen below R200 a ton. Manufac- turers are reluctant to change their policy in regard to price and size of bar until they see some stability in the market. However, increased buy- ing generally, especially by Germany and Russia, gives some expectation that consumption and production can be balanced at about the present price. 107. Consumption is not likely to increase as rapidly in the future as it did after the war. Rising incomes in the richest countries may, in fact, lead to lower consumption of chocolate; "Chocolates", for example, replace chocolate bars. The grei test advcnce may be expected from coun- tries in Europe with a comparatively low standard of living by the highest European standards. The biggest single question hanging over the market in Europe is the Soviet Bloc, where a more liberal attitude to consumption would make a profound difference. lNot much can be expected from tropical countries, because the low melting point of cocoa butter makes it unsuit- able for such places. 108. The trend of production in Ghana appears to be about in line with an eventual balance of world consurption and output by 1960 at about 950,000 to 1,000,000 tors, and a real price at much the same level as it is now, i.e. about £185 a ton f.o.b. Takoradi. This would mean an average price to the grower of under E125 a ton, if the Cocoa Marketing Board is to break even. For the 1956/57 mid crop the price has already been reduced from £149 to Q135. 109. Pith world prices at this level there will be much less incentive to carry out new planting, especially in the Caribbean. It seems unlikely, at least at present, that Ghana's prospects would be improved by raising its production sights any higher. Efforts at restriction would probably be self- defeating in the long run. Timber 110. In 1956 timber took second place among the exports from Ghana, relegating gold to third place for the first time in over 50 years. This is a far cry from prewar days when the timber industry consisted of "a struggling export trade in mahogany logs and a number of small sawmills producing for the needs of their own organizations or for local consumption". Before the war, the consumption of logs amounted to between 2 and 3 million cubic feet (round timber), about half for export. The corresponding estimate for 1955 is 371 million cubic feet, of which the equivalent of 30 million were exported either as logs or sawn lumber. - 29 - 111. This rapid expansion has been accompanied by three important developments: i) The creation almost from scratch of a sawmilling industry. Before the war only logs were exported. Now as much sawn lumber is exported as logs. ii) The broadening of the market. Virtually the only prewar markets were the United Kingdom and the United States. Now about 40% goes to Continental Europe and other smaller markets are also opening up. iii) The greater number of varieties sold. Before the war virtually nothing but mahogany was sold. !,ow mahogany accounts for less than 30% of the value of exported timber. 112. The United Kingdom and United States are still the main markets for mahogany. The United States takes little else. But three other so-called "primary" woods, Sapele, Baku and Utile, which are similar to mahogany and are used in solid or veneer form for furniture and panelling, have gained accentance in Europe and the United Kingdom. The greater part of the logs go to Europe, while the sawmills export most of the lumber to the U.K.; with the exception of one urerican mill, t1.e sawmills are British. There is, hoever, a growing market in sawn Sapele in Europe and South Africa. 113. The most remarkable strides have been made by a lighter and softer wood called Vawa in Ghana (Obeche elsewhere). Exports of Wawa in 1955 were in quantity more than all other woods together. During the postwar shortage and control of softwoods, Wawa enjoyed an excellent market as a substitute. Since decontrol in the U.K., however, it has lost ground. Exports now con- sist mainly of logs shipped to Germany (or the Netherlands as entrepot) where it is still used extensively in construction. It suffers from borer infestation and its competitive position cannot be considered too secure. 114. Timbers other than the four "prinaries" and Uawa are normally des- cribed as "secondaries". There are a great variety of timbers in Chana with varying properties. Some have similar uses to mahogany; others are durable and insect-proof rather than decorative. Only a handful are com- mercially exploited and only two, Kokrodua and Dmeri, are now being exported in regular quantities. Fowever, there is a gratifying increase in the amount of secondary woods milled and exported to the U.K. by the sawmills. Vest Africa is a small but growing market. 115. All the valuable timbers are found in the Closed Forest Zone. The virgin forest is dense and humid with trees growing to heights of 150 to 200 feet forming a more or less complete canopy above the lower tiers. But only a small number - perhaps one to three per acre - of these trees are of exploitable size and species. In the wetter climate of the extreme south-west the trees are evergreen and conditions favor Mahogany, Sapele and Baku; toward the north-east the trees are deciduous in the dry season and here more Wawa and Utile are found. - 30 - 116. Sixty years ago the Closed Forest was scarcely touched. Virgin forest covered 30,000 square miles, a third of the country. But the Closed Forest Zone is largely coterminous with the cocoa-growing areas, except for the rain forest of the south-west. Five years ago it was supposed that more than half the forest still remained. But recent sur- veys of the cocoa areas now indicate that only about a third of it is left. The present estimate is that there are 6,000 square miles of re- served forest and 5,000 of unreserved forest. In establishing new cocoa farms, farmers have probably destroyed 4,000 to 5,000 square miles of forest since the war. 117. The rate of destruction in 1955 is not known with any accuracy but it is reckoned at roughly 400 square miles per annum. Destruction of tim- ber has been going on much faster than the timber companies could cut it. The volume of primary wcods cut was estimated as the marketable quantity on 200 square miles and that of wawa and the secondaries as the quantity on a much smaller area; and some of this wood was cut in non-cocoa areas. In any case, the capacity of the railway and of Takoradi harbor has, until recently, been inadequate for the timber already offered. The capital value of the marketable trees destroyed over the last 10 years must be reckoned as at least 21CO million at the port - possibly much more. 118. This destruction continues within the validated concessions granted by landowners to the timber companies. Quite apart from the actual destruction of trees, the honeycombing of the forest splits It into unworkable small parcels. There is very little that the companies can do about it. By the terms of their concession they have to respect the rights of the local inhabitants. In fact the new farmers are mainly strangers, but it is difficult to distin.uish them from the original inhabitants, particularly if the landowner has received a consideration from them and connives at their actions. In any case, legal action by a foreign company would be most unpopular. They must confine their opera- tions to "salvage felling" ahead of the farmer. 119. Such conditions are not calculated to encourage new investment in an industry which requires heavy initial investment in the roads, housing and other amenities necessary to the location of a sawmill in a remote area. With the prospect that the unreserved forest may at the present rate of destruction be exhausted in 10 to 15 years, these companies are laying plans to base their operations on the Reserves. The Reserves have a pro- tective function, to guard the headwaters of rivers, to prevent the en- croachment of savannah and to preserve humidity. But a substantial area, about 4,000 square miles, can be exploited on a sustained-yield basis. The Forestry Department believes that on a 25-year cutting cycle the Re- serves would only yield half the present cut of primary woods, although more wawa and secondaries might well be available. 120. Under controlled exploitation, the yield of the reserves could be increased first by freeing existing young trees from natural competition and so increasing their growth rate and secondly by reducing the present heavy mortality among saplings under natural conditions. But since the most valuable trees mature in about 100 years, only moderate results can be expected after 40 years and really substantial results will take 80 years to emerge. - 31 - 121. Timber is unique among Ghana's resources in that it not only furnishes an important raw material or semi-manufactured product for export but is also the basis for a domestic industry bf wide application and considerable poten- tial. The value of exports alone now exceeds that of gold. Employment in timber extraction and saw-milling is about 30,000 or nearly as much as the whole organized mining industry. It offers opportunity to the African in many fields, as a timber merchant, as a "saw-doctor" (a highly skilled job in the mill) and as a carpenter. 122. Plainly public policy for this industry is of great importance for the future of the economy. One of the announced purposes of Forest Policy is as follows: "The progressive utilisation, without replacement, of the remainder of the forest resources not permanently dedicated to forestry, controlled in such a way as to make its supplies last as long as possible compatible with market requirements, and particularly until the utilisation of Forest Reserves can be accompanied by successful regeneration, whilst at the same time utilising its supplies to the utmost prior to their destruction by farming." 123. In the face of a situation, which in 1951 did not appear so serious as it does now, a fact-finding committee at that time recormended that the Native Authorities then existing be encouraged to control farming in their areas and to create "Timber Lands" dedicated to controlled exploitation for a period of, say, 20 years. Since then, however, democratically elected Local Government Councils have been created, which are entitled to a share of the revenues from the land, but do not have ownership of the lnnd which remains with the Chief, or Stool. Powers of administration and o,nership have been separated in a way which appears to make the control of land use more difficult. 124. In the last ten years, in fact, the pursuit of an effective policy for the unreserved forest has been in default. What is even worse is that in areas where forest is scarce, cocoa farmers have recently invaded the reserves which have in some places a vital protective function. A permis- sive attitude seems to have been taken towards this illegal action. 125. The fundamental question in Ghana is how the competition for land from cocoa-farming (and, more recently, coffee-farming) and the food- farming that accompanies it are to be resolved. Outside the reserves the resolution is now largely left to the interplay of market forces among a variety of interests. At present the land, no doubt, produces more per acre under cocoa (including food farms) than under timber, which explains what has been happening. And, of course, an unscrupulous landowner can have his cake and eat it too. - 32 - 126. But output per acre is not necessarily the only consideration. Cocoa from Ghana is a much higher proportion of the world's output than is timber (unless it is narrowly defined)*. The marginal effect on prices of increased production is, ceteris paribus, therefore, likely to be more depressing for the entire cocoa crop than for the timber output. In other words, the value to the economy of an extra acre under cocoa may be less than it is to the producer. This is not to argue a restrictive policy to the point where prices would encourage extensive new planting elsewhere, but only to indicate that a laissez-faire attitude is not enough. 127. In the future, as incomes in Ghana rise and the pattern of expenditure changes, it is possible to conceive of more uses for a greater variety of timbers and the establishment of a securely based industry supplying plywood, building timber and furniture to the home market; a pulp industry is an even- tual possibility. If the use of a greater variety of timbers can be encour- aged, their cutting would become more economical. 128. It is impossible to predict the future course of relative costs and prices for cocoa and ti-ber. Although timber is by no means a declining industry, one cannot be certain that in the future economy of Ghana, timber will be more productive compared with cocoa than it now is. But conversion from timber to cocoa is irreversible. Land left in timber, on the other hand, can always be turned over to cocoa later. Reasonable safeguards for the forest would be no more than a prudent hedge for the future, especially if eventually the land is no longer needed for cocoa. Minerals 129. In 1955 minerals accounted for 22% of exports and 6% of direct government revenues (in the form of comnany taxes and royalties). 1ining profits before taxes have, however, declined from -2.5 million in 1950/51 to 91.7 million in 1954/55. Profits after taxes have fallen more sharply from £1.47 million to 90.73 million in the same period. The relatively small contribution of mining to government revenues reflects the tight financial position of the gold mines. 130. During the war, a number of gold mines were put on a "care and maintenance" basis. Exports, which had reached an all-time peak of 858,000 ounces in 1940, amounted to only 475,000 ounces in 1945. Since then, mines have been reopened and production steadily increased up to 1954, when ex- ports reached 788,000 ounces. In 1955, however, they were only 724,000 ounces. 131. Rising costs have plagued the mines, while the price has scarcely changed since the devaluation of 1949. Although successful efforts have been made to increase efficiency, they have not been enough to heep all the mines going. Two mines, which produced over 100,000 ounces between them in 1954, have since gone out of production. One of these, which had at considerable risk decided to undertake new development work, reversed its decision as a result of a strike which lasted from November 20, 1955 to February 29, 1956. * Ghana produces about 1' of the world's hardwoods, exports 5-10' of world hardwood exports and exports 25-30% of tropical hardwoods imported into Europe and North America. - 33 - 132, There are now seven gold mining companies operating in Ghana. Five of these work lode mines, one works a "banket"*mine, and the other is a dredging company. Of these, only two of the lode m,ines which provide nealy half the current output are highly profitable and have an assured future. In conjunction with a wage award that followed the strike, the government agreed to subsidize four of the mines for two years to cover the cost of social services; in fact, the subsidy will enable some of these companies to continue development work, without which they might only have a short life ahead of them. 133. Manganese ore is produced from a single open-cast mine. Under the stimulus of postwar demand, output increased raridly from an average of 45o,000 tons in 190/43 to 780,000 in 1950/53. In 1951 during the Korean boom exports were over 800,000 tons. During 1954 and 1955, production has been at the rate of less than 500,000 tons a year partly to allow for new development work, During 1956 it has picked up again to an annual rate of between 600,000 and 7C0,000 tons. 134. The most easily accessible surface ores have already been won and future operations will involve the removal of progressively more over- burden and hence will entail higher costs. Although the mine is profit- able &t present and output may continue for some time at about the present level (with swings up and down according to market developments), the effect of increasing costs is bound to be felt sooner or later. In any case, no increase in production can be looked for. 135. The producers of diamonds (nearly all industrial) consist, on the one hand, of some 600 licensed African diggers, who produce more than half the total output, and five foreign companies, of 0hom one is by far the largest. Output in 1954/55 was distributed as follows: Diamond Output 1954/55 (thousand carats) African diggers 1,120 Largest company 9h0 Four other companies 14o 2,200 136. The African licensees employ tributors, who are in effect share- croppers. The tributors number some 12,000. Their methods are very primitive and their operations are uncontrolled, payment being on the basis of diamonds won. It is probable that half the diamonds are never found, but a diamondiferous area, once so worked, becomes uneconomic to exploit. * Banket reefs consist of pebbles of a conglomerate, in which gold occurs as minute grains. For the most part, they cen only be worked profit- ably as an open-cast operation. - 34 - 137. In recent years, illicit diggers have invaded the richer parts of the reserve areas of the largest mining company, which holds concessions covering 64 square miles. In order to defend itself, the company has had to increase its security forces and also to mine these richer areas itself. Consequently, the average grade of the reserves has gone down steadily in the last 10 years. Up to 1954, the quantity of the reserves also fell, but in 1955 more was ad6ed than taken out. The proved reserves now have a 15- year life and, at present, the mine has reasonable future, subject to the continuance of the diamond market. 138. Bauxite is at present produced only on a small scale from a mine which was opened during the war by the U.K. Ministry of Aircraft Produc- tion. It is now owned and operated by the British Aluminium Company, which processes the bauxite into alumina and aluminum in Scotland. Out- put is likely to continue at the present rate of 150,000 tons per year. At this rate the reserves at this mine should be adequate for many years to come. In addition to these reserves there are other large deposits amounting to some 200 million tons which are not as yet being worked. These constitute the main untapped known physical resources of Ghana. They are the basis of the Volta River Project which is discussed in Part V. 139. Employment by the mining companies (but excluding the 12,000 tri- butors) has declined each year since 1951 from 43,000 to 31,000 early in 1956. The latter figure represented abo,it one-third of the person, k. nown to be employed in private enterprise and about one-sixth of the total number of known wage or salary earners. Other_S ts 140. Ghana exports a number of agricultural products besides cocoa, of which copra, palm kernels, kola nuts and coffee (robusta) are the most important. Others include coconuts, limes and lime-juice, bananas, rubber and tobacco. The total value of all these in recent years has been a little over I.l million. Coffee has shown the greatest promise. Exports in 1955 were only 1,300 tons, but this was higher than they had ever been. 141. The Department of Agriculture has been distributing seedlings of coconut palms, oilpalms and coffee in recent years. The Agricultural Development Corporation, a postwar government agency, has also started an oilpalm plantation. The latter is managed by a subsidiary of Unilever which already runs a small plantation and oil-expressing plant.* The A.D.C. has also under consideration rubber, banana, coffee and cocoa plantations. It was originally contemplated that the Colonial Develop- ment Corporation would participate, but now that Ghana is independent, other finance will have to be arranged. * In Ghana, the oil is used locally, the kernels being exported. - 35 - 142. From the export point of view, these activities are, on the whole, marginal, with the possible exception of coffee. It is not expected that, even if all the present schemes come off, the addition to exports would exceed £± million in the next 5-10 years. Moreover, there are difficulties to be faced; for example, in banana production, disease has been a problem in certain parts of the country and the shipping of small and uncertain quantities is uneconomic. Domestic Food Production 143. The staple foods vary from north to south. In the extreme north, they are millet and guinea-corn (sorghum). In the large empty savannah belt which stretches halfway down into Ashanti, yams are more important. In the forest belt the staples are predominantly plantains and coco-yams, maize and cassava (these two particularly on the fringes). Rice and ground- nuts are grown in various parts of the country outside the forest belt. 144. Only in the north does there appear to be a real shortage of staple food. The extreme north is known as a "hunger area". Improvement in the productivity of this area is already underway by making draft animals available to farmers on loan terms in conjunction with soil conservation measures. Small schemes for raising rice in valley bottoms and efforts to persuade farmers to start small vegetable plots on moist land have mat with some success. Tobacco-growing is also being encouraged by a rew tobacco company. Although these are modest efforts in terms of the govern- ment's overall expenditure, they can make a tremendous difference to an individual farmer's income. 145. The north is bound to be an area needing capital for years to come. The sooner it can be raised above its deplorably low stain6ard of living, the sooner it will cease to be a drain on the rest of the economy and pro- vide more of the capital for its own development and revenue for its own services. The cooperative movement is just starting in the north where it is faced with a situation different from that in the south. People in the south have higher incomes and loans are mainly, though not exclusively, required as an advance against an annual crop such as cocoa. But draft animals in the north, for example, are a capital investment. Most of the money must initially come from outside, since adequate capital could not in the first instance be saved by local cooperatives from their members' own exiguous incomes. Thenceforward, however, the borrowers can be re- quired to repay over as little as 4 years and the proceeds can be put into a revolving fund for re-use. There is, therefore, some basis for a continuous process of development, given an initial impulse. 146. In the south, maize has been afflicted with rust in the past, but the Department of Agriculture now seems to have this under control. During the bad rust years substantial amounts of grain were imported, but the south is fortunate in having large reserve stocks of food in the form of cassava in the ground. 147. If staples are plentiful in the south, this is not to say that they are as cheap as they might be. One of the main grievances in the recent mining strike was the cost of living. Lowering the cost of food by in- creasing the efficiency of production would contribute more to the economy than raising wages, if the effect is to drive mines out of production. - 36 - Seasonal fluctuation in the price of certain foods is quite marked. Bulk purchases by the government which were started after the war have since been given up, since the market and the distribution system is not suited to the handling of large quantities. Small maize silos are now being en- couraged by the Department of Agriculture and the Cooperative Movement. So far there are very few, but the evidence suggests that they are a profitable village investment. 148. There are possibilities for the development of better-yielding types of maize and for raising yields by fertilizing. Pilot planting of maize and other crops (including cotton and sugar) has been started under irri- gation on the fertile but heavy soil of the dry Accra plains. Experiments will take time to fructify and will depend on specialists from abroad in the first instance. Even if successful, the full benefit will depend on the market price responding to lower costs of production, which would not necessarily happen automatically under present market conditions. This difficulty may well have to be faced if the success of meat production (pigs, for example) depends on the economical production of food. 149. Although Ghana has been largely self-sufficient in staples, there have been for many years imports of meat, fish, and. sugar. Recently, with a rising standard of living and migration to the towns, imports of "luxury" foods have gone up a great deal. The following table illustrates this: Food Imports into Ghana (Thousand Tons) Unit Av. 1934-38 1950 ia5] Rice Th. tons 11.8 9.4 4.4 Flour " 7.0 21.4 33.5 Sugar* " 6.3 13.0 28.3 Canned fish 2.7 3.9 11.4 Dried fish " 2.7 2.2 3.7 Meat " 3.3 3.6 10.3 Live cattle* Th. head 43 58 60 Live sheep & goats* 80 205 217 * 1935-39 in first column; 1954/55 in third for live animals. 150. Food accounted for about 15% of all imports in 1955; more than half consisted of meat, fish and dairy products. In addition to the meat imported as such, more than half the live animals slaughtered are imported from French Upper Volta. Although the quantity of fish caught locally is probably more than that imported (only rough estimates are available), the quality is low and the value may not be more than half. - 37 - 151. Yeat and fish are important as a source of protein: "The fundamental problem of nutrition in this country remains the deficiency of protein."* There is a large potential demand as the standard of living goes up. As an example, one may quote the consumption per head in a sample survey of Afri- cans in Kumasi in 1955. The value of meat and fish consumed by each person per annum was, on the average, between 8 and E9. At this level, the entire population would consume meat and fish to the value of £40 million. In fact, according to national income statistics, production amounted to only .7-h million. Even making allowances for statistical limitations and different prices in different places and for different products, the discrepancy is very large. 152. There are, of course, problems to be faced. In respect of meat, they include: i) The prevalence of tsetse-fly over large areas of the country. ii) The habit in the cattle country of the north of keeping cattle for prestige. iii) Shortage of water in certain areas. Investigation into some of these problems is going on, although in certain cases it has only just started. Efforts are being made to improve the local and tsetse-tolerant cattle, but less attention is being given to what is fundamental to the meat industry, its economics. Parallel investi- gation into the true cost of providing feed in the form of either pasture or grain appears necessary; there is no use breeding fine animals at twice the cost any one will pay for them. 153. Fishing has progressed further from its primitive state than has cattle-raising. For many years the canoe fishermen on the coast have been using nets which must have helped output although their income is still very low. In the last few years, a small but efficient boatyard started by the Fisheries Department and now owned by the Agricultural Development Corporation has been making small power boats (from local timber and imported engines) which has probably stepped up the value of output per fisherman five or six times. The next step will be still larger power boats, when Tema harbor is completed. The main problem here will be to establish a sound systen of marketing the fish, especially in view of the seasonal nature of the potential catch. Although canning is one possible answer, it may not be practicable without complementary pro- ducts such as fruits and vegetables; and in the present state of farming, a satisfactory flow will be difficult to organize. Land Tenure 154. Changes in land tenure are bound up with progress in agriculture. Already many changes have taken place in Ghana since the days of a subsis- tence economy, exemplifying the dictum that it is agricultural technique that decides tenure just as much as tenure deciding agricultural technique. * Report of M edical Department, 1950. - 38 - 155. Originally the land was owned by Kinship groups or "lineages", which held land on a communal or corporate basis. Each member had an allotment of land which, as there was ample land, was all he could cultivate. On his death his son might take over, but no one could dispose of the land he worked of his own accord. Alienation of land took place, but only by general con- sent. Many rights, such as the collection of wild fruit, game and firewood in the forest were purely communal. 156. Strangers might be allowed to stay and cultivate land, too, on pay- ment of a token present, subject to their continued good behavior. But the present was not so much a rent as an acknowledgment of their relation- ship with the owners. 157. With the coming of cash crops, a money economy, the growing scarcity of physical resources for particular purposes and in particular places and the consequent creation of economic rents, the old pattern has changed. Under the influence of cocoa-growing, the process of evolution in southern Ghana has gone about as far as anywhere in africa. Individualization of ownership has proceeded apace and rights r-tve become linked with particular parcels of land more than with freedom to use any piece of land within a large area. 158. The dying-out of the cocoa-lands in the south-east has led to an influx of stranger farmers into Western Ashanti and the Western Region. Holding of land on a share-cropping basis is becoming common. Normally the landowner's share is one-third (abusa) but cases of one-half (abena) have been reported. 159. The custom of "pledging", which is an old one, has for some time been extended to land, especially cocoa farms. In one form, the custom is akin to pawning, in that the creditor takes possession of the farm, but title remains with the debtor. The creditor uses the produce to pay off interest and principal, frequently on onerous terms. In other forms, the debtor may not be able to redeem his farm without a heavy cash payment that he cannot find. Usually the debt is incurred for consumption purposes such as marriage or funeral expenses and the logical ultimate remedy, when the debtor is unable to repay, would be a forced sale. But, in some forms of pledging, this is either impossible or it is subject to a right of re- purchase by the original owner with a premium. In any event, it is unpopular. 160. The pledging of land has chronically been recognized as a problem. So long as people spend in excess of their income, it will continue and tend to become a political issue. However, the remedy is less to relieve indebtedness indiscriminately (as the Cocoa Purchasing Company did) than to inculcate the notion that land may be most appropriately granted as security for debt if the money goes to improve it and that the penalty for improvidence is loss of the land. 161. In line with the general process of evolution, previously unoccupied land has come to be recognized as "stool" land, i.e. land belonging to a chief. In the old days, a chief would have acted as the trustee of the tribe and the benefits from the land would have accrued to his people and transactions in it sanctioned by them. But now the chief's powers are - 39 - mainly of a ceremonial and. religious nature. His administrative position has been largely taken over by Local Government Councils, which now get up to two-thirds of any revenue from stool-land and may issue by-laus con- trolling its use. Thus there has grown up a new and somewhat confused conception of land, whose ownership and management are to some extent separated. This is, also, true of Forest Reserves, where the management is dictated by the Forestry Department, but concessions are granted by the landowner. 162. Today, the system of land tenure and land use is a half-way house between the old and the new. While the commercial value of land is widely, perhaps universally, recognized, the semi-religious or ancestral attachment to it lin-ers on. Moreover, transactions in land take place under a variety of rules: some in writing, some verbally; some under English law, the majority under customary law, which varies from place to place. dhile this state of affairs may impose little handicap on present systems of agriculture, it is by no means clear that this is the case, if any attempt is made to improve agricultural productivity. The position is particularly difficult for strangers, whether they be Africans or foreigners, but particularly the latter. All sorts of difficulties may be encountered in securing real security of title, such as boundary disputes and disputes as to ownership, disputes which might never arise unless there was seen to be something large at stake. For example, a plantation can only be established in practice, if it does not affect existing native habitations and does not interfere with their rights. It is, of course, difficult to find land, over which no one is going to assert that they have any customary rights. Similar difficul- ties are met with forest concessions. 163. A really successful "breakthrouchil in advancing the techniques of farming presupposes the creation of a new type of farmer. It is pos-sible that he may evolve by means of agricultural extension work from the tradi- tional peasant society, which has already shown a capacity for progress. But in other parts of the world, significant advances have been made by settling promising farmers on land which they hold on such terms of tenure that they are willing to improve it, but under conditions which impose certain standards of good husbandry. 164. If it is possible to create this new type of farmer with a social status and an income comparable to other occupations in which there are new opportunities, then it may be necessary to move ahead of evolution to make the system of land tenure more reliable and more adaptable to individual or company ownership, so that land is readily capable of being secured for agricultural credit and so that the owner may have the incentive to invest. For this, a codification of existing customary land law may be necessary, together with a simple method of registration of title even if this is introduced only gradually. 165. The effects of uncertain title on agriculture have been emphasized because the land is the backbone of the economy. Similar difficulties are met in acquiring industrial sites, but so far there is little industry. Moreover, in Kumasi there is no problem, because land is under the control of the Asantehene's Land Office and in Tema the government has acquired compulsorily a large bloc of land on which it will put an industrial estate. - 40 - industry 166. The number of people recorded as employed in manufacturing at the end of 1954 was under 15,000. Of these, 9,000 were employed by the saw- mills and a further 3,000 by printing shops and the garages. Only about 2,700 were employed by other industries and they were distributed over 74 establishments. The principal products made by firms of any size are cigarettes, beer, soft drinks, furniture and bricks and tiles. Although Ghana imported textiles and clothing to the value of £20 million in 1955, employment in these industries was only about a hundred in several small establishments. Ghana, it should be noted, produces no cotton. 167. The problems and prospects of industrialization have been exhaus- tively treated by Professor Lewis.* One cannot do better than quote the gist of his conclusions: "1Measures to increase the manufacture of commoditi-s for the home market deserve support, but are not of number one pirity. A small programme is justified, but a major programme in tL:- sphere should wait until the country is better prepared to carry it. The main obstacle is the fact that agricultural productivity per man is stagnant. This has three effects. First, the market for manufactures is small ... Secondly, it is not possible to get ever larger savings out of the farmers, year by year, to finance industrialisation ... And thirdly, agriculture, because it is stagnnt, d:es not release labour year by year; there is a si-r- tage of labour in the Gold Coast which rapid industrialisation vould aggravate." * * I. * 31 "Very many years will have elapsed before it becomes economical for the government to transfer any large part of its resources towards industrialisation, and away from the more urgent priori- ties of agricultural productivity and the public services. Yeanwhile, it should support such industrialisation as can be done on terms favourable to the country. That is to say, it should support industries which can be established without large or continuing subsidies, and whose proprietors are willing to train and employ Africans in senior posts. Because industrialisa- tion is a cumulative process (the more industries you have already, the more new industries you attract) it takes time to lay the foundations of industrialisation, and it would be wrong to post- pone the establishment of any industry which could flourish after a short teething period." W.A. Lewis, Report on Industrialisation and the Gold Coast, 1953. - l - 168. Professor Lewis regarded the conditions as favorable for the follow- ing industries: Oil expressing Cement Canned fruit & vegetables Glass Salt Lime Beer Industrial alcohol Bricks and tiles Miscellaneous chemicals lood products A mission from the Federation of British Industries which visited Ghana in 1955 expressed doubt about the last five, but a more favorable attitude towards tanneries and shoe factories and cotton textile mills (based on imported yarn), which were on Professor Lewis' "marginal" list. 169. Of the remaining six on the list, beer is already being produced by private enterprise and a new brewery is to be started in Kumasi. The manufacture of bricks and tiles, furniture and, in a small way, oil expres- sing is being undertaken by the government-owned Industrial Development Corporation. Salt is a case on which the problem of land ownership impinges. There is a tribal dispute about the ownership of the lagoons where it might be manufactured. 170. Professor Lewis expressed some surprise at the little use made of the one abun,3ant raw material, wood. Since then, the boatyard at Sekondi has provided a small but successful example of its exploitation. Part of the trouble in the first instance may be inadequate retail distribution, which is both a reflection of the little use made so far and an impedi- ment to its growth. 171. The government set up the Industrial Development Corporation in 1947 in order to further industrialization. In the beginning numerous small loans were oranted to small African businesses without adequate control or supervision. Many of these went sour. Since 1953 a new policy has been adopted, limiting the operations of I.D.C. mainly to outright subsidiaries and to participation in undertakings in partnership with established com- panies. !ost of the undertakings have been going only a short time and their financial results have not so far been very satisfactory, in some cases, in spite of protection or government contracts. There have been problems with management and marketing. 172. More recently, the government has been engaging the interest of substantial foreign firms in industrial investment with the idea that part of the capital should be supplied either by the I.D.C. or the government directly. Unilever, for e-xnample, has been exploring the possibility of a soap factory at Tem and there have been discussions about a clinker cement factory and a flour mill. The government has also introduced Pioneer Industries Legislation, under which remission of income tax for a period of up to five years may be granted. A sub- sidiary of a British tobacco company has operated successfully for some time and has played a welcome part in the fostering of tobacco growing in Northern Ashanti and the Northern Territories. - 42 - 173. The limited number of opportunities, the scarcity of raw materials and the lack of local business experience means that almost any new industry in Ghana is likely to involve some element of subsidy, whether it be in the overt form of a loss borne by the I.D.C. or the less obvious method of pro- tection. Professor Lewis provides a healthy corrective to the idea that industrialization is worth the cost of perpetual subsidy or loss. He comes to the following conclusions: "(1) There is always a case for temporary assistance, to set an industry upon its feet. (2) Industries which employ mainly women are specially worth attracting, even to the extent of some protection. And (3) manufacturing industry as a whole is worth some support, because of the uncertainty of agricul- tural prices, but this argument must not be pressed very far. "We may sum this up by recommending that the government should be prepared where necessary to give some assistance to any of the industries listed in Chapter IT as 'favourable' or 'marginal'. The assistance should be for a short period only, say not exceed- ing five years, and should be limited in amount, say to the equiva- lent of a 20 percent tariff on imports. Industries which are not likely to stand on their own feet without longer or greater assistance should not be supported." 174. It is perhaps worthwhile pointing out one problem that might make the period of five years somewhat conservative in certain cases. Professor Lewis refers to the chicken-and-egg problem of industries which depend on regular supplies of local materials, mhich could not be organized until the industry itself was there. Initially an industry of this kind would be at best dependent on imported products. Examples might be soap, ground- nut oil, fruit and vegetable canning, alcohol. A longer period of "gesta- tion" than five years might be necessary to stimulate local production. Any concessions should, howevei, be contingent on serious efforts to help improve the local supply, not only by the company concerned but by the government itself. 175. Varketing is also a problem and the difficulties have sometimes been underestimated. The people are notoriously brand-conscious and conservative in their taste. A pioneering promotion effort may be necessary for some time, the cost of which, like the European export drive to the United States, may be heavy initially. However, much of the difficulty might be overcome, if the government took steps to enlist the advice and the help of the large trading firms, which have great experience in this field and sufficient stake in the country to be interested in its development. Transortation 176. The focal points of transportation in Ghana are Takoradi, the only deep-water port, Accra, the capital, and Kumasi, the capital of Ashanti and the main center of the cocoa industry. The main railway lines run from Takoradi and Accra to Kumasi. The recent construction of a link from Achiasi on the Kade spur line to Kotoku north of Accra completed the triangle. - 43 - 177. The main road traffic is also along this triangle. The reconstruc- tion of roads servicing it received priority in the Development Plan. The Accra-Kumasi road, now virtually complete, roughly follovs the railway line. Much of the Takoradi-Accra road following thecoast is new; certain stretches of it are still under construction or in need of renovation. The road from Takoradi to Kumasi via Cape Coast is complete, but much of another route through the mining center of Tarkwa still remains to be reconstructed. Three other main roads with fairly heavy traffic are the one northeast from Accra to Southern Togoland, the one northwest from Kumasi to Sunyani and the long road from Kumasi through Tamale to Bolgatanga in the extreme north. Construction or reconstruction of these was included in the Plan and is now, for the most part, complete. An extension of the north road to Bawku in the northeast was dropped from the Plan. A second route between Kumasi and Tamale is now under construction. 178. On the whole, the road program seems to have been soundly conceived. Development of the north, which has had poor communications hitherto, should be particularly helped. However, certain roads of not patently high priority, in Togoland for example, appear to have been added, at the cost, perhaps, of delaying completion of some others. Some sections have been rather expensive. 179.Since the war Takoradi harbor has been extended and provided with special facilities for handling timber in order to take care of the greatly increased tonna7e. The way in which this has developed is illustrated by the following table: Takoradi Harbor Traffic (Th. tons) C,ZPo0rtLs I-Morts 1938 470 300 1951 1380 670 1955 1270 850 180. The increase in export traffic is principally due to the change in manganese, bauxite and timber traffic. In 1951 these three accounted for about 1,200,000 tons between them. Takoradi is now able to handle the traffic offered reasonably well, although the harbor is apt to be con- gested with logs awaiting shipment. A large new harbor is being built at Tema near Accra and is expected to be ready in 1960 or soon thereafter. By the time Tema harbor and the remaining stretches of the main trunk roads are completed, Ghana should have ample transportation capacity. 181. A financial problem, however, 1.ill face the railways. The railways and harbors are run by a government administration with separate accounts. The harbors are profitable but the railways have in recent years begun to lose money: - 44 - Railway and Harbor Accounts 1954/55 (9 million) Harbor & Port Total Railways Services Revenue* 4.26 3.26 1.00 Expenditure** 36 0- Surplus or Deficit 0.15 Dr. 0.30 0.45 Capital Charges 1.06 0.62 0.44 Surplus or Deficit after Capital Charges Dr. 0.91 Dr. 0.92 0.01 Excluding subsidies. ** Including renewals but excluding capital charges. 182. Thus the railways made a loss before capital charges (interest, sinking fund and redemption charges) and the railways and harbors only a small profit which amounted to only about il on capital invested. 183. In the 12-month period 1955/56* the railway did much better, reduc- ings its operating deficit from R430,000 to S90,000. In 1955 the government, which is the administration's only creditor, waived interest and redemption charges on certain loans and reduced them on others. This will reduce the capital charges to about one-third of what they were, so that taking into account other income (mainly interest on renewals fund investments) and other expenditure (mainly capital charges), the overall deficit in 1955/56 would be quite small. 184. Railway costs have gone up rapidly. The locomotive cost per engine- mile increased by 57%, between 1950/51 and 1954/55, more than half the increase being due to hi7her fuel costs. The railways have also had considerable difficulty in finding senior staff, which has had its effect on maintenance. The development of airlines and the road program have brought competition from planes, buses and trucks and curtailed the railway's ability to pass higher costs on to the user. 185. Passenger and high-rated import traffic have been continuously lost, especially on the Accra-Kumasi line. From 1946/47 to 1948/49 the railway carried between 4,500 and 5,000 tons of cotton goods. The average during the last four years has been 2,200 tons in spite of much higher imports. * The end of the fiscal year was changed during 1956 from March 31st to June 30th. The railway's accounts for 1955/56 will therefore be for fifteen months. This will give an abnormal picture of the railway's financial position, because it makes money during the cocoa season (October-Yarch) and loses it during the rest of the year. - 45 - Much the same is true of other local and imported produce. In 1950/51 the traffic in fuel oil began to turn down. The only import which has steadily increased is cement. Freight Revenue 195A/55 (e 000) Cocoa 811 Manganese Ore 206 Sawn Timber 105 Bauxite and Logs 562 Petroleum Products 253 Cement and Lime 119 Other 383 2,439 186. Two-thirds of the revenue now comes from exports, but of these cocoa, manganese and sawn timber pay their way, while logs and bauxite apparently do not, especially logs consigned to sawmills at Takoradi which enjoy a favorable rate. Yuch depends, tierefore, on cocoa and manganese. The cocoa rate is comparatively high, and the fact that the railway retains about 70% of the traffic is due as much to Cocoa Marketing Board policy to help the railways as it is to economic considerations. Manganese traffic has of late been rather variable and the improvement in the rail- ways finances in 1955/56 may have been partly due to the recovery in manganese production. 187. The railway administration points to the "unfair" advantage enjoyed by road traffic on the main competitive routes. Maintenance of the main roads and minor improvements have since 1953 been financed from a Road Fund, to which revenues are assigned from customs duties on motor vehicles, gaso- line and lubricants and fees for automobile and driving licenses. Initially revenue from this source was adequate to cover all expenditure but in the 1956/57 estimates revenue does not cover maintenance, quite apart from the minor improvements. 188. The railway's main competitors use diesel oil, which is not taxed, and are probably responsible for much of the maintenance expenditure. This, on the face of it, suggests that there is something to the railway's contention. A compensating tax on diesel vehicles would have the disadvan- tage of discouraging development in general, but this is not necessarily the only method of compensation. 189. A study of the true economic costs of road freight and passenger traffic might well be worthwhile. It would be desirable to associate it with a detailed study of railway costs, distinguishing between overhead costs which do not change appreciably with the volume of traffic and the more direct costs of carrying particular goods on particular lines. It may be that certain types of traffic now lost-to the roads could be re- covered at rates covering their direct costs. A -tudy of this kind could - 46 - also cover such questions as how far the policy of dieselization recently adopted should be carried. However, the fact that the pattern of traffic will change somewhat, when Tema harbor is completed, would limit its use- fulness at the present time. Public Utilities 190. Urban electricity and water supply are both operated by the central government. Since a number of services (e.g. transport) are rendered by the government to the departments concerned on a sub-economic basis, and certain items (e.g. pensions) are carried elsewhere in the government bud- get, it is difficult to arrive at a true relation between costs and charges. 191. The figures available for water supply, however, even if they do not reflect the true position, show that it is a heavily subsidized service. This might be expected in the smaller towns where costs of operation are spread over a small volume of water. In six such small towns revenue only covers 15% of the cost of operation and maintenance. But even in Accra, Takoradi and Kumasi which consume over 80% of all urban water supplied, the service is run at a loss. 192. Costs and revenue during the fifteen-month financial period 1955/56 are shown below. Water Supnly for Accra Kumasi and Takoradi 1955/36 (g 000) Operation and maintenance 228 Renewals 62 Share of overhead 61 351 Revenue 276 Deficit -75 (Interest for 15 months at 5%. 136) (Illustrative deficit -211) 193. The government does not normally take into account interest on the capital it has invested. But water supply is a highly capital-intensive service; the effect of adding an additional 5% charge for capital illus- trates how costly the present system is. 194. The principal explanation is that half the water is distributed free through standpipes. One-third :goes to metered customers at 2/6d per 1,000 gallons and one-sixth to industry at 4/- per 1,000 gallons. In the three main towns the proportions would be about 20% industrial, 35% metered domestic and 45% free (either standpipe or domestic not paid for). The cost of water is as follows, approximately: - '47 - Cost of U,Jter P_er 1,000 G-allons Overall Three Yain Towns Others Without interest 2/7 2/4 4/- Including interest c 5% 3/10 3/2 6/10 Thus industrial consumers pay more than cost and house-owners considerably less, if interest is included, even in the main towns. It is certainly open to question whether this is the right way to encourage industry, which is a big consumer and reduces the average overhead. The government has recently adopted a policy in respect of new water supplies for municipalities of sel- ling the water in bulk at 2/6 per 1,000 gallons leaving the municipality to collect the cost of the water in whatever way it pleases. This will mean further subsidies. 195. Where water is bought and sold in villages which have no supply, people are prepared to pay far higher prices than the present government rates. Consumers who have the benefit of an urban water supply might reasonably be expected to pay a modest part of this hidden surplus between true costs and the market price in order to contribute capital to the development of the country, in particular to the capital cost of water for those towns and villages that are not so well off. As it is, consumers are subsidized for their good fortune. 196. It is true that opposition to payment for water has a long history and the present free standpipe system might be difficult, though certainly not impossible, to change. Yoreover, in small but growing towns, it would be quite unreasonable to expect full coverage of capital charges in the first instance. There is much less excuse in the larger towns. 197. The position of electricity supply is similar to that of water, although from the available data, it does not appear to be so bad. It would be in the interests of the government to set up its Public Utilities on a true accounting basis, which would reflect interest, true depreciation and subsidies from other government departments now hidden in the budget accounts. Even if the government decides on a conscious policy of subsidy, for example, on !7rounds of health, it should at least know the real costs of a subsidized service. 198. Ghana's consumption of electricity is still low. Of a total genera- ting capacity (all thermal) of 85,000 kw at the end of 1956, 60,000 kw belonged to the mines. The remaining 25,000 kw are principally used for commercial and domestic purposes in the main towns. In most of them kilowatt-hours generated have nearly doubled between 1951 and 1955, i.e. an increase of 20% per annum. There are some local shortages, for instance in Kumasi. A U.N. technical assistance mission is now investigating the possibilities of rural electrification; one enterprising cooperative in Ashanti has amassed sufficient capital to pay for its own plant. - 48 - 199. The Volta river is a potential scurce of waterpower on a large scale. The Volta Fcheme described in Part V would have a capacity of 600,000 kw, from which 50,000 kw would be reserved for general consump- tion. But the cost of tapping this supply for small towns would be prohibitive and it is over four times the contemplated capacity for Accra/Tema, the main potential market, in 1957. It would also be possible to b-iild a smaller dam at Bui on the Black Volta in Northwest Ashanti with a capacity of about 100,000 kw, but this project is a long way from consuming centers other than Kumasi and a few of the gold mines. - 49 - V THEI VOLTA RIVER PROJECT History of the Project 200. The existence of large bauxite deposits at Yenahin in Western Ashanti has been known for many years and the Gold Coast Government (as it then was) considered the possibility of aluminum production as long ago as 1924. Serious commercial interest in the scheme led to the publication in 1952 of a United Kingdom White Paper (Cmd. 8702), which eave an outline of a scheme for aluminum production in the Gold Coast. 201. The Volta River Project is a scheme for damming the Volta river at Ajena, about 75 miles from its mouth in the eastern part of the Colony, thus creating a lake 200 miles long. Over 600,000 kw of electric gener- ating capacity would be installed at the dam site; all but 50,000 kw would be used for producing 210,000 tons of aluminum a year. This would require the opening of a mine at the bauxite deposits at Yenahin, an alumina plant, a smelter and a township at Kpong near the dam site, two new railway lines (about 70 miles in all) connecting the mines and smelter with the present Kumasi-Accra line, and a 35-mile railway line from the smelter to the new port at Tema. As already noted, the new port and township at Tema are being built, irrespective of the Volta River Project, although not on so large a scale. 202. Under the 1952 scheme, there would be a smelter company owning and operating the mines and aluminum plant, financed partly by equity and partly by loan capital. The principal stockholders were to be Aluminium Ltd. of Montreal, Canada, and the Pritish Aluminium Company; the Gold Coast Government would also have a 10% share of the equity. The British Govern- ment would supply the loan capital. The lam and power plant were to be financed by loan capital from the two governments (mainly the British) and were to be operated by an independent authority. The new railways and harbors would come under the existing administration. These, together with other ancillary works such as roads, the new towns and compensation for flooding were to be financed by the Gold Coast Government. 203. The four parties to the proposed scheme, the two governments and the two aluminum companies, agreed that a Preparatory Comission should be set up to follow up the work already done and to examine the problems in greater detail. The Commission under the chairmanship of Sir Robert Jackson published its report in July 195A. The new estimate of the cost of the project was £231 million compared with the 1952 estimate of P144 million. ioreover, the Commission warned that these costs might, during the construction of the project, be inflated and that it would be wise to reckon with a total need for capital of £309 million. 204. The.report was already available to the various parties when they met in London in April 1956. The greatly higher cost and the prospects of lower returns robbed the project of some of its former attraction. No firm conclusion was reached in the discussions. - 50 - 205. A now proposal was, however, put forward for carrying out the project. Instead of producing aluminum from the start and working up by stages from 80,000 tons to 210,000 tons a year, there would be a first stage during which alumina would be imported and production of aluminum would be at 120,000 tons. This would save the cost of opening the mines and of build- ing the alumina plant and most of the railways. There would be an interval of at least five years after construction of the first stage (which would take seven years) before advancing to full production. However, as the financial return during this interval would be small, there would be a strong incentive to complete the project. The total time involved would thus be a minimum of 12 years (7 plus 5). The Cavital Required 206. The Commission's estimate was made in September 1955. By September 1956 costs had risen by 7%, bringing the estimate for the whole project up to 2248 million. To this must be added an additional .11 million for work- ing capital and certain ancillary projects not included by the Commission, bringing the uninflated estimate to £259 million. 207. The Commission added an allowance of 45% to their original estimate. This was meant to take account of a possible increase in costs due to infla- tion, either in Ghana or in world prices, or to unforeseen engineering hazards. It was not meant to be a prediction, which is impossible, but a rough guide, based on experience with other projects, of the allowance a prudent investor should make in calculating the amount of money he might conceivably have to provide to finish the project. Forty-five percent might appear to be high, but the Commission would regard 30% as a minimum. Applying a 30% factor to the latest estimate (except for parts already under construction), the amount of capital that should be in sight would be e325 million (over 6.900 million). 208. The sheer size of the project is itself a problem. By throwing in all possible reserves in addition to money already spent or earmarked, Ghana might be able to put up about £75 million. This would still leave £250 million to be found. How much of this the other parties might con- tribute is not, in present circumstances, capable of definition, but it would probably be unrealistic to expect more than half. There are possi- bilities for reducing the standard of housing and certain other 'frills' and for postponing certain eirpenses like fishery development. Against this, there is the possibility of a higher increase than 30%. 209. In April 1957 the government granted a three-month option to an American group to investigate the possibilities of financing and construc- ting the entire project. - 51 - The Peturn on the Project 210. At September 1956 prices the value of the aluminum produced at full capacity would be about 939 million per year f.o.b. Tema. Out of this would have to come the revenue to the smelter company, the power plant, the railways and the port (to the extent they would be used for handling aluminum and materials). Taking into account the returns to the Ghana Government on ancillary projects like housing, telephones and so forth, the total returns might be in the region of 940 million. P,o figures of the total costs of raw materials, labor and depreciation, except for power, are available, but they would probably be around half of the gross returns. It must, however, be stressed that this is no more than an in- formed guess; there is a large margin of error on either side. The range of return on the whole project would thus be about 5 to 10%; nearer 10%, if current costs are less than half and construction costs uninflated; nearer 5% if current costs are more than half and construction costs are inflated.* 211. The first claim on the net returns would come from interest on debt. At the inflated prices, external debt (apart from foreign equity contri- bution) would come to about R200 million. Interest on this would cost £12 million at 6'; the rest would be available for the equity return to the aluminum companies and the total return to the Government of Ghana, most of which would consist of income taxes. Clearly if aluminum prices rise or interest rates fall, the amount available for the aluminum com- panies and Ghana Government together would be higher. But the present aluminum market is easy and the money market tight. How the net returns would be split up between them would depend, of course, on the terms of such agreement as might be reached, including such matters as the arrange- ments for freight rates and power prices and the tax regime. 212. The project thus appears, from the Ghana Government's point of view, to be highly geared, with a wide range of possible returns depending on the terms of whatever agreement might be reached, on tYe future trend of prices and on the interest rate on loan capital. In the first 12 years or more, during construction and the first stage, there would be little or no return. Effect on the Economy during Construction 213. The Volta River Project is a large project by any standards; in relation to Ghana's population or national income it is perhaps twice as large as the Assuan dam is for Egypt. Nevertheless, it would not neces- sarily impose too great a physical strain on the country's resources. 214. Expenditure during the peak year would be about 020 million, which would be no more than the total government capital expenditure during the present fiscal year (1956/57). Moreover, the proportion of local expendi- ture would be lower - about a third compared with a half for present government expenditure. 215. At the end of 1955 there were probably some 40,000 men engaged on construction work (apart from mainterance) of which 30,000 to 35,000 would be working for the government or on government contract. As the government's These figures do not take into account changes in aluminum, raw material or labor prices. - 52 - development expenliture falls off, men will have to be dismisEed. There should be no insuperable difficulty in finding the 15,000 men required for the project during the peak year. 216. No particular difficulty is expected in handling the materials required for the project, provided the ports, railways and roads are operated efficiently. The completion of the first berth at Tema would clearly help by greatly shortening the haul. 217. The principal difficulty for Ghana would be a financial one. Obviously this depends on the capital contribution it would have to make. If Ghana put in as much as £75 million, there would be very little left over for other kinds of developments. Indeed, in a bad year for cocoa, there miFht be difficulty in balancing the current budget, unless greater efforts are made to cut current expenditure and increase current revenue. How far the government can do this remains to be seen. Effect on the Economy during Operation 218. The principal benefit to Ghana would be the addition to government revenue. This is certainly not to be under-estimated. The country will have to look to the government for some time to come as a source of capital. Public demand for better health and education is strong. In a country where there is a long tradition of resistance to taxation, a painless source of government revenue is of considerable importance. It would, however, be at least 12 years before the returns would be substantial. 219. Many of the raw materials, like chemicals and fuel, for the alumina plant, the smelter and the railways have to be imported. The value added locally would, therefore, largely consist of the revenue to the government and the wages and salaries of employees. As the project is highly capital intensive, the labor force required to run it is comparatively small. About 16,000 people would be employed in the smelter company's operations and in the public utilities (power, rail and port). The wage income of African employees would probably fall between £3 and £4 million. But this would not necessarily be a net addition to income, since people might as a result be drawn out of other occupations. 220. There would also be certain other direct benefits such as improved fishing in the lake and the availability of cheap electricity from the power plant for domestic use - about 50,000 kw would be so reserved. These benefits might be in the order of 21 to £2 million but they would be rather long-range. The principal direct additions to national income other than government revenue would therefore be only of the order of £5 million per annum. 221. Altogether it is by no means proven that given present interest rates and present risks, there are sufficiently large prospective returns to the project to satisfy all the claimants. Another drawback of the project is the long period of gestation before returns become available to the economy, unless it is radically changed to produce bauxite or alumina in the first instance. However, there is no indication whether this would be commercially attractive. - 53 - 222. The project would not necessarily, therefore, bring outstanding benefits to Chana under present circumstances. On the other hand, aluminum, which is lilely to be in growing demand from industrial countries, would bring a healthy diversification over the long run to an economy which might otherwise become increasingly deperdent upon cocoa. The project would itself generate the exchange needed to service foreign capital. 223. The problem is, to some extent, one of timing. There are drawbacks to undertaking so large a project at a times when the economy has to pass through a period of readjustment. The transition will occur when the administrative machine (including public utility services) is also passing through a critical stage. It n-y rot be wise for the government to saddle itbelf with so large a responsibility at this juncture. The first step, in any further considera- tion of the project, should be a more detailed calculation of the likely returns on various sets of assumptions. The risks involved to the various parties can then be more closely assessed and a firmer basis arrived at for deciding in what circumstances the project might be undertaken. - 54 - VI ECONCYIC POLICY 224. Ghana has for many years enjoyed a continuous growth in export pro- duction and, when production faltered, a very favorable conjuncture in the terms of trade. But it cannot rely on the terms of trade being of any further help. This may be illustrated by an example of what might happen some time in the 1960's, based on the following assumptions: i) Cocoa production increases to 300,OCO tons on the average, i.e. an increase of 30% over the 1951/55 average. The price is 185 a ton f.o.b. ii) Other exports overall also increase by 30% over the 1951/55 average (very largely because of timber). Prices are as they were in 1955. iii) Import prices are as in 1955. On these assumptions, which are not pessimistic, the quantity of exports would be 30 hi-her than in 1951/55, but their real value would not be appreciably more. 225. The major export resources left are bauxite and water power. The combination of these in the production of aluminum will, however, need a vast amount of capital, the employment will in comparison be small and the range of revenue to the government depends on a number of unknown factors. As Ghana can only afford a small part of the necessary capital, external investors will have to find the major part. The injection of capital on such a massive scale into a single country is not a step to be lightly undertaken and in7estors will require a prospective return on capital commensurate with the risks and sacrifices involved. It may be that the project will have to await conditions in the money and aluminum markets which would enable it to go forward on terms satisfactory to Ghana. 226. Thus, with the exception of the Volta River Project (and that only, after a long interval), the export side of the economy, which has been the mainspring of government revenue, cannot be expected to be so dynamic as in the past. Attention, in any case, needs to be given at the present stage of development to the domestic side. The Objectives of Development 227. In the last six years the Government of Ghana has had ample capital at its disposal; until the price of cocoa turned down in 1955, more was coming in than it could possibly spend. At the same time development be- came popularly identified with capital expenditure on new and imposing projects and with the provision of social services to the people. The development plan was more a plan to satisfy t'ese ambitions than an orderly program to develop the economy. 1uch was, it is true, achieved, but the plan also left behind a large bill of recurrent expenditure and - 55 - some monuments cf investment which cannot, for some time to come, be used to capacity. It had, in fact, more effect on government consumption than on private production. 228. The emphasis on capital expenditure was perhaps unfortunate because in agricultural countries, current expenditure by the government is often just as important a me.ns to raise the productive capacity of the country. Indeed, the distinction is semantic rather than actual, since the services of an agricultural specialist are as much an investment for the future as the building he works in. And sometimes measures, rather than money, are needed, in particular, to encourage private expenditure on development. These two ways of promoting development have tended to be submerged in Ghana. 229. Among the most important tasks before the government is to stcp the conflict between timber and cocoa production going in favor of cocoa by default, although the results would hardly begin to emerge ten years from now. heedless destruction of the timber lands is the antithesis of a policy which seeks to diversify the economy. Tegulation of the present invasion of concessions and encroachment on reserves would stop a wastage of capital and preserve one important resource capable of substantial pro- duction for both export and local use, especially if methods of pulping tropical hardwoods can be improved. In fact, as has already been indicated, it may well be possible to resolve the conflict in favor of both, if cocoa production can eventually be concentrated on the best soils and on a much smaller area than at present. In the meantime, however, basic research on soils and fertilizing is necessary. 230. Of parallel importance will be experimentation in the improvement of food proOuction. By experiment is meant not only scientific investiga- tion in such important fields as plant-breeding but demonstration of costs and probiemns under practical conditions, whether on a farm or a plantation. Experiment should be directed towards well-defined goals and the greatest emphasis given to those crops or foods that appear likely to yield the most promising returns under conditions of practical farming. 231. Closely allied with progress in agriculture and indeed in industrial development as well, is the question of land tenure. 'Measures to smooth the path of development in this respect may well take on added importance in the future. It is not too early to study the problem now, since any changes in the present system will require prior publicity and gradual persuasion of the people. 232. Thus although certain capital expenditures will undoubtedly appear desirable, such as additional secon-lary schools to fill the present gap in the educational ladder (more important than building up the University), more electricity, more water, more roads, and so forth, some of the most vital thin.s for the future of the economy will require measures and men rather than large amounts of money. 233. The one exception is, of course, the Volta River Project. Though it promises grert benefit to the country in appropriate circumstances, the benefit is not to be compared to the loss that may eventually ensue, if steps are not taken to safeguard the timber and cocoa industries, nor even to the potential increase in food production. - 56 - Subsidies and Capital Formation 234. The currert shortage of capital may again emphasize the necessity for encouraging savin5s and capital formation and reducing subsidies to the minimum, The example of the public utilities has already been cited. The "right" price to be charged for public utility services is a matter widely debated and unlikely to be resolved precisely. But, only in certain exceptional circumstances would the users of a service be expected over the long run to pay less than its cost, including capital depreciation (at re- placement cost) and a reasonable rate of interest. But in Ghana few elec- tricity and no water facilities recover their real costs. 235. This point has been stressed because the habit of expecting the central government to be a universal provider appears to be so prevalent. Local authorities, for example, contribute very little to education. Again, the provision of cheap housing to government servants is simply a disguised method of raising salaries, which are already under considerable pressure to emulate the standards demanded by expatriate officers. 236. The granting of subsidies and similar favors reduces the capital available for those types of investment which really promote development by increasing production, by recouping capital from the increase and by enabling further development to continue. Small but important examples have already been mentioned: the sale on loan of power-boats to fisher- men in the south and of bullocks to farmers in the north. In both cases the added income is ample to repay the inves'ment in a few years. This kind of development deserves to be encouraFed. Subsidized competition by the government is a dis-service, not a service, to African enterprise. Subsidies cannot be and should not be excluded altogether, but the onus of proof should always be on the advocates of subsidy. 237. This raises an allied point. The opening up of opportunity for Africans has gone a long way in the last ten years. There is, naturally, anxiety to give Africans similar opportunities in the business field, in trade, contracting, small-scale industry and transportation. It is, of course, entirely right that African entrepreneurs should be expected to rise in these fields; indeed, in several cases they have already. But the first requirement on the part of an African entrepreneur is good management. Lack of opportunity has, in the past, too often been attri- buted to lack of capital and unfair competition on the part of the larger European firms and, more particularly, of the smaller "Syrian" and Indian traders. 238. In fact, there is evidence that there is a fair amount of African capital about. Branches of banks opened in new towns have attracted sizeable Oeposits and cocoa-farm owners have built up their holdinFs of real estate. But access to capital, whether it be African or European, ultimately depends on the borrower's creditworthiness, which in turn depends on a sound record of management of the capital the would-be borrower has had already. That the building-up of a successful enter- prise by an African is not impossible is illustrated by the success of certain African market women in trade, who have husbanded their own capital and obtained credit. - 57 - 239. The Cooperative Movement is an old school and the Guarantee Corpora- tion a new one in which these arts are being learned. No good service is rendered by pushing the growth of African enterprise faster than it develops in schools such as these. This was the mistake made by the I.D.C. in its early days and also, in the field of agriculture, by the C.P.C. 240. The present situation calls for a policy of Africanization, but not of uninhibited Africanization. It is difficult to divorce this policy from politics, but, to the extent possible, it needs to be divorced. The posts on Government Boards and Corporations that influence the implementation of policy n-ed to be filled by people with independence of judgment and not made the rewards of political service. Economic Advice 241. In order to assist the government in determining its policy and in laying its plans for development, it needs good economic advice, not merely case by case, but on a day-to-day basis. It is eminently desirable that it should have within the Administration an economic secretariat, which could look at the economy as a whole. A unit of this kind, which need not be large, should be able to interpret the current economic situation to the government and give it some indication of possible future trends. At all times it should be in a position to comment on important questions of policy and to point out the economic effects of policy decisions. Its advice would be particularly valuable, where a decision in one sector has consequences for another; rail and road competition is a case in point. 242. An economic advisory unit would serve as a link between the Statis- tical Services and the government. The collection and assessment of statistics is a technical service which in Ghana has improved greatly in the last few years, although working under the handicaps common to many under-developed countries. But the end-product should be used in the first instance by people who, working closely with the statisticians themselves and aware of the limitations of the statistics, are prepared to interpret them on the basis of their local "feel" of the situation. This interpreta- tion is an essential link with the government. An economic advisory unit could assist the government in this way and, at the same time, help the Government Statistician to obtain needed statistical information to which, for one reason or another, he has no access. 243. One example may be given. Cocoa prouction and trade is the most vital element in Ghana's economy. A continuing study of cocoa, both within Ghana itself and in the world at large, is essential to an understanding of the economy and its future. Statistics of purchases are regularly collected by the Cocoa Marleting Board and a detailed sample survey of cocoa acreage and conditions has been carried out by the Department of Agriculture. This information is not collated - and indeed, because of the different types of records , it is apparently difficult to collate. Nor has the statistical information collected by the Department of Agriculture been interpreted in a way which could be readily understood outside it. - 58 - 244. Thus, information on an industry of paramount importance to the economy is, so far as current interpretation for the use of the government is concerned, going to waste. To be sure, predictions based on present information would be hazardous. But they would, at least, give the govern- ment a general idea of the trend in cocoa production, based for example on different assunptions as to the control of capsid disease. No single ele- ment in the economy could be more important eycept, of course, the price of cocoa. Since Ghana produces so much of the world's cocoa, the two are, of course, closely linked. 245. This is one instance of the kind of job that needs to be done to keep the government properly informed. It is one which an economic advisory unit could at least take steps to see was done, even if it did not do it itself. It is not the only case. STATISTITCAL APT17X Table I Growth of Exports (page 6 of text) II Annually Recurrent Expenditure (page 16 of text) III Average Annual Exports of Cocoa from Ghana (page 25 of text) IV National Income and Depreciation 1955 V Gross National Expenditure 1955 VIT Personal Consumption 1955 VII Capital Formation as Percent of G.N.P. VIII Balance of Payments and Government Savings IX Total Domestic Exports and Cocoa Exports X Mineral Exports XI Log Exports XII Exports of Sawn and Other Manufactured Wood XIII World Production of Raw Cocoa XIV World Absorption of Raw Cocoa XV Cocoa Bean Prices XVI Value and Volume of Exports, Terms of Trade XVII Cocoa Marketing Board: Balance Sheet at September 30, 1956 XVIII Cocoa Marketing Board: Operations; Division of Proceeds of Sale XIX Imports of Selected Commodities XX Imports and Duties by End Use XXI Central Government Revenue and Expenditure XXII Development Plans XXIII Public Debt as of June 30, 1956 XXIV Money and Banking XXV Public Utilities: Production XXVI Electricity: Installed Capacity TABLE TV National Income and Depreciation 1955 (F millions) From Cther From Domestic Total From Cocoa Exports* Sources* Wages & salaries recorded 49.3 - 5.5 43.8 Gross company profits 15.2 - 8.0 7.2 Cocoa Marketing Board operating profits 4.1 4.1 - - Government income (incl. railways) 31.2 28.6 0.5 2.1 Miscellaneous 212.3 33-5 3.1 98.7 235.1 66.3 17.1 151.7 Net income from abroad -1l5 National income plus depreciation 233.5 .. * Income from other exports is under-estimated and from domestic sources over-estimated. Source: Economic Survey 1955. TAPLE V Gross National Expenditure 1955 (2 millions) Disposable Fixed Investment Financial Funds* Consumption Investment in Stocks Saving Persons 187.8 182.0 7.6 - -1.7 Companies 4.6 - 5.7 2.2 -3.3 Central Government and Railways 41.7 16.5 18.0 0.1 7.2 Public Boards 5.8 - 3.2 2.4 0.2 Local Authorities 9. 6.9 1.0 - 1.6 249.5 205.3 35.4 4.7 4.0 Less Indirect Taxes (Net) -16. 0 4. Gross National Expenditure at Factor Prices 233.5 ** * Disposable funds include capital transfers from the central government to persons, public boards and local authorities of 1.4, 1.7 and 1.5 respectively. Source: Economic Survey 1955. TABLE VI Personal Consumption 1955 (k million) Food Staple foods (local) 52.6 Groundnuts, oils & misc. crops (local) 26.3 Meat and fish (local) 7.6 Imported food 12.1 9.6 Drink and Tobacco 14.7 Textiles, clothing and footwear 29.5 Household goods 8.1 Fuel and light Firewood 5.3 Other 2.6 7.9 Durable household goods 7.1 Housing and water African-style 3.2 Other 1.7 4.9 Travel and other services 11.2 182.0 Source: Economic Survey 1955 and Government Statistician. TABLE VII Capital Formation as Percent of G.N.P. Local Central Govt. Public Year Persons Companies Authorities (incl.railways) Boards Total 1950 0 2 9 12 23 1951 2 2 10 6 20 1952 3 2 10 1 16 1953 -2 2 11 3 14 1954 3 2 19 4 28 1955 2 2 13 2 19 * Less than one-half percent. Source: Economic Survey 1955. TABLE VIIT Balance of Payments and Government Savings (9 millions) 1950 1951 1952 1953 1954 169 5 Balance of Payments Current Account* 17.8 19.9 8.0 3.6 35.2 4.0 Investment in Etor!ks by Companies 1.3 4.6 -4.9 -0.2 0.3 2.2 19.1 24.5 3.1 3.4 35.5 6.2 Financial Savings Central Government (and railways) 8.7 10.8 5.6 6.1 26.8 7.2 Public Boards and Corporations 16.0 15.3 -2.7 8.1 6.3 0.2 24.7 26.1 2.9 14.2 33.1 7.4 * Including capital grants from U.K. and F.0.A. TABLE IX Total Domestic Exports and Cocoa Exports 1936-1939 1950-55 Total Exports Cocoa Exports Cocoa as % Quantity (9 million) (e million) of Total of Cocoa Unit Price (th.tons) (9 per ton) 1936 12.3 7.7 62 311 25 1937 16.0 10.0 62 236 42 1938 11.2 4.5 41 263 17 1939 12.8 5.1 40 281 18 1950 76.2 54.6 72 267 204 1951 90.0 60.3 67 230 263 1952 84.3 52.5 62 212 248 1953 88.0 56.1 64 237 237 1954 113.2 84.6 75 214 395 1955 95.7 65.6 69 206 318 Source: Trade Reports and Economic Survey 1955. T!fLE X Mineral Exports Pauxite Manganese Diamonds Gold 000 £ 000 £ 000 1 000 tons Yillion tons Million Carat Million Ounces Million 1938 - - 32L 0.9 1,296 0.6 678 4.8 1950 115 0.2 713 5.0 1,140 2.7 705 8.7 1951 130 0.2 806 7.2 1,764 6.4 692 8.6 1952 74 0.1 79Z, 8.3 2,136 5.4 704 9.2 1953 115 0.2 746 8.7 2,160 3.9 733 9.4 1954 163 0.3 461 5.1 2,124 4.3 788 9.8 1955 116 0.2 540 5.2 2,280 5.5 724 9.0 Source: Digest of Statistics, August 1956. TALE XI Log Exports A. 2untity (million cubic feet) 1938* 1950 1955 Mahogany 4.36 2.71 Baku 0.79 1.15 Sapele 1.05 2.12 Utile 0.19 1.08 Primaries 6.39 7.06 Wawa 2.36 8.96 Secondaries 1.64 0.88 Total 0.84 10.39 16.90 B. Value (E million) Mahogany 1.66 1.10 Baku 0.19 0.37 Sapele 0.23 0.67 Utile 0.04 0.29 Primaries 2.12 2.43 Wawa 0.32 1.72 Secondaries 0.31 0.29 Total 0.07 2.76 4.44 Only 3% of the logs and sawn timber exported in 1938 was not mahogany. Source: Trade Reports. TAPLE XII Exncrts of Sawn and Other Manufactured Wood A. Ouantitv (million cubic feet) 1938* 1950 1955 Mahogany 0.78 1.61 Baku** 0.10 Sapele 0.43 1.62 Utile 0.74 Primaries 1.22 4.07 Nawa 0.69 0.89 Secondaries 8 Floor Strips 0.15 1.46 Veneers & Plywood 0.02 0.26 Total 0.05 2.08 6.68 B. Value (P million) Mahogany 0.48 1.06 Baku i* 0.06 Sapele 0.22 0.94 Utile 0.41 Primaries 0.70 2.46 Wawa 0.32 0.37 Secondaries & Floor Strips 0.10 0.81 Veneers and Plywood 0.01 0.05 Total 0.01 1.13 3.69 Only 3% of the logs and sawn timber exported in 1938 was not mahogany. Less than 5,000 oubicrfeet-or £5,000. Source: Trade Rteports. TABLE XIII WORID PRODUCTION OF RA1 COCOA ('000 Long Tons) 1934/35- 1938/39 1952/53 1953/54 1954/55 1955/56 1956/57 Forecast Africa 491 501 L68 L93 522 524 Ghana 280 247 211 220 237 275 Nigeria 99 109 97 89 114 140 French West Africa 85 119 128 147 136 139 Others 27 29 32 37 35 40 Western Hemisphere 23 2 2 280 298 306 221 Brazil 123 140 153 148 168 173 Others 111 129 127 150 138 148 Asia and Oceania 10 11 11 10 12 _14 World Total 735 784 759 801 840 929 Source: Pre War - FAO Commodity Series, Bulletin #27 - Cacao (November 1955) Post War - Gill & Duffus Ltd. - Cocoa M4arket Report #104 (March 29, 1957) TAPLE XIV WORLD AESORPTIONT OF RAU CCCOA ('000 Long Tons) 1934L"38 1953 1954 1955 1956 1957 Forecast Western Hemisphere 281 350 2/ 2L )2/ 24- U.S.A. 238 235 194 188 220 235 Canada 11 15 12 13 14 15 Others 32 100 88 93 90 94 Europe (ex USSR) 3688 377 7 08 United Kingdom 90 120 15 101 92 105 West Germany 75 69 69 75 88 90 France 43 47 49 43 51 55 Netherlands 58 65 50 56 65 70 Others 80 87 94 97 112 115 U.S.S.R. 8 20 20 20 20 40 Australia and Oceania 7 9 11 10 15 15 Africa and Asia 5 21 20 182 1? World Total 647 798 722 714 796 858 Note: Absorption is measured at the stage of grinding of raw cocoa beans. Consequently absorption may differ from consumption to the extent of net trade in cocoa products and changes in stocks of same. Source: Gill & Duffus Ltd. - Various issues of Cocoa Piarket Report TABLE XV COCOA BEAN FRICES spot Accra, New York (U.S. cents per pound) Actual Price Real Price IV 1920 13.6 135 1921 7.8 12.3 1922 9.2 14.6 1923 7.6 11.6 1924 7.6 11.9 1925 9.5 14.1 1926 11.5 17.7 1927 15.8 25.5 1928 12.8 20.3 1929 10.4 16.8 1930 8.1 14.4 1931 5.2 11.0 1932 4.4 10.5 1933 4.4 10.3 1934 5.2 10.7 1935 5.0 9.6 1936 6.8 13.0 1937 8.4 15.0 1938 5.3 10.4 1939 4.8 9.6 1940 5.1 10.0 1941 7.6 13.4 1942 8.9 13.9 1943 8.9 13.3 1944 8.9 13.2 1945 8.9 12.9 1946 11.5 14.6 1947 34.9 36.2 1948 39.7 38.0 1949 21.5 21.7 1950 32.2 31.2 1951 36.3 31.6 1952 35.7 32.0 1953 37.2 33.8 1954 57.8 52.4 1955 37.4 33.8 1956 27.3 23.9 :1 Actual price deflated by the U.S. General wholesale price index, 1947/1949 = 100; 1956 Index 114.3 Source: M.. Bureau of Labor Statistics TABLE XVI Value and Volume of jMrtfz Terms of Trade (1948 = 100) Value of Volume of Export Import Terms of Exports Exports Prices Prices Trade 1936/39 24 99 24 39 61 1948 100 100 100 100 100 1949 .88 118 75 94 80 1950 138 123 112 101 111 1951 162 111 146 121 121 1952 152 108 141 127 111 1953 159 117 136 115 113 1954 205 108 190 109 174 1955 173 106 163 107 152 Source: Material submitted by Statistical Department. Table XVIT Cocoa Marketing Board Balance Sheet at September 30, 1956 (E million) Liabilities Assets Stabilization Reserve 51.0 U.K. investments 35.9 Trading and General Reserve 20.0 Ghana investments 17.1 Scholarship Fund 7.0 Share and loans to cocoa purchasing company and Local Development Grants 3.2 Cooperative Marketing Association 5.0 Rehabilitation Scheme 2.8 Liquid balances and other Other Allocations 2.8 current assets 29.4 86.8 Less current liabilities .6 Net current assets 28.8 86.8 Source: Cocoa Marketing Board Table XVTII Cocoa Marketina Board Operations 1951/52 - 1955/56 (V million) 1951/52 1952/53 1953/54 1954/55 1955Z/56 Cost of cocoa ex-farm 31.4 32.2 28.0 29.5 35.0 Expenses and export duty (net of investment income) 16.6 18.5 35.6 39.9 16.5 Surplus or deficit (-) 3.6 6 11.1 8.1 0.8 Proceeds of Sale 51.6 57.1 74.7 77.5 52.3 Division of Proceeds of Sale of Cocoa ( per long ton) 1951/52 1952/53 1953/54 1954/5f 1955/56 Farmer's price 149.3 130.6 134.4 135.0 148.3 Expenses 16.3 17.3 17.2 17.6 18.7 Export duty 70.0 64.7 163.5 175.8 61.9 Surplus or deficit (-) 9.5 18.8 43.6 26.7 -7.1 Export price 245.1 231.4 358.7 355.1 221.8 Source: Cocoa Marketing Board TABLE XTX Imports of Selected Commodities (Monthly averages) 1950 1955 Grey and white cotton piecegoods (mill.sq.yds.) 0.5 1.0 1.3 Other cotton piecegoods (mill.sq.yds.) 2.1 6.1 8.3 Synthetic fabrics (mill.sq.yds.) 0.3 0.7 4.0 Corrugated iron sheets (tons) 133 694 1391 Cars (number) 34 130 325 Trucks, buses (with and without bodies) (number) 40 270 305 Beer (th. gallons) 51 250 298 Cigarettes (th. lbs.) 43 124 179 Padios (number) 13 88 932 Gramophones (number) 115 388 1277 Aviation & motor spirit (mill. gallons) 0.7 1.8 2.8 Fuel oil (mill. gallons) 1.2 2.2 3.3 Cement (th. tons) 4 15 25 Note: See also page 36. Source: Digest of Statistics. TABLE XX Imports and Duties by End Use 1950-1955 (i million) 1950 1955 Imports Duty Av. Rate Imports Duty Av.Rate Commercial Imports Non-Durable Consumer Goods Food ( 5.1) (0.1) ( 2.0) ( 9.3) (0.3) ( 3.2) Drink ( 1.4) (1.0) (71.4) ( 2.5) (2.8) (112.0) Tobacco ( 1.1) (2.1) (191.0) ( 1.9) (3.5) (184.4) Textiles (11.5) (1.5) (13.0) (20.0) (3.0) (15.0) Others (_3.2) . 8) (25.0) (7.2) (1.4) (19.4) Total 22.3 5.5 24.6 40.9 11.0 26.9 Durable Consumer Goods 3.5 0.4 11.4 8.5 1.0 11.7 Fuel and Lubricants 2.3 0.8 34.8 4.0 2.1 52.2 Non-Darable Producer Goods 6.5 0.3 4.6 9.7 0.4 4.1 Durable Producer Goods 9.8 0.1 1.0 17.1 0.4 2-3 Total 44.4 7.2 16.2 80.2 14.9 18.6 Non-Commercial Imports 3.7 7.7 48.1 .. .. 87.9 .. * Source: Ministry of Finance; Trade Reports. TABLE XXI Central Government Re-:enue and Expenditure (E million) 1950/1 191/2 1952/3 1953 124 19556* 1956/7** (1st Current Recelps Income tax 4.2 4.8 6.8 5.7 6.0 5.2 5.0 Import duties 7.2 9.7 9.6 12.0 12.3 15.0 15.7 Export duties 9.5 15.0 16.8 21.5 50.6 22.3 15.8 Other 4.0 4.1 7.9 7.2 8_3 8.2 8.7 Total 24.9 33.6 41.1 46.4 77.8 50.7 45.2 CaDital Receipts U.K. & FOA grants 0.1 0.1 0.1 0.5 0.9 0.2 1.4 Loan from Cocoa Market- ing Board & local loans - 2.3 3.5 4.5 4.4 0.5 - Miscellaneous** - 4.6 0.8 0.8 - - Total 0.1 7.1 4 .8 5.3 0.7 1. Total Receipts 25.0 40.6 45.5 52.3 83.1 51.4 46.6 Current Expenditure 11.8 15.3 23.7 25.1 29.5 34.0 41.7 Capital Expenditure 10.5 9.4 16.7 17.1 16.4 24.6 28.3 Total Expenditure 22.3 24.7 40.4 42.2 45.9 58.6 70.0 Overall Surplus or Deficit +2.7 +15.9 +5.1 +10.1 +37.2 -7.2 -22.4 * Revised estimates for 12 months. ** Owing to lower expectations from cocoa export duties, the figure for revenue has been reduced in the table on page 15. The figure for capital expenditure has also been reduced on page 15. * Includes net loan repayments and the net figure for deposits and advances, whenever there are net receipts. Net payments are included under capital expenditure. Source: Economic Survey 1955. T-,P I- I18 XII Development Plans A. Expenditure from Development Funds (9 million) Estimated Expenditure to 6/30/57 1951/52 6.7 1952/53 13.7 1953/54 15.5 1954/55 15.0 1955/56 (15 months) 25.3 1956/57 (estimate) 21.8 98.0* Subsequent Commitments First Development Plan 6.0 Tema Harbor & Town 13.2 Other Commitments 7.2 Uncommitted balance 11.3 37.7 Total Receipts to 6/30/57 135.7 * Of which 82.2, first Development Plan, 15.3 Tema and 0.5 other. Source: Compiled from material submitted by Ministry of Finance. TABLE XXTI (Continued) B. Allocations to First Development Plan and Tema Harbor and Town by Type of Expenditure (E million) Communications Railways and harbors 22.6 Roads 17.1 P.T.T., Air 2.2 41.9 Other Economic Services Electricity 2.2 Urban anad Rural Water 7.5 Agriculture 6.0 Commerce, Industry, Mines 3.4 19.1 Social Services Education and Social Welfare 14.0 Health 5.5 Housing 6.9 26.3 Administrative and General Army and Police 5.6 Official Buildings 8.9 Local Government Capital Works 9.3 Miscellaneous 2.9 26.7 Unallocated 3.52 117.5* * Certain costs and allocations have changed since this classification was drawn up (e.g. the cost of Tema has gone up). The total does not correspond, therefore, with that on the previous page. Table XYITI Public Debt as of June 30, 195 (E thousand) DutstandinL Amount Sinkinp Funds EXTFRNAL DEBT Funded 3% inscribed stock 1963 2,010 1,355 41'% inscribed stock 1960/70 1.170 - 857 Total 7xternal Debt 3.180 2,21 INTERNAL DEBT Funded 4o stock 1968/73 500 29 3-f% stock 1969/74 1,000 35 Registered Fremium Bonds 1954/64 500 62 Bearer Bonds 1955/56 500 43 Loan (Development Fund) 1956 -4- 000 6,500 169 Unfunded Takoradi Harbour Extensions E 2,300,000 1951/52 Loan 1,846 £ 1,350,000 1952/53 Loan 1,197 E 1,150,000 1953/54 Loan 1,059 E 350,000 1954/55 Loan 335 Railway Improvements E 2,170,000 1952/53 Loan 1,924 E 2,565,400 1953/54 Loan 2,363 " 1,358,000 1954/55 Loan 1,300 Trans-Volta/Togoland Development a 300,000 1953'/54 Loan 276 E 700,000 1954/55 Loan 670 E 2,000,000 (Development Fund) 1956 Loan Total Unfunded Debt 12,970 Total Internal Debt 19.4 TOTAL PUBLIC DEBT 2 5 TOAL 2,381 Source: The Financial Statement 1956/57 TABLE XXIV Money and Banking (Q million monthly averages) A. Commercial Banks Principal Principal Assets Liabilities Total Assets Balances Held Loans & Deposits & Liabilities* Currency Abroad (Net)** Advances 1947 9.5 2.6 5.9 0.6 9.0 1950 12.4 8.5 0.6 2.2 11.8 1955 23.6 3.7 12.3 4.2 20.0 June 1955 23.2 4.1 12.4 3.9 19.5 Sept. 1955 25.7 5.0 11.5 4.8 20.2 Dec. 1955 25.7 3.0 13.7 5.9 21.9 March 1956 24.5 2.3 15.0 4.6 22.0 June 1956 26.6 2.0 16.4 5.3 23.6 B. Currency Circulation (including banks) (9 million monthly averages) 1947 15.8 1950 31.5 1955 33.8 June 1955 30.1 Sept. 1955 32.0 Dec. 1955 41.6 March 1956 34.1 June 1956 30.3 * Balances due abroad have been deducted from total assets and liabilities. ** Overseas investments included in 1955 and 1956. Source: Digest of Statistics. TABLE XXV Public Utilities: Production A. Electricity Generated (million kwh) 1951 1955 Accra 16.2 29.5 Sekondi/Takoradi 8.3 14.1 Kumasi 3.2 7.6 7 other towns, 2.9 5.7 30.6 56.9 B. Water Consumption (million gallons) 1951/52 1955/56 (12 months) Accra 802 1374 Takoradi 457 670 Kumasi 313 406 4 other towns* 326 435 1,898 2,885 Excludes towns with supplies starting after 1951. Source: Economic Survey 1955; Public Uorks Department. TABLE XXVI Electricity: Installed Capacity (thousand kw) 1952 1956 1957 (Estimated) Accra 3.8 6.4 9.7 Kumasi 1.4 4.5 7.0 Sekondi/Takoradi 3.4 7.2 7.2 Legon (near Accra) - 3.8 3*8 Tema - - 2.0 OtIhers 1.6 3.6 5.1 10.2 25.5 34.8 Mines 56.4 (61.0)* * 1955. Source: Economic Survey: Electricity Department.