The Politics of Government-Business Relations in Ghana, 1982-2008

The Politics of Government-Business Relations in Ghana, 1982–2008

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The Politics of Government-Business Relations in Ghana, 1982–2008 Darko Kwabena Opoku

THE POLITICS OF GOVERNMENT-BUSINESS RELATIONS IN GHANA, 1982–2008

Copyright © Darko Kwabena Opoku, 2010. All rights reserved. First published in 2010 by PALGRAVE MACMILLAN® in the United States—a division of St. Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010. Where this book is distributed in the UK, Europe and the rest of the world, this is by Palgrave Macmillan, a division of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN: 978–0–230–10556–0 Library of Congress Cataloging-in-Publication Data Opoku, Darko Kwabena, 1962– The politics of government-business relations in Ghana, 1982–2008/ Darko Kwabena Opoku. p. cm. ISBN 978–0–230–10556–0 (alk. paper) 1. Industrial policy—Ghana. 2. Ghana—Economic policy. 3. Government business enterprises—Ghana. I. Title. HD3616.G533O66 2010 3229.30966709049—dc22

2010007917

A catalogue record of the book is available from the British Library. Design by Newgen Imaging Systems (P) Ltd., Chennai, India. First edition: September 2010 10 9 8 7 6 5 4 3 2 1 Printed in the United States of America.

Dedicated to the memory of my late maternal uncle, Okyeame Nana Kofi Kontor, III, known in private life as Opanin Kofi Donyina, to whom I owe my education and a lot more.

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CON T E N T S

Acknowledgments

ix

List of Abbreviations

xi

Map of Ghana Introduction One

xiv 1

Ghanaian Entrepreneurs and Ghanaian Governments

15

Two

The First Eighteen Months of PNDC Rule

25

Three

The Achievements and Limitations of Economic Reform

45

Strains in Government-Business Relations, 1983–1991

75

Four Five Six Seven Eight Nine

Government-Business Relations in the Democratic Era

101

The Changing Face of Ghanaian Business: The Rise of P/NDC Stalwarts

141

NDC-Business Relations: The Case of Brong-Ahafo

161

Constraints of the Institutional Environment on Capitalist Expansion

189

The Theoretical Implications of Ghana’s Experience

213

viii

Contents

Conclusion

227

Notes

233

Bibliography

239

Index

253

AC K NOW L E DGM E N T S

This book is a revised and updated version of my 2005 University of London doctoral dissertation. In bringing the original project to fruition, I received excellent assistance and support from my advisers—Dr. Richard Jeffries, Professors John Sidel and Stephen Chan. I would like to express my deepest appreciation and gratitude to them for helping me hone the research questions and for making incisive comments that helped shape this book. Richard was especially instrumental in my intellectual development and this book owes much to his insights. I would also like to acknowledge Professor John Boye Ejobowah, Wilfrid Laurier University, Waterloo, Canada, where I taught for two years, for his friendship and mentorship. I am grateful to Professor Rhoda Howard-Hassman, my colleague at Laurier, for reading and commenting on parts of this book. Last, but certainly not least, I would like to thank Professor Edward Andrew, University of Toronto, for taking special interest in me and for his guidance. A rare teacher, Professor Andrew, more than any other teacher, has profoundly impacted my life. He was the best teacher I ever had. While conducting field research in Ghana, I was affiliated with the Department of Political Science at the University of Ghana, Legon. Professor J. Ayee provided assistance in securing a small f lat at the Legon campus and in obtaining a library card. I had stimulating discussions with Professors. M. Oquaye, E. Gyimah-Boadi, and K. Jonah. Osei Nyamekye, my classmate in Primary School, welcomed me into his home in Kumasi. Peter Bessey, a.k.a. Pozo Hayes, my classmate in Secondary School, hosted me in Sunyani. In both places I had the pleasant combination of reminiscing on my boyhood days while incurring no expense. I should also like to thank my many interviewees, both named and unnamed in the text, for sharing their experiences, knowledge, and insights with me. I have learned, sadly,

x

Acknowledgments

that Dr. K. Safo-Adu, who gave me many hours of interviews, has passed away. May the soul of this brave Ghanaian rest in peace. My academic journey would have been cut short were it not for the moral and financial support from my relatives and friends in Toronto. My cousin and most enduring friend, Kwaku Bona, deserves special mention. He stuck with me and never f linched in situations where many would have given up. I owe Kwaku a great debt of gratitude. My cousin, Kofi Owusu-Bona, repeatedly went to great lengths to lighten my burden, and never tired of me. I am also deeply indebted to Alex Ankomah, for his unwavering friendship, encapsulated by the following incident. On May 30, 2003, my laptop containing all but two draft chapters of my dissertation and of which there were no saved copies was stolen. Years of hard work had come to nought. Or so it seemed. Alex bought a new laptop for me the next day and succeeded in motivating me to start over again within days! Maria McIntyre and Sybil Mosley also proved to be invaluable friends. In London, my friend and classmate Pat Antwi and her husband Kwaku Acquah, were very supportive. Their welcoming home and cheerfulness made the difficult time in London more manageable. Thanks so much for your friendship. To my mother, Akosua “Nyamekye” Frimpomaa, I say thank you for your love and for inspiring me. Smart, and exceptionally perceptive, she taught me the value of hard work and perseverance. Ever the optimist, she never saw the glass as half empty and would never let me quit. Finally, this book would not have materialized without the support and patience of my wife, Adwoa Boahemaa. She has been a blessing to me.

A BBR E V I AT ION S

AC ACR ACSMA AFRC AGI AMA ARB ATC BAs BKF BOG C CB CBI CDRs CEPA CEPS CHRAJ CIBA CPP CVC DA DC DCE DG DIC DWM EIU

Africa Confidential Africa Contemporary Record Ada Cooperative Salt Miners Association Armed Forces Revolutionary Council Association of Ghana Industries Accra Metropolitan Assembly Africa Research Bulletin Ada Traditional Council Business Associations Brong Kyempim Federation Bank of Ghana Cedi Consultative Bodies Confederation of British Industries Committees for the Defence of the Revolution Centre for Policy Analysis Customs, Excise and Preventive Service Commission on Human Rights and Administrative Justice Council for Indigenous Business Associations Convention People’s Party Citizens’ Vetting Committee District Assembly Defence Committee District Chief Executive Daily Graphic Divestiture Implementation Committee December Women’s Movement Economist Intelligence Unit

xii ERP GBA GED GEPC GFIC GHACEM GIPC GMA GNCC GNPC GPRTU GSE GTP GUTA IB ICL IFIs IMF IRS ISSER ITG JFM MFJ NCD NDC NDM NICs NIB NIC NIRP NLC NPP NRC NRP NTE ODI OECF PDC PEF PNDC

Abbreviations Economic Recovery Program Ghana Bar Association Ghanaian Enterprises Decree Ghana Export Promotion Council Ghana Film Industry Corporation Ghana Cement Works Ghana Investment Promotion Centre Ghana Manufacturers’ Association Ghana National Chamber of Commerce Ghana National Petroleum Corporation Ghana Private Road Transport Union Ghana Stock Exchange Ghana Textile Printing Ghana Union of Traders Association Identifiable Bodies Industrial Chemicals Limited International Financial Institutions International Monetary Fund Internal Revenue Service Institute of Statistical, Social and Economic Research International Tobacco Ghana June Four Movement Movement for Freedom and Justice National Commission on Democracy National Democratic Congress National Democratic Movement Newly Industrializing Countries National Investment Bank National Investigations Committee National Institutional Renewal Programme National Liberation Council New Patriotic Party National Redemption Council National Reform Party Nontraditional exports Overseas Development Institute Overseas Economic Cooperation Fund People’s Defence Committee Private Enterprises Foundation Provisional National Defence Council

Abbreviations P/NDC PNP PP PSAG PSCC PSR PT P/WDC SCCL SFO SMC SOEs SSNIT T&CG TTBF UGCC UTAG VAT VSPL WA WDC

xiii

Provisional National Defence Council and the National Democratic Congress People’s National Party Progress Party Private Sector Advisory Group Private Sector Consultative Group Private Sector Roundtable Public Tribunal People’s/workers’ defense committees Star Chemicals Company Limited Serious Fraud Office Supreme Military Council State-owned enterprises Social Security and National Insurance Trust Transport and Commodity General Tano Tile and Brick Factory United Gold Coast Convention University Teachers Association of Ghana Value Added Tax Vacuum Salt Products Limited West Africa Workers’ Defence Committee

2

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BURKINA FASO

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International boundary Region boundary

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National capital Regional capital

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UP U PPE ER R W WE EST

Wulugu

Road

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10

0

25

50

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75 Kilometers 50

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75 Miles

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Lambert Conformal Conic Projection, SP 8N/32N

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Kara

Yendi

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Bafilo Bassar

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Black

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BRONG-AHAFO

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BENIN

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6

Bight of Benin

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Accra

Winneba

Gulf of Guinea

Cape Coast Sekondi Takoradi

Axim

Cape Three Points 2

0

Map Information: Courtesy of The General Libraries, The University of Texas at Austin.

2

Introduction

The Premise and the Argument Since the early 1980s, the World Bank, backed by aid donor countries, has been involved in efforts to stimulate capitalism in Africa by requiring African governments to implement a set of orthodox, neoliberal economic policies in return for structural adjustment loans. Indigenous business has been conceived as the linchpin of the neoliberal capitalist project. “Africa needs its entrepreneurs” the World Bank argues, “Only their initiative can ensure that the long term demand for low-cost products and services will be met” (1989, p. 135). After two decades of reforms intended to stimulate the private sector, however, viable and dynamic African capitalists have remained almost as distant as ever. Moreover, although these reforms were expected to foster a state-capital alliance, that alliance has not materialized. Indeed, government-business relations remain fraught and at times even hostile, and efforts to stimulate capitalism in Africa and boost economic performance have been disappointing. Why do leaders adopt neoliberal economic reforms and then antagonize the very people upon whom success would depend? Why have these reforms had such a limited effect in encouraging private local business, or stimulating dynamic capitalist growth? These are the central questions addressed in this book. In considering these puzzles, I question some of the theoretical assumptions that have informed neoliberal economic reforms in Africa and the policy prescriptions that arise from them. The evidence is drawn from Ghana, which became synonymous with neoliberal economic reforms in Africa in the 1980s and 1990s. I advance two main sets of arguments in this book. The first is that Ghana’s patronage-based politics and the accumulating strategies of rulers meant that political—not economic—considerations

2

Government-Business Relations in Ghana

dominated policy making and government attitudes, leaving little room for autonomous capitalists. My second argument is that some of the same policy measures designed to promote capitalist growth also spawned challenges that limited the ability of Ghanaian capitalists to expand. Thus, the basic character of African political economy and neoliberal policy prescriptions are critical to an understanding of my research questions. The World Bank’s (1981) report provided the basis of the orthodoxy which attributed the main causes of Africa’s economic crisis to mistaken domestic policies. Wide ranging in its critique of prevailing economic policies, this seminal report identified mismanagement in the public sector, a bias against agriculture, and illiberal trade and exchange rate policies as major causes of Africa’s economic crisis. It argued that pervasive state intervention in African economies had stif led capitalists and prevented them from playing a major role in Africa’s development. The report tended to assume, a priori, that if a conducive set of economic policies were adopted, capitalist expansion would occur. It further assumed that once such reforms were undertaken, entrepreneurs would commit more of their resources. By the late 1980s, the World Bank had developed a nuanced understanding of the complex causes of Africa’s economic woes. “A crisis of governance,” that is, “the exercise of political power to manage a nation’s affairs,” the Bank concluded, underlay Africa’s “development problems” (1989, p. 60). While insisting that economic reforms were essential, the Bank noted that they needed to be augmented by politico-institutional reforms or else the efforts to steer African economies toward a productive capitalist trajectory would fail. This thinking roughly coincided with the demise of communism in Eastern Europe in the early 1990s, after which several powerful Western countries began making their much-needed bilateral assistance to African countries conditional on democratization. Democracy, it was argued, was a precondition for effective implementation of liberal reforms, the assumption being that it would counter discretionary power, make rulers accountable and create a fertile ground for capitalist expansion. The World Bank adopted this view, triggering a wave of democratic transitions in Africa. Africanists were overwhelmingly skeptical about the supposed links between democracy and more efficacious neoliberal reforms (see, e.g., Jeffries, 1993; Callaghy, 1994a). They noted that the economic crisis that prompted the Bank to become more actively involved in African economies had been caused by the subordination of economic matters

Introduction

3

to political concerns and that it was unlikely that this would end, not least because the beneficiaries of this system were the same people being asked to dismantle it. The observation that political concerns trumped economic ones had been particularly eloquently expounded by Robert Bates (1981) who argued that, in formulating economic policy, African government leaders had been primarily concerned to maximize their prospects of political survival. This concern drove them to intervene in markets to transfer resources from agricultural smallholders to better organized, more vocal, and politically threatening urban groups such as bureaucrats, industrialists, and workers. The main instrument for transferring resources lay in state marketing boards, which in effect taxed export crop producers at steadily increasing rates to fund the expansion of government and para-statal employment. Further, governments in Anglophone Africa tended to maintain vastly overvalued exchange rates. This made imports—consumed primarily by urban groups—artificially cheap, but greatly reduced the real returns to farmers. Governments also deliberately depressed the cost of food to placate urban groups. Over time, the extent of the bias against agriculture induced many peasant producers to abandon or reduce production for the market, or to smuggle their crops into neighboring countries where they could gain higher prices. Declining volumes of agricultural exports were the main reason for the growing balance of payments problems of many African countries—far more important over time than the deterioration in the terms of international trade. Since proceeds from agricultural exports formed the fiscal base of many African states, declining agricultural output led over time to a decline in government revenue as a proportion of GDP. Governments became increasingly unable therefore to maintain transport infrastructure or health and educational provisions, or even, paradoxically, to maintain the real wage levels of the government employees whom such policies had initially been designed to serve. Most African governments were thus caught up in a downward spiral of economic decline which they themselves had largely induced. Bates noted that although these policies had proved economically detrimental, they made considerable political sense. To understand such perverse uses of power requires reference to personal rule. Long identified as the dominant mode of governance in Africa, personal rule evolved as part of the efforts of Africa’s new, insecure, and fragile regimes to co-opt potentially hostile elements and build up followings. Governments expanded the size and scope of the

4

Government-Business Relations in Ghana

state to provide them patronage in the form of, for example, jobs for educated and semi-educated youths who might otherwise threaten the stability of government. Leaders assumed vast powers and circumvented formal rules to consolidate power. An ability to monopolize avenues for accumulating vast fortunes for themselves and their allies was also central to personal rule. Indeed, incumbents saw a capitalist class that was capable of accumulating capital on a significant scale independent of government as politically threatening. “In the interest of his domination,” Weber noted, “the patrimonial ruler must oppose . . . the economic independence of the bourgeoisie” (1978, p. 1107). Thus, President Kwame Nkrumah of Ghana was expressing a common concern when he confided in an aide his fear that if he permitted Ghanaian capitalists to succeed they would rival and threaten his power (Esseks, 1971a). Since the African state has been the prime locus of resources and benefits and hence accumulation and upward mobility, governments have been very successful in inf luencing the fortunes of capitalists. Indeed, the most successful entrepreneurs have almost invariably been insiders; outsiders perish. Confronted with this legacy, neoliberal efforts to foster capitalism in Africa aim to deny rulers key instruments of patronage—rents, overvalued currencies, intervention in the economy, operation of public enterprises, etc. African governments, on the other hand, are locked in a fierce, zero-sum game in which victors determine who controls vital resources, most notably capital. Since control over such resources is paramount to the retention of power, incumbents are loath to forfeit them. Capitalism, therefore, faces forbidding odds. Why, then, do African governments adopt neoliberal economic reforms? Various reasons have been put forward of which the most compelling is that it was the only viable option. This was certainly true in the case of the Provisional National Defence Council (PNDC) regime of Jerry Rawlings, which initiated these reforms in Ghana. Only after a failed experiment with radical populism and futile efforts to gain assistance from socialist nations did the PNDC agree to reform. Even then, the successive governments of Rawlings had difficulty relating to capitalists in a manner consistent with their economic policies. That notwithstanding, Ghana’s reform program was quite thorough, and it had some notable achievements to its credit. By the mid-1990s the reforms had included a massive depreciation in the exchange rate; the removal of all quantitative restrictions on imports and the lowering of tariffs to a relatively uniform 10 to 25 percent range; a reduction of corporate taxes to 35 percent and of capital gains tax to 5 percent;

Introduction

5

the removal of price controls and subsidies; the privatization or closure of numerous public enterprises; the revision of the foreign investment code to improve incentives; and the award of special incentives to exporters and to investors in infrastructure. As the World Bank noted, Ghana was by 1994 the most advanced country in Africa as regards free trade and low tariff-based protection. Compared with the decade preceding adjustment, the Ghana economy greatly improved the level of its exports, imports, and the overall balance of payments. GDP growth averaged 5.2 percent in 1983–1990, though it declined to an average of 4.4 percent in the 1990s (Hutchful, 2002, p. 58). Fiscal performance was particularly impressive, with government revenue as a proportion of GDP rising from 5.3 percent in 1983 to 14.4 percent in 1986 and then averaged 14.5 percent through to 1991. This facilitated a strong recovery of real expenditure, enabling the government to improve educational and health provision, as well as to rehabilitate the transport and communications infrastructure, steadily if not spectacularly. Gross national investment as a proportion of GDP also rose from 3.7 percent in 1983 to about 16 percent in 1990 (Hutchful, 2002, p. 58). This recovery in investment was generated primarily, however, by the public sector, ref lecting in part the high level of external assistance. Private investment increased from 4 percent in 1983 to about 9 percent in 1990 but then stagnated at this level. Despite this limited success, some World Bank officials still optimistically envisaged an East Asian–style economic take-off in Ghana in the early 1990s. This optimism was baseless. Ghana’s achievements vis-à-vis the East Asian NICs were mediocre, the services sector having consistently been the most dynamic sector. This, a structural change, could be interpreted as in some respects regressive. Although the industrial sector increased its share of GDP from 11.6 percent in 1983 to 14 percent in 1987, it then stagnated at that level through to 1998 (compared to the 20 percent achieved in the 1970s). This apparent stagnation concealed, moreover, a shift within the sector, with mining accounting for an increasing share, while manufacturing declined dramatically. As Sanjaya Lall (1995, p. 2025) has pointed out, manufacturing value added (MVA) rose rapidly in 1983 to 1989 because imported inputs were now accessible to existing industries which had been suffering for many years previously from huge excess capacity. As this excess capacity was used up, however, the exposure to international competition induced by such a rapid reduction in protectionist tariffs led to a sharp deceleration of industrial growth. The rate of growth of MVA fell from 12.9 percent in 1984 to 5.6 percent in 1989, and then to a

6

Government-Business Relations in Ghana

mere 1.1 percent in 1990. By 1996 manufacturing accounted for a mere 4.8 percent of GDP, down from 7 percent in 1993. Ghana was increasingly turned, as the President of the Private Enterprise Foundation put it, “into a nation of shoppers and storekeepers with very little manufacturing or industrial activity.” Looking at developments within the industrial sector in more detail, one observes that the large-scale enterprises—many of them state-owned—were the most severely hit; indeed they were virtually devastated by import competition. This was primarily because they suffered most from a relative lack of modern technological capabilities. The survivors were mostly in activities that enjoyed natural protection from imports: very small-scale enterprises, making low-income or localized products, and a few larger enterprises that were protected by high transport costs or that processed local raw materials. There was no significant increase in foreign investment in manufacturing as distinct from mining and other primary activities. Nor was there any significant increase in manufactured exports. Of course neoliberals absolve themselves of blame in the partial success in Ghana and elsewhere in Africa. They blame, first, the failure, even in Ghana, to pursue sufficiently sound macroeconomic policies and, second, as the Bank increasingly stressed from the late 1980s onward, the need to create the requisite enabling environment in terms of political processes and institutional supports. Against this backdrop, I assess the extent to which Ghana’s limited success can be explained in terms consistent with a neoliberal theoretical framework, including its stress of the new institutional economics on the importance of providing secure property rights and reducing transaction costs. The contrasting explanation by the developmental state school must logically follow. Wade (1990), Amsden (2001), Chang (2003), and others have shown that the most successful developing nations intervened to provide extensive subsidization of manufacturing industry in a manner of which neoliberal economists disapprove; and they have shown, moreover, why they needed to do so in order, as Amsden has put it, to “shift the center of gravity of their economies away from primary product-based assets toward knowledge-based assets, the essence of economic development” (2001, p. 8). It is crucially important to add, however, that the reason such government-allocated subsidies accelerated the development of reasonably efficient industries rather than feather-bedding highly inefficient and ultimately unsustainable ones was because they were tied to monitorable performance standards: “They did not become giveaways” (Amsden, 2001, p. 8). Despite

Introduction

7

Kang’s (2002) attempt to downplay such factors, the achievements of East Asian developmental states had some important preconditions in terms of, minimally, genuinely development-oriented governing elites together with quite efficient and corporately coherent bureaucracies that could be relied upon to conduct such monitoring. The World Bank’s repeated references to the lessons offered by these nations together with its emphasis on administrative coherence and capacity as essential for capitalist development call for using them as contrasts with Ghana. It is worth stating two beliefs underlying my discussion of the developmental state. First, although it is common to present neoliberal economics and “developmental state” interventionism as conf licting conceptions of how to develop, it seems to me that recent analyses have tended to downplay the contribution of what one might term “relatively orthodox” macroeconomic policies and other typical neoliberal prescriptions—investment in infrastructure, expanded educational provision, and various means of lowering transaction costs—to the success of South Korea and Taiwan, and subsequently a number of Southeast Asian economies. It was arguably in part at least because subsidies were provided within the framework of relatively orthodox exchange rate policy, for example, that they were effective in stimulating rapid growth. At the same time, recent analyses, in their emphasis on structural and political relationships, have arguably downplayed the degree of divergence between the kinds of interventionist policies implemented in most African states in 1960–1980 and those adopted in, for example, South Korea and Taiwan, as well as the significance of this divergence for the modes and effects of the kinds of rent-seeking generated. Moreover, I will argue that the neoliberal emphasis on the importance of enhancing the security of property rights and reducing transaction costs has much to contribute to an explanation of the reasons for the limited success of the liberalizing reforms implemented in Ghana. I will illustrate in considerable detail how and why the PNDC, the quasi-military regime that began the reforms, alienated business. Second, the inf luence of democratization on this situation was far more ambiguous than the World Bank or bilateral donors had anticipated. In Ghana, the return to constitutional rule via democratic elections in 1992 actually witnessed an intensification of P/NDC harassment of businesspeople because the latter tended to support the leading opposition party. Third, democratization was actually accompanied by only very limited changes in the institutional environment, which remained in many ways uncongenial to capitalist development.

8

Government-Business Relations in Ghana

Having said this, when one turns to consider Ghana’s experience under the New Patriotic Party (NPP) government which acceded to power from January 2001 to January 2008, the limitations of a neoliberal analysis become more clear. The NPP was very much “the party of business.” It followed World Bank policies even more faithfully and rigorously than its NDC predecessor, practicing what the Bank considers to have been even more sound macroeconomic management, and in the context of far more cordial relations with the business sector. And yet the results in terms of increased business investment or overall economic growth were modest. It is therefore relevant to consider what forms of policy measures might be necessary to stimulate capitalist development in Ghana and what administrative and political preconditions may be required. Research Methods, Research Context, and Scope of the Book The main method of data collection for this book consisted of openended interviews with 280 medium- and large-scale Ghanaian businesspeople. I set out to investigate the development of such businesspeople’s relations with government and the role of these political relations in the fortunes of their businesses. This was obviously very politically sensitive and the prevailing political conditions affected the research methodology used to investigate these issues. The original intention was to administer a survey questionnaire and then to follow this up with open-ended interviews. This intention rapidly, however, encountered problems. I mailed or hand-delivered questionnaires to a list of businesses selected from files compiled by the Ghana National Chamber of Commerce and the Association of Ghana Industries, the two oldest business associations in Ghana. There were so few responses to the questionnaire, however, that the resulting sample would have had no analytic value. Accordingly, this exercise was abandoned. Although the results of a survey questionnaire might have proved interesting, it was arguably more important for the purposes of this study to conduct extensive open-ended interviews. Survey results were likely to be of limited reliability on such topics as the politics of government-business relations and the reasons why private sector investment fell well below expectations. As Aryeetey has noted, surveys fail to capture the true extent of the impact on investment of uncertainty over the credibility or sustainability of reforms in Ghana. In surveys,

Introduction

9

businesspeople tended to cite financial constraints as major difficulties. But “when there are no questionnaires in sight,” they express their views over government antagonism toward them (Aryeetey, 1994, p. 1219). Fortunately, many of the same businesspeople who refused to answer the survey questionnaire on the grounds that the questions were too “political” proved willing to participate in open-ended interviews. As one interviewee pointed out, “People can deny that they spoke to you or say that you misquoted them. It is not so easy to disentangle oneself from something that one has written.” After it became clear that many informants were uncomfortable with being tape-recorded, this practice, too, was discarded. Thereafter, I relied on taking notes of interviews. Interviews were conducted in two languages: Twi, the most widely spoken language in southern and central Ghana; and English, Ghana’s official language. It must be stressed that the subject of government-business relations in Ghana was one on which a significant number of Ghanaian entrepreneurs were wary of expressing their views even in 2000, seven years into constitutional rule. The reasons for this will become obvious in the following pages. Here, it may suffice to note that entrepreneurs often feared that regime informants might pose as academic researchers to gain information that could be used to hurt them. The fact that 2000 was an election year probably heightened this fear. This situation argued for open-ended interviews with businesspeople whose trust the author managed to gain over a period of time. Open-ended interviews also had the advantage of encouraging interviewees to raise whatever issues they considered relevant. I was able, moreover, to obtain clarification on sensitive issues through repeated visits and through further questioning of informants in relation to information gathered from newspapers and other sources. Once I had established a rapport with them, many entrepreneurs proved willing to introduce me to business colleagues. That helped widen the sample of cases. The sample of entrepreneurs interviewed for this study was not, therefore, based on “scientific” selection. I interviewed, quite literally, as many businesspeople as I could contact and who agreed to be interviewed; though, in general, entrepreneurs involved in industrial activities were preferred over others. In all, a total of 280 entrepreneurs were interviewed (120 in Accra, Ghana’s capital and largest city; 100 in Kumasi, Ghana’s second largest city; and 60 in Brong-Ahafo, one of Ghana’s ten administrative regions).

10

Government-Business Relations in Ghana

An obvious question arises: did this rather unsystematic method mean that there was likely to be a bias in the findings? It is difficult to be sure about this, but it seems clear from impressionistic evidence, scholarly works, newspaper sources, World Bank reports, and so on, that the majority of businesspeople found relations with Rawlings’ governments very difficult. Accordingly, the fact that most of the interviewees stressed this factor does not seem likely to be unrepresentative. One potential source of bias might be the fact that the research focused on relatively successful medium- and large-scale businesses. All the entrepreneurs included in the study, save about half a dozen, employed at least fifty people. It is relevant here to comment brief ly on the selection of Accra, Kumasi, and Brong-Ahafo as research sites. Studies of Ghanaian capitalists have traditionally been based on businesses located in the major business centers of Accra and Kumasi. Together, these are home to the bulk of medium- and large-scale businesses in Ghana, making them obvious areas of interest for studying capitalist activities. For me, doing research in the two cities with the highest concentration of enterprises offered obvious practical benefits. Brong-Ahafo, one of Ghana’s ten administrative regions, was included in the study because it promised to add an additional dimension to the study. It seemed important to study businesses at the local level in the relatively small towns in one of the regions in order to gauge whether similar pressures and difficulties arose at this level as in Accra and Kumasi. Interviews were conducted from January to December 2000. Where confidentiality was a condition for granting an interview, I have kept my word and indicated this in the text. Where no such condition was attached, the identity of interviewees is revealed, except in cases in which it has been judged that the nature of the information calls for withholding the informant’s identity. In order to check for empirical accuracy, the accounts of entrepreneurs were supplemented by interviews with bureaucrats and civil servants, officers of various civil society organizations, academic analysts, and politically well-informed Ghanaians. Information provided by these groups of people sometimes confirmed the accounts of entrepreneurs; at other times contradictions emerged. Where the latter was the case, I “challenged” entrepreneurs’ versions of particular incidents in order to clarify the issues. By the same token, information provided by entrepreneurs enabled me to cross-check versions put forward by the nonbusiness interviewees. There was an additional reason for interviewing bureaucrats and civil servants. It is clearly important to investigate whether, in response

Introduction

11

to the emphasis placed on charting a more vigorous capitalist development path, there has been any significant shift in the attitudes and conduct of bureaucrats and civil servants toward the capitalist class. Because the task of implementing policies falls on bureaucrats and civil servants, their attitudes and conduct could facilitate or hinder business operations. In order to assess the extent to which there had been progress in these respects, a set of interviews were conducted with several dozen bureaucrats and civil servants. In addition to these surveys, information for this book was drawn from the Ghanaian media. So far as was possible, I sought to check media reports against information garnered from personal informants. Several of these media sources merit mention here. Reports by West Africa, the London-based weekly, proved to be a useful source of information, particularly for the 1980s when independent reporting was hard to obtain. Despite being mouthpieces of the government, the state-owned newspapers, the Daily Graphic and Ghanaian Times, also provided invaluable information on matters involving businesspeople, and in echoing the official antibusiness line. A prime example would be the probes into the affairs of Vacuum Salt Products Limited (see chapter four). Reports by the state-owned press in the 1980s obviously have to be treated rather cautiously as they tended to ref lect the government’s preferred view rather than to present a balanced or unbiased account of contemporary incidents and developments. In the constitutional era after 1992, private newspapers proliferated. For this later period, then, it became possible to cross-check accounts written from different political perspectives. The Ghanaian Chronicle, the Crusading Guide, the Statesman, among others, followed national developments closely. They are widely cited in the following pages. Structure of the Book The book has nine main chapters, together with this introduction and a conclusion. Chapter one provides an historical account of the policies successive Ghanaian governments adopted toward domestic business interests from independence up to the accession to power of the PNDC regime on December 31, 1981. Chapter two describes the “revolutionary” or “radical populist” phase of the PNDC regime from the beginning of 1982 to late 1983. It outlines the context within which the PNDC seized power, what it initially set out to do, the challenges that it faced, and how and why it changed course. In particular, it highlights the

12

Government-Business Relations in Ghana

threat that the regime and its “revolutionary” organs posed to business interests, emphasizing that this experience was to continue to inf luence businesspeople’s attitudes toward the regime for the rest of its duration. Chapter three discusses the “structural adjustment” economic reform measures introduced in Ghana from 1983. The chapter considers to what extent the failure of the Rawlings (PNDC and NDC) governments to stimulate the development of the private sector might be attributable to the limitations of these economic policies. These policies were a remarkable departure from policies pursued by previous postcolonial regimes in Ghana, and they could be credited with a degree of success in engineering economic recovery. Nonetheless, while the reforms offered some improved incentives to entrepreneurs, they also created quite daunting challenges. The difficulties these policies created for indigenous business were compounded by poor implementation and, particularly after Ghana returned to constitutional rule in 1993, by undisciplined macroeconomic management. The challenges proved particularly devastating for large-scale manufacturers. Chapter four discusses government-business relations in Ghana from the adoption of market reforms in April 1983 to the onset of democratization in 1990–1991. It considers to what extent the PNDC’s shift from an anticapitalist orientation to embrace neoliberal reforms ushered in a new, more responsive attitude toward business. I note that, although the adoption of market reforms presupposes a willingness to collaborate with business, this was actually not the case in Ghana. Not only did the regime fail to consult businesspeople, it continued to confiscate businesses and to persecute some of Ghana’s top entrepreneurs. Thus, businesspeople remained fearful and sought to hide their wealth rather than to invest. In chapter five, I discuss the transition to democracy and the accession to power of the NDC via the elections of 1992. I also delineate government-business relations through to 2000 when the NDC lost power. Bilateral donors had promoted democracy on the grounds that it would curb abuses of power and facilitate market reforms in Africa. This expectation was not borne out in Ghana as political rivalries poisoned government-business relations. Chapter six details how the NDC government decimated entrepreneurs who fraternized with the opposition. Meanwhile, it sponsored its stalwarts and allies, providing them with credit, privatized public assets, and such, propelling them to the pinnacle of business. Chapter seven shifts the focus temporarily away from the national to the regional level, presenting a case study of government-business relations in Brong-Ahafo, one of Ghana’s ten administrative regions.

Introduction

13

It builds on the observation in chapters five and six that, although economic liberalization took some vital sources of patronage out of the hands of the authorities in Ghana, there were still numerous other means through which they could inf luence the fortunes of entrepreneurs. This case study of government-business relations in small-town Ghana also sheds important light on the vital role business played in NDC resource mobilization. Chapter eight reviews the question of whether cultural factors have inhibited the growth of African entrepreneurs. What role, if any, did cultural attitudes play in the weakness of Ghanaian entrepreneurs in the 1990s? I argue that cultural factors, while not unimportant, have been largely a response to economic, political, and institutional uncertainty. These “environmental” factors are accorded explanatory priority. Since the economic and political explanations are discussed extensively in earlier chapters, this chapter focuses on the institutional dimensions. To what extent did state institutions in Ghana provide an environment that was congenial to, and supportive of, a capitalist economy? I focus on the civil service and the judiciary because of their primacy in creating conditions conducive to capitalist development. Since the prime aim of reform was to reorient Ghana’s economy toward export growth, I also discuss the support provided to business by the Ghana Export Promotion Council, the state agency responsible for facilitating exports. Chapter nine considers the implications of the research findings in relation to the more general debate about the most appropriate policies for fostering capitalist development, including the growth of manufacturing in developing countries. Up until this point, the book’s empirical material has been presented largely within the confines of neoliberal theory, as supplemented by the new institutional economics, in line with the theoretical assumptions of the IFIs and the policies they have pressed on the Ghana government. In chapter nine, I turn to consider the critique of such assumptions by the “developmental state school.” I thereby seek to consider whether more interventionist policies are likely to be necessary to foster industrialization in Ghana (and in other African states), and what are the necessary political and institutional preconditions for the successful implementation of such policies. An outline of the economic policies and achievements of the NPP government which displaced the NDC from office in 2000 help clarify this question. Finally, the conclusion presents the overall argument, drawing together the findings of the previous chapters.

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CH A P T E R

ON E

Ghanaian Entrepreneurs and Ghanaian Governments

Recent years have witnessed an explosion in studies that shed light on why neoliberal reforms have achieved limited success in Africa. What emerges from this burgeoning literature is that save for one or two countries, African governments have eschewed reform coalitions with business often with harmful effects for economic growth. They have preferred to develop particularistic relations with entrepreneurs while building business empires. Government leaders have been driven by a desire to amass wealth, secure preeminent positions, and obtain instruments of patronage. In his excellent study of Zambia, Zimbabwe, and South Africa, Scott Taylor (2007) argues that whether regimes collaborate with business or not may be determined by the nature of the economy, the relative contribution business makes to the economy, and the institutional strength of business vis-à-vis that of the state. In Zambia, reliance on copper put little pressure on leaders to cooperate with business. In Zimbabwe, by contrast, a more diversified economy with a strong manufacturing sector and in which business—mainly white-owned—possessed strong organizational capabilities forged a state-business alliance until a dwindling support base led President Robert Mugabe to abandon this pact. A state-business coalition has held in South Africa as post-apartheid governments have realized the institutional strength of business and its economic weight. In her study of government-business interactions in South Africa, Mauritius, Ghana, and Zambia, Antoinette Handley (2008) uses a broadly similar framework to illuminate how and why local states and conditions shape these relations. South Africa and Mauritius, she argues,

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Government-Business Relations in Ghana

are characterized by “constructive contestations”; that is, the business classes possess the economic wherewithal and a high level of capacity that is matched by a state able to display an equally high level of capacity. A “healthy” balance between the “two relatively well-matched protagonists” has enabled business to have “a significant and sustained impact on economic policy-making” in South Africa and Mauritius. In Ghana and Zambia, by contrast, she notes that “neo-patrimonialism” holds sway, and the state dominates business. Moreover, in Ghana and Zambia, unlike in South Africa and Mauritius, the impact of business on economic policy-making was “negligible” (p. 2). The literature on government-business relations in the Third World, more broadly, emphasizes the centrality of a state-business coalition as vital to successful capitalist development and economic transformation, as well illustrated by a collection of papers edited by Maxfield and Schneider (1997). These coalitions, as numerous studies have shown, have been common in Asia and Latin America. Some East Asian states developed especially close relations with business, drawing (mostly) praise (Evans, 1995; Chang, 1994) but also condemnation and charges of cronyism, particularly after the Asian financial crisis of the late 1990s (Kang, 2002). There is, therefore, broad recognition that a state-business nexus significantly enhances the prospects for success. Conversely, where there is little state-business collaboration or, worse, hostilities, the prospects for success become very slim. Indeed, Taylor (2007, p. 3) argues that business-state coalitions are essential institutions of late capitalist development. And, while the argument that state-business coalitions emerge when business possesses economic weight and is institutionally well organized seems to be a reasonable hypothesis, it risks being overstated. After all, the aim of neoliberalism was precisely to help develop business. Ultimately, whether to collaborate with business or not is a political decision that may be inf luenced by considerations other than business capabilities. Indeed, in a comparative study of business activism in five Latin American countries, Schneider (2004) found that although business inf luence was higher in Chile, Colombia, and Mexico than in Argentina and Brazil, this greater inf luence had more to do with state policy actions than with economic characteristics of business or broader political parameters. The attitudes and orientation of political leaders are therefore crucially important and very relevant to the case of Ghana. While my argument falls under the broad frame that personal rule and patronagebased politics and viable capitalism are odd pairs, it is important to add

Ghanaian Entrepreneurs and Governments

17

that there are important variations within this broad system. In this regard, Jon Kraus’ (2002) study of state-business relations in Ghana and Nigeria is illustrative. Although both countries were under authoritarian regimes, government-business relations were markedly better in Nigeria partly because of leadership orientation. And, in relation to other Ghanaian leaders, Rawlings was arguably the most hostile to local capitalists. Comparisons between him and other Ghanaian leaders place the study in comparative relief. Essentially a bully, Rawlings personally handled matters of government-business relations, dealing with entrepreneurs as he saw fit. His ability to at once pursue neoliberal policies and subvert capitalists highlights important nuances and contradictions unforeseen by neoliberal grand theories. I stress the contradictions through an examination of government interaction with business associations (as recent studies tend to do), but I also pay close attention to particularistic relationships between government and individual entrepreneurs. Case studies are especially important to a study that uses the personal rule framework. They are, I think, the ultimate manifestation of the operation of personal rule. They reveal the extent and scope of leadership mediation in economic competition and underline how abstract some neoliberal assumptions are. I present the Ghanaian world as it was, not as conceived through a set of assumptions. There are further reasons why this book is suffused with detailed case studies. Somewhat surprisingly, many Ghanaians are unaware of what transpired in Ghana under Rawlings during the 1980s with regard to the persecution of entrepreneurs beyond very sketchy details. Ghana’s fairly small business community, it turned out, was also quite uninformed. Even taking into account the fact that the government controlled information f low during the 1980s, I found the general lack of knowledge about what exactly happened to certain entrepreneurs very surprising. Accounts of events often related to me by some businesspeople proved to be so distorted as to have little semblance of what actually occurred. Having trawled through mountains of information, I hope that this book will prove informative to many Ghanaians. The Political Economy of Ghana’s Economic Decline and the Road to Adjustment Ghana began independence in 1957 in much better economic shape than most African countries. Ghana had been the world’s largest producer of

18

Government-Business Relations in Ghana

cocoa, with over $500 million in foreign exchange reserves. It boasted the highest per capita income ($300) in Africa (Stryker and Tuluy, 1989) and was ranked among middle-income countries. It possessed a relatively well developed infrastructure and civil service. Ghana, Genoud wrote, was “a more advanced colonial economy” (1969, Chapter 2). Sir Arden Clarke, Ghana’s last colonial governor, proclaimed that if Ghana’s development effort failed, few African countries were likely to succeed (Seidman, 1978). Soon after independence, however, Ghana’s economy began to stagnate: it entered a period of severe decline in 1975, and it reached its nadir in the early 1980s. Ghana’s first leader, Dr. Kwame Nkrumah, sought to industrialize the country primarily by using state resources. There were three main considerations for this. First, the dominant development theory in Nkrumah’s day accorded a preeminent role to the state as an agent of development and social transformation. It was argued that, since ex-colonies lacked an indigenous capitalist class, the state ought to assume this role. State intervention was seen as essential to accelerate the process of industrialization, which required resources that were beyond the reach of indigenous capitalists. Nkrumah sought to apply this development theory in Ghana (Killick, 1978). Second, Nkrumah was also attracted to economic statism because it dovetailed with his “socialist” and nationalist beliefs. Like Presidents Julius Nyerere of Tanzania and Kenneth Kaunda of Zambia, Nkrumah was hostile to capitalism. The colonial experience engendered a deep ideological suspicion of capitalism. African nationalists routinely blamed international capital for supporting imperialism and slavery, making no distinction between capitalism and colonial exploitation. Nkrumah and other African government leaders adopted a strategy of nationalization and state-sponsored industrialization in the guise of “socialism” in order to repel foreign capitalist domination or “neo-colonialism.” Finally, the expansion of para-statals offered the political attraction of providing employment for the urban groups, thereby enabling Nkrumah to consolidate his hold on power. These urban groups— unemployed school leavers, low-paid workers, and ex-soldiers—had been the main support base for Nkrumah’s nationalist fight and had provided the main activists of his Convention People’s Party. They expected to be rewarded with jobs, and there was little prospect of large-scale private sector enterprises expanding rapidly enough to meet this demand. Moreover, the issues that galvanized people into political action and which Nkrumah exploited so well in the anticolonial struggle—housing scarcity, unemployment, rising cost of consumer

Ghanaian Entrepreneurs and Governments

19

goods, and lack of opportunity for upward social mobility—had special appeal to urban inhabitants (Leith and Lofchie, 1993). Beginning in 1960, Nkrumah launched a massive state-led import substituting industrialization project. In order to provide a high degree of artificial protection for para-statals spanning all economic sectors, he employed a trade regime of import restrictions: a cumbersome system of tariffs, quotas, exchange controls, and outright bans. He granted monopolies to some para-statals, and yet nearly all para-statals proved unprofitable and relied on annual government subventions to survive. This was attributable partly to poor feasibility studies and planning, but also to chronic mismanagement, overmanning, excessive political interference, and shortage of skilled staff (Killick, 1978). In parallel with the explosion of para-statals, the civil service also ballooned. As the state stretched itself into ever wider areas, it became the main employer and the main source of upward social mobility. It accordingly incurred costs that put undue strain on public finances. The key source of finance for the overdeveloped state was excessive taxation of cocoa farmers, Ghana’s most important foreign exchange earners. The monopsonistic Cocoa Marketing Board set artificially low producer prices, and creamed off the difference between this price and the world market price. By 1964, the real purchasing price of a load of cocoa had fallen to about half its pre-1957 value. Farmers began to reduce production and investment (Kennedy, 1988). The squandering of cocoa taxes on a failed industrialization project meant that the government had no reserves to use when commodity markets collapsed in the mid-1960s. Faced with a growing balance of payments deficit, Nkrumah chose to maintain a fixed exchange rate rather than devalue the currency. This choice necessitated, however, that he ration foreign exchange and introduce a regime of import licenses, the bulk of which went to state enterprises and political allies. The rationing regime gave additional discretionary and allocative power to government officials, thereby triggering a massive surge in the scale of corruption. Amidst growing economic problems and increasing political repression, Nkrumah was overthrown in a military coup in February 1966. The National Liberation Council (NLC), the new regime, was economically more pragmatic than its predecessor. It sought to improve the balance of payments and ease inf lationary pressures. It favored the abolition of import, price, and exchange controls, but it achieved only a modest reduction in the coverage of import licensing. It cut public employment and raised the price paid to cocoa farmers. A

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Government-Business Relations in Ghana

privatization scheme caused a political storm that forced its cessation (Killick, 1978). The civilian government that succeeded the NLC in 1969 was more fully committed to economic liberalization and rationalization. The Progress Party (PP) government of Dr. Kofi Busia favored the abolition of import controls and the introduction of responsible fiscal and monetary policies. It was slow to introduce reforms, owing largely to its fear of the reaction of the Trades Union Congress (TUC) and other urbanbased interests. Nonetheless, it proceeded to initiate some quite radical liberalizing moves in the course of 1971, notably: (1) the abolition of public sector housing and transport allowances; (2) the replacement of free university education with interest-free loans; (3) the introduction of a national development levy on salaries; (4) a cut in the defense budget; and (5) retrenchment of the civil service. These measures did indeed antagonize urban social groups: students confronted the government over the abolition of grants, and industrial unrest soared. Busia responded by abolishing the monopoly position of the Ghana TUC. An austerity budget, involving a fairly massive but realistic devaluation of the cedi, was introduced in December 1971 ( Jeffries, 1982). Such measures were economically sensible, but a group of military officers led by Colonel I. K. Acheampong, sensing the opportunity presented by widespread popular discontent and resentful at the withdrawal of their own amenities, staged a coup d’état in January 1972. The new government, the National Redemption Council (NRC), regarded the PP’s liberalizing measures as a capitulation to “imperialism” and rejected them. (The NRC was renamed the Supreme Military Council in 1975.) “[M]y aim,” Acheampong declared, “is to use state power to capture the commanding heights of the economy and to control it in such a way that its development will not go to benefit only a few handful of well-placed Ghanaians” (West Africa, June 23, 1972, p. 781). Accordingly, he partially revalued the cedi, repudiated “bad” debts on the grounds that they had been fraudulently contracted, and unilaterally rescheduled “good” debts. He pacified groups whose interests had been threatened by the liberalizing measures of the PP government. He restored student and public sector allowances and raised the minimum wage. The NRC reintroduced comprehensive administrative rationing of import licenses and foreign exchange, and widened the scope of price controls, reinstating the distributionist policies which tended to favor urban over rural groups. Owing to a rise in the world market price for cocoa and to good food crop harvests, the economy was quite robust in 1972, 1973, and 1974.

Ghanaian Entrepreneurs and Governments

21

Thereafter, however, severe economic decline set in as the effects of statism came home to roost. Cocoa output plunged in response to low real producer prices, so that foreign exchange became acutely scarce. In the Ivory Coast and Togo, Ghana’s immediate cocoa-producing neighbors, prices were respectively six and four times higher than in Ghana by 1978 ( Jeffries, 1982). These disparities encouraged cocoa smuggling. For an economy heavily reliant on imported inputs for industry, agriculture, and consumer goods, the lack of foreign exchange caused acute shortages and led to the rise of kalabule, a neologism that encapsulated various forms of commercial profiteering, bribery, hoarding, and smuggling in response to scarcities and over-regulation. In 1978, as the regime responded to its fiscal shortages by printing more money, inf lation reached new highs (Gyimah-Boadi and Jeffries, 2000, p. 38). The standard of living declined severely for nearly everybody. Rural producers were especially hard-hit. Whereas cocoa farmers had received between 40 and 50 percent of the world price of cocoa between 1952 and 1963, their share fell to 30 percent in 1965 and tumbled to about 10 percent between 1975 and 1981 (Woods, 2004, p. 231). Also, getting paid was fraught with long delays. The state undermined its own authority and alienated rural people, who disengaged from the state en masse (Chazan, 1983; Mikell, 1989). Allocation of import licenses was riddled with nepotism, favoritism, and corruption. Increasingly over time, the only beneficiaries of these policies were regime insiders, their families, and cronies, making fortunes overnight either as importers or by reselling licenses (Oquaye, 1980). Amidst this increasingly closed system of rent-seeking and a collapsing economy arose kleptocracy or, to put it bluntly, rule by theft. Members of Acheampong’s government became blatantly and massively corrupt. A coalition of professionals and students led a campaign against Acheampong. On July 5, 1978, members of his own government forced him from office. The Supreme Military Council II did little before being overthrown by the Armed Forces Revolutionary Council (AFRC) led by Jerry Rawlings on June 4, 1979, ahead of a planned return to civilian rule. The AFRC launched an anticorruption drive. In its three months in office, it executed three ex-heads of state and five senior military officers, confiscated some private firms and other assets, and oversaw the planned multiparty elections and the launch of Ghana’s Third Republic in September 1979. The Peoples’ National Party government recognized the dire economic situation, but proved indecisive. In particular, it failed to agree to IMF [International Monetary Fund] stabilization measures, including the demand for a substantial

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Government-Business Relations in Ghana

devaluation. By then, Ghana had the most overvalued currency in Africa (May, 1985) and, of 32 underachieving economies, Ghana’s was the most distorted (World Bank, 1983). On December 31, 1981, Rawlings staged his second coup, ushering in the PNDC [Provisional National Defence Council] regime. It is worth brief ly expanding a little here on several points implicit in the foregoing analysis. First, although the dominant view among the younger members of Ghana’s intelligentsia was that national economic decline was attributable to “dependence” on international capitalism, such an explanation was not very intellectually tenable. If anything, it was Ghana’s relative independence rather than its dependence that made its economic calamity so thorough. As Jeffries has put it, Acheampong was able to refuse to devalue and to “remedy revenue shortages simply by print[ing] more money, precisely because Ghana did possess an independent Central Bank and her own currency unlike the members of the CFA franc zone” ( Jeffries, 1989, pp. 79–80). As Rothchild and Gyimah-Boadi (1986) have also observed, contrary to assertions that international capital was mainly to blame for Ghana’s economic woes, by the 1980s Ghana had been abandoned by foreign capitalist interests because it was both strategically and economically insignificant, and because government policies made it extremely difficult to conduct business there. Second, attributing Ghana’s impoverishment to the character or terms of international trade is f lawed. A comparison of the divergent experiences of Ghana and the Ivory Coast will clarify the point. In human and natural resources, Ghana had the edge over its neighbor. Both countries, of course, participated in global trade as commodity exporters and shared similar economic structures. Both faced rising oil prices in the 1970s—a condition often cited as a major cause of Ghana’s economic crisis. Yet, while Ghana struggled, the Ivory Coast enjoyed an “economic miracle,” averaging growth rates of between 7 and 8 percent a year during the period 1960 to 1979 (Gyimah-Boadi and Daddieh, 1999). The divergent experiences are attributable primarily to domestic policies, not exogenous factors. In particular, because the Ivory Coast government paid much higher real prices to its cocoa producers and was able thereby rapidly to expand cocoa production, it was in a position to reap the benefits of record-high world market prices in 1976–1978. This in turn enabled it to cope quite easily with the increased cost of oil imports. In relation to Ghana, therefore, Robert Bates’ (1981) analysis has considerable explanatory power. It does, however, fail to capture, as

Ghanaian Entrepreneurs and Governments

23

Gyimah-Boadi and Jeffries (2000) have argued, two vital issues. First, in the case of the SMC, policies designed to protect the economic interests of urban groups resulted, by 1978, in severe impoverishment of these same groups. This, of course, was scarcely politically rational and indeed, in the end, undermined regime political survival. One might therefore question whether Bates’ explanation of the motives for statist, urban-biased economic policies is entirely adequate. Second, and related to the former point, it is difficult to explain the policy change that occurred in Ghana in 1983, or the relatively minor level of domestic resistance, in terms of Bates’ theory. I will return to this point in chapter three. The State and Indigenous Capitalism in Ghana How did indigenous capitalist enterprise develop under these successive regimes? By the early 1980s, it remained mostly small scale, with little in the way of medium- or large-scale private enterprises. There were three main reasons for this. First, only rarely did state policy provide any meaningful scope for private business operations. Second, the long period of economic stagnation and decline impeded capitalist growth. Third, the Ghanaian state developed an ethos of obstruction rather than assistance to capitalist entrepreneurship. I will discuss these issues in turn. To varying degrees, the policies pursued by Ghanaian governments after independence left few arenas for capitalist accumulation. Nkrumah was very suspicious of Ghanaian capitalists: he also believed that encouraging their growth would hamper the advance to socialism (Anin, 1991). Accordingly, Ghanaian capitalism, to the extent that it was to be accepted, had to be congruent with socialism—that is, it must operate mainly in minor activities, those unfit for state involvement. Nonetheless, strategically placed figures with access to import licenses and state contracts did manage to acquire fortunes. The NLC and the PP regimes were more approving of capitalism. They improved Ghanaian entrepreneurs’ access to loans and import licenses and reserved certain categories of enterprises for them. Acheampong and his colleagues reversed this shift through their creation of extreme scarcities of foreign exchange, their allocation of the few available import licenses to racketeering girlfriends (the so-called golf-girls, who drove around in new Volkswagen Golfs), and their consequent creation of conditions highly unpropitious for genuine

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Government-Business Relations in Ghana

business activity. The dominance of para-statals—which exceeded 300 in 1983—stif led the growth of private capitalist enterprise. The parastatals received the bulk of the meager foreign exchange available. Ghana’s economic decline impeded capitalist expansion. The chronic shortage of import licenses caused shortages of critical imports for local manufacturers. The high levels of inf lation, averaging 7.6 percent in 1960–1970 and 36.4 percent in 1970–1981, made capitalists risk-averse and oriented to short-term commercial activities (Kraus, 2002, p. 399). The sharp fall in the standard of living of nearly all social groups after 1975 reduced most people’s capacity to spend money. Capitalist accumulation suffered accordingly. Statism and the politics of distributionism fostered an anticapitalist ethos that bore quick political fruit, not least because vocal groups, including most Ghanaian intellectuals, believed that capitalism was self-seeking and antisocial. Those who held this view saw the problem as lying not with statism, but with corruption in the distribution system. When the AFRC sought to punish what it saw as corrupt businesspeople in June–September 1979, its actions involved many who were doing no more than adapting to circumstances. The effect was further to demoralize those who sought to run legitimate capitalist enterprises. Rawlings had risen to power in June 1979 at the head of a movement whose main aim was to punish and eliminate kalabule, or corruption. He returned to power on December 31, 1981, at the head of a broader coalition, many of whose members sought to go further, to establish a more radical form of socialism. The prospects for capitalist entrepreneurs appeared bleaker than ever.

CH A P T E R

T WO

The First Eighteen Months of PNDC Rule

This chapter examines government-business relations during the radical populist or self-proclaimed “revolutionary” phase of the PNDC regime. This began with the take-over of power on December 31, 1981, and lasted roughly till the latter part of 1983. Though quite shortlived, it was marked by intense antagonism toward business, which continued to inf luence businesspeople’s perception of the PNDC government for many years thereafter. During this phase, the regime was preoccupied with “giving power to the people” and waging war against corruption. It created and empowered new institutions to realize these goals. The activities of these new institutions, coupled with fiery anticapitalist government rhetoric, not only stigmatized the ownership of private property and wealth, but also gravely threatened capitalist entrepreneurship. The economy, meanwhile, continued to deteriorate as the regime, deeply divided, failed to agree on an economic policy. Politically, the PNDC seemed likely to disintegrate into feuding factions. It managed to change course only after fierce internal battles and the consolidation of Rawlings’ personal dominance. Background to the PNDC The PNDC began on a decidedly radical note, proclaiming a revolution based on anti-bourgeois, anti-imperialist mobilization of ordinary Ghanaians. A proper understanding of this must refer back brief ly to the AFRC interlude of June–September 1979. Under the Supreme Military Council (SMC), which ruled from 1975 until July 1978, corruption and commercial profiteering, unprecedented in both scale and

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Government-Business Relations in Ghana

scope, had developed in an environment of ever deepening economic crisis, administrative breakdown, and civil disorder (Oquaye, 1980). General Fred Akuffo and others who served in Acheampong’s government overthrew the SMC in a palace coup, ushering in the SMC II. Owing to their close association with Acheampong, however, members of the SMC II failed to punish Acheampong and other racketeers by instituting legal proceedings against them. Amid widespread expectation that the SMC II was preparing to give a blanket indemnity to its members and those of the SMC I before a planned return to constitutional rule, Flight Lieutenant Jerry John Rawlings led an unsuccessful mutiny of junior military officers on May 15, 1979. Rawlings’ criticisms of corruption and misrule at his trial made him a popular hero. He was then sprung from jail to lead a new military government, the Armed Forces Revolutionary Council (AFRC), on June 4, 1979. The AFRC’s main objective was to punish former military leaders and senior officers for allegedly tarnishing the image of the armed forces through blatant corruption. Dubbed a “house-cleaning exercise,” the AFRC’s program “purged” the military, executing all three ex-military heads of state—Generals A. A. Afrifa (1966–1969), I. K. Acheampong, and F. K. Akuffo—and five other military officers, hoping thereby to instill probity and accountability in public life. It is important brief ly to examine the AFRC’s attitude toward the private business sector, given that the PNDC’s policy in 1982–1983 was in large measure a continuation of that of the AFRC. In 1979, Rawlings blamed “the greater part of [Ghana’s] present economic and social woes [on] some businessmen who hide behind the curtain to dupe the country through trade malpractices and other anti-social activities” (Ghanaian Times, July 7, 1979). In line with this thinking, the AFRC developed no coherent economic policy other than energetically enforcing price controls and launching a brutal campaign against kalabule (corruption). The most dramatic measure taken in pursuit of this goal was the razing of Accra’s Makola Market, which the AFRC regarded as the bastion of corruption. The AFRC created special courts to try many prominent entrepreneurs on charges of “crimes against the state,” which consisted primarily of fraudulent acquisition of import licenses, business malpractices (especially with regard to tax evasion), and alleged “profiteering.” The trials were decidedly perfunctory and nontransparent, with little opportunity for the accused to prepare a defense. They commonly resulted in prison sentences ranging from ten to ninety years, the imposition of huge fines, and the confiscation

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of private assets. In one notable case, the multimillion dollar TATA Brewery in Accra, owned by J. K. Siaw, was confiscated. Scores of entrepreneurs f led Ghana (Oquaye, 1980). Recognizing that any lengthy continuation of military rule would be massively unpopular, the AFRC proceeded with the planned elections for a return to civilian rule in September 1979. The victors in these elections, Dr. Hilla Limann and his People’s National Party, were publicly warned by Rawlings that they were “on probation,” expected to prioritize economic recovery and to continue the battle against corruption. Hopes that Limann’s government might embrace these aims soon faded. Limann displayed quite astonishing inertia and ineptitude in his handling of the economy (Chazan, 1983; Jeffries, 1989; 1991). Meanwhile, damaging scandals and allegations of corruption involving senior officials, captured the headlines. Rawlings, who had threatened to overthrow Limann if he failed to combat corruption, made good his threat on December 31, 1981. In hindsight, the odds were against Limann’s government. The mutineers of June 4, 1979, had initiated what, in Bayart’s (1993) parlance, one might term a revolution of the “social juniors.” It is notable, for example, that no officer beyond the rank of Major participated in the coup or served on the AFRC. This departure from past coups ref lected the level of disenchantment with the military establishment and with the old political elite more generally. The 1979 coup birthed several radical left-wing organizations and transformed Ghana’s puny left into a formidable national political force.1 The left became highly visible and vocal critics of Limann’s government. Extending their critique beyond the issue of corruption to the nature of prevailing state-society relations more generally, they sought radical change (Chazan, 1991). The left together with Rawlings’ personal popularity with wide sections of Ghanaian society overshadowed Limann’s government. In the period between September 1979 and December 1981, these radical groups, recognizing that their own future inf luence would depend largely on their closeness to Rawlings, sought to develop personal ties and to win him over to their ideas. For his part, Rawlings proved willing to spend considerable time with their leaders and certainly became quite sympathetic to some of their neo-Marxist ideas, if not entirely convinced as to their practicability. He also developed close personal bonds with radical figures, most notably the two Tsikata brothers, Fui and Tsatsu, law lecturers at the University of Ghana; their cousin, retired Captain Kojo Tsikata; Sergeant Allolga Akata-Pore; and Chris Atim, ex-National Union of Ghana Students vice-president and

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secretary of the June Four Movement ( JFM)—a group named after the day in 1979 when Rawlings first seized power. They and their radical movements derived their intellectual origins from the “dependency” school of political economy. They blamed Ghana’s underdevelopment on the exploitation of foreign capitalist interests with the connivance of a local “comprador bourgeoisie” and wanted to sever Ghana’s ties with global capitalism. They were thus strongly opposed to any deal with the International Monetary Fund (IMF) or World Bank. Deeply distrustful of the profit motive, they espoused socialism and the destruction of the position of the “propertied classes” ( Jeffries, 1989, p. 93). Though Rawlings bonded with some of these radical figures, he was never entirely converted to the dependency perspective. He had been, in 1979, and essentially remained, a moral reformer who attributed Ghana’s woes to the abuse of power by Ghanaian government leaders and their business cronies. Having attached themselves to him in 1979–1981, however, the neo-Marxists sought to dominate the new PNDC government. As the economic crisis worsened, the ideological divergence between Rawlings and these radical groups became increasingly apparent and developed into a major rift. The Economic Challenge The PNDC inherited a collapsed economy. Ghana’s major exports— cocoa, mineral resources and timber, which together accounted for up to 90 percent of its export earnings—had declined sharply. Cocoa exports fell from 557,000 tons in the 1964/1965 crop year to a meager 185,000 tons in 1980–1981. Mining output also tumbled: gold from 900,000 fine ounces in 1962 to 333,095 in 1981; diamonds from 3 million carats a year in the 1960s to under 1 million forecast for 1982; bauxite from over 300,000 metric tons a year in the 1960s to 173,000 forecast for 1982. Timber exports earned $130 million in 1973 but merely $21.6 million in 1981. The fall in the world market price of cocoa in the early 1980s compounded matters: a ton of cocoa sold at £590 in 1981 compared to £2900 in 1977 (Africa Contemporary Record, 1981–1982, p. B425). This severely restricted Ghana’s ability to import crucial machinery, spare parts, and industrial raw materials for local manufacturing. The manufacturing index fell from 100 percent in 1977 to 69 percent in 1980 and 63.3 percent in 1981. Inability to either import goods or produce goods locally caused shortages of every conceivable item. Inf lation reached triple digits, and food production tumbled. Between 1974 and

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1982 maize output fell by 54 percent, rice by 80 percent, cassava by 50 percent, and yam by 55 percent (Hutchful, 1989, p. 94). From 1975 to 1983, the real minimum wage plunged by a massive 86 percent. Caloric intake fell to only 65.4 percent of the minimum daily requirement by 1983, compared to an average of about 92 percent during the 1970s. Infant mortality rate surged. Much of the transport infrastructure had witnessed serious deterioration (Callaghy, 1990, p. 274). The poor state of roads, the lack of spare parts, and increased cost of petroleum all contributed to worsen food shortages, especially in the cities. In sum, the PNDC faced a grave economic challenge. A series of shocks compounded Ghana’s troubles. Global recession depressed the prices of Ghana’s already low volumes of exports. As Ghana’s poor creditworthiness sank ever lower, so bilateral lending fizzled out. Further, Ghana experienced a severe drought in 1982–1984 that ruined crops and worsened food shortages; bush fires reduced both cocoa and timber output. Water levels behind the Volta dam, the main source of hydroelectric power, fell below the minimum necessary for generating hydroelectricity, thereby reducing already low capacity utilization still further to between 20 and 25 percent by late 1983 and seriously disrupting industrial output (Toye, 1991). In late 1982, Nigeria expelled an estimated 1 million Ghanaians—about 10 percent of Ghana’s population. The sudden inf lux of returnees, together with the cost of ferrying them home and feeding them in camps before transporting them to their hometowns, stretched state resources to the limit. Unconfirmed reports of Libyan involvement in Rawlings’ coup alarmed most West African states. Liberia swiftly recalled its envoy from Ghana. The Ivory Coast closed its land border with Ghana. Togo followed suit. Border closures aggravated shortages of consumer goods by cutting the f low of supplies from these states to Ghana to a trickle. This represented a serious setback for traders involved in the lucrative cross-border trade. However, it was Nigeria, which Ghana owed an estimated $142 million in unpaid petroleum imports (Africa Research Bulletin [ARB], January 1982, p. 6313), that took the most punitive action. It effectively imposed an oil embargo on Ghana by insisting on immediate payment for deliveries. Nigeria had been highly critical of Libya’s growing inf luence in Africa and saw the latter’s alleged role in Rawlings’ coup as a dangerous advance in its expansionism. Partly because of external hostility, but mainly because of the PNDC’s own orientation, the leadership sought assistance from Libya and the socialist bloc. This proved futile. Libyan assistance, for example, was

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limited to oil supply on credit, which was hopelessly inadequate. The Soviet leadership itself advised Ghana to go to the IMF. This rebuff was not surprising. Ghana required huge capital inf lows if economic recovery were to occur and none of these countries proved willing or able to provide such resources ( Jeffries, 1991). Hence, IMF assistance appeared to be the only viable means of resuscitating the economy. The very idea of an agreement with the IMF was anathema, however, to the neo-Marxists within the PNDC and their constituencies. For them, the revolution’s aims included extricating Ghana from the “imperialist system” of which the IMF was a central pillar. Rawlings initially shared this view, but became increasingly critical of it, as the radical leftists failed to provide a workable alternative to an IMF deal. He increasingly sided with a group of technocrats who had concluded that, given the gravity of the crisis and the scale of assistance required, an IMF deal was the only practical solution. These differences, which underscored the ideologically diverse character of the PNDC’s original leadership, made negotiation of a policy consensus very elusive. Initially, the neo-Marxists were in the ascendancy. Although Rawlings was the preeminent figure, his continuing dominance was far from assured. In fact, as shown later, his position on several issues was challenged, and at one stage, there were moves to displace him. It must be emphasized, however, that, although Rawlings was essentially a moral reformer and a fighter for the social underdog, temperamentally antipathetic to any dogmatic ideological position, he did share with the leftists a dislike of capitalism, together with a belief that the hardship experienced by most Ghanaians over the previous eight years was partly the fault of unscrupulous, corrupt businesspeople in collusion with government officials. Although he did not believe in pursuing a socialist path, he did want to make an example of corrupt businesspeople in order to rid Ghanaian society of kalabule. In 1982, the PNDC took several punitive actions that seriously hurt and frightened Ghanaian businesspeople. For example, it sealed off Ghana’s borders and ordered that 50 cedi (C) notes, then the highest denomination, be exchanged within days for new currency notes. Entrepreneurs in the lucrative cross-border trade who were outside Ghana at the time were unable to exchange their holdings at the banks. Even some of those who were present in Ghana were unable to meet the short deadline. This in any case proved inconsequential because those who turned in their C50 notes to the banks were frequently not repaid in the new notes. The exercise, as Kraus (2002, p. 402) points out, was to

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“eliminate the gains of traders holding large cash sums.” Also, as part of an effort to track down wealthy businesspeople in order to investigate them, the PNDC recalled all business loans and directed that all business transactions over C1000 be paid by check. These directives inevitably unnerved businesspeople, especially as they set the precedent that banks could be required to reveal details of accounts to the authorities. “Power to the people” and the “war against corruption” found expression in the creation of populist and quasi-judicial institutions or “counter institutions of state power” designed to circumvent and weaken middle class domination (Hansen, 1991). Defense Committees, National Investigations Committee, Citizens’ Vetting Committee, and Public Tribunals were the central planks of the regime’s efforts to realize these goals. They merit attention here because they had enormous implications for many individual businesspeople and for business confidence more generally. Popular Organs: The Defense Committees (DCs) DCs were created to give expression to the PNDC’s concept of “power to the people.” DCs were to serve as “instruments of popular participation, political education, channels of communication to and from the leadership, and political control” (Ray, 1986, p. 68). They were intended to be mass-based and truly populist in membership and outlook in order to defend the rights of ordinary people against “oppressive” groups—landlords, ex-politicians, entrepreneurs, chiefs, etc. Since DCs were meant to empower “hitherto oppressed groups”—workers, farmers, fishermen, soldiers, etc.—members of oppressive groups were barred from joining DCs. Also, DCs were to expose and handle “corruption and counter-revolutionary activities” in their workplaces and communities (Ghanaian Times, January 30, 1982). This drew a spontaneous and enthusiastic response, as DCs sprang up all over Ghana. It must be stressed that, although probably genuinely committed to involving ordinary citizens in the decision-making process, the PNDC also sought to use this as an instrument for mobilizing mass support. Power to the people spurred many citizens, particularly young, angry men to mobilize to support the regime, enabling it to penetrate the entire country at hardly any financial cost. There were two types of DCs: community-based people’s defense committees, and workplace-based worker’s defense committees.

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Government-Business Relations in Ghana People’s Defense Committees (PDCs)

In the short term, PDCs proved valuable for the PNDC. They explained the ideals of the “revolution” to the public and galvanized support for the government. Their support was particularly critical in 1982–1983, when the regime’s security was rather tenuous. PDCs conducted extensive “surveillance,” reporting suspicious activities to the authorities. Such activities led to, among other achievements, the capture of dissident soldiers involved in the June 1983 coup attempt and in foiling it (West Africa [WA], July 11, 1983, p. 1634). PDC surveillance, widely reported in newspapers, intimidated and frightened potential opponents. PDCs undertook various self-help or developmental activities. They set up community farms; built schools and clinics; cleared village paths and wells of vegetation; rehabilitated public toilets; filled potholes; unclogged drains; and performed other communal work. These activities were vital in three respects. First, given the disintegration of the state apparatus to a point where it failed to provide these basic services, the PDCs filled a major vacuum. Second, their eagerness gave the regime a welcome political and psychological boost in its calls for self-reliance. Third, their support portrayed the PNDC in a positive light and somewhat blunted opposition forces, giving the regime the sense that it was on the right track. Over the longer term, however, the PDCs became a major political liability for the PNDC. As part of the regime’s “commandist” approach to the economic crisis, it restored price controls, which the Limann regime had relaxed. PDC enthusiasts vigorously enforced them. Naturally, merchants and traders refused to sell at a loss. They disregarded price controls or, more frequently, hoarded their goods. Either of these “crimes” resulted in seizure of their goods, arrests, trials and imprisonment, and f logging in public. Business assets were often confiscated. Houses belonging to landlords who disobeyed rent control laws, or who protested by refusing to rent their houses and rooms, were confiscated (WA, July 5, 1982, p. 1787). Similarly, vehicles were confiscated from transport owners who ignored officially sanctioned fares or kept their vehicles parked. Following the official line in 1982–1983, PDCs vilified entrepreneurs as exploitative, corrupt, and greedy. They repeatedly denounced businesspeople as “saboteurs” and subjected the latter to searches, detentions, intimidation, and interrogation, thereby clearly challenging their legal right to private property. Indeed, PDCs hardly distinguished between public and private property, calling for nationalization of privately owned businesses and other assets. In some instances, such as Vacuum Salt Products Limited (see chapter four), PDCs, acting on their

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own, “took over” private businesses and turned them into “people’s property.” This forced many entrepreneurs to f lee Ghana. Some activists (mis)understood people’s power as an opportunity to settle personal scores and engaged in self-serving acts such as fraud and theft. They “took over” traditional councils, sometimes “destooled” or chased chiefs out of their palaces, accusing them of corruption, misappropriation of land and calling for nationalization of all stool lands (Owusu, 1996, p. 330).2 Their bullying, zealousness, and corruption provoked public outcry and resentment and derision of “Rawlings’ democracy” as “mobocracy.” Though Baffour Agyemang-Duah’s (1987, p. 620) assertion that the P/WDCs “initiated a reign of terror reminiscent of the Red Guards in China during Mao’s cultural revolution” is exaggerated, even the sycophantic state-owned Daily Graphic (e.g., February 17, 1982) joined calls for officials to bring them to heel. Rawlings, who had initially been in favor of “participatory democracy,” began to take a more jaundiced view of such behavior and quickly lost confidence in them. Some scholars have attributed this to pressure from the World Bank, once he entered into negotiations with the IFIs. Actually, however, Rawlings’ change of view predated this. One reason was that the PDCs were largely under the thumb of the radical leftists. He not only disapproved of some of their more extreme actions but suspected that they were being developed as an alternative power base beyond his personal inf luence. Second, he realized that their increasingly lawless and arbitrary behavior was beginning to undermine broad popular support for the new government. In his 1982 May Day speech, he deplored such behavior and later lamented that some DCs had assumed “police power, made rash allegations . . . and in certain areas . . . constituted . . . themselves as political witch-hunting committees” (Hansen, 1991, p. 39). Even though the public mood turned decisively against them and gave regime opponents plenty of ammunition to attack it, Rawlings did not feel sufficiently politically secure to rein them in until 1984. By then, however, they had turned virtually all businesspeople against the regime, and had convinced most businesspeople that Rawlings himself was far more hostile to business than was really the case. Workers’ Defense Committees (WDCs) WDCs were assigned three main functions: (i) to ensure that workers participated in decision making in their workplaces; (ii) to help increase production, productivity, and efficiency; (iii) and to defend workers’ interests against arbitrary and unfair management practices (Legon Observer, April

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1982, pp. 6–9). Officials saw these as vital in curbing managerial indifference and high-handedness to workers and promoting industrial democracy. WDCs sprang up, especially in the major towns and cities. The WDCs, like the PDCs, proved to be a mixed blessing. They undertook self-help projects and acted as vanguards of the PNDC. The regime sometimes used them to crush antigovernment protests (WA, May 16, 1983, p. 1209). Expectations that they would increase productivity did not materialize, however, partly because they spent considerable time attending political gatherings and discussing workers’ revolution, criticizing imperialism and the profit motive, and partly because of the acute shortage of foreign exchange to import raw materials, spare parts and machines to feed factories. At other times, they deliberately disrupted factory and office productivity. WDCs sought to promote workers’ interests through militancy and confrontation. Many proved hostile toward managers and entrepreneurs, accusing them of exploitation, corruption and incompetence. In some cases, managers were dismissed, beaten up, locked out, or arraigned before public tribunals on corruption charges. In others, WDCs abolished management boards and governing councils in both public and private sectors and replaced them with worker-run interim management committees (Gyimah-Boadi, 1990). Further, WDCs seized private businesses and turned them into public property (WA, July 11, 1983, p. 1634). The most celebrated case of workers’ power occurred in November 1982 at the Ghana Textile Printing (GTP), a joint venture between the state and the United African Company. Here, workers chased out management and occupied their bungalows and offices because of plans to lay off some workers on the grounds of a shortage of raw materials. When police clashed with protesting workers, resulting in injuries to some workers, the PNDC swiftly nationalized GTP, deported its expatriate manager and set up a management team of workers and “patriotic” managers. Further, the PNDC ordered an investigation into the incident, promising to severely punish officers found to have used unnecessary force (Graham, 1989). GTP was returned to its owners in 1988, but such militancy had thoroughly undermined the confidence of businesspeople in the regime. The Citizens’ Vetting Committee (CVC) The CVC’s mandate was to “investigate persons whose lifestyles and expenditures substantially exceeded their known or declared incomes.”

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Anyone with a bank balance of 50,000 cedis (C) (about $16,000 at the official exchange rate) or more could be investigated for tax avoidance and default. Investigators uncovered widespread tax evasion, over- and underinvoicing, currency trafficking, fraudulent bank loans, and customs and excise offenses. Two cases might be considered to indicate the extent of tax evasion. Investigators discovered that a businessman owned fourteen houses, the last of which he purchased at C400,000 in January 1982. He purchased eight vehicles between 1977 and February 1982, the last costing C300,000. Yet he declared income of C266,000, calculated to be about 7 percent of his estimated actual income of C4.8 million in 1981. In July 1982, the CVC ordered him to pay C12 million. By March 1983, he had already paid half that amount (Ephson, 1983). Another businessman made C595,000 in profit in December 1981 but underdeclared his income. Using an average monthly profit of C500,000 to calculate his income, the CVC levied a penal liability of C3.9 million, which he failed to pay. He forfeited his bank savings, his car, a warehouse of goods, and other assets to the state (Ephson, 1982). Thanks to such investigations, tax revenues from the self-employed rose from C128 million in 1981 to C307 million in 1982 (Hutchful, 1989). The CVC unearthed some indubitably corrupt practices, but its judgments enjoyed little credibility. Two main reasons account for this. First, it was increasingly used as a political weapon against the private sector, more especially opponents of the PNDC. Zaya Yeebo (1991), a former PNDC minister, has revealed that, while Rawlings was eager to vet some people, he blocked the vetting of others such as Obed Asamoah and Kofi Awoonor, his close associates. Second, CVC personnel were mostly PNDC stalwarts. Hence many saw them as one and the same. Even when CVC investigations were not politically motivated in the sense of being partisan, most businesspeople regarded them as unfair because prosecutors could convict nearly anyone who did business during the Acheampong era, when businesspeople really had little choice but to engage, to some extent, in corruption and other technically illegal practices. Many businesspeople believed that their competitors were breaking the rules and, unless they did the same thing, they could not survive in business. The prime responsibility, arguably, lay not with entrepreneurs themselves as much as with the array of government regulations and their abuse by parasitic government officials. It was not until the latter part of 1983, however, that Rawlings gradually became persuaded that economic liberalization was a more effective way than punitive action to reduce kalabule.

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Government-Business Relations in Ghana The National Investigations Committee (NIC)

The second body, the NIC, was to investigate cases of corruption, or kalabule. The NIC was empowered to monitor suspects before they committed crimes. It had power to arrest and detain suspects as well as to freeze their assets. Further, it could freeze any bank account with a balance of C50,000 or more and investigate such account holders to establish whether they had engaged in unlawful activity. Those who failed to provide a satisfactory explanation to the NIC forfeited their money to the state and were often referred to the CVC and finally to the public tribunals for prosecution. Furthermore, the NIC could freeze the bank accounts of individuals suspected of tax evasion pending investigations (Yeebo, 1991). The vast majority of people affected and investigated were businesspeople. Indeed, businesspeople tended to believe that this law was specifically designed to target them. Like the CVC, the NIC uncovered many genuine crimes and recovered millions of cedis for the state. According to Donald Ray (1986, p. 60), the NIC collected C5 million in reparations in less than two years after the 1981 coup. In the view of the PNDC and its allies, such recovery of funds was evidence not only that the anticorruption campaign worked, but also that the Ghanaian business class was culpable. Many businesspeople argue, however, that they paid money simply in order to avert further harassment and possible imprisonment, even though they were innocent. Some such businesspeople have in fact had NIC decisions against them reversed upon petitioning the Commission on Human Rights and Administrative Justice (CHRAJ). CHRAJ’s snapshot annual reports (1993–1994; 1996; 1997) of some of the cases it has reviewed raise serious questions about the NIC’s integrity. The lasting image of the NIC in the business community is equally highly negative for several reasons. First, many question the premise of the law, which assumed that anyone who was wealthy was probably involved in corruption. Second, the onus of proof was reversed in NIC probes: suspects had to prove that they acquired their wealth legally. Third, the NIC relied on three controversial methods for informationgathering: (i) exacting confessions, sometimes through torture (Yeebo, 1991); (ii) the word of informants; and (iii) a directive that compelled bankers to submit names of clients whose bank savings exceeded C50,000. Finally, public confidence in the impartiality of the NIC, as with the CVC, was seriously undermined because it was dominated by “revolutionary” cadres and others who were closely identified with the PNDC.

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The NIC’s probes had a detrimental effect on business activity even when the accused were found innocent. The automatic investigation of individuals whose bank balances exceeded C50,000 seriously hindered business operations, holding up much-needed working capital while investigations were ongoing. The experience of Anthony Sikpa, owner of a coffee exporting business, is illustrative. In 1981, he took a C1 million bank loan for expansion. His bank account was frozen in 1982, and remained so for over three years pending the outcome of investigations. He was eventually cleared of any malfeasance but this proved costly. First, the cedi’s value tumbled during the period he was being investigated. To put his dilemma and that of other capitalists into perspective, one should note that, over the period of eighteen months after March 1983, the cedi was devalued by 1818 percent, making it worth 5.5 percent of its prior nominal value. Second, although Sikpa was banned from using the loan, he was still required to service it. This financial outlay inevitably hindered his business progress. He argued that investigations into his finances “were unnecessary” and could have been avoided had officials “not been too wedded to the idea that anyone who had wealth was involved in kalabule” (interview, Sikpa). The long-term consequences of these investigations have arguably been even more pernicious, particularly with regard to confidence in the banking system. Interviews I conducted revealed that businesspeople, and indeed most Ghanaians, have lost whatever confidence they previously had in banks owing to “the pervasive breach of bank secrecy during the early days of the PNDC.” A prominent industrialist echoed a common sentiment in the business community when he decried forcing bank officials to submit the names of wealthy clients to investigative bodies as “contrary to common sense” and “short-sighted.” He recalled the infamous 1982 story of a certain Mr. Blay, a branch manager at Barclays Bank, who was reportedly stripped in front of his staff and given forty-eight lashes on his bare buttocks for refusing to submit the names of wealthy clients (interview, Appiah-Menkah). Such actions led to a massive f light of capital out of Ghana. For years later, banks were starved of cash as wary citizens kept their money out of them, prompting the governor of the Bank of Ghana to appeal to officials to adhere to the confidentiality and sanctity of bank accounts (WA, November 17, 1986, p. 2431). Pertinently, Ghana’s domestic savings rate of 8 percent of GDP was well below the 13 percent for Africa (Leechor, 1995, p. 174). The experience of harassment during this period arguably exacerbated a tendency which has been more widely observed among

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African businesspeople: the tendency toward “the missing middle.” Bowditch (1999) found this experience to be one of the reasons why many Ghanaian businesspeople chose, as long at least as Rawlings was in power, to confine their business to a fairly small scale. My own research, discussed in detail in chapter eight, also found that many Ghanaians were wary of scaling up from small-scale to medium-scale enterprises in case they became more noticeable to government. The Public Tribunals (PTs) The PTs constituted the third and final leg of the quasi-judicial institutions. Initially designed to provide “speedy, simple, and straightforward justice,” the PTs were given several novel powers. First, they were “not to be fettered in their procedures by technical rules which in the past have perverted justice and enabled criminals to go free.” Second, since legal technicalities were to be avoided, only the presiding members were required to be lawyers. By the end of 1984, only two major tribunal chairs were lawyers, the rest being soldiers or PDC activists (Kraus, 1985). Third, until 1984 convicts had no right of appeal except to Rawlings himself even though the PTs could, and did, impose the death penalty. The PNDC thus circumvented regular courts and the most basic principles of justice. The most feared PNDC institution, PTs added to the anxieties of businesspeople. The Ghana Bar Association (GBA) led a spirited but ultimately futile fight against PTs on two grounds. First, it regarded the procedures and composition of PTs as antithetical to the basic principles of law. Second, it saw PTs as an attempt by the PNDC to replace the established legal system. The regime refused to budge, whereupon GBA members boycotted PTs. This provoked regime officials, radical groups, and the state-controlled press to intensify efforts to discredit the legal establishment, accusing it of corruption and arrogance. Radical groups openly threatened lawyers and judges (Gyimah-Boadi and Rothchild, 1982). In one case, radicals ordered lawyers in private practice to stop operating or risk destruction (Daily Graphic, October 1, 1982). In other cases, activists seized courts, chased out judges or set up their own “people’s courts” to mete out popular justice (Atim and Gariba, 1987). In June 1983, Accra-Tema PDCs “dissolved” the Judicial Council, “abolished” the post of Chief Justice, and occupied the Supreme Court buildings. Entrepreneurs and prominent figures were arraigned before PTs on charges of “economic sabotage” (more in chapter four). Convicts faced

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harsh sentences: crippling fines, confiscation of businesses and other assets, prison terms ranging from five to sixty years. Critics charged PTs with heavy-handedness and with being regime stooges, ready to make judgments in line with the political will of the PNDC. Subsequent confessions by some PT chairs lend some credence to this view. At their 1988 annual conference, some chairs confessed to having been unfair to accused persons, having passed harsh sentences or demanded unreasonable bail conditions they knew were impossible to satisfy as well as having imposed sentences of thirty or fifty years when the appropriate sentence would have been one or two years! Though refreshingly candid, these confessions nevertheless raise the question of why the PTs were so heavy-handed. One chair explained: [I]nitially we were given the impression that as tribunal chairmen we had to put the fear of the devil into people, especially the wealthy, the old noisy politicians, the playboys and their hightime women. So we were mischievously being vindictive as if the accused were our personal, bona fide enemies. (Agyemang, 1988, p. 210) This attitude ref lects the vindictive mood of the day. As one businessman noted, “the tribunals fell into the populist web and played to the gallery” (interview, Victor). More important, it ref lects the close ties between the regime and PT officials. The PNDC had an unfettered discretion in determining the composition of PTs. According to one former tribunal chair, the PTs were “packed with supporters of revolutionary justice” (confidential interview). In fact, it was at times difficult to distinguish between PNDC activists and PT staff and in what capacity they acted. Addo Aikins, for example, contemporaneously served as a PT chairman and as secretary general of the June Four Movement, an avidly pro-PNDC group (Lamptey, 1984, p. 1065) and in favor of revolutionary justice. The fusion of the roles of prosecutor and judge in the PT produced easy convictions. Scarcely any entrepreneur I interviewed questioned the regime’s right to enforce the law. What most protested were (1) the apparent arbitrariness in laying charges and the disregard for due process of law; (2) the often “political” nature of the cases, with the ill-defined term economic crime construed to “mean everything and anything the government said it was” (interview, A. A. Owusu); and (3) the belief that “once arraigned before a tribunal, conviction inevitably followed” (interview, Safo-Adu).

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Government-Business Relations in Ghana Threats to Regime Survival, Defeat of Ultra-Leftists, and Structural Adjustment

By the end of 1982, the PNDC was in danger of losing what popularity it had initially enjoyed owing to the assault by the DCs and quasi-judicial bodies on businesspeople and other alleged “enemies of the revolution.” Ghanaians had become deeply divided into opposing camps of friends/enemies. While radical groups, the lower ranks of the army, the unemployed, and leftist intellectuals celebrated their political gains, businesspeople and the well-to-do were repelled by what they regarded as PNDC-supported anarchy and “hate campaign.” Their sense of being persecuted turned their initial apprehension toward the PNDC into total and long-lasting hostility. Meanwhile, the balance of payments crisis had worsened, and Ghana was unable to pay for crucial imports, such as fuel, medicines, and spare parts. Productive and entrepreneurial activities had collapsed, exacerbating socioeconomic problems. The regime itself, deeply divided and deadlocked over several key issues, was in disarray. Its credibility and survival hung in the balance, not least because it had failed decisively to tackle the economic problems inherited from the People’s National Party government. The PNDC faced a dilemma. The radical groups provided crucial support and services. Yet they increasingly embarrassed government leaders and at times even challenged the regime. Though the lack of clear guidelines for DCs and of a precise remit contributed to their chaotic behavior, it became increasingly clear that a faction within the regime was encouraging such behavior. While Rawlings and others wanted to discipline the DCs, this faction resisted it. In February 1982, as calls for the PNDC to control DCs intensified, a committee headed by Chris Atim was created to oversee DC activities. However, Atim and other radicals, seeking to use DCs as their support base in their growing disagreement with Rawlings over the direction of the revolution and, more specifically, over the issue of whether or not to seek IMF help, neglected to enforce discipline. Hence, a new Committee headed by Rawlings replaced Atim’s team in July 1982 (Nugent, 1996). By then, a dual power structure had emerged. This became increasingly clear as the differences between the PNDC factions solidified. The dual state structure was manifest in the virtual collapse of law and order, particularly growing indiscipline on the part not only of revolutionary organs, but also of regular soldiers. In some cases armed soldiers went to “courts to stop trials which they have thought were not going their way, and in at least one recent case a magistrate was told he had to reverse his

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verdict at the point of a gun” (Africa Research Bulletin [ARB], July 1982, p. 6528). The dual power structure was also evident in growing contradictions in official pronouncements. In fact, Brigadier Nunoo-Mensah felt obliged to resign as the Chief of Defence Staff and PNDC member in November 1982, citing among other factors a lack of clarity as to who was ruling. Official PNDC decisions were often disregarded or “varied by anybody in the hierarchy” (ARB, November 1982, p. 6658). It was against this backdrop of near-anarchy that three judges and a retired army officer were abducted and murdered in June 1982. The middle classes were outraged and interpreted the murders not simply as an attack against the legal establishment but as part of a wider antiestablishment campaign, indeed as only the “latest in a whole series of brutal incidents against magistrates, priests and innocent civilians” (ARB, July 1982, p. 6528). Rawlings condemned the murders and ordered an investigation that led to the trial and execution of Amartey Kwei, a PNDC member, and six others. This decision fueled further controversy, however, as many believed that two other PNDC members—Kojo Tsikata and Akata-Pore—were implicated in the crime but were not charged. Many saw Kwei as a scapegoat, and Rawlings has since been accused of a cover-up and even complicity. The crime, over which a PNDC member resigned in protest, dealt a further blow to the regime’s credibility, and galvanized enormous public hostility toward it. This incident highlighted a growing disregard for life. Businesspeople felt targeted and especially vulnerable. “Businessmen became an endangered species . . . I don’t know of any businessman who didn’t f lee the country. I left too” (Appiah-Menkah interview). Of course, not everyone left, but his point is clear: they f led in droves. Since DC indiscipline and closed membership were partly to blame for this growing hostility toward the regime, the Rawlings faction proposed tighter control over DCs and to allow “all patriots,” regardless of their social class, to be members. This effort to downplay the importance of class met with resistance from the radicals, who conceived the “revolution” in class terms and viewed Rawlings’ proposal as a risky capitulation that would enable the “enemy” to hijack the revolution. Rawlings’ stance therefore provoked allegations of betrayal and of being a “counter revolutionary” (Atim and Gariba, 1987) and a “demagogue” (Yeebo, 1991). Atim and Gariba, who claim to be “sons of peasants” in contrast to the more “middle-class” Rawlings, saw DCs as true working-class bodies and wanted them to remain so. The neo-Marxists, led by Atim, Akata-Pore, and Yeebo, had other reasons for opposing the proposed changes. As disagreements within

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the regime over the direction of the “revolution” hardened, a vicious power struggle that progressively threatened Rawlings’ position as Chairman ensued. These figures sought to use the DCs, the JFM, and NDM to mobilize support for their own leadership ambitions against the Rawlings faction. Coup attempts in October and November 1982 paved the way for the Rawlings faction to rid the regime of the neoMarxists. Disagreements over economic policy came to a head in October 1982 when discussions with the IMF began in earnest. The neo-Marxists relied on their close relationship with several radical groups to oppose the negotiations, which became confrontational and tense (Yeebo, 1991). The ongoing negotiations with the IMF provoked coup attempts in which the three most prominent ultra-leftist members of the PNDC were implicated and subsequently forced into exile. Rawlings emerged from this situation in a more secure position to initiate a change of direction. The demise of the radical left was a triumph for pragmatism over dogmatism. It gave the pragmatists, led by Rawlings, considerable latitude to tackle pressing issues. By April 1983, the PNDC had adopted a structural adjustment program, otherwise known as the economic recovery program (ERP). This development decisively altered the course of the “revolution.” It also marked a watershed in economic policy making in postcolonial Ghana. I discuss the ERP in chapter three, but it is worth noting that though one might imagine that the purge of the ultra-leftists would have reassured businesspeople, it did not actually do so at all significantly. This was partly because they failed to distinguish between the beliefs of Rawlings and those of his erstwhile colleagues. It was also, however, because, even as the left condemned Rawlings for betrayal and capitulation, and even as he pursued extensive liberalizing economic reforms, he remained populist in much of his rhetoric and continued to persecute entrepreneurs. Accordingly, businesspeople continued to regard him as hostile toward them. Conclusion The impact of the revolutionary phase of the PNDC regime was catastrophic for the private sector. Government failure to distinguish between legal and illegal accumulation, together with its presumption that businesspeople were corrupt, undermined the legitimacy of private wealth. Anticapitalist sentiments and attitudes reached new heights. Never before had Ghana’s business community been under such open

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attack and vilification. Overnight, many lost factories, businesses, homes, vehicles, fishing vessels, and a host of other assets. Others paid punitive and financially crippling fines. Physical attacks, threats of violence, and the general anarchy unleashed by fanatical popular organs made many feel vulnerable. Many f led into exile. Controversial convictions and harsh sentences by quasi-judicial bodies sapped business morale. Much was to change in the policy and attitudes of the regime after it adopted structural adjustment, but the key question remained whether the changes would be sufficiently fundamental to reassure a deeply skeptical business community.

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CH A P T E R

T H R E E

The Achievements and Limitations of Economic Reform

Liberal economic reforms were adopted after fifteen months of radical populism marked by bitter disagreements over how to revive Ghana’s economy. Thereafter, the PNDC pursued what is generally held to have been one of the most comprehensive structural adjustment programs in Africa. When, upon Ghana’s return to constitutional rule in 1992–1993, Rawlings won the elections of 1992 and 1996, thereby retaining power until 2000, the economic reform process continued, albeit not as rigorously as during the PNDC period. Despite seventeen years of market reforms which provided improved incentives designed to make the private sector the engine of growth and prosperity, private investment remained, by 2000, very weak, and a strong domestic capitalist class failed to emerge in Ghana. World Bank (e.g., 1995; Armstrong, 1996) studies put private sector investment at 8 percent of GDP. IMF studies (e.g., Pattillo, 1998) estimated private investment at 4 percent of GDP. This investment rate included both domestic and foreign investment. Clearly, Ghana’s effort to stimulate a more robust capitalist development strategy had failed. This, of course, was scarcely what donor countries and the IFIs who had guided the reform effort had expected. What explains the continuing weakness of the private sector? Were these economic policies misconceived in the sense of being inherently inadequate to stimulate the desired response and attain the proclaimed goals? Were the policies poorly implemented? Or was the problem rather, as the World Bank later came to emphasize, one of poor governance, a lack of the political and institutional reforms needed to complement

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economic liberalization? I argue that all three sets of factors were inf luential and it would be wrong to downplay the significance of any one of them. In what follows, I show that several key reform measures proved not to be as unambiguously favorable to the private sector as intended. Second, the reforms were not pursued in as thoroughgoing or consistent a fashion as has sometimes been suggested, particularly during the latter half of the 1990s. Third, the Ghanaian government proved unwilling to intervene in order to provide assistance to entrepreneurs so as to reduce the risks of investment. This proved to be especially damaging to Ghana’s industrial sector and export diversification efforts. In subsequent chapters, I shall consider additional factors, which fall under the heading of governance and institutional failures. The ERP and Improved Incentives Ghana’s economic reforms were intended to reverse years of economic decline by rolling back the state while encouraging productive economic activity. In order to achieve this, the government sought to restore incentives for production of food, industrial raw materials, and exports; to increase the availability of consumer goods and improve the distribution system; to control inf lation; to rehabilitate the physical infrastructure to support directly productive activities; and to restructure economic institutions. The strategies adopted were devaluation of the cedi, removal of subsidies, abolition of price controls, trade liberalization, improved prices for agricultural exporters, divestiture of public enterprises, retrenchment of public employees, and improved revenue mobilization. The focus of the ERP was an export drive aimed at checking macroeconomic distortions and the chronic shortages of foreign exchange. Since cocoa, minerals and timber accounted for about 90 percent of Ghana’s total export earnings, incentives to boost output received the greatest attention. Until the mid-1970s, cocoa accounted for about 60 percent of Ghana’s total foreign exchange revenues and could be considered the economic backbone of the nation. After peaking at 557,000 tons in the 1964/1965 crop year, exports entered a period of steady decline before tumbling in the late 1970s. In the 1980/1981 crop year exports totaled a mere 185,000 tons. This fell further to 159,000 tons in 1983/1984. Declining output was attributable to several interrelated and mutually reinforcing factors. The single most important factor, however,

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was, as Jeffries (1993, p. 21) has explained, the “erosion of incentives . . . through currency overvaluation and excessive de facto taxation via monopsonistic marketing boards.” This resulted in a dramatic decline in the producer price of cocoa such that by the first half of the 1970s farmers received only 75 percent of average 1960s prices in real terms and one-third of the 1950s prices. By 1983 they were receiving 20 percent of the world market price (Hutchful, 2002). In order to reverse this trend and thereby encourage output, the World Bank demanded that farmers’ share of the international price of cocoa reach 55 percent by 1988–1989 (Herbst, 1993, p. 81). Devaluation and significant downsizing of the state-owned marketing board, Cocobod, permitted periodic increases in the producer price. The launch of the Akuafo Cheque1 reduced the abuses of the old system and restored a degree of producer confidence. These measures helped curb cocoa smuggling and encouraged farmers to rehabilitate existing farms and undertake new plantings. Output rose from the low point of 159,000 tons in 1983/1984, more than doubling to 321,000 tons by crop year 2001/2002. By the beginning of the ERP, the mining sector had been declining for many years. Gold output had fallen from 900,000 fine ounces in 1962 to 333,095 in 1981; diamonds from 3 million carats a year in the 1960s to under 1 million in 1982; bauxite from over 300,000 metric tons a year in the 1960s to 173,000 forecast for 1982. Owing largely to the promulgation in 1986 of the Minerals and Mining Law, which offered several enhanced fiscal incentives and benefits to mining interests, mineral output robustly recovered, vastly outstripping any previous level of production. Ashanti Goldfields Company and several other mining firms rehabilitated and expanded existing mines and new mining ventures came on stream. The legalization of indigenous small-scale mining also streamlined such activities and cut smuggling. Gold exports rose steadily, surpassing cocoa as Ghana’s leading foreign exchange earner in 1994. Output and earnings from diamonds, bauxite, and manganese also rebounded (Gyimah-Boadi, 1995a; 1995b; Hutchful, 2002). Timber exports had also tumbled by the early 1980s. Whereas timber exports had earned $130 million in 1973, this figure had fallen to a mere $21.6 million by 1981. As in the cocoa and mining sectors, improved incentives were provided. Of major significance was the provision of soft loans made possible through World Bank assistance. This enabled some timber firms to import new equipment and spare parts for the first time in many years (Bentsi-Enchill, 1989). As

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a further incentive, log exporters were permitted to retain 5 percent of their export earnings, while exporters of processed timber were able to retain 20 percent. Retention rates were even higher in cases in which foreign loans had been contracted (Anyemedu, 1991). These incentives enabled firms to import capital equipment and raw materials for expansion. Consequently, timber exports rose from 103,000 cubic meters in 1983 to 538,000 in 1988 (Gyimah-Boadi, 1995a), though log exports rose faster than exports of higher value-added veneer and plywood in 1983–1988. Potentially higher export receipts were therefore missed. In 1996, in an attempt to remedy this, the export of logs was banned, forcing timber firms into processing or else quitting the industry. Conscious of the pitfalls of dependence on a narrow export base, the ERP sought to diversify exports by promoting nontraditional exports, that is, exports other than cocoa beans, timber, and minerals. A new export regime removed a variety of export duties, abolished export licensing, and thus streamlined export procedures. Also, export incentives such as duty-free import of machinery and income tax rebates were introduced (Leechor, 1995). The incentives paid off quickly. Between 1986 and 1992, the number of exporters rose from 373 to 3,188, export products proliferated from 99 to 164, proceeds rose from $23.76 million to $68.4 million and export destinations expanded from 28 to 67 (GEPC, 1996, p. 93). I shall return to a fuller discussion of the implications of this. Exchange rate reform was another key objective of the ERP. When the ERP began in April 1983, the cedi was overvalued to the tune of 2,242 percent (Herbst, 1993, p. 40). The vastly overvalued cedi had long reduced exporter earnings while importers with access to subsidized, administratively allocated foreign exchange made windfall profits. To reverse this trend and uphold exports and discourage imports—a key tenet of reforms—the PNDC began in April 1983 a radical reform of the exchange rate via a series of discrete, steady devaluations to narrow the gap between the official and the free market rates. While economically rational, devaluation entailed political risks. It induced price increases for imported goods and a short-term rise in the cost of living that threatened to alienate key regime allies such as workers and students who became increasingly uneasy with the direction of the “revolution.” Accordingly, the PNDC sought to depoliticize devaluation by launching an auction-determined exchange rate system run by the Bank of Ghana in September 1986. Also, in early 1988, private foreign exchange bureaus were legalized, paving the way for f loating

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the cedi. This had three main benefits. First, exchange bureaus absorbed much of the parallel market. Second, competition between the bureaus, the banks, and the remnants of the parallel market resulted in a further fall in the cedi’s value. Third, business gained improved access to foreign exchange. The subsequent abolition of import licensing cut a key source of governmental and bureaucratic corruption and thereby facilitated business activity. Part of the reason why devaluation proved not to be as explosive an issue as some had feared was, arguably, however, that it did not have much impact on the prices already being paid by the majority of Ghanaians on parallel markets. Those who suffered most were import racketeers. The reverse side of the coin, as it were, of improved incentives for productive activity was that austerity measures were implemented in order to cut government spending and reduce budget deficits. The government shed some costs by withdrawing subsidies on consumer goods and introducing user fees for education and health. Reducing subsidies on electricity, water, and telephones meant that bills increased for users. In order further to reduce costs, the public sector was downsized: 30,000 civil servants were retrenched between 1987 and 1990, while Cocobod, formerly the Cocoa Marketing Board, cut staff by 30 percent between 1983 and 1992. Admittedly, not all of these job losses were “real.” Rigorous monitoring led to the removal of tens of thousands of “ghost” workers from the public payroll It proved trickier to implement the divestiture of state-owned enterprises (SOEs) so as to reduce the huge drain they exerted on the public purse. Indeed, this was the reform measure the PNDC was most reluctant and slow to undertake. I discuss the divestiture program and its impact on Ghanaian capitalism in chapter six. Here, I outline why it was not until 1994 that divestiture began in earnest. First, various technical problems, such as the accurate valuation of SOEs, had to be resolved. Second, public opinion, informed partly by the experience of previous divestitures, was generally hostile to privatization (Gyimah-Boadi, 1991a). Third, some senior government officials, including Rawlings were very suspicious of capitalism and reliance on the profit motive. These government leaders preferred to attempt to improve the management of SOEs through corporate plans, annual performance contracts, and improved accountability rather than to privatize them. Fourth, the section of the local private sector most capable of purchasing SOEs was composed mostly of political opponents of the PNDC government. Officials felt that allowing these businesspeople to acquire SOEs would make for better-financed opposition.

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It is difficult not to think that Ghana missed an opportunity here. In the years prior to the end of the Cold War, foreign investors might well have been attracted to Ghana on a much larger scale if the government had shown, by its implementation of a rapid divestiture program, that it was genuinely committed to capitalist development. Ghana’s subsequent economic experience might then have been very different. As it was, by the time that the government, having failed significantly to improve the performance of SOEs, turned to implement divestiture in a serious manner, Western investors were already looking to Eastern European economies as more promising investment locations. One of the PNDC’s undoubted achievements was that revenue mobilization improved, owing to a widening of the tax net, improved tax compliance, and robust collection efforts. Revenue as a percentage of GDP rose from less than 6 percent in 1983 to 14 percent in 1986 (Leechor, 1995) and continued to grow into the 1990s. Indeed, as the World Bank (1992b, pp. 20–21) noted, Ghana’s tax revenue exceeded all expectations and was the most successful aspect of the reform effort. This helped to narrow the fiscal imbalance. It also of course facilitated increased government expenditure on health and education and the extension of various services to many rural areas. Ghana’s experience reveals the fallacy of the common identification of structural adjustment with reduced social welfare provision. By the mid-1990s the reforms had included a massive depreciation in the exchange rate; the removal of all quantitative restrictions on imports and the lowering of tariffs to a relatively uniform 10–25 percent range; a reduction of corporate taxes to 35 percent and of capital gains tax to 5 percent; the removal of price controls and subsidies; the privatization or closure of numerous state-owned enterprises; the revision of the foreign investment code to improve incentives; and the award of special incentives to exporters and to investors in infrastructure. In the World Bank’s assessment, Ghana was by 1994 the most advanced country in Africa as regards free trade and low tariff-based protection. The macroeconomic gains were considerable. GDP grew for the first time in many years, averaging over 5 percent from 1984 to 1990. Real GDP grew at 8.6 percent in 1984 and averaged 5.3 percent from 1985 to 1988. Additionally, gross domestic investment as a percentage of GDP rose from a pitiful 4 percent of GDP in 1982–1983 to 12.5 percent in 1990 (Gyimah-Boadi, 1995a, p. 310), though this was mainly attributable to government investment. Private sector investment both foreign and indigenous remained low. Though inf lation f luctuated from year to year, overall it was moderate, falling to 15 percent in 1991–1992.

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Further, budget deficits turned into a small balance of payment surplus by 1987 (Rothchild, 1991, pp. 9–10), and in 1990, Ghana eliminated its outstanding external payment arrears (Kapur et al., 1991, p. 3). Export earnings rose to $566 million in 1984, $632 million in 1985, $749 million in 1986, $820 million in 1987, $843 million in 1989, and $900 million in 1990 (Gyimah-Boadi, 1995b). Meanwhile, aid inf lows rose from less than 1 percent of GDP in 1983 to about 10 percent by 1990. Nevertheless, it must be noted that consumption per capita, real wages, and levels of key social services such as health and education remained low in comparison to the pre-1975 period (Kraus, 1991). Economic recovery allowed a much-needed rehabilitation of Ghana’s collapsed economic and social infrastructure and enabled the state to resume delivering some of the basic goods and services it had previously scarcely been providing. Railway lines were rehabilitated, harbors were expanded and improved and roads were upgraded, resurfaced, and paved with asphalt. Also, northern Ghana was connected to the national power grid. Telecommunications improved and radio and television networks were fitted with new transmitters so that the spatial coverage of the latter was extended. Furthermore, utilities suppliers received new equipment and operational vehicles (Gyimah-Boadi, 1995b). Improvements in infrastructure facilitated productive activities and the movement of goods and services. In interviews, even the most avidly anti-PNDC businesspeople acknowledged the positive impact of these developments on business, though some added (controversially) that, considering the level of external support the regime received, it should have done better. Ghana aye ketewa (Ghana has shrunk)—meaning it takes much less time to travel—was a constant refrain. An entrepreneur in the Brong-Ahafo capital of Sunyani, recalled in an interview, “The days when you could not be sure if a truckload of goods from Accra would arrive or not owing to bad road conditions and shortages of spare parts, that is long behind us thanks to improved roads.” He welcomed improvements in telecommunications, especially the advent of mobile phones. “I have provided my drivers with mobile phones. If they encounter difficulties, a phone call usually settles it. It saves time and money.” Harbor expansion and upgrading eased import-export activity and reduced business costs. Electricity extension to northern Ghana encouraged a growth in business activity there. Brong-Ahafo’s booming timber industry (see chapter seven) owes a great deal to the region’s access to hydroelectric power. By the early 1990s, Ghana had clearly become the frontrunner in market reforms in Africa, winning

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widespread acclaim and generating speculation that it might be ready for economic take-off. Economic Deceleration in the NDC Era The aforementioned gains were not sustained, however, as the 1990s progressed, and as weaker economic management generated macroeconomic instability. In 1992, government expenditure soared by nearly 45 percent, resulting in a fiscal deficit of 4.8 percent. This reversed the trend of maintaining a fiscal surplus attained since 1987. Money supply rose by more than 50 percent, the current account deficit widened to almost 9 percent of GDP, the cedi depreciated sharply, and inf lation soared over the previous year. All this occurred against a backdrop of a fall in revenue and external inf lows. In 1993, the budget deficit fell to 2.5 percent of GDP, owing largely to a 5.6 percent increase in total revenue. Despite the improvement, however, money supply grew by nearly 30 percent. The authorities reported surpluses in 1994 and 1995, but these were accounted for by one-off divestiture proceeds. If these receipts are not treated as normal revenue, the “surpluses” become deficits. The fiscal surplus of 2.2 percent of GDP in 1994, for example, becomes a deficit of 1.1 percent (World Bank, 1995). In 1996 the deficit soared again, wiping out the “gains” of the previous three years. Tight monetary and fiscal policies in the ensuing years bore some fruit. In 1998 the cedi stabilized, depreciating by only 4 percent as against 23 percent in 1997, the growth in money supply fell to below 18 percent for the first time since 1990, and inf lation fell by nearly 16 percent (Hutchful, 2002, p. 217). This did not, however, signal an economic turnaround. Indeed, the government continued to run sizeable deficits. Moreover, a severe terms-of-trade shock hit Ghana between mid-1999 and the end of 2000, leading to a dramatic collapse of the economy. This was due to a sharp increase in oil imports coupled with a plunge in the prices of gold and cocoa—two products that, together still accounted for over 60 percent of foreign exchange earnings. The price of the latter reached a thirty-year low in 2000. The effects were a sharp depreciation of the cedi, runaway inf lation, and a hike in interest rates (World Bank, 2001). Clearly, 1999–2000 was an unusually bad time, but the economic meltdown also underscored the fragility of Ghana’s economic gains. The foreign exchange crisis was only the latest manifestation of the cyclical swings in global commodity prices and Ghana’s vulnerability in its excessive reliance on gold and cocoa. The structure of the economy

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had apparently undergone little change. More specifically, Ghana had been de-industrializing rather than industrializing. Various measures were taken to combat the foreign exchange crisis. Of these, three merit particular mention. First, purchases of foreign exchange were limited to $2,000 in the same transaction or on the same day, and buyers had to identify themselves. Second, exporters were no longer allowed to retain a portion of their earnings in hard currency. Third, raids were conducted against unauthorized currency dealers, who had emerged again after years of relative inactivity. These measures were not only reminiscent of the “bad old days” but also reversed key reform changes. Thus, by the time the Rawlings era ended, the economic gains had virtually vanished. In 2001, when the New Patriotic Party took power, Ghana, which only a few years earlier was being touted as a success story, joined the highly indebted poor countries scheme to qualify for debt relief. This enraged political opponents and some sections of the public, but their criticisms ref lected a sense of loss of national pride rather than an ability to propose realistic alternatives. What accounts for the marked contrast in economic performance between the 1980s and 1990s? Several explanations have been advanced. The first—favored by government leaders—was that democracy limited government’s ability to act with speed and toughness. President Rawlings famously chafed at “constitutional anarchy,” arguing that “The complexities of constitutional procedures are slowing down government’s ability to respond to the concerns of the people” (Holecek, 1993, pp. 173–174). And, according to finance minister Kwame Peprah, democracy hindered their “ability to carry out the desired adjustment required by the Bank” (Business in Africa, June–July 1997, p. 38). The official position therefore accorded with a school of thought that holds that strong, authoritarian rulers are better placed than democratically elected ones to push through unpopular but desirable economic measures. Democratization certainly contributed to the poor economic performance of the 1990s. After all, the unravelling of the economy occurred in parallel with the electoral cycle. Substantial election-related increases in civil servants’ salaries in 1992 and massive infrastructure projects, which were also in part politically motivated, contributed heavily to the soaring budget deficit in that year. In 1996, another election year, government expenditure soared again. It was also the democratic constitution that created the permissive environment for the 1995 protests against the introduction of value-added tax, forcing its withdrawal.

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Had VAT been successfully introduced, it might have helped to stabilize the economy. Equally, increased political sensitivity led to an excessively modest increase of only 19 percent in the gas price in 1996. This was “insufficient even to compensate for exchange rate depreciation” (Overseas Development Institute, 1996, p. 5). Democratization cannot wholly account, however, for the economic deceleration. Some point to signs of weakening commitment to the economic reforms before the Fourth Republic began, tracing the origins of the economic decline to 1990. “Unbudgeted outlays for a Ministerial Conference of the Non-Aligned Movement; peace-keeping operations in Liberia in 1990 and, later, the direct and indirect costs of local government elections, placed a great strain on a still fragile economy” (Overseas Development Institute, 1996, p. 3). More pointedly, “it can be argued that recent [poor] economic performance has had less to do with the current political situation and more to do with a declining commitment to fiscal control in the last few years of military rule” (Overseas Development Institute, 1996, p. 5). Government expenses in relation to the 1992 elections compounded rather than caused the sharp rise in money supply and related complications. Further, a major cause of the poor macroeconomic performance was increasing fiscal laxity resulting from shifting power relations within the government—though this might be considered indirectly related to the onset of democratic politics. A prime example was the heavy losses incurred by the Ghana National Petroleum Corporation (GNPC), the state oil import agency. In 1994, the government wrote off $124.7 million owed by the GNPC, causing a 46 percent rise in the money supply and fueling inf lation (World Bank, 1995). The futility of Kwesi Botchwey’s calls for action to stem the losses precipitated his resignation as Finance Minister in 1995 (Africa Confidential, April 23, 1995). The underlying cause of Botchwey’s exasperation was his loss of control over economic issues and government expenditure. Tsatsu Tsikata, head of the GNPC, was exerting growing inf luence over Rawlings at this time. Botchwey had to battle with several of Rawlings’ ministers and other close advisers to keep expenditure down, earning the enmity of some (Yeboah-Afari, 1995, p. 1278). This ref lected growing factional competition within the government and a loss of focus on monetary and fiscal issues. Indeed, Botchwey’s departure heralded the collapse of the much-fabled economic team and resulted in growing fiscal indiscipline. Last, external disbursements had, as noted above, been vital to Ghana’s recovery. Indeed, this had prompted references to Ghana’s economic

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progress as “aid driven” (Armstrong, 1996). As the 1990s progressed, this critical resource dwindled quite rapidly. At a time of rising government expenditure, this placed additional strain on the economy. The Response of Domestic Capital The improved incentives provided by the economic reforms were expected to lead to an expansion of private business both in the number and in the scale of enterprises. In reality, however, only a very limited expansion of Ghanaian capitalism occurred. This much is universally acknowledged. There is difficulty, however, in obtaining precise data on indigenous investment. The available data rarely distinguishes between local and foreign investment. As well, data on the private sector as a whole is poor, unreliable, and irregular. As the World Bank (2001, p. 5) noted, it is “difficult . . . to ascertain the actual level of private investment as reporting is poor and current data include an unidentified proportion of investment by public enterprises.” Indeed, the Ghana Investment Promotion Centre (GIPC) failed to provide a World Bank study with any specific data on the number of enterprises established. The study simply notes that, although the GIPC approved a high number of project applications, “actual investment outcome was very low” (World Bank, 1993a, p. 61). Despite this, there are clear indications that the contribution of Ghanaian capitalists to new investment was tiny. Writing in 1994, Aryeetey (p. 1211) notes: As a percentage of GDP, the target for private investments was 15% per annum for the second half of the last decade, but private investment actually only increased from 2.9% in 1983 to 5.4% in 1985 before tumbling to 2.4% in 1986. During 1987–90, private investment increased from 5.5% to 5.8% including a sizeable increase in foreign direct investment in the gold mining sector, which accounted for more than half of the recorded growth. A recent World Bank study (2001, p. 5) asserts that private investment constituted 13 percent of GDP in 1999, but one cannot attach too much weight to a single year. Another calculation estimates that private investment increased from 4 percent in 1983 to about 9 percent in 1990 but then stagnated at this level. It seems likely that investment as a percentage of GDP in the 1990s was not much higher than in 1980,

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when gross investment reached an all-time low of 6 percent of GDP. Moreover, although there was some structural change, this could be interpreted as in some respects regressive. Services were consistently the most dynamic sector. Although the industrial sector increased its share of GDP from 11.6 percent in 1983 to 14 percent in 1987, it then stagnated at that level through to 1998 (compared to the 20 percent achieved in the 1970s). This apparent stagnation concealed, moreover, a shift within the sector, with mining accounting for an increasing share, while manufacturing declined dramatically. As Lall (1995, p. 2025) has pointed out, manufacturing value added (MVA) rose rapidly in 1983 to 1989 because imported inputs were now made available to existing industries which had been suffering for many years previously from huge excess capacity. As this excess capacity was used up, however, the exposure to international competition induced by such a rapid reduction in protectionist tariffs led to a sharp deceleration of industrial growth. The rate of growth of MVA fell from 12.9 percent in 1984 to 5.6 percent in 1989, and then to a mere 1.1 percent in 1990. By 1996 manufacturing accounted for a mere 4.8 percent of GDP, down from 7 percent in 1993. Ghana was increasingly turned, as the President of the Private Enterprise Foundation put it, “into a nation of shoppers and storekeepers with very little manufacturing or industrial activity.” A dynamic domestic industrial capitalist class remained as distant as ever. More recent data from the GIPC sheds further light on private sector investment. The GIPC registered a total of 1,100 investment projects between 1995 and 1999. This excluded investments in mining and investments under the Ghana Free Zone Board since 1997. Foreign equity investments totaled $385 million as compared to $192 million of local equity investments. Over a five-year period, then, both foreign and domestic investments were tiny (World Bank, 2001, p. 5). Reforms Spawn Challenges What accounts for this limited private sector response to liberalizing economic reforms? Central to any explanation must be the fact that key reform measures, although designed to provide improved incentives, also created serious challenges for local entrepreneurs and limited their ability to respond favorably. Take currency devaluation, a major reform measure designed to encourage exports and limit imports. Though vital for economic recovery, devaluation also caused three

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major problems for business. First, and particularly at the start of the reforms, banks were reluctant to lend the huge sums of cedis firms now needed to buy dollars, partly because revaluing assets offered as collateral in the face of steep devaluation proved to be difficult and risky. Second, in the interest of limiting the volume and value of imports, the Bank of Ghana required entrepreneurs bidding for foreign exchange to deposit 100 percent of the cedi value of their auction bids. Clearly, few businesses could afford to lock up their much-needed capital in this way. Third, businesses that had borrowed in foreign currency faced serious problems in repaying such loans as “the value of the cedi was declining at a rate far higher than any profit these businesses could have made” (Kraus, 2002, p. 407). The weak cedi hampered all businesses, though exporters and traders were not as badly hurt as firms in manufacturing, construction, and services. The generally weak and unstable cedi remained a major source of business complaint throughout the Rawlings era. The worst case of currency collapse since the cedi began f loating in 1991 occurred in the period 1999–2000. At the beginning of 1999, the exchange rate was 2,400 cedis to a dollar. By the end of the year the cedi had fallen to about 3,500 to a dollar. By mid-2000, it had dropped further to 6,000 to a dollar, closing at over 7,000 to the dollar at the end of the year. Importers complained that the rate of depreciation alone was enough to erase profits and erode their working capital. The cost of industrial equipment and input soared. In interviews, some businesspeople said they had suspended their activities because of the cedi’s instability. They also blamed inf lationary pressures induced by the cedi for incessant demands by workers for wage increases. Even exporters, the ostensible beneficiaries of devaluation, were desirous of a more stable cedi as devaluation fueled inf lation “without maintaining incentives to export” (Overseas Development Institute, 1996). Furthermore, entrepreneurs said that instability made planning extremely difficult and investment very risky. The twin issues of high interest rates and lack of access to credit also caused serious problems for local business. Officials saw high interest rates as vital to curtail excess demand and inf lation. For much of the Rawlings era interest rates in Ghana were above 30 percent, peaking at 51 percent in the late 1990s. Predictably, the state received the bulk of bank loans. This was paradoxical given that, while the World Bank stressed private sector-led economic growth, it also urged strict credit ceilings. The effects were particularly severe in Ghana. Citing a World Bank study, Kraus writes: “In a comparison of private sector

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credit as a percentage of GDP during 1986–93, in Ghana it averaged 4.9%, Kenya 19.6%, Zambia 13.7%, Zimbabwe 13.5%, Indonesia 37.2%, Malaysia 69.7% and Thailand 55.1%” (Kraus, 2002, p. 409). Private sector credit in Ghana rose, averaging 9.2 percent during 1995–1999, but it was still well below the average of 26.1 percent for low-income countries, excluding China, 40.7 percent for middleincome countries, and 118.8 percent for high-income countries (World Bank, 2001, p. 7). These problems worsened in the 1990s, owing to the considerable macroeconomic instability, entailing high government expenditure and budget deficits. To fund the budget deficit, the government increasingly relied on domestic borrowing, mainly by offering high rates for treasury bills. For much of the Rawlings period and especially during the 1990s, government treasury bills attracted interest of over 30 percent, peaking at 45 percent in October 1997. Banks’ preference for the security of treasury bonds meant a severe credit crunch. Surveys consistently found inadequate finance to be a major constraint to investment (Aryeetey, 1994; Baah-Nuakoh, 2003). CEPA and ISSER, among others, perennially lamented this problem (e.g., CEPA, 1998, 1999, 2000; ISSER, 1998, 1999, 2000). An added complication was the fact that repayment periods for loans in Ghana were usually short. At a time when Ghanaians were facing stiff international competition, lack of affordable loans placed them at a disadvantage. Private sector groups such as the Association of Ghana Industries and the Private Enterprises Foundation made largely futile appeals for improved access to credit. The latter estimated that, given the interest rate charges of 45 to 50 percent in 2000, investments needed to “return yields in excess of 80% in order to promote the use of local credit” (Private Enterprise Foundation, 2000, p. 5). It is not difficult to see why it was the services sector that boomed in Ghana or why a significant section of the business community financed their activities from nonbank sources (Pattillo, 2000). One survey found that “over 78% of the entrepreneurs irrespective of size used their own savings to establish their firms” (Baah-Nuakoh, 2003). The limitations which this placed on business expansion are quite obvious. A corporate tax of 35 percent compounded the problems faced by business. Nontraditional exporters and hoteliers were liable to 8 percent and 25 percent tax respectively (Overseas Economic Cooperation Fund, 1999), but clearly most businesses fell into the 35 percent corporate tax bracket. Although the tax rate had been reduced from over 40 percent, 35 percent was still high, especially given the high interest rates.

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Trade liberalization, another key reform policy, produced mixed results. For Ghanaian traders, long hampered by perennial shortage of goods, trade liberalization was a welcome change. It gave rise to a large and steady inf lux of imported goods and brisk business. For local manufacturers, trade liberalization was initially beneficial. The elimination of the difficulties associated with the import licence system of the pre-reform era made imported raw materials and equipment more accessible and led to a surge in manufacturing between 1983 and 1987 (Armstrong, 1996). Over the longer term, however, trade liberalization led to excessive competition from cheap imported manufactured goods, which proved destructive to Ghanaian manufacturers. I discuss this issue in greater detail later. Poor Policy Implementation Another factor that limited private sector response was policy slippage. Although Ghana’s reform program was quite comprehensive, policy measures were not always fully implemented. Privatization, for instance, was adopted very reluctantly. On occasion, policy lapses caused the IFIs to withhold loan and aid disbursements from the Ghanaian authorities. For entrepreneurs, policy slippages caused uncertainty over the sustainability of the reform program in the medium to long term (Aryeetey, 1994; Leechor, 1995). Research has shown that, where uncertainty obtains, risk-averse investors tend to adopt a wait-and-see attitude (Rodrik, 1989, 1991; Pattillo, 1998). In an insightful essay, Aryeetey asks, “Why is the private sector [in Ghana] not investing as is desirable and expected?” He notes that uncertainty was caused by, among other things, instances of unsatisfactory policy administration, policy inconsistencies to the extent that some policies actually undermined others, macroeconomic instability, and a policy environment in which officials frequently revised policies. He notes further that there was a strong belief that reforms were pursued not out of conviction but “only to satisfy donor conditions for assistance. Hence, in the absence of such assistance, government would reverse policies” (Aryeetey, 1994, p. 1219). Thus, quick, short-term investments with relatively high returns such as trading and services proved more attractive over manufacturing with its usually long gestation period. Unsatisfactory policy administration caused other problems. As noted, fiscal and monetary targets were repeatedly missed in the 1990s. In this environment of budget deficits and macroeconomic instability,

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the cedi was unstable, there were wild swings in inf lation and interest rates kept rising. These mutually reinforcing factors negated the probusiness incentives and discouraged capitalists from responding strongly. Regarding this, it must be pointed out that private investment tended to plunge in years of increased volatility. In 1992, for example, private investment “fell precipitously” to 4.3 percent of GDP after continuously rising to a ten-year high of 8.1 percent in 1992 (World Bank, 1995, pp. vii–viii). In 1996 and 2000—years marked by macroeconomic instability—this recurred (World Bank, 2001). The Industrial Sector The manufacturing sector merits close examination because of its primacy to economic growth and transformation and as the decisive ingredient in sustained economic growth (Hawkins, 1986; Kitching, 1989; Teal, 1999; Riddell, 1993). Industrial expansion is necessary to raise incomes and employment, to diversify exports, to extend markets, and to avoid dependence on a few commodities. Industrial expansion is needed so that countries can substitute domestic production for imports . . . . In nearly all economies, manufacturing has been the critical agent of the structural transformation from a primitive, low productivity, low income economy into one that is dynamic and diversified (Lall and Stewart 1996, p. 179). Ghana’s leaders realized the need for a solid industrial base and professed to use local capital to that end. Rawlings, in characteristically anti-imperialist language, proclaimed: [I]nstead of putting our faith in foreign investors, we must rather encourage our own industrialists who are capable of building for us a strong industrial base . . . [F]ailure to encourage our production in . . . industry . . . is a cause of the immense strains on our foreign exchange reserves. . . . With the absence of adequate production, we are thrown into the claws of powerful multinational industrial and trading firms. (West Africa [WA], January 11, 1982, p. 73–74) Similar sentiments were repeatedly expressed not only by Rawlings but also by other key government figures, such as Finance Minister

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Botchwey (e.g., WA, January 13, 1986, pp. 68–69). They understood the dangers in relying on primary commodity exports and the importance of developing export-oriented manufacturing. Indeed, long-run success hinged on Ghana’s ability to export manufactured goods, which have usually served as a spur for nations to attain sustainable growth. For a small economy like Ghana’s, this was especially vital. At the inception of market reforms, private Ghanaian manufacturing was tiny, weak, and mainly small-scale. The sector had been dominated by para-statals and foreign capital, owing to the large overheads required and the establishment of state monopolies. What little manufacturing local capitalists had controlled had survived behind high tariff walls, restrictive quotas, and an exchange regime that allowed them to gain hard currency cheaply. In this environment, there was little pressure to modernize and many had been relatively inefficient, or at least had not been able to achieve the economies of scale that would enable them to compete successfully against foreign imports. The bulk of manufacturing firms operated well below their capacity, owing to inadequate foreign exchange, lack of spare parts, and shortages of essential imported inputs. Only with appropriate policies aimed at energizing them could these infant industries be expected to be economically successful. Manufacturing output showed respectable growth in the initial stages of the reform program. Between 1984 and 1988, the average annual growth rate for manufacturing was 12.6 percent. Improvements occurred in all subsectors of manufacturing, though this varied by sector. Iron and steel products and sawmill and wood products led the way while the textile/garment and leather products sector performed poorly (Overseas Economic Cooperation Fund, 1999, Chapter 3). The rise in manufacturing output stemmed mainly from trade liberalization, which made badly needed imported raw materials and equipment accessible. In the long run, however, growth in manufacturing output leveled off. Between 1989 and 1996, average annual growth rate was a mere 2.7 percent. By 1996, all manufacturing sectors, bar one, had surpassed their 1977 production levels, regarded as a base period. The exception— the textile/garment and leather sector—had recovered less than 60 percent of 1977 output. Manufacturing as a whole had risen to 115 percent of 1977 level (Overseas Economic Cooperation Fund, 1999). This fell in both 1997 and 1998, mainly owing to energy shortages, though, again, performance varied by sector. In 2000 output reached its nadir in the postreform era, recording a miniscule 0.5 percent rise as a result

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of the severe depreciation of the cedi, which raised the cost of imported inputs and the cost of credit (Economist Intelligence Unit [EIU], 2001, p. 31). Manufacturing performance was the most disappointing aspect of Ghana’s reform effort. What accounts for this? Trade liberalization is often blamed for the failure of the industrial sector to show dynamism under economic reforms. Riddell (1993), Lall (1995; 1996), Lall and Stewart (1996), and others have argued that reforms damaged Africa’s already weak industrial base further still by opening local markets to stiff international competition. The underlying reason was that the World Bank took the view that infant industries must not be protected. State intervention in favor of some activities over others was deemed to create market distortions. Hence all sectors, including industries, must be put on an equal footing to compete or else die. This stance has been widely criticized as counter to the long-term development of African industrialization and as the weakest of neoliberal policy measures. The evidence from Ghana validates such criticisms. Trade liberalization, which occurred over a short period of time, exposed Ghanaian manufacturers to intense competition against which they were ill-prepared, causing grave distress. Although generally in favor of reforms, manufacturers objected to “dumping” as imports f looded into Ghana. Frequent pleas for state intervention in the form of protection were made. In 1988, the vice-president of the Ghana Employers Association, issued what was by then a familiar plea to the government to impose quotas on some imports to save “local industries from extinction” (Ephson, 1988, p. 1012). By 1992, 1,200 local industries—mostly garment, leather, metal, and pharmaceutical—had collapsed (WA, September 14, 1992, p. 1572). Between 1995 and 1999, an average of over 470 firms collapsed each year (CEPA, 2000, p. 29). Repeated devaluations, credit ceilings, and high interest rates caused further complications for manufacturers because, as the cost of production rose, imports became cheaper. Difficulty in gaining access to loans to import upgrading equipment and the ever-rising cost of locally manufactured goods made such goods increasingly uncompetitive. Appeals for the curtailment of trade liberalization went largely unheeded. Finance Minister and economic czar, Botchwey, resisted such calls, insisting that: “It’s not prudent to protect any firm solely because it is Ghanaian-owned.” In a clear rebuttal of the view that infant industries need state protection, he argued that “Some infant industries will never grow to maturity. They’ll always remain babies with big teeth” (Kpor, 1989, p. 63). The Minister of Trade and Industry

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also ruled out shielding local industries from imports because it “will be in conf lict with the Government’s anti-inf lation stance, since it will raise the cost of competing imports and therefore the cost of living” (Parliamentary Debate, July 14, 1993). Calls for state intervention and government resistance to it ref lected a wider debate, which warrants brief comment here and will be taken up more fully in chapter nine. This debate relates to the appropriateness or otherwise of the World Bank’s demand for the withdrawal of the state from the economy and the faith neoclassical economists place in self-regulating markets. Using evidence from East Asia, comparative political economists have attacked this approach as misconceived. The Asian “miracle” of rapid and sustainable economic growth, they argue, occurred via a market-led framework but also, and crucially, governments frequently intervened in the market to bolster infant industries. This “defiance” of the most fundamental dictate of neoliberal economics led one critic of the faith in self-regulating markets to advocate “getting the prices wrong” when she actually meant “getting the prices wrong correctly” (Amsden, 1989). Although a consensus that successful economic transformation requires appropriate economic policy as well as a supportive institutional and political framework has emerged, there remains a divergence of view between the “liberals” who have predominated at the Bank, and the “state developmentalists.” The liberals have seen the necessary institutional support as being fairly minimal, restricted to, for example, enforcement of contracts through an independent judiciary. They, accordingly, oppose government intervention in, say, the provision of subsidies, whether for exports or import substitutes. State developmentalists, on the other hand, have argued for the need for far more direct forms of government intervention and encouragement to build up “infant industries.” They posit that late industrialization requires an activist state to mediate market forces. Leading advocates include Robert Wade (1988, 1990) and Alice Amsden (1985, 1989, 1994). In a lucid and compelling critique of the Bank’s (1993b) Report of the East Asian miracle, Amsden (1994) provocatively asks: “Why Isn’t the Whole World Experimenting with the East Asian Model to Develop?” Africa’s development quagmire was probably foremost in her mind. The obvious problem with attempting to emulate the East Asian model in Africa is that the East Asian strategy depended for its success on the existence of a high degree of administrative capacity at the service of a genuinely committed “developmental elite.” It was a highly risky strategy that could succeed only to the degree that the

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government was adept at “picking winners” and determined to discipline the firms that benefited from its assistance rather than featherbedding them. It remains questionable whether any African state has had or currently possesses either the commitment or the administrative capacity to implement such a strategy effectively. This debate clearly cannot be settled on the basis of the Ghanaian evidence alone. Quite apart from the question of administrative feasibility, one might well argue that, as will be shown in subsequent chapters, the political environment under Rawlings was not sufficiently conducive to capitalist development. The state failed to provide the “minimal” forms of institutional protection for property rights and contracts. One might further argue that the key defect of the Ghanaian program lay not so much in the failure to provide subsidies as in the speed of liberalization. Ghana moved farther and faster than any other African country in regard to market liberalization, bucking the trend toward phased liberalization. In Nigeria, for instance, economic liberalization proceeded slowly and, as regards tariffs, there was actually partial de-liberalization (Hamalai, 1993). Ghana, as the Bank itself noted, went farthest in Africa in “reaching low tariff-based protection and free trade” (Lall, 1995, p. 2025). Manufacturers in Ghana had little time to adjust to the change. The Bank later admitted that “the transition to [trade liberalization] might have been too abrupt for some industries” (World Bank, 1993a, p. 49). The design and sequencing of trade liberalization in Ghana had been a moot question within government circles for sometime. In 1990, P.V. Obeng, Rawlings’ effective deputy, gave expression to this, referring to the “over-liberalization of certain economic activities” as a mistake when industries were not on a “sound footing” (WA, March 5, 1990, pp. 359–360). This probably inf luenced the creation of a Business Assistance Fund of 10 billion cedis ($10 million) in 1994 to assist viable but distressed businesses. By then, many firms had already collapsed. The amount was in any case totally inadequate. Moreover, it was widely held that assistance went mainly to regime allies, many of whom failed to repay their loans. The creation of this fund must not be taken to mean a change in policy. In fact, in 1995, a defiant Botchwey rejected the view that liberalization had been taken too far: “The domestic manufacturing sector is so import-dependent, and also adds so little value, that the only way you can protect industry here is to ban imports. We can’t pander to this kind of sentiment. If we were to levy tariffs, the cost to the economy would be much higher than anyone can blame on trade liberalization” (Africa Report, March/April 1995, p. 40).

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Trade liberalization continued to generate controversy. In 2000, the Private Enterprises Foundation (PEF), which had emerged as a leading business lobby, captured concerns over Ghana’s “over-liberalized” economy by expressing “deep concern about the current hostile environment . . . for the business community . . . the liberalization of our economy . . . has been carried too far . . . the importation of all manner of things which the over-liberalized regime allows has been one of the causes of the pressure on foreign exchange” (Private Enterprise Foundation, 2000, p. 1). A study by Rankin and associates (2002) sheds additional light on the impact of trade liberalization on manufacturing in Ghana. It shows that, save for the metals, machinery, and chemicals sector, output in all manufacturing sectors contracted in the latter half of the 1990s. This sector outperformed all other manufacturing sectors in the reform era, though it started from a very low volume of output (Overseas Economic Cooperation Fund, 1999). Rankin and associates attribute this to the trade orientation of each sector. The metals, machinery, and chemicals sector is “predominantly non-traded and thus protected from trade liberalization and competing imports. Furthermore, because of its domestic orientation, it has benefited from the growth experienced in the rest of the economy and managed to avoid the costs of imported competition.” The traded sectors, by contrast, faced import competition, which has intensified due to, among other things, ongoing economic and trade reform. “Although this reform seems to have benefited firms in the early 1990s, this effect seems to have worn off by the latter half of the period” (Rankin et al., 2002, p. 37). It is instructive to consider developments in the textile and garment sector in some detail, as this sector has served as a springboard for many developing countries to burst into export markets. In 1998 the production level in this sector was 55.9 percent of that of 1977 (EIU, 2001, p. 48). Why did a sector that has a reputation as a “take-off ” industry perform so abysmally in Ghana? A study of the textile and garment industry by Dr. A. H. O. Mensah provides useful insights. Mensah, an experienced business executive and former chair of the Board of Directors of Juapong Textiles, once a success story, documents that there were 138 medium- and large-scale garment manufacturers in Ghana in 1979. By 1987, only twenty-two remained in business. By 1995, fifty new medium-sized firms had been created. He found the garment sector “moving away from large-scale to small-scale and household enterprises” (Mensah, 1998). From 1995 to 1999, the following export earnings were reported: $1.7 million, $0.3 million,

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$0.6 million, $5.2 million, and $2.7 million, respectively (World Bank, 2001, p. 34). Textiles did just as poorly. Mensah is particularly disappointed with exports of kente cloth because “its uniqueness to Ghana . . . gives Ghana a complete monopoly and absolute comparative advantage on the export market. There have been European, Korean and Ivorian imitation kente prints but these are no match for Ghana’s kente” (Mensah, 1998, p. 7). Ref lective of the decline of the textile industry, a 1996 UNIDO report estimated that employment in the sector had declined from 25,000 in 1975 to a mere 7,000 in 1995 (CEPA, 2000, p. 29). Mensah identifies seventeen problems faced by the sector. It is clear, however, that many of these were hardly new. Others, like poor infrastructure and erratic supply of inputs, had improved under reforms. The new and decisive factors were the unstable cedi and the effects of trade liberalization. The former made the cost of industrial equipment and inputs increasingly expensive. Many firms lacked the resources to import critical equipment and inputs. A World Bank study found that, as of 1990, the average age of machines and equipment was thirteen years (Overseas Economic Cooperation Fund, 1999, p. 19). Firms that were able to import essential equipment and materials had difficulty passing on the rising cost of production to consumers who now had a range of choices from an inf lux of second-hand clothing from Europe and North America and cheap imports from southeast Asia. Since some of the second-hand imports were donations acquired by traders at the cost of shipping and handling, they proved very competitive against the low quality but more costly local textile and garments. To be sure, second-hand clothing had long been available in Ghana, but liberalized trade and foreign exchange led to a huge surge in imports. Mensah estimates that second-hand clothing had taken about 65 percent of the domestic market (Mensah, 1998, p. 10), meaning that in addition to failing to export, local textile and garments firms were losing the domestic market. He therefore concludes that the sector is “endangered.” My interviews with owners of textile and garment firms in Accra provide further insights. Many of these firms operated with obsolete machinery, purchased in the 1960s and 1970s, mostly from China. Spare parts could be obtained only from the manufacturer and orders took months to arrive, inevitably disrupting production. With such old machinery, the line of products was rather narrow, putting them at a disadvantage in relation to imports. They realized the need to replace the machinery, but business was not brisk enough to enable them to raise the money for this change. Many

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had difficulty accessing bank loans. In fact, among manufacturers, textile and garment firms identified credit as the most significant constraint (Baah-Nuakoh, 2003). Frequently, they cited high interest rates and an unstable market as reasons. It is of note that, textile and garment manufacturers ranked poor demand for their products as a greater constraint than did other manufacturers (Baah-Nuakoh, 2003). Moreover, the garment sector was among the least exportoriented (Soderbom and Teal, 2000). The radical liberalization of import and export tariffs tended to destroy local industries without generating new, more export-oriented ones. Admittedly, Ghana had previously exported very small amounts of manufactures. This was precisely, however, what export-oriented reforms were supposed to rectify. The one sector that saw some progress in the export market was wood processing (Soderbom and Teal, 2000). In an insightful paper, Teal (1999) seeks to explain why Mauritius exports manufactures but Ghana does not. He notes that Mauritian firms are four times more efficient than Ghanaian firms. Second, wages in Ghana are high relative to productivity, making firms uncompetitive in export markets. Third, to be competitive, firms need to employ a minimum of 100 employees since exporters must be able to afford the costs of marketing and costs of access to foreign markets. Few Ghanaian firms meet this requirement. Fourth, the relative success of firms in wood processing is because they are capital-, rather than labor-, intensive. The last point is at odds with the conventional wisdom that the comparative advantage of economies such as Ghana’s lies in labor-intensive sectors. The future of the wood sector, however, is bleak. Ghana failed to enforce timber regulations for decades, causing a serious depletion of forests (Owusu, 1998). Recent efforts to save the industry from total collapse hinge on two main measures: the banning of round logs exports in 1995 and the introduction of a Timber Resources Management Act in 1997. The latter, the more determined measure of the two, includes a Timber Utilization Contract, a scheme which, among other things, requires contractors to replant their allotments. Both measures have had little impact owing to enforcement difficulties, and illegal logging remains rampant. Reports indicate that contracts are awarded to firms that lack the capacity to use timber resources efficiently and that some contractors resell their contracts for profits (World Bank, 2001). Moreover, contractors rarely comply with the provision to replant their allotments. Collusion between timber contractors and enforcement agencies has further jeopardized the future of the wood sector.

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Government-Business Relations in Ghana Lack of a Clear Industrial Policy

The poor performance of manufacturing raises an obvious question: How much weight was industrialization assigned? Curiously, despite the apparent recognition of the primacy of industrialization in economic progress, it was not until 1992, a decade after the reforms had begun, that a formal industrial strategy document was unveiled. The Industrial Policy Statement: A Strategy for Industrial Regeneration identified food and agro-based industries, forestry, earth-based industries, engineering, energy, and chemicals for special attention. A striking feature of this document was its lack of detail on exactly how these prioritized areas were to be stimulated. It had no clear strategy to persuade entrepreneurs into industry. It did not provide special schemes, such as concessionary loans or lower corporate tax for industrialists. Oddly, while yam exporters qualified for lower taxes, manufacturers of cooking utensils did not. High interest rates, the uncertainty engendered by macroeconomic instability, and the fact that investment in industry takes relatively longer to mature made the sector unattractive in comparison with, say, trading. Indeed, this document was quite lame, and according to an official at the Ministry of Trade and Industry, it “never saw the light of day” (interview). The document Ghana 2000 and Beyond also merits attention here as it made references to the need to encourage industrialization. Published in 1993, this document was the product of a collaborative work between the World Bank and Ghanaian officials. It argued that Ghana needed to redouble its efforts to achieve accelerated annual growth of between 8 percent and 10 percent as opposed to the average 5 percent it had achieved so far. It restated the point that Ghana’s economic future lay in private sector export-led growth and identified mining, agricultural exports, agro-processing, light manufacturing, and related service industries as areas of enormous potential and deserving of special attention. Despite this, however, a concerted effort to prod entrepreneurs, by way of incentives, to invest in these areas was lacking. This was especially odd because the document made repeated references to lessons from the Asian countries that have made giant economic strides in the post–World War II period. Their success, as is by now widely acknowledged, owed much to, among other things, state identification and prioritization of potential areas of growth, provision of cheap loans, and other incentives in order to encourage investment in such areas. Finally, Ghana—Vision 2020, the most comprehensive development plan issued during Rawlings’ leadership, deserves mention. Published

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in 1995, its primary concern was to lay out a strategy to transform Ghana from an underdeveloped country to a middle-income country by 2020. Like the other documents cited above, Ghana—Vision 2020 also acknowledged the need for a healthy industrial base as a condition for accelerated growth. It reiterated the need to focus on agro-processing and light manufacturing, arguing that these industries had the potential to lift Ghana out of poverty and make the vision of becoming a middle-income country by 2020 a reality. Like the other documents, it also failed to spell out how these activities were to be stimulated. Moreover, there continued to be no appreciable effort to provide incentives for existing or would-be manufacturers. Consequently, it was the services sector that continued to attract the lion’s share of investment capital. In sum, the government hardly prioritized industry. The relative weight accorded to a particular goal can be judged partly on the basis of the quantity of resources the national budget commits to it. In 1998, the government devoted a paltry 0.38 percent of its recurrent budget and 25 percent of its development budget to trade and industry. This fell well behind expenditure on education (33 percent of recurrent and 6.17 percent of development), health (8.52 percent of recurrent and 15.87 percent of development), mines and energy (0.5 percent of recurrent and 18.3 percent of development), roads and transport (1.17 percent of recurrent and 13.14 percent of development), defense (5.93 percent of recurrent and 2.59 percent of development), and local government and rural development (1.20 percent of recurrent and 7.86 percent of development) (Overseas Economic Cooperation Fund, 1999, p. 48). Nontraditional Exports (NTEs) In line with their understanding that only a sturdy, diversified export sector could underpin the reform effort, Ghana’s leaders launched an export regime that removed various export duties, abolished export licensing, and simplified export procedures. As well, they offered export incentives, such as duty-free import of machinery and income tax rebates. Further, exporters were permitted to retain a portion of their foreign earnings. To boost exports, the moribund Ghana Export Promotion Council (GEPC)—created in 1969—was revived. The GEPC intensified efforts to encourage NTEs, adopting the slogan “Export Ghana, Export More.” These initiatives paid dividends: the number of exporters, products, and volume of exports rose rapidly.

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Proceeds rose accordingly to $124.4 million in 1993, $175.6 million in 1994, $220.4 million in 1995, $273.8 million in 1996, $334.9 million in 1997, $403.2 million in 1998, and $403.2 million in 1999 (World Bank, 2001, p. 9). This placed NTEs third in the sources of foreign earnings after gold and cocoa. The NTE sector therefore showed much promise. In spite of the major strides Ghana made in the NTE sector, however, NTEs accounted for less than 10 percent of GDP. The foreign exchange crisis of 2000 revealed that, despite progress, Ghana still relied heavily on gold and cocoa; export diversification had achieved only partial success. The bulk of NTEs consisted of resource-based products, mainly unprocessed and semiprocessed products, whose prices, like gold and cocoa, were prone to large f luctuations. Furthermore, progress in the NTE sector was not as impressive as the figures might initially suggest, considering the reclassification of NTEs in 1995 to include plywood and veneer which were previously considered “traditional.” The “success” was in any case very much relative to Ghana’s initial very narrow export base. What accounts for the limited success of NTEs? Part of the reason was that exporters received little institutional support. A consideration of the performance of the GEPC, the state agency responsible for facilitating exports, will clarify the point. The GEPC is “the national focal point institution for export development and promotion . . . Manned by a well trained professional staff, the Council is an authority on the export of products in the non-traditional sector” (GEPC, n. d.). It asserts in its brochures that it performs a range of essential services for exporters, including developing national export awareness, providing the necessary assistance to penetrate the international market, identifying products with export potential, locating markets for them, and providing advice on export marketing. The GEPC was therefore supposed to facilitate exports in much the same way as state agencies in the Asian tigers (Evans, 1997; Wade, 1990). The need for such support is self-evident. “No country ever succeeded in export development in which government and business were not working hand-in-hand,” a World Bank (2001, p. vi) study declares. Entering the export market requires large fixed costs such as market research in foreign markets and establishing an overseas supply network. These are essential for success in the competitive global market. Ghana’s predominantly small-scale exporters were in no position to bear such costs, making state support necessary. Such support, however, proved in practice to be sadly inadequate. The GEPC was

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hamstrung by a lack of vital resources and personnel. Available data on funding to the GEPC from 1993 to 1997 shows a wide variation not only between the amounts requested and what were approved, but also the actual amounts that were released. In 1993, the GEPC requested 1,200 milion cedis (C), but only C397 million was approved, and a mere C209 million was released. In 1994, C1,100 million was requested, while C637 million was approved and only C449 million was released. In 1995, C3,300 million was requested, C616 million was approved, and C370 million was actually released. In 1996, C2,000 million was requested, C716 million was approved, and C643 million was released. Finally, in 1997, C1,500 million was requested, C994 million was approved, but only C512 million was received (Overseas Economic Cooperation Fund, 1999, p. 48). As late as October 2000, when I conducted interviews at the GEPC, funding for that year’s projects had still not been released. In the words of one officer, the GEPC was “seriously under-resourced.” With two barely functional computers, it was hardpressed to access and impart information. According to another, “the cream of our staff keeps leaving. Most people use this place as a stepping stone to greener pastures. The older people here are very frustrated.” In equivalent agencies in the Asian tigers, by contrast, staff retention was high. They had resources that allowed them to act on the collective action problems of business. The Thai external trade council, for example, kept an up-to-date, relevant, and readily accessible data bank, carried out market research, and performed other functions without which business would have been hard-pressed to break into unfamiliar foreign markets (Wade, 1990). Moreover, whereas the Asian tigers provided incentives, such as export subsidies and soft loans, such schemes were largely nonexistent in Ghana. According to the GEPC: There is no special scheme for selective financial assistance to the export sector. Credit facilities for production and marketing are lacking, coupled with high interest rates, cumbersome procedures and conditions attached to loans. Loan rediscounting facility is undeveloped. Soft loans contracted by government are not lent to exporters at preferential interest rates. Export Credit Guarantee, Export Refinancing and Export Insurance Schemes are not yet in place. Exporters also lack the knowledge of working with the export financing process and thus experience difficulties in obtaining finance. Many financial institutions are not capable of assisting exporters because of inadequate knowledge about operations of

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the export sector . . . thus making them insensitive to the difficulties facing these operators (GEPC, 1996, p. 94). The GEPC also lamented “a multiplicity of problems” that prevented the NTE sector from “realising its potential.” It noted further that exporters lacked the skills, knowledge, and techniques for export management. “Enterprise level planning, production and marketing systems are weak and inefficient” (GEPC, 1996a, p. 94). This was hardly surprising, given that 97 percent of exporters were small-scale, earning less than $200,000. The top 1 percent earned between $1.3 million and $4.6 million (GEPC, 1996, p. 92). Most seem unfit for global competition, as evidenced by the f luctuation in the number of exporters. In 1992, there were 3,188 exporters. By 1995/1996, there were 2,802 exporters. This climbed to 3,278 in 1997/1998 and dropped to 2,760 in 1998/1999. By 1999/2000 this had declined further to 1,315 (GEPC, 1995/1996; 1997/1998; 1998/1999; 1999/2000). Though the need for export training schools was recognized, lack of funding limited GEPC ability to do this. It was not until 2000 that the government proposed to establish an export development and investment fund. Conclusion To conclude, we must return to the original questions posed at the beginning of this chapter, namely, “Were the economic policies misconceived in the sense of being inherently inadequate to stimulate the desired response and attain the proclaimed goals, or were the policies poorly implemented?” The answer would seem to be a little of both. At this stage of the study, it seems best to remain agnostic regarding the feasibility of an East Asian–style development strategy. It is nonetheless clear that, while the supposed thrust of market reforms in Ghana was to encourage private sector, export-oriented growth, there were serious f laws in the way the program was both formulated and implemented. Key reform policies—repeated devaluation, high interest rates, and very limited access to credit—presented indigenous entrepreneurs with serious challenges. Additionally, and against the backdrop of these various problems, Ghana opened its doors wide to international competition against which local industrialists were ill-suited to withstand. Macroeconomic instability and policy slippages, particularly during the 1990s, compounded the problems and diminished the capacity of businesspeople to take advantage of the new opportunities and incentives

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created by reforms. In fact, it appears that the problems spawned by the reforms virtually eroded the incentives they created. Even if one were to rule out government subsidies on the South Korean model, government might have done far more to coordinate and provide assistance in the critical area of export promotion. On top of all this, the political relations between the P/NDC government leadership and important sections of business were extremely fraught. I consider this issue in subsequent chapters.

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CH A P T E R

FOU R

Strains in Government-Business Relations, 1983–1991

The Provisional National Defence Council (PNDC) began as a predominantly neo-Marxist government intent on establishing a leftist revolution. The parlous state of the economy, however, persuaded Rawlings of the necessity to adopt an orthodox stabilization and structural adjustment program. By April 1983, when the reform program was launched, businesspeople had experienced fifteen months of persistent harassment and punitive measures. Did the remarkable turnabout in economic policy trigger an equivalent shift in PNDC-business relations? This question is important because market reforms clearly require state-business collaboration if increased investment in private enterprises is to occur. How did the PNDC address this key issue? Was the adoption of market reforms accompanied by an increased voice for businesspeople in economic policy? In this chapter, I examine government-business relations from the adoption of economic reforms until 1990–1991. I argue that, notwithstanding market reforms, relations between the PNDC and the business community did not improve in any fundamental way. Several mutually reinforcing factors account for this. First, although the government took some measures to control the excesses of 1982–1983 and broaden the ruling coalition, it did little to conciliate businesspeople. Also, the government’s use of anticapitalist rhetoric continued and only very rarely did the leadership declare unqualified support for business. Moreover, the private sector was sidelined in economic policy-making. Most important, harassment of prominent businesspeople continued. As a result, Ghanaian capitalists remained fearful

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and distrustful of the PNDC and many, rather than investing, sought to hide their wealth. One aim of this chapter is to illustrate the extent to which the PNDC continued to harass businesspeople even while pursuing extensive market reforms. I do so by presenting several case studies that underscore the antagonistic relationship between the PNDC and business. It is vital to emphasize this point not least because it has received less attention than the PNDC’s lack of consultation with business. This study recognizes that government’s failure to consult business remained a source of grievance throughout the PNDC period and damaged relations, but it is important to note that the continuing harassment of businesspeople caused far more damage. For a number of reasons, which are quite difficult to disentangle, the PNDC persisted with investigations, forcible factory closures, and confiscations of businesses owned by several of Ghana’s most prominent entrepreneurs. Familiarity with the full extent of these arbitrary actions will facilitate a better understanding of donors’ calls for improvements in governance by the late 1980s. It will also illustrate why some of these actions came to symbolize PNDCbusiness relations. Economic Reforms, Political Changes, and Limited Reconciliation The adoption of market reforms prompted some significant changes in the PNDC government’s style and political priorities. In contrast to the anarchy that had characterized its first fifteen months in power, the postadjustment period witnessed government efforts to instill greater discipline and order, both in the workplace and in the wider society. This was partly a response to IMF and World Bank pressure. Following the adoption of structural adjustment, the Bank, concerned about the heightened fear which businesspeople were experiencing, impressed on government leaders to allay such fears. This, it noted, was “mandatory for eliciting a quick response from the private sector” (World Bank, 1984, p. 51). This was sound advice. Economic recovery, now a top priority, could not occur in a chaotic environment. Moreover, Rawlings had seen first hand that excessive autonomy of the defense committees threatened his own authority. The committees that were largely under the control of radical leftists were being developed as an alternative power base beyond Rawlings’ personal inf luence and being mobilized

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to impede adjustment. Faced with this political threat, he reined in the committees, renamed them the Committees for the Defence of the Revolution, and assigned them mainly economic tasks. In tandem with this, the ultra-Marxist elements within the PNDC were defeated and subsequently purged. Other important changes occurred. The activities of the National Investigative Committee and the Citizens Vetting Committee were scaled down. The latter was reconfigured into the Office of Revenue Commissioners with an appellate structure to review complaints and grievances against both procedure and decisions. In an apparent move to reassure business, the interim management committees established in para-statals were disbanded and proper managers reinstated. Similar overtures were made to foreign capital by, for example, denationalizing Ghana Textile Printing and returning it to private ownership in 1988. As part of this effort to restore normalcy, the regime took several conciliatory steps. One such move was the appointment of the highly regarded former Chief Justice Azu Crabbe to head investigations into the murder of the three judges and the retired military officer in 1982. Another was the appointment of some establishment figures as PNDC members and secretaries. Notable examples were Justice D. F. Annan, an ex-High Court judge, several prominent chiefs, and F. A. Jantuah, a lawyer and ex-politician. Moreover, in 1984, the PNDC established in Ashanti, the hotbed of opposition to the regime, a regional consultative committee, comprising key groups such as chiefs, professionals, and businesspeople, to advise it (Kraus, 1987). These moves failed, however, significantly to alter the attitude of the middle classes. For instance, most lawyers hardly regarded Justice Annan, PNDC vice-chairman, as representing them. Based on my interviews with a sample of lawyers, it seems that Annan was probably regarded as a traitor; likewise the chiefs.1 Although these moves took some sting out of criticisms of the PNDC as hostile to the middle classes, it failed, therefore, to gain the confidence of the latter. Full reconciliation was arguably in any case impossible, especially as the PNDC became increasingly authoritarian—partly, it must be said, in response to subversive activities on the part of both left- and right-wing opponents. Relations with the Private Sector Market reforms presuppose that reformist regimes are keen to collaborate with business. This is a prerequisite for the latter to spearhead

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economic growth. In Ghana, however, a state-business coalition was lacking and relations remained fraught. First, the PNDC did little to conciliate business. Second, though the government’s antibusiness rhetoric subsided, it did not stop; the leadership remained openly suspicious of business and the profit motive. Third, businesspeople not only lacked a voice in government to articulate their interests, they were also shut out of policy discussions and starved of vital information. Investigations and trials of entrepreneurs, which were commonly perceived as politically motivated, continued. Ultimately, the PNDC and capitalists existed in separate, barely intersecting spheres. The lack of business representation in government was remarkable, given that the ERP’s success would obviously depend not just on immediate economic incentives but also on business confidence. The World Bank was correct to stress that removing uncertainties was fundamental to a positive private sector response. A direct business voice in government would have gone a long way to reassuring business. Moreover, the leadership continued to use antibusiness rhetoric, raising doubts about the extent of its conversion from its initial neoMarxist viewpoint. Eight years into reforms, Ebo Tawiah, a senior official, could still say that the PNDC saw wealth as undesirable. Even the relatively liberal Secretary for Finance and Economic Planning, Dr. Kwesi Botchwey, contended that “luxury consumption” deprives “the majority of Ghanaians of their fair share of national resources” (Tangri, 1992, p. 104–105). Such statements reinforced suspicions that the PNDC remained fundamentally antibusiness. Why did government leaders persist in such rhetoric? The underlying reason was that they still believed that corruption was rife in the business community and freely said so. Rawlings persistently called businesspeople “crooks” and “thieves.” At the “First Dialogue” between the PNDC and business in February 1990, Tawiah devoted his opening address to decrying business improprieties, which he said made the regime “waver in its confidence in the Ghanaian business community.” He challenged business to “institute a code of ethics” (Tangri, 1992). Given the well-publicized culpability of some entrepreneurs, including recent scandals in the timber industry (Bentsi-Enchill, 1989; West Africa [WA], January 23, 1989, p. 123), Tawiah’s concerns might seem justified. Nonetheless, it was scarcely helpful to launch such a tirade in a keynote address at this much-awaited meeting. Botchwey, too, slammed “profiteering,” “corrupt business culture,” and “inf luence peddling” (Tangri, 1992, p. 104). Such hectoring continued to strain relations. In an interview conducted for this study, an officer at the Association of

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Ghana Industries recalled the meeting as a “disappointment . . . regime officials showed no interest in constructive dialogue . . . . They were interested in moralizing.” Another who attended noted that, “The meeting provided the regime an opportunity to assure business that it had changed course. It failed the test and the exercise proved to be a waste of time” (interview, Ghana Chamber of Commerce officer). Thus what might have heralded a new era in government-business relations proved disastrous. Such condemnation of corrupt businesspeople, it must be noted, was largely missing the point that, with all the obstacles to profitable business activity deriving from government policies and bureaucratic obstacles, it was scarcely possible for businesses to survive unless they did engage in a degree of “corruption.” How else would entrepreneurs have survived in the 1970s without some corrupt practices when government officials and bureaucrats made it an integral part of doing business? Moreover, by concentrating their fire on entrepreneurs, government leaders ignored the collusion of public officials. The timber scandals mentioned earlier illustrated that the latter were key players in corrupt practices. PNDC repression intensified in the mid-1980s, exacerbating the fear still felt by many businesspeople. Admittedly, both the Left and the Right experienced a rise in repression. The Left lost its earlier political inf luence and became disillusioned when popular political participation was abandoned. The withdrawal of subsidies, the imposition of austerity measures, and the rising cost of living angered the Left. As trade unionists, leftist leaders, and student activists questioned the reforms, staged protests, or called for elections, they were subjected to arrests and detentions. The universities were periodically closed down. The alleged involvement of some businesspeople in several coup attempts intensified the tensions with the government (Ray, 1986; Boahen, 1997). Repressive measures, which many believed included the secret execution of those deemed to be subversive, cowed opponents and silenced critics. By the late 1980s, a so-called “culture of silence” prevailed in Ghana. Government-Business Consultation To what extent did the PNDC consult the organized private sector and what impact did the latter have on policy formulation? Consultation is important for two main reasons. First, it is crucial in assuring the

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business community that it is regarded as a vital partner. Second, consultations provide businesspeople with information as to what to expect and hence how to plan. It has been established that consultations facilitated the operations of business and helped to build the “growth coalitions” that underpinned the economic success of the Asian tigers ( Johnson, 1987; Wade, 1990; Evans, 1992; 1995). The IFIs accordingly expended considerable resources and time to encourage consultation in Ghana. Before considering government-business consultation, it is necessary to relate the relevance of two major assumptions made by theorists of collective action to Ghana. First, collective action theorists tend to assume that governments accept the legitimacy of activism and are responsive to pressure. This may be true in relatively pluralistic and even more in liberal polities, and it is hardly coincidental that analysts cite examples mainly from such settings. But even here, significant variations exist in state response to group interest owing to differences in “state traditions” (Dyson, 1980). In Ghana, as in most African states, governments have historically tended to react with repression rather than toleration to pressure from interest groups, or at least to seek to restrict the autonomy of such groups. The second major assumption of collective action theory, related to the first, concerns the determinants of group capability in achieving goals. Theorists assume a priori that, if a skilful leadership emerges to coordinate collective action, if groups possess resources, and if they are well organized and enjoy political leverage, they will inf luence state policies and practices. While these are certainly vital determinants of successful advocacy, as state officials undoubtedly take them into account in weighing the level of attention to assign competing interests, their efficacy is often overstated. Even in advanced capitalist states, where leaders are generally responsive to group pressure, the modes of interest group politics depend not so much on conditions in civil society as on particular regimes’ frameworks of ideas and historical experiences (Dyson, 1980, p. 57). The evidence from Ghana shows that business inf luence varied from regime to regime. Government leaders’ attitudes tend to account for this more than variations in businesspeople’s organizational capability. It is important to note, moreover, that in Ghana, as in many developing countries, one of the main obstacles to effective collective organization of business interests lies in the fact that the classic “free rider” problem is exacerbated by the highly personalized, “cronyist” character of government-business relations.

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Business Advocacy before the Rawlings Era In order to place PNDC-business consultation in context, it is necessary to present a brief historical overview of government-business relations in Ghana. Attempts by indigenous businesspeople to press for favorable policies began in the 1920s and intensified after the Second World War. Activists demanded (1) that Levantines and Indians be forced out of certain economic sectors to make way for local concerns; (2) that shipping quotas and import licenses should be allotted to them more fairly; (3) that they should be eligible for timber concessions; and (4) that they should be provided with improved access to credit. Colonial officials were intent, however, on maintaining the status quo: that is, favoring first European and then Indian and Levantine traders over Ghanaians (Kennedy, 1988). Economic nationalism, which peaked in Ghana after World War II, was a major factor in the formation of the nationalist parties (Rathbone, 1973). From 1950, when a legislative assembly with an elected indigenous majority was created, local business expectations mounted. The Gold Coast Chamber of Commerce, an all-indigenous group formed in 1953, renewed calls for certain privileges for local entrepreneurs, but Nkrumah declared a “no colour bar policy” in business ( Jonah, 1985). Independence sparked even greater optimism in business circles. Nkrumah initially promised assistance, but this proved to be modest (Esseks, 1971b, 1975). After 1960, he espoused a socialist ideology, and repudiated his former promise of assistance. By 1964, he could bluntly say that, “we would be hampering our advance to Socialism if we were to encourage the growth of Ghanaian private capitalism.” He held that it was the responsibility of government to protect its citizens from capitalist “greed.” He opposed privatization, for example, on the grounds that it amounted to “betraying the trust . . . of our people for the greedy interest of a small coterie of individuals . . . Production for private profit deprives a large section of the people of the goods and services produced” (quoted in Anin, 1991, p. 59). He neither consulted business nor accommodated its interest. His extensive curtailment of political rights and freedoms deterred business political activism. Nkrumah was overthrown in a coup in February 1966. The successor regime, the National Liberation Council (NLC), pledged to support Ghanaian business. Indeed, one of the main justifications it gave for overthrowing Nkrumah was its concern to revive indigenous business.2 Almost overnight, several relatively articulate business groups emerged. These groups included the Association of Ghanaian

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Businessmen, the Crusade for the Protection of Ghanaian Enterprises, and the Indigenous Ghana Manufacturers’ Association (which splintered from the multinational Ghana Manufacturers’ Association). “Ghanaian businessmen,” a keen observer wrote, “became much better organised . . . Widely publicised meetings were held and statements were made to the press” (Kennedy, 1980, p. 23). Ghanaian business activism began in earnest at this time. This activism centered on three main issues: access to import licenses, access to credit, and calls for reserving economic activities that required little capital and no specialized knowledge for Ghanaians. The last demand had become an emotive issue. Indians and Levantines had long dominated commerce and were deeply resented because (1) they formed the most immediate rivals to Ghanaian businesspeople and (2) it was believed that, with government assistance, Ghanaians could carve out a niche in those sectors. Discussions in the Legon Observer at the time provide glimpses of the resentment toward Indians and Levantines. Calling for legislation to ban them from certain economic sectors, P. K. K. Quaidoo, a prominent businessman, wrote, “[I]t will not be long before these commercial bloodsuckers establish themselves also as the industrial vampires of the Republic of Ghana. This must be prevented at all costs” (Quaidoo, 1967, p. 16). The NLC took measures of considerable significance to assist Ghanaian business. Between December 1965 and the end of 1968, bank credit to state institutions dropped by 33 percent but increased 31 percent for the private sector. Also, whereas the CPP regime had planned to allocate to the public sector about 70 percent of 1966 imports, the NLC planned to allocate 61 percent to private business. By August 1970, 97 percent of the Public Works Department contracts had been awarded to Ghanaians. Moreover, a new import-licensing regime favored local business. In marked contrast to the CPP, businesspeople were consulted and appointed to public boards and commissions and to head major public ventures such as the Black Star Line and the State Gold Mining Corporation (Esseks, 1975). A proposed divestiture program, however, drew opposition from the public, especially from the intelligentsia, and was abandoned after a handful of mainly small enterprises had been sold (Frimpong-Ansah, 1991). Much more significant was the policy of economic Ghanaianization, set in motion by the Ghanaian Enterprises Decree (GED) in 1968. This reserved the following five categories of enterprises for Ghanaians: (i) retail businesses with an annual sales volume of 500,000 cedis (C) or less; (ii) wholesale businesses with an annual

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sales volume of C1 million or less; (ii) taxi businesses of any size or kind; (iv) all agencies representing overseas manufacturers; (v) any small-scale enterprise in basic extractive, processing, or manufacturing industry or transportation employing thirty people or less, or the value of whose assets was C100,000 or less. All existing foreignowned businesses in the affected categories had to be transferred to Ghanaians within two to five years (Esseks, 1971b). The GED did not fully achieve its aims. This was because, even with some state assistance, local entrepreneurs had difficulty raising the necessary capital. Second, many lacked vital skills. Third, these problems reinforced the continuing, if somewhat diminished, belief that the state was better able to spearhead economic growth. As a result, the state remained the dominant economic investor. For the purposes of this study, the main significance of the GED was not so much the extent to which it achieved its stated aims but rather its illustration of the growing inf luence of BAs. For example, it transformed the Ghana Manufacturers’ Association from a “dinner club” into a formal interest group (Esseks, 1975, p. 49). Nevertheless, the impact of BA activism must not be overstated. NLC concern to cultivate political support from those whose interests Nkrumah had neglected or victimized (Esseks, 1975) was probably more important than lobbying by particular organizations. Kofi Busia’s Progress Party (PP), which won the 1969 elections, proved even more responsive to Ghanaian business interests. The Aliens Compliance Order, issued within a few weeks of the PP’s accession, was the first of a series of measures designed to assist local business. This gave all aliens without resident permits two weeks to obtain one or leave Ghana, resulting in the expulsion of over 150,000 aliens, among them hundreds of traders, artisans, and businesspeople. Widely seen to have been issued at the behest of Ghanaian business interests, its main target was West Africans, more specifically, Nigerians, who had proved to be formidable rivals in small- to medium-scale business (Peil, 1971). The regime funded special loan program for smalland medium-scale businesses, a scheme that guaranteed commercial bank credits to local business as well as state-funded business training opportunities (Esseks, 1975; Kennedy, 1980). Ghanaian businesspeople were commonly known to have ready access to government leaders, including the Prime Minister. The appointment of the first Ghanaian entrepreneur, the late S. C. Appenteng, to the Board of Directors of the National Investment Bank in 1971 ( Jonah, 1985) was further evidence of growing business inf luence.

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Perhaps, the most significant measure introduced by the PP government in relation to business was the Ghanaian Business Promotion Act. It accelerated the pace and broadened the scope of the Ghanaianization exercise initiated by the NLC, which had set a five-year timetable for foreign participation to end in certain economic sectors. The PP regime moved all the dates forward, in some cases to as little as one month. Moreover, the scope of the sectors reserved for Ghanaians was expanded (Esseks, 1975). In sum, the PP era proved to be the golden age of indigenous private sector development based on close businessgovernment relations. This arguably owed more, however, to the ideological predilections of the regime, which was in any case the party of business, than to BA pressure. Colonel I. K. Acheampong’s 1972 coup reversed the fortunes of BAs. Though his restoration of statism and extensive controls narrowed the scope of the private sector, it was not, as is often suggested, unambiguously ruinous to the interests of business. His populist/socialist bark proved to be worse than his bite. Not only did he seek to improve the provisions of the Ghanaian Business Promotion Act, but he also indigenized small-scale industries in 1975 ( Jonah, 1985). Moreover, Acheampong often met business leaders and attended the inauguration of private businesses. Indeed, he, together with several other key officials, developed close ties with some top entrepreneurs, thereby disappointing those who had expected a more radical agenda. It was the adoption of misconceived macroeconomic policies, such as the insistence on maintaining a vastly overvalued currency, together with the mismanagement of import license allocation, that proved decisively harmful to business. It led, over time, to the rise of “contractors”—officials, their wives, and their girlfriends, who obtained the coveted licenses and often resold them for fabulous profits (Oquaye, 1980). Regime-business relations became increasingly personalized, as officials proved more concerned with cementing patronage ties and filling their own pockets than addressing collective business interests. This vitiated the collective solidarity of BAs and undermined their cohesion. When they sent memoranda or delegations to the central bank and government officials, including Acheampong himself, these had little impact on government policies and practices. By 1976 the Ghana Manufacturers’ Association (GMA), for instance, was under great strain. “The very existence of the GMA is threatened by the suspected invidious license allocation system,” it said in a memorandum to Acheampong. “Some of our members believe that Ghanaian enterprises have been victimised in favour of certain expatriate firms who tend to

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be more successful in currying favour with the allocation officials” (quoted in Bennell, 1984). A group of disaffected Ghanaian members broke away from the GMA. It is noteworthy that, though officials justified the import license system on the grounds that it protected the public interest, it actually served a select and diminishing number of private interests, more especially cronies of the regime. Equally important, these beneficiaries were not, in most cases, genuine experienced businesspeople but racketeers who salted most of their profits into overseas bank accounts. BAs continued to exert little inf luence under the Akuffo (1978–1979) and Limann (1979–1981) governments. In both cases, benign neglect by these regimes stemmed from the deepening economic crisis rather than hostility as such. In a context of acute scarcity of foreign exchange, licenses, and contracts, personalized ties with officials proved more rewarding than membership of BAs. PNDC Relations with Business Associations Against a backdrop of mutual PNDC-business antagonism, did the adoption of market reforms persuade the leadership to consult business and did the latter’s organizations inf luence government policymaking? The evidence shows that the PNDC refused to incorporate business in the economic decision-making process through inclusion on policy committees, consultations, or any other regular interaction, at least until 1988. Part of the reason was that, initially, government leaders hardly had a clear economic strategy beyond stabilizing the economy. The regime adopted market reforms primarily for pragmatic reasons and only after a bitter internal rift. Representatives of the private sector played no part in it. Government leaders scarcely considered the longer-term direction of reforms. To the extent that they did, they focused on increasing cocoa, mineral, and timber exports. Only the last of these had a sizeable local capital involvement. Government calculations gave little thought to the longer-term role of local capital and this remained the case until the late 1980s when the f laws of this strategy forced them to rethink the issue. The reform effort, as Finance Minister Kwesi Botchwey often noted, was a learning process. In addition, there appears to have been a conviction within the regime that economic policy-making ought not to be discussed outside the economic team headed by Botchwey. This small technocratic team enjoyed Rawlings’ confidence, monopolized information, and eschewed accountability and consultation in order to expedite

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decision-making. A further rationale appears to have been that the less business and other actors knew about economic policies, the better the chances of preempting possible opposition to such policies. Economic decision-making was so nonconsultative that officials of the regime themselves jokingly referred to the process as “command and control.” These explanations, however, can only go so far. Botchwey would probably himself have been inclined to engage in more consultation with business leaders. A further crucial factor was that Rawlings wished to isolate entrepreneurs for two mutually reinforcing reasons. First, he remained committed to his self-proclaimed role as the defender of “the common man,” more especially “the poor”; and he adopted a political strategy of courting the political support of the latter. Having made much political capital out of his attacks on “corrupt” capitalists, it seemed politically unwise for Rawlings to court business, particularly as austerity measures bit into supporters’ pockets. His need to periodically reaffirm his commitment to the poor gave rise to continuing denunciations of business. Second, Rawlings was prepared to recognize that economic liberalization might have the virtues of providing fairer returns to farmers and of reducing opportunities for corruption; but he remained, like many Ghanaians—and indeed rather like many colonial officials—antipathetic to urban capitalism, which he associated with greed and lack of publicspiritedness. Illogical as it might seem, he favored a form of economic development without large-scale capitalism—though he was admittedly very vague in his ideas as to what alternative form this might take. Rawlings is said to have referred to Castro as having been the leader he most sought to emulate; though he also admitted to having been disillusioned by Castro’s arrogance once he actually met him.3 The inf luence of such attitudes on the part of government leaders was clearly evident in 1982–1988. During this period, access to key officials such as the Finance Minister proved almost impossible for businesspeople. Business leaders frequently complained that their views were ignored and that they learned about policy decisions through the media. Only rarely did meetings with officials occur and then only at the insistence of the Fund and the Bank. It is worth illustrating this a little more fully by considering the regime’s relationship with the two oldest business associations in Ghana, the Association of Ghana Industries (AGI) and the Ghana National Chamber of Commerce (GNCC). It is true that, by the start of PNDC rule, the AGI and GNCC were relatively weak organizations, owing mainly to the fact that

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the “cronyist” character of government-business relations during the Acheampong era had undercut the inf luence they had previously, brief ly enjoyed. Nevertheless, they remained better organized and financed than other BAs in Ghana and retained some political clout. For over two decades, they had been the main link between their members on the one hand and government officials on the other. This enabled them to coordinate interactions between successive regimes and the business community, and to play a pivotal role in negotiating access to the all-important import licenses and foreign exchange allocations. Their usefulness was such that membership in one or both was considered a “must” for entrepreneurs, and there was a significant overlap between the membership of both groups. The onset of PNDC rule led to a further decline in the inf luence and prestige of the AGI and GNCC. The regime maintained a steady distance from these associations during much of the 1980s, partly because it perceived the leadership of the AGI and the GNCC—S. C. Appenteng, A. Appiah-Menkah, B. A. Mensah, and others—to be corrupt. As shown later, all these figures experienced political difficulties with the government. As well, PNDC leaders considered these associations to be vehicles of their leading political opponent. An AGI officer described initial relations with the PNDC as “tumultuous” because “key members of AGI happened to be on the other side of the political divide. Rightly or wrongly, the AGI was perceived as an opposition institution. For this reason, the government would not take AGI’s opinions and concerns into account.” According to this officer, relations became fraught soon after the 1981 coup when the government allegedly attempted, unsuccessfully, to engineer the removal of Appiah-Menkah, then President of the AGI. Interviews at the AGI and the GNCC showed that, during much of the 1980s, the primary means of communication with officials was through the IFIs. Hart (1996) argues that, since such meetings, when they occurred, were held at the Ghana Investment Promotion Centre— the state agency responsible for promoting foreign investment—they were in any case meant primarily to appeal to foreign businesspeople. Interactions between business leaders and key public officials were few and far between (Tangri, 1992). Such interactions as occurred with Ghanaian entrepreneurs proved unproductive from the latter’s point of view. A corollary of government antipathy toward BAs was the lack of tangible rewards for both ordinary members and association officials. As theorists of collective action have frequently noted, special

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rewards, such as enhanced status and valuable contact with powerful individuals (e.g., politicians and bureaucrats) are crucial incentives for prospective leaders or “political entrepreneurs” (Frohlich and Oppenheimer, 1971; 1978). Where such rewards do not obtain, interest in organizing collective action is low. In Ghana, fear of being investigated, tried, or having one’s business confiscated also deterred business activism. Moreover, the probes and convictions of businesspeople, together with tight state control over information f low in the 1980s, succeeded in portraying the private sector as corrupt and rapacious and in turning public opinion against it. Discredited (some controversially) and apprehensive, the general strategy of business leaders was one of maintaining a low profile (Gyimah-Boadi, 1994). The Introduction of Consultative Bodies Starting in February 1988, however, the government began to take hesitant steps to consult business. This was not via existing BAs but rather by creating the first of three consultative bodies (CBs). This idea was put forward by the IFIs which seem to have concluded by then that the PNDC was unlikely to consult businesspeople as long as the latter were represented by the existing BAs. The novelty of CBs was that they offered a fresh start in the sense that the PNDC inf luenced their composition. Predictably, they were not dominated by the “old guard” business leaders whom Rawlings despised. Three factors led to this policy shift. First, private sector response to the reforms had been very limited and hesitant. The failure to consult business was believed to be a major reason for this. Second, economic growth had begun to stall. This was also linked, at least in the view of the IFIs, to the failure to involve the private sector in decisionmaking. Third, the lack of consultation was believed to have left business unconvinced that reforms were irreversible. Regular consultation was seen as vital to signal to business that the reforms were permanent. The first CB, the Private Sector Consultative Committee (PSCC), was created in February 1988 at the behest of the World Bank and bilateral donors; BAs played no part in it. PSCC meetings revealed continuing mutual distrust between PNDC officials and business leaders. Representatives from both sides accused the other side of lack of seriousness (Hart, 1996). The PSCC failed to attain any degree of formality or regularity. It collapsed within a year.

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Three years later, another attempt was made to institute regular consultations. The Private Sector Advisory Group (PSAG), a brainchild of the Bank, was created because of continuing PNDC reluctance to consult the old BAs, which Rawlings saw as representing the old, corrupt business networks.4 Bank officials had become increasingly concerned at the slow development and expansion of the private sector and its continuing uneasy relations with the PNDC. Evidence of a mounting disparity between the expected rate of private investment and actual investment was also causing growing anxiety within the regime. Despite this, the PNDC agreed to consult business only after Bank officials made it a condition for continued assistance (Hutchful, 2002). Such pressure, together with the fact that Botchwey, the economic czar, headed the PSAG, endowed it with much promise. This initiative also collapsed within a year, however, mainly because businesspeople felt frustrated that, despite consultations, their views were largely ignored by government. BAs were thus unable to inf luence government policy. A prime indicator of the extent of the marginalization of Ghanaian businesspeople is the fact that they were excluded almost entirely from the divestiture process. It was a telling comment that, whereas labor had a “heavy presence” on the Divestiture Implementation Committee (GyimahBoadi, 1991a), business was not represented on it at all. Labor, of course, opposed divestiture. In short, the PNDC did little to gain the confidence and trust of Ghanaian businesspeople. First, they were excluded from the new ruling coalition. Second, the leadership still tended to denounce them as corrupt and exploitative. Third, officials balked at consultation. All this might not have deterred businesspeople from investing under the PNDC, given the improved incentives. In order fully to understand the poor business response to reforms and the continuing antagonism of PNDC-business relations, one needs to consider also the persisting threats to private property rights and personal security. Continued Harassment of Entrepreneurs The existing literature on the continuing harassment of businesspeople is surprisingly scant. Scholars have paid far more attention to lack of government consultation than to details of trials, business closures, and confiscations. Hutchful (2002), for instance, makes just passing references to the trial of K. Safo-Adu and confiscation of International

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Tobacco. Indeed, these cases are relegated to a brief footnote (p. 177). S. C. Appenteng, also mentioned in a footnote, is simply referred to as “one of the leading Ghanaian businessmen and owner of Vacuum Salt Products” (p. 177). Like Hutchful, Herbst (1993) comments on the PNDC’s failure to consult business, making even more casual mention of harassment of entrepreneurs. This should perhaps occasion little surprise, given his references to Ghanaian entrepreneurs as corrupt and his apparent view that many should be left to fold (pp. 54, 136). Though Tangri’s (1999) revised version of his 1992 article is somewhat more attentive, his treatment of the continuing harassment of entrepreneurs in barely one paragraph hardly ref lects the importance of this issue. This focus on the lack of consultation rather than on the harassment of entrepreneurs inverts the order of their importance. After all, the abiding image of the PNDC in the collective psyche of Ghanaian entrepreneurs is not failure to consult them. Rather, it is their experience of harassment and their persisting fear that this would recur. Moreover, the notion that Ghanaian entrepreneurs were irredeemably corrupt and that this was the genuine reason for punitive action by government has been granted an excessively facile acceptance (e.g., Herbst). True, they have historically tended to practice varying degrees of tax evasion and other forms of corruption, having little alternative but to do so if they were to acquire necessary inputs and resources. As illustrated in the following case studies, however, concrete evidence of culpability was often lacking. They suggest that the PNDC often had quite other motives for persecuting successful Ghanaian capitalists. In some cases, the authorities’ actions appear to have been motivated in part by genuine suspicions of corruption but with additional motives playing an important role. In other cases, it seems clear that the main motive was that the entrepreneurs were political opponents. One would therefore be well advised not to take PNDC claims of corruption at face value. The case studies which follow are based on material obtained from three main sources: (1) face-to-face interviews with entrepreneurs; (2) newspaper reports; and (3) material from some scholarly publications. They highlight the difficulty in clearly establishing and disentangling government motives, the considerable risks businesspeople continued to face, and the arbitrary character of many of the regime’s actions. The Case of A. Appiah-Menkah A. Appiah-Menkah was Deputy Minister of Trade and Industry in Busia’s regime from 1969 to 1972. He set up Apino Oil Palm

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Plantation and Ashanti Oil Mills in the early 1960s to process palm fruits. In 1974, he set up Appiah-Menkah Complex, which employed 267 people with 570 agents (interview, Appiah-Menkah). Apino soap was indispensable in Ghanaian homes and in the “chop boxes” of boarding school students in the 1970s and 1980s when Ghana experienced shortages of consumer goods. He was a long-time President of the AGI and was, until recently, the most successful Ghanaian soap manufacturer. The PNDC detained Appiah-Menkah on several occasions starting in 1983. The first instance of detention, for which no explanation was given, lasted three weeks. The second, when he was accused of involvement in the June 1983 abortive coup attempt, lasted three months (AC, August 3, 1983). After being interrogated and investigated for his alleged involvement in the coup attempt, he was released without charge (interview, Appiah-Menkah). He was subsequently charged, however, with making a false compensation claim under a new 1984 decree retroactive to 1974. As a lawyer, he had obtained C1.4 million for clients in a 1977 claim (WA, September 30, 1985, p. 2062). The prosecution initially alleged that he had conspired to cause monetary loss to the state but then submitted an application to withdraw the case at the beginning of the trial. The public tribunal (PT) chairman refused, however, to grant this application, leading defense counsel to allege that this indicated the chairman had an interest in the case (Daily Graphic [DG], January 24, 1986). In my interview with Appiah-Menkah, he maintained that the prosecution realized the case against him was very weak, hence its desire to abandon the trial. He further claimed that the real reason for the charge was his political opposition to the PNDC, citing as evidence government attempts to remove him from the AGI presidency in 1982. Appiah-Menkah was convicted and jailed for eighteen months in 1985 and fined C600,000. Besides being required to refund the compensation award of C1.4 million, he was ordered to pay C8 million compensation to the state or serve an additional ten years in prison (WA, September 30, 1985, p. 2062). Counsel appealed the ruling and applied for bail, but the same PT chairman would not entertain the bail application on the grounds that the “judgement had not been typed.” It took three months to type the judgment and prepare the appeal papers. Appiah-Menkah was still refused bail (DG January 24, 1986). Moreover, the appeal was never heard because the regime “did not have a panel to hear it” (interview, Appiah-Menkah).

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Government-Business Relations in Ghana The Closure of Industrial Chemicals Limited and Trial of Kwame Safo-Adu

Dr. Kwame Safo-Adu trained at King’s College Medical School, London, where he won the Linchley Prize for Pharmacology in 1956. He taught Pharmacology at the same school and at Ibadan University Medical School, Nigeria, before setting up a private clinic in Kumasi in 1966. He was Minister of Agriculture in the Progress Party Government, 1969–1972, and also served on the Council of State in Ghana’s Third Republic (Safo-Adu, 1985). He set up a pharmaceutical factory, Industrial Chemicals Limited (ICL), in 1974, near Kumasi, producing vitamins and antimalarial drugs with a $700,000 World Bank loan paid through the National Investment Bank (NIB). He repaid the loan in full in half the loan period, and secured an additional $200,000, which he again paid in full before maturity. In 1986, he borrowed $1.3 million in order to purchase machines and equipment for expansion (interview, Safo-Adu). The PNDC refused to give Safo-Adu an import license or allow him to use the loan. He sought redress at the UNESCO Industrial Court, which ruled in his favor fifteen months later. By then, the $1.3 million dollar loan had swollen to the equivalent of $3 million owing to repeated devaluations of the cedi. He nonetheless went ahead with ordering the machines, which duly arrived. He left Accra for London on February 26, 1988, to arrange for raw material supplies. That night, four armed soldiers posing as armed robbers broke into his home in Accra. They assaulted his daughter, but his eleven-year-old grandson escaped to f lag down a taxi for help. The taxi driver happened to be Safo-Adu’s off-duty police neighbor. He radioed for help and patrol police soon arrived. A gun battle ensued between the “robbers” and the police, in which two “robbers” were killed. Another, wounded, escaped but died later. With irate soldiers threatening retaliation, the PNDC canceled police/military participation in the 1988 Independence celebrations (interview, Safo-Adu). The expanded ICL factory was commissioned on October 1, 1989. Two days later, Rawlings reportedly led about 300 soldiers to cordon off the factory, beat up everybody in sight, and ordered an investigation into the affairs of ICL (WA, November 20, 1989, p. 1948). The Citizens’ Vetting Committee investigated Safo-Adu for six months, starting in January 1990, and detained him while a tribunal was being set up to try him. He faced ten counts of economic sabotage, including diverting his loan for purposes other than those for which he obtained

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it, and tax evasion. Each charge carried the death penalty by firing squad upon conviction (WA, November 5, 1990, p. 2795). The prosecution alleged that Safo-Adu had diverted his loan to import shampoo. This charge seems, however, decidedly trivial. Of the total loan of $1.3 million, Safo-Adu spent a paltry $2,522.09 importing shampoo (WA, November 5, 1990, p. 2795). In any case, his counsel argued that the terms of the loan did not restrict how it could be used. On the tax evasion charge, Safo-Adu claims that he produced documentary evidence in court to show that he had actually overpaid taxes. He was acquitted and discharged on all ten counts in October 1991 (WA, November 4, 1991, p. 1858). The PNDC immediately announced it would appeal against the acquittal, but in the end did not. Nonetheless, ICL remained closed for more than two years; and, despite Safo-Adu’s acquittal, the NIB closed his account and returned his loan balance to the World Bank, insisting that he repay the used portion within six months (interview, Safo-Adu). This case had wider ramifications for other individuals involved. As a punishment for having approved Safo-Adu’s loan, Andrews Wontumi, the senior director of the NIB was charged with aiding and abetting. Significantly, Wontumi, unlike his colleagues, refused to testify against Safo-Adu and, though acquitted, lost his job. For approving ICL’s license, Frank Bruce, the acting director of Pharmaceutical Services at the Ministry of Health, was also charged with aiding and abetting (WA, November 5, 1990, p. 2795). Similar charges were brought against Kwamena Bartels, Safo-Adu’s special assistant and counsel. Lastly, Boakye Danquah, the public tribunal chair, who acquitted SafoAdu, soon f led to seek refuge in Britain. In a BBC interview, he alleged that officials at the highest level had pressured him to convict Safo-Adu and later threatened his life (Gyan-Apenteng, 1992; African Observer, November 6, 1997). The Closure of Kastena Air Processing Another infamous case involved the late Major Kwame Asante, who was a commissioner (minister) in the Acheampong regime. Like SafoAdu, Asante had set up a factory near Kumasi with a World Bank loan through the NIB before the PNDC came to power. His company, Kastena Air Processing, produced oxygen for hospitals and gas cylinders for domestic and commercial purposes. The factory was cordoned off by a band of some 200-strong soldiers on November 3, 1989, the same day that Safo-Adu’s factory was forcibly shut down.

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Like Safo-Adu, Asante faced an investigation into how he obtained his loan facility (WA, November 20, 1989, p. 1948). He was subsequently charged. Unfortunately, beyond this point, details of Asante’s case are scanty. Nevertheless, interviews conducted with several of Asante’s friends and political insiders were remarkably consistent in suggesting the following series of events. A military lorry crashed into Asante’s car on the Accra-Kumasi road. Moments later, a military helicopter landed at the scene of the accident and airlifted the soldiers, but did not assist Asante, who subsequently died. Asante accordingly enjoys something of a martyr’s status as a victim of PNDC vindictiveness in his native Ashanti region, where the PNDC leadership is blamed for his death. Investigation and Confiscation of Vacuum Salt Products Limited Arguably the most dynamic Ghanaian entrepreneur, the late S. C. Appenteng, from a rather modest start as a cocoa-purchasing clerk, built up a business empire, including trade, finance, commerce, manufacturing, and processing. Ghana’s “salt king” purchased Panbros Salt from three Greek brothers, the Panagiotopulus, in 1970 under Busia’s Ghana Business Executive Promotion Act, which required certain categories of foreign-owned businesses to either sell shares to Ghanaians or sell their businesses outright. His second salt business, Vacuum Salt Products Limited (VSPL), located at the Songor Lagoon, Ada, in the Greater Accra region, is the focus here. He signed a ninety-nine year lease with the state in 1971 and constructed a facility to convey seawater into the lagoon to mine salt. Shares in VSPL were sold in 1975 (interview, Leon Appenteng). Appenteng (1993) argues that PNDC interference prevented VSPL from reaching its full potential and his ultimate goal of establishing a chemical industry using revenue from VSPL. My interview with his son, Leon, manager of Panbros, revealed, however, that VSPL’s difficulties predated the PNDC regime. Conf licts with local inhabitants had begun in 1974, the year VSPL began salt mining, when a certain Mr. W. G. Nartey, claiming part of the VSPL concession, set up a salt mining company called Star Chemicals Company Limited (SCCL). Locals had complained that VSPL’s salt mining activities deprived them of their right to take salt from the lagoon (Amate, 1999). In an effort to forestall an escalation of conf lict, Acheampong’s government divided the lagoon into three concessions: (1) VSPL, (2) SCCL, and (3) Ada Traditional Council (ATC) (DG, February 5, 1986).

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In 1979, however, the conf lict was rekindled and a new dimension was added. Playing on local sentiments, two local politicians, Ameto Williams and Kofi Batsa, campaigned for parliamentary seats in the 1979 elections on the platform that, if elected, they would evict Appenteng, an Akan “outsider” (Hansen, 1991, p. 74) and restore control of VSPL to the Adas (Amate, 1999). The conf lict thereby assumed overt ethnic dimensions. A subsequent attempt to take over VSPL was prevented by a court injunction that was still in force when the PNDC seized power. Thus, VSPL was encountering difficulties before the PNDC era. Appenteng (1993) is correct, however, in saying that the conf lict took a new, more virulent turn after the 1981 coup, owing to PNDC actions and attitudes. Defense committees (DCs) in Ada “confiscated” VSPL in September 1982 and encouraged local inhabitants to collect salt freely. This resulted in clashes with VSPL and serious disruptions to the company’s operations. Unlike previous regimes, the populist PNDC condoned this; it issued a directive permitting locals to enter VSPL to mine salt (DG, February 3, 1986). Suitably encouraged, the DCs, the ATC, and the Ada Co-operative Salt Miners Association (ACSMA) intensified calls for VSPL’s expulsion. The PNDC ordered the Amissah Inquiry of 1986/1987 to investigate VSPL’s right to the lagoon, its relationship with locals, and its tax records. Fui Tsikata and Joe Reindorf, both with close links to the PNDC, represented the ACSMA and the ATC, respectively. They tried to show that VSPL had no compelling grounds for a concession and doggedly sought to show that Appenteng obtained the leasehold through deception. They claimed that he purported to use the “scientific method of vacuum evaporation” when in fact he used solar evaporation. Tsikata argued that VSPL “simply pumped seawater into crystallization pans and waited for the natural processes of evaporation,” adding that VSPL’s pipes served no purpose other than to give its operations a more “sophisticated appearance.” Cross-examining VSPL’s Executive Director, Reindorf argued: “You will agree with me that the company which says it is going to use much sophisticated method to produce salt is more likely to impress government than the one who is going to sit by the lagoon and wait for the sun to evaporate water for salt” (DG, February 20, 1986). The point was clear: if VSPL did not use sophisticated scientific methods to mine salt, then its concession was unjustified. The two counsels also tried to show that VSPL’s activities were detrimental to the interests of locals’ welfare. Allegations against VSPL ranged from irresponsible behavior to criminal acts. Counsels argued,

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for example, that VSPL’s culverts hindered locals’ salt-mining activities and damaged or destroyed canoes and fishing nets and other property, preventing them from earning a living. They argued that VSPL’s culverts caused f looding and threatened the villagers’ lives (DG, January 17, 1986). Reindorf accused VSPL of “hoarding” the lagoon for “spurious scientific” operations, and “anti-social and unchristian neighbourliness” (DG, February 21, 1986). Subsequent to this, the PNDC ordered VSPL’s culverts blocked (DG, January 27, 1986). Consequently, VSPL could not trap seawater for salt. Tsikata tried to incriminate VSPL, suggesting that police used its vehicles to arrest suspected salt thieves and used its premises to detain them (DG, n.d.).5 The Appentengs were accused of forcing suspected thieves to chew raw salt and of thereby causing physical harm to them. They were also blamed for the rumored fatal shooting of a woman by police protecting VSPL’s interest at the lagoon in May 1985 while she was attempting to steal salt. The Deputy Commissioner of Police Operations, dispatched to investigate this rumor, reported that nobody had been killed. Rawlings personally intervened, f lew to Ada, and returned to Accra with the body of a woman supposedly killed from gunshot wounds (DG, April 25, 1986). The state-owned media gave extensive coverage to the probe and vilified the Appentengs. The Adas and the two counsels tried to show, moreover, that VSPL had filed its tax returns improperly and failed to pay appropriate royalties (DG, February 13, 1986). Significantly, VSPL never faced any tax-related charges. Indeed, the company was never charged with any offense. Nor did officials make the findings of the probes public. This reticence was presumably because no firm evidence of impropriety was found. Starting in 1988, the VSPL saga took a steady turn for the worse. That year, the state assumed control of stool lands. The PNDC quickly nullified VSPL’s lease, replacing it with a thirty-year lease. The new lease was effectively useless, however, since it barred VSPL from trapping seawater, thus ending its operations (interview, Leon). In 1989, the PNDC barred the Appentengs from entering VSPL. Somewhat needlessly, it ordered the NIC to investigate allegations of financial impropriety against VSPL in 1990. Again, no charges followed. Yet VSPL was placed under the control of a PNDC-appointed management team, which subsequently brought in a Cuban technical team to advise it on a “master plan” to develop salt mining in the Songor area. For what it is worth, the Cubans apparently recommended a public-private partnership involving all the concessionaires of the Songor (Appenteng, 1993).

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The PNDC nullified VSPL’s leasehold in August 1992 and placed the company under the control of the Ghana National Petroleum Corporation (GNPC), headed by Tsatsu Tsikata, Rawlings’ closest aide. VSPL summoned the government to the International Arbitration Centre in The Hague in 1993. The latter would not, however, hear the case after the government compensated the Greek shareholders, thereby making it an “internal matter” (interview, Leon). In effect, VSPL was confiscated. As a footnote, it should be noted that the PNDC acted ostensibly to protect the Adas. The official statement that barred the Appentengs from VSPL in 1989 read: “Mr Appenteng and his relatives had continually harassed and undermined the interest of the people in the salt mining area, thereby breaching the spirit in which the government . . . revalidated Vacuum’s lease” (WA, November 13, 1989, p. 1908). Subsequent events tended, however, to belie this paternalistic posture. Ada natives revealed in interviews that the GNPC continued to use VSPL’s much-maligned salt-mining method. Moreover, locals were still barred from mining salt from VSPL’s concession. Irate, they clashed with the security forces to press their demands for billions of cedis in royalties from the state and compensation for access to lagoon (Statesman, November 5, 2000). Confiscation of International Tobacco Ghana Ltd. B. A. Mensah established International Tobacco Ghana Ltd. (ITG) in 1974. By the late 1980s, ITG employed 1,200 people and created thousands of spin-off jobs and economic opportunities. ITG faced liquidity problems in the late 1980s and failed to remit excise duty of C751.1 million to Customs, Excise and Preventive Service (CEPS) on time. The excise duty was a special tax which companies collected from their customers on behalf of CEPS and were expected to hand over within twenty-one days of collection. Together with interest repayments of C216.9 million, ITG’s debt totaled C968 million (WA, August 27, 1990, p. 2372). It must be stressed that this was not a tax evasion case; rather, it was a case of tax arrears (Africa Confidential [AC], April 5, 1991). Mensah blamed ITG’s liquidity problems on the massive devaluation of the cedi and pleaded for time to pay his tax arrears. For the government, however, ITG had appropriated state revenue. In July 1989, the PNDC barred the Mensahs from ITG premises. CEPS then seized all ITG assets until all tax arrears were paid in full. Mensah invited London-based Rothmans International to buy ITG equity shares so as to enable him to pay his debt. With a deal within reach, the PNDC blocked the negotiations and arranged with Rothmans

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and the national pension and insurance fund, the Social Security and National Insurance Trust (SSNIT), to take over ITG. Africa Confidential (April 5, 1991) noted that Mensah had already reached an agreement with Rothmans and SSNIT and that ITG was confiscated on the very day the new company was due to be set up. Mensah sued Rothmans and SSNIT in July 1990 for C32 billion ($100 million) for illegal seizure of ITG. He was arrested and charged with economic sabotage a day before the judgment. Rothmans and SSNIT, meanwhile, were “granted an indemnity for taking possession of ITG property, protecting them against any legal action by ITG” (AC, April 5, 1991). Mensah therefore sought redress at the UNESCO Industrial Court to press his compensation claim. He was swiftly arrested and charged with “attempting to bring the government into disrepute.” Mensah insisted that several entrepreneurs, most notably Asare Pay All, a private lottery company, owed far more tax arrears than he did (interview, Mensah). General Implications These forcible business closures, investigations, trials, and confiscations became causes célèbres. The PNDC justified its actions on the grounds of fighting corruption. The defect with this explanation is that, as these cases have illustrated, allegations of corruption often did not hold up, despite lengthy probes. Appenteng was never charged; the charges against Mensah were largely brought as a reaction to his lawsuit, and they appear to have been intended to frighten him into silence. The decidedly f limsy nature of the charges brought against him probably explains why his trial was quietly abandoned. It seems likely, therefore, that other considerations, including vindictiveness toward known political opponents, a resolve to punish any entrepreneurs who had prospered under previous regimes, and even venal self-interest, motivated the PNDC’s actions. In order to make sense of this continued government harassment of entrepreneurs, it is instructive to refer to a book written by Kofi Awoonor (1984), an inf luential PNDC insider. Awoonor’s anger toward “corrupt” entrepreneurs is palpable. He asserts that Acheampong coowned Kowus Motors and International Tobacco Ghana, and that this explained the success of these firms. Awoonor alleges that Ahomka Lindsay, another entrepreneur, exploited ties with Acheampong. When these firms were subsequently confiscated, some saw Awoonor’s patent

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hostility toward their owners as ref lecting the PNDC’s and, more especially, Rawlings’ viewpoint. It is noteworthy that, in the months preceding the seizure of ITG, for instance, the alleged “Acheampong connection” received extensive publicity. Critics saw this as an important motivation for the seizure (Fordwor, 1998). Rawlings did try to distance himself from Awoonor, but this was only after his book had caused a storm. Whatever the reasons for the continuing harassment of business, an indisputable fact was the regime’s wide discretionary power, as evidenced by the arbitrary and drawn-out nature of the cases. “Investigators did not appear to have any precise mandate and they operated on the basis that they were to continue until they found “something wrong,” even if that might be totally unrelated to the allegation or charge which they were originally to investigate” (Fordwor, 1998, p. 190). As one might expect, entrepreneurs followed these cases with trepidation. In interviews, many recalled their fears over what might befall them. It is hardly surprising, therefore, that many Ghanaian businesspeople continued to dislike the PNDC intensely. Many wished to see it toppled and some sponsored coup attempts to achieve that end. Although the exact amount involved will probably never be known, it is fair to say that capital f light reached an unprecedented level in Ghana during the PNDC era, owing to an exodus of entrepreneurs. Of those who stayed, few were willing to risk investing when property rights were insecure. Together with the uncertainty over the sustainability of Ghana’s reform in the medium to long term, risk-averse investors held back. In Ghana, the persistence of anticapitalist rhetoric and ongoing persecution of entrepreneurs made the uncertainty acute. Many strongly believed that reforms were pursued not out of conviction but only to satisfy donor conditions for assistance. Others were loath to invest because, in their judgment, that would amount to tacit support of a reviled regime. Thus, as the World Bank (1993a) was to note with dismay, after a decade of reforms, private investment, both local and foreign, remained disappointingly low. Conclusion In conclusion, the adoption of orthodox economic reforms did not signal any very significant change in PNDC-business relations. Nor did it change PNDC rhetoric, which continued to stigmatize profit and equate wealth with corruption. The PNDC monopolized economic

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policy-making, making it clear that business activism was unwelcome. This forced business to seek inf luence through the IFIs with little success. The forcible factory closures and confiscations, investigations and trials reinforced the view of businesspeople that the PNDC was socialist and antiwealth. The significance of these actions transcended the difficulties caused to the particular entrepreneurs involved because these entrepreneurs were among Ghana’s most experienced and most prominent. They therefore became symbols of the risks run by businesspeople. Businesspeople remained very fearful throughout the PNDC period, unsure when it would be their turn to face harassment. In this environment, they were inclined to hide their wealth, not to invest. For these reasons, together with the limitations of the economic policies noted in the previous chapter, Ghanaian business failed to expand.

CH A P T E R

F I V E

Government-Business Relations in the Democratic Era

By the late 1980s, aid donors had come to the conclusion that the market reforms that they were sponsoring in Africa would succeed only if augmented by congenial governance. This followed the growing realization that broad discretionary power wielded by undemocratic, corrupt, and unaccountable African governments hindered economic reforms. “Underlying the litany of Africa’s development problems is a crisis of governance” the World Bank, in its famous 1989 (p. 60) report, argued. Bilateral donors began making their much-needed aid assistance to African states conditional on democratization, based on the belief that it would check arbitrary power, undercut their patronage, bring more conciliatory relations with business and other interest groups, and thereby make market reforms more effective. The advocacy of democracy was a watershed because until then, African regime types had concerned donors much less than regime commitment to reforms. Previously, indeed, some donors, including the IFIs, had appeared to share the widespread, if debatable, belief that strong, authoritarian regimes, possessing autonomy from societal forces, were relatively effective in implementing harsh but necessary reform measures. Authoritarianism had certainly been useful in Rawlings’ Ghana, so donors were quite ambivalent about Ghana. On the one hand, the United States criticized Rawlings’ disdain for party politics, threatening that it might jeopardize aid f lows (Economist Intelligence Unit, 1990, p. 16). On the other hand, donors felt that “at the very least a defeat of . . . Rawlings would cause a period of economic policy instability and that a democratically elected president would be more

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inclined to pander to populist sentiments and opinion” (West Africa [WA], November 16, 1992, p. 1954). Many Africanist scholars expressed skepticism about the links between democracy and more effective economic reforms (e.g., Jeffries, 1993; Callaghy, 1994a, 1994b; Bienen and Herbst, 1996). Donors’ aim to destroy key political instruments such as patronage and rents on which Africa’s neopatrimonial rulers rely to consolidate power was sound but idealistic. Historically, the African state has been the prime locus of resources and benefits and hence accumulation and upward mobility. Rulers have tended to monopolize economic opportunities for themselves and loyal clients (Kennedy, 1988; Boone, 1990). Consistent with patrimonial rule, they block or limit independent avenues of accumulation (Weber, 1978). Donor efforts to destroy instruments so vital to power in order to foster dynamic capitalism thus faced forbidding odds. Bates (1981) detailed how political concerns often trump economic rationality in Africa. How else to explain Zimbabwe’s ongoing tragedy? Despite the skepticism, the idea seemed plausible in theory. The crucial question, however, was how one identified “congenial governance.” Unless this was more specifically defined, it verged on the tautological. If good governance was identified with multiparty democracy, then the connection with economic development, or with successful economic liberalization, was historically difficult to sustain. In Ghana, the connection proved to be tenuous or, at least, decidedly ambiguous. Indeed, as shown later in this chapter, from the onset of the process, democratization entailed countervailing tendencies toward the harassment of suspected opposition supporters in the business community. Donor pressure for democratization converged with domestic factors to trigger political changes in Ghana so that, by 1991, a transition to democracy was underway. This culminated in the holding of elections in November and December 1992 and the launch of Ghana’s Fourth Republic on January 7, 1993. Rawlings and his National Democratic Congress (NDC) emerged as victors. The transition to civil rule was marked by acrimony following opposition parties’ accusations that the NDC enjoyed unfair advantages. They disputed the results of the presidential elections and boycotted the parliamentary contest. Thus, the Fourth Republic began in a highly tense political environment. This had serious implications for government-business relations. Despite these difficulties, a second set of elections were held in December 1996, when Rawlings and the NDC again won

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and formed a second government under Ghana’s Fourth Republican constitution. This chapter considers the effects of democratization on governmentbusiness relations in Ghana from 1991 to 2000. Democracy had been promoted on the grounds that it would curb arbitrary power and facilitate reforms. This argument would seem at first sight to be appropriate to Ghana: the PNDC’s ability to disregard property rights had owed much to its authoritarian and unaccountable character. To what extent, however, was this expectation borne out? The evidence suggests that, at least in the short term, democratization did not have an unambiguously beneficial effect on government-business relations in Ghana. In fact, it added another dimension to the antagonism in governmentbusiness relations, and this antagonism intensified in the run-up to the 1992 elections and into 1993. Over time, the hostilities lessened, but this owed more to “institutional” factors—a relatively autonomous Supreme Court, greater opposition inf luence, a critical private media, and a generally more alert civil society—than to a change in government attitude. Indeed, Rawlings never overcame his dislike of a substantial section of Ghana’s business community, and as a result, even while he came to acknowledge the need for consultation, he put this into practice only very halfheartedly. He also sought to bypass the older business associations by sponsoring one that he deemed politically more acceptable. Moreover, while proving quite accommodative of business groups comprising small-scale entrepreneurs, he remained unwilling to extend similar gestures to those representing “big business.” The Domestic Factor in Democratization Donor advocacy of democratization proved very opportune for prodemocracy forces in Ghana. The latter’s agitation for a return to civilian rule dating back to 1982 had been ineffectual for four main reasons. First, the most articulate pro-democracy groups—the Bar Association, the Christian Council, and the Association of Recognised Professional Bodies, etc.—were in disarray, failing to rekindle the spirit that proved so decisive in bringing down Acheampong in 1978. Second, fear of repression for criticizing the PNDC induced mass political passivity—what Rawlings himself called a “culture of silence.” Third, visible economic improvement—filled shops, rehabilitated infrastructure, etc.—what Green (1998) calls “performance

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legitimation,” blunted criticisms of the PNDC. Fourth, it proved difficult to whip up popular anger against a government that was far less corrupt than Acheampong’s SMC.1 The political tide began to turn in February 1988 following a public lecture by the late Professor A. A. Boahen in which he criticized the PNDC on various issues, including a contrasting interpretation of why a “culture of silence” existed in Ghana. Whereas Rawlings used the term to mean a distressing lack of interest in public affairs, Boahen viewed “passivity” as the result of government repression. “We have not protested or staged riots because we trust the PNDC but because we fear the PNDC! We are afraid of being detained, liquidated or dragged before the CVC [Citizens’ Vetting Committees] or NIC [National Investigations Committee] or being subjected to all sorts of molestation” (Boahen, 1989, pp. 51–52). Boahen’s seminal speech struck a chord and proved catalytic for the opposition. The TUC began to reassert itself, joining the pro-democracy coalition to demand a return to democratic rule. Church and professional bodies rediscovered their voices. Even some of the radical groups that had initially supported the PNDC joined the groups that coalesced to form the Movement for Freedom and Justice (MFJ)–the first formal opposition group–in August 1990. Led by figures of all political hues, the MFJ demanded the lifting of the ban on party politics, a timetable for civilian rule, release of political detainees, and an amnesty for exiles. It must be stressed, however, that these changes were partly attributable to a softening of PNDC repression by the late 1980s. This buoyed critics to attack the regime on various fronts, including the sensitive issue of human rights abuses. True, opponents faced arrests and detention, but vital changes had occurred. Though Rawlings had long recognized that his regime would need to legitimize itself via a system of political representation at a later stage, he had placed this on the back-burner and initially focused on economic recovery. He hoped to achieve this system of political representation on a nonpartisan model, at the local level initially with elected district assemblies (DAs), but then building up a pyramidal structure extending to the national level. The altered political landscape probably precipitated the holding of nonpartisan DA elections between December 1988 and February 1989.2 The introduction of the DA system, however, intensified political ferment. Opponents decried it as a ploy to preempt party politics. They also saw it as a sign that the political noose was loosening. By the late 1980s, moreover, the limitations of the PNDC’s political insulation from societal forces had become clear. While this had been

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vital to the success of the stabilization phase (1983–1986), involving mainly “stroke of the pen” reforms, it was unsuitable for the structural adjustment phase (1987–1992) requiring complex reforms and confidence building. Rawlings recognized the need to build a “national economic consensus” on reforms in order to move from “rehabilitation and crisis management to deepen the recovery programme” (WA, January 12, 1987, p. 59). The failure to gain a consensus on proposals to use the DAs as the base of a national system of political representation meant that, by the early 1990s, the PNDC still lacked the broad social base needed for complex reforms. There were certain attractions, in this context, to restoring multiparty democracy. Were the PNDC to call and win elections, it could claim to have gained an endorsement for launching deeper reforms. A related factor was that the main opposition to reform measures and to the regime more generally came from the urban areas. The rural population had tended to benefit most from a reform program that, in the terminology of Bates, was designed to redress “urban bias” (Bates, 1981). There was accordingly good reason to think that the Rawlings regime was more popular in many rural areas than in the towns. According to Bates, such rural support was relatively politically unimportant to African governments, the main threat to whose survival came from better organized and more articulate urban groups. Bates was writing, however, in the context of the prevalence of unelected governments. In the context of democratic multiparty elections, rural support could be turned into sizeable political capital. Finally, intra-regime pressure proved crucial in the PNDC’s decision to accept party politics. A notable feature of Ghana’s return to democracy was its relative orderliness. This was partly because unlike in some African states, most Ghanaian government leaders recognized the need to adapt to the winds of change. This was admittedly not equally true of all of them. Rawlings himself initially tried to stick to his “no party politics” position. Other senior figures, however, including most notably Kwesi Botchwey, had concluded that, unless they accepted party politics, they might have to use even more repressive measures to deal with the growing popular pressure for democratization, perhaps on a scale akin to the infamous Latin American dictatorships of the 1970s and 1980s.3 They prevailed upon their colleagues to accept political reforms, helped by unofficial soundings of popular opinion around the country suggesting that Rawlings was likely to win an election.

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A major step toward democratization occurred when the National Commission on Democracy (NCD) was authorized in 1990 to conduct regional seminars to discuss future democratic constitutional arrangements. This provoked heated controversy. Critics feared that the NCD, which the PNDC had created earlier to develop a plan for nonpartisan democratic representation, would simply endorse Rawlings’ aversion to party politics. Rawlings’ occasional reiteration of this position only heightened such concerns. The MFJ and the Ghana Bar Association (GBA) protested, moreover, that they were likely to be sidelined within these seminars relative to pro-PNDC groups. In the event the public discussions, which began in July, succeeded mainly in reminding Ghanaians of Acheampong’s “Union Government” proposals (a thinly veiled cover for continued military rule) and hence in arousing popular skepticism toward Rawlings’ position. The NCD’s final report, issued in March 1991, concluded, against Rawlings’ personal preference for a “no-party” system, that there was a popular desire for multipartyism. Consequently, the PNDC appointed a committee of experts to formulate proposals for a draft constitution, followed by the appointment of a consultative assembly in late 1991 to debate the draft constitution. The modality and composition of the assembly proved highly contentious in two ways. First, whereas the PNDC insisted on itself determining the assembly’s composition, critics demanded a constituent assembly elected on a constituency basis. Second, while the PNDC insisted that the assembly’s recommendations should be merely advisory, opponents called for binding recommendations. The opposing positions were tactical: while the PNDC expected its position to give it leeway to maneuver, the opposition’s goal was to foil this. The PNDC prevailed. Of the assembly’s 260 members, 117 came from the district assemblies (DAs), 121 represented 62 “identifiable bodies,” and 22 were government appointees. Critics accused the PNDC of “packing” the assembly with pro-PNDC groups such as Committees for the Defence of the Revolution (CDRs), the June Four Movement, and the 31 December Women’s Movement—all of which opposed multiparty politics. Critics objected further to the granting of equal representation to, for example, the GBA and the University Teachers Association of Ghana (UTAG), on the one hand, and groups like hairdressers and butchers on the other hand. For critics, the PNDC was “playing populist political games at

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the expense of intelligent, mature and professional input into the constitution-making process” (Gyimah-Boadi, 1991b, p. 37). The PNDC insisted that its arrangements were far more sociologically representative than those favored by the opposition. Past experience demonstrated that elections via geographical constituencies resulted in a disproportionate number of lawyers and other professionals being elected. The PNDC’s proposal was designed to ensure that a wider variety of “corporate groups” were represented. The emphasis on the representation of such groups in the assembly—an historical precedent—ref lected Rawlings’ enduring effort to project himself as “a man of the people” and his long-standing criticism of multiparty electoral politics as tending to produce highly unrepresentative “representative assemblies,” consisting predominantly of lawyers and other “westernised elites.” Opposition objections played into his hands. Indeed, the Chairman of the Committee of Experts referred to those objecting to this arrangement as “elitist snobs” ( Jeffries and Thomas, 1993). The PNDC had a point in seeking to include various sociological groups, but its argument raised as many questions as it answered. It failed to explain why the CDRs were allocated ten seats while the GBA, Christian Council, and UTAG were allocated one seat each. It also failed to explain why the armed forces, whose population totaled 20,000, was given eight seats while the police force and Ghana National Association of Teachers, each 80,000 strong, were given two seats each. Moreover, critics found it curious that bakers and butchers, for example, were represented, whereas the Ghana Institute of Management and the Ghana Veterinary Medical Practitioners were excluded (Ayee, 1996a). The PNDC had another, more narrowly self-interested reason for bypassing openly hostile groups—the GBA, UTAG, Christian Council, etc.—in favor of more amenable ones. Had these groups prevailed, Rawlings and some of his colleagues might have been barred from standing for office. It is notable that, unlike previous constitutions, the 1992 Constitution did not disqualify candidates if either parent was non-Ghanaian. Whether a constituent assembly would have retained this provision and barred Rawlings (whose father was Scottish) from standing is debatable. Considering, however, the failed court action sought by Dr. John Bilson, leader of the Third Force Party, to prevent Rawlings from running on the grounds that the latter had not renounced his British nationality, the concern was real enough. Saaka’s (1997) reference to the 1992 Constitution as “tailor-made” for Rawlings is nonetheless exaggerated. The most remarkable feature of the constitution eventually formulated was its rejection of many of the

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proposals put forward by the Committee of Experts and favored by Rawlings—e.g., proposals for representation of the armed forces. Businesspeople, the Transition to Democracy, and the Fourth Republic How did capitalists figure in this rancorous political milieu? The transition to democracy stoked the mutual loathing between Rawlings and entrepreneurs, dating back to 1979, when Rawlings first seized power and brutally persecuted entrepreneurs. The latter had thus long been anxious to be rid of Rawlings and the problems he had caused them. Several top capitalists who were opposition politicians deployed their wealth to this end. As well, wealthy entrepreneurs were set to back the opposition, more specifically, a Danquah-Busia party. To understand why this was so, it is vital to backtrack a little in the political history of Ghana. From the end of the Second World War to the rise of Rawlings, Ghana developed what was in effect a two-party political system. Although the names of parties changed between the various periods of electoral politics, they mostly represented one or the other of two main political traditions, dating back to the era of decolonization. The first political tradition is associated with the United Gold Coast Convention (UGCC), Ghana’s first nationalist party. The UGCC, led by Dr. J. B. Danquah, was a party of the educated elite and businesspeople. It was succeeded by the National Liberation Movement (NLM), headed by Dr. K. A. Busia, in 1954. The NLM was primarily a movement of the Ashanti, combining cocoa farmers’ grievances with a significant element of Ashanti nationalism. Though the UGCC and the NLM failed to win any of the three general elections that preceded independence, they provided the basis for the Progress Party, which came to power in 1969 with Busia as prime minister. The Danquah-Busia tradition has historically been associated with advocacy of liberal democracy and liberal economic policies, but it has also tended to draw its strongest support from the educated elite, businesspeople, and the Ashanti ethnic group. The second political tradition is traceable to Dr. Kwame Nkrumah, Ghana’s first postcolonial government leader, and his Convention People’s Party (CPP). Nkrumah built a populist tradition that emphasized socialism, or perhaps more accurately state capitalism, in the interest of the “common man.” Nkrumah developed a “one-party state” and the Nkrumahist tradition was henceforth associated with a relatively uncommitted attitude toward liberal democracy. The CPP succeeded in

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the 1950s in winning electoral support from a majority of Ghanaians in most regions except the Ashanti Region; though, in the 1969 elections, its successor, the somewhat misleadingly named National Alliance of Liberals, won a majority of seats only in the Volta Region as Ghanaians elsewhere expressed their disillusionment with Nkrumah’s dictatorship. The continuing significance of Nkrumah’s legacy was indicated, however, by the fact that, in the elections of 1979, the People’s National Party led by Dr. Hilla Limann rode to power largely by skillfully exploiting its links to the Nkrumah era, which many by now recalled nostalgically. Ghanaians have historically commonly identified themselves as either Nkrumahist or Danquah-Busiaist. These two political traditions have tended to have rather different associations with, and for, businesspeople. Nkrumah promoted a form of “socialism” that centered on the establishment of state-owned industries and extensive welfare services. The main beneficiaries were the rapidly growing number of state employees. There was some room left for small-scale businesspeople, and CPP acolytes tended to monopolize these opportunities. Thus, by the time Nkrumah was overthrown in 1966, the most successful entrepreneurs of the pre-independence era had been severely weakened (Rathbone, 1973). The Danquah-Busia tradition, by contrast, has commonly been regarded as the party of the educated elite and “big” business, with an additional bias toward Ashanti interests. This alliance predates independence, when the most successful businesspeople in the then Gold Coast, seeking to expand their economic opportunities in the face of discriminatory colonial policies, began to agitate for independence. Their failure to accede to power at independence in 1957 caused a further setback to their economic aspirations. Busia’s victory in 1969 enabled them to recover lost ground. His Progress Party (PP) government enjoyed overwhelming support among leading entrepreneurs such as B. A. Mensah and S. C. Appenteng. Also, a large number of the PP government’s leaders, including Victor Owusu, the Attorney General, and J. H. Mensah, the Minister of Finance, were in business. This blurred the distinction between politicians and entrepreneurs, prompting references to the PP as the “party of businessmen.” The PP regime was ousted by Acheampong in 1972 partly because the latter objected to its liberal economic policies. When party politics was restored in Ghana in 1979, the Danquah-Busiaists regrouped as the Popular Front Party with the usual cast of characters, i.e., entrepreneurs-cum-politicians, in the leadership and again with staunch “big” business backing.

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The union between “big” business and the Danquah-Busia tradition survived the Rawlings era. Leading capitalists formed part of the nucleus of the group that formed the Danquah-Busia Memorial Club in the late 1980s, from which the New Patriotic Party (NPP) emerged in 1992. Rawlings’ main reason for disliking them originally lay in the fact that they had been able to thrive during the Acheampong era by compromising with kalabule. On the eve of democratization, however, Rawlings’ main concern was their association with the opposition and their possession of the wherewithal to mount a serious challenge to his retention of power. The historical pact between “big” business and the NPP aside, Rawlings had become a totemic hate figure within this group owing to the punitive actions that both his AFRC and PNDC regimes took against leading capitalists. This group of entrepreneurs had a clear stake, therefore, in Rawlings’ defeat. By the same token, they believed that an NPP government would be more sympathetic toward their interests. While the NPP’s official stance was very much in line with IMF and World Bank prescriptions, in private, promises were made to protect local business from foreign imports. Two NPP leadership contenders—J. A. Addison and K. Safo-Adu—as well as the party’s 1992 presidential candidate, A. A. Boahen, insisted in interviews with me that they would have taken measures to limit imports and would have instituted special programs such as cheap credit, to revive local industries. Neither the fact that there was disagreement within the ranks of the NPP over this question, nor the fact that such a position would have placed an NPP government at odds with the IFIs, weakened the resonance of such promises with entrepreneurs. Of the six candidates who vied for the NPP presidential nomination in 1992, three—K. Safo-Adu, J. A. Addison, and J. A. Kufuor—were businessmen. The main source of funding for the NPP was expected to come from donations from businesspeople. Rawlings and his allies were understandably concerned about this as the democratization process unfolded in Ghana. Thus, the National Commission on Democracy urged political parties to “eschew . . . the unacceptable features of party politics such as when political parties become corporate vehicles of investment which must be recouped” (National Commission on Democracy, 1991, p. 36). Accordingly, the PNDC passed a law that banned foreigners and private companies from making financial contributions to parties and limited individual contributions to a maximum of C200,000 ($200). The latter measure was later revised, in response to both domestic and external pressure, to allow founding members to donate as much

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as they wished and ordinary members to donate up to C1 million ( Jeffries and Thomas, 1993). Rawlings saw the restrictions as crucial to prevent parties from becoming the “vehicles of cliques of financial moguls” ( Jeffries and Thomas, 1993). Given events such as the Chiavalli scandal,4 Rawlings’ concerns were to some extent probably genuine. But the moves were also designed to hobble the NPP, which enjoyed the backing not only of most of Ghana’s wealthiest entrepreneurs, but also of the bulk of Ghana’s professionals. In fact, Rawlings said he hoped “to keep those punks out” of power “by stipulating restrictions on the financing, leadership and modus operandi of political parties in a new constitution” ( Jeffries, 1992, p. 225). While the curbs were probably breached, violators courted potential danger because the law required political parties to declare the sources of their revenues and to publish their audited accounts annually. Boahen, the NPP’s presidential candidate in 1992, told me in interviews that the potential risks deterred many probable donors from contributing. He recalled instances of secretive night donations and donations on condition of anonymity—wise precautions as some top entrepreneurs were soon to discover. The Elections Controversy The imminence of democracy raised the political stakes in Ghana. It offered the opposition the prospect of unseating the much-reviled PNDC through the ballot box. For Rawlings, victory would confer the legitimacy he still lacked, despite the respect he had gained by halting the economic decay and starting a process of economic recovery. The two main opposition groupings laid claim to the mantles of Ghana’s two political traditions, thereby hoping to revive old political networks and invoke the memories of political icons to their advantage. The Nkrumahists failed, however, to unite, instead fragmenting into four separate parties. None of these enjoyed any significant business backing. The Danquah-Busiaists, by contrast, succeeded in uniting under the banner of the NPP. As noted earlier, it was supported by most of Ghana’s professionals and entrepreneurs, and had more resources than other opposition parties. Moreover, its presidential candidate, Boahen, having emerged as a leading critic and opponent of the PNDC, had bolstered his national profile. Riding the crest of this wave, and with a large pool of able people in its ranks, the NPP regarded itself as the most qualified, obvious party to rule.

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The PNDC morphed into the National Democratic Congress (NDC), with Rawlings as presidential candidate. Unlike the opposition parties, the NDC did not associate itself explicitly with either of the two political traditions. Noting, however, that the squabbling among Nkrumahist leaders was causing the alienation of their own potential supporters, NDC leaders sensed an opportunity to win over such people to their own side. The NDC therefore exploited Nkrumah’s legacy whenever this suited its purposes. The exhumation and reburial of Nkrumah’s remains in Accra, together with the building of a mausoleum in his name, were part of an opportunistic attempt to cultivate the support of Nkrumahists. Rawlings had preceded this with a wellorchestrated visit to Nkrumah’s birthplace. Moreover, the P/NDC leadership included a number of avowed Nkrumahists such as Kojo Tsikata, Ebow Tawiah, and Kwamena Ahwoi and these frequently took the opportunity to assert that they saw the NDC as the natural “home” for Nkrumahists. There was a certain plausibility to such claims insofar as Rawlings’ energy, populist style, and avowed “concern for the common man” clearly echoed important political characteristics of Nkrumah. The major difference in their economic policies notwithstanding, Rawlings, like Nkrumah, tended to view small-scale entrepreneurs far more favorably than “big” entrepreneurs. This was partly because they viewed the former as part of the “masses,” and thus part of their political base. It also accorded with their shared populist resentment of wealthy entrepreneurs and their political allies. In line with this distinction, Rawlings tried to organize pro-NDC associations of small businesspeople. In January 1993, for example, he created a Council of Indigenous Business Associations (CIBA)—an umbrella body comprising mainly small- and medium-scale indigenous business groups. Rawlings had additional motives for courting such entrepreneurs. Businesspeople provide vital resources for mobilizing supporters and a client base that parties can tap into. In Ghana, Rathbone (1973 p. 388–389) notes “the man with money is a powerful figure . . . He is significant not just because of his probable moral inf luence, but because the socio-economic context of low employment and a family-based social system make him a patron who can command considerable personal support.” For both historical reasons and in response to the P/NDC’s fraught relations with big business, the latter was largely aligned with the NPP. CIBA was created partly to offset this. As I discuss more fully later, CIBA members provided both political and financial support to the NDC.

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Rawlings polled 58 percent of the votes in the presidential contest, compared to 30 percent of the votes for his closest rival, Boahen. The opposition parties disputed the results on the grounds of electoral fraud. Sporadic riots erupted in several major cities, most notably Kumasi, the hub of NPP support, where a dusk-to-dawn curfew was imposed. Bombs were detonated in Accra. A Commonwealth Observer Group and a delegation from the Carter Center acknowledged electoral irregularities, but concluded that the scale of this was not enough to affect the result. The NPP contested this assessment and published The Stolen Verdict, detailing alleged electoral fraud. The opposition parties boycotted the parliamentary contest, allowing the NDC to win 189 out of 200 parliamentary seats. Two minor parties, which joined the NDC to form the Progressive Alliance, won nine seats. Independents took the remaining two seats, resulting in a de facto one-party parliament. The elections controversy was hardly surprising and probably inevitable, given that PNDC rule had been acrimonious and divisive. Campaigning had been very uncivil. The NDC—and especially Rawlings—campaigned on their incorruptibility while accusing opponents as rogues seeking power to re-enact a corrupt regime. The opposition demonized Rawlings, casting him as a jumped-up “small boy,” envious of successful people, emotionally and psychologically unstable, and a bloodthirsty dictator who should never have ruled Ghana. His mixed race heritage became an issue in some quarters. “Rawlings is not a Ghanaian in terms of culture, physical outlook, as regards language, colour, hair and character” the Free Press (August 21, 1992) declared. Boahen signaled that, if he won the elections, Rawlings and some of his cohorts might be prosecuted for human rights abuses. The refusal of the opposition to accept the election results somewhat diminished the legitimacy that Rawlings derived from his victory and the respect he had expected to gain by yielding to pressure for multiparty elections. This deeply angered him. Feeling robbed, the opposition was equally angry. Thus, while officials insisted that the NPP must rescind and renounce its Stolen Verdict since it undermined their tenure (WA, 1993, p. 2111), Boahen continued to refer to himself as a “victor deprived of his victory” (Nkrumah, 1994, p. 123). Open Government Antagonism toward Business The lack of political conciliation impacted detrimentally on government-business relations. This was partly because leading capitalists

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had associated themselves with the opposition. Notable examples were A. Appiah-Menkah, who was not only the national organizer of the NPP but also Boahen’s single most important financier. Dr. K. D. Fordwor, another successful entrepreneur, the owner of both a quarry company and a mining interest, was also a staunch ally of Boahen. In his book, Swimming Upstream (1998), he alleges that his companies were sabotaged by the PNDC. Fordwor became the Ashanti Regional Chairman of the NPP. Other business supporters were Kwadwo Gyamfi, owner of a pharmaceutical company; B. A. Mensah; and S. C. Appenteng. Donations by these figures to the NPP made it the most viable opposition force. A further reason was the demonstrable presidential ambitions of several entrepreneurs. This, together with their efforts to cast Rawlings as a failure, touched a raw nerve and heightened his anger toward business. Though Kwabena Darko, the presidential candidate of the National Independence Party, was a marginal candidate, his major campaign theme, which contrasted his own business “success” with Rawlings’ lack of education or business experience, may have been the most hurtful. Rawlings was reputed to have failed his military promotion examinations several times, and rumors persisted that his June 4, 1979, coup was partly to avert dismissal from the military. He was understandably angry and for his part, pejoratively called Darko “akoko [chicken] Darko.” Other entrepreneurs, most notably B. A. Mensah, also launched personal attacks against Rawlings (Ofori, 1993). For rich entrepreneurs hoping through their political wing, the NPP, to see off Rawlings and thus pave the way for their economic ascent, the elections proved anticlimactic. Rawlings’ victory left them badly exposed to the full weight of government disfavor, and swiftly too. On January 6, 1993, a day before the Fourth Republic was instituted, Rawlings signed the “Confiscated Assets (Removal of Doubt) Law” to affirm the seizure of hundreds of individuals’ assets retroactive to 1982 and twenty-three new decrees confiscating the assets of several entrepreneurs retroactive to 1982 (Ninsin, 1996, p. 29). This was significant, as the new constitution abolished the quasi-judicial bodies—the National Investigation and Citizens’ Vetting Committees and nominally retained the Public Tribunals—which had underpinned PNDC persecution of capitalists. The new government quickly attempted to pass a bill to establish a Serious Fraud Office (SFO) with broad powers to monitor, investigate, and prosecute an unspecified number of frauds and economic crimes. As originally conceived, the executive director of the SFO was to be

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empowered to “freeze assets and bank accounts of a person being or about to be investigated” (WA, September 6, 1993, p. 1590) and apply to the high court or regional tribunal for confirmation. The unions, the private business sector, the private media, and the opposition were all quick to note the striking parallels between the proposed SFO and the quasi-judicial bodies. The bill was decried as a cynical attempt to resurrect these bodies and to deploy them against opponents, especially entrepreneurs. Businesspeople believed that they were the prime target of the bill, but they also argued that it would have broader, more serious implications for the economy as a whole. A leading entrepreneur described the bill as “premature . . . too draconian and . . . very dangerous . . . for our fragile economy” (WA, September 6, 1993, p. 1590). The SFO bill caused such a storm that the government made major changes to it, eventually passing a more moderate version of the original. For example, the SFO was required to first seek court authorization before freezing the assets and bank accounts of a person or organization being or about to be investigated. Moreover, the SFO’s power was limited to public sector financial and economic crimes except for matters involving private persons or companies who had connections with the public sector or public officials (SFO, 1999). Dr. J. A. Addison—Costly Presidential Ambition Beside these legal moves, opposition-aligned entrepreneurs came under closer scrutiny and experienced harassment as the government began to make a clear-cut distinction between friends and enemies within the business community. I present three illustrative examples. J. A. Addison was one of the first capitalists to feel the effects of the poisoned postelection political atmosphere. One of the few entrepreneurs to emerge from the testing PNDC era unscathed, by Addison’s own account, he had enjoyed good relations with the government. That ended abruptly when this self-proclaimed “old guard Danquah-Busiaist” rebuffed an invitation to join the NDC and promptly fell into the enemy camp (interview, Addison). He probably compounded matters by seeking the NPP’s presidential candidacy. This had immediate consequences for his business, Multi-Wall Paper Sacks (MWPS). First, he was one of several entrepreneurs whose products Rawlings urged Ghanaians to boycott (see later discussion). Second, GHACEM, the cement manufacturer with majority shares controlled by a Norwegian company, in which Addison owned shares, terminated its contract to buy cement sacks from him.5 The contract was then

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awarded to a Nigerian. Third, Ghana’s Customs Agency abruptly levied an additional 10 percent duty on his raw material imports. Lastly, when the government sold its shares in GHACEM, it refused to honor a 1967 agreement under which Addison had the right of first refusal (interview, Addison). These setbacks were undoubtedly linked to Addison’s political affiliation. Ironically, although he had been allowed to pursue his business interests unhindered during the PNDC dictatorship, he faced political interference under constitutional rule. Kwabena Darko—Costly Presidential Ambition Kwabena Darko, owner of Darko Farms, the largest poultry farm in Ghana, like Addison, emerged from PNDC rule unharmed. Darko, as noted earlier, contested the presidency in 1992 on behalf of the National Independence Party. His rare foray into politics surprised many because he had, until then, studiously shunned politics. This change of tack marked him as an enemy as far as the NDC was concerned. Apart from being Rawlings’ favorite target of ridicule during the run-up to the 1992 elections, there were also allegedly malicious efforts to cripple Darko economically. During my interview with Darko in July 2000 he alleged that, since 1992, the Internal Revenue Service (IRS) had virtually operated an office at his company. He further alleged that the IRS office in Kumasi, which should ordinarily audit his accounts, had been relieved of that task by officers from Accra, whom he believed were more directly under government inf luence. Although Darko’s experience bore a strong resemblance to that of other opposition-supporting entrepreneurs, it was also different in that his political stance does not appear seriously to have harmed his business. A key factor here was that his business, unlike many others, hardly relied on the state or links to state-owned enterprises for access to inputs or contracts. As such, the government’s ability to hurt him was quite limited, though political insiders recount that officials did try to block his joint venture agreement with Tyson Foods. The timely intervention, however, of the USAID Mission in Ghana saved the deal (Business Chronicle, May 21, 1999).6 Osei Safo: The Risks of Double Dealing The experience of Osei Safo, owner of the agro-exporting business, Combined Farms, further illustrates how the advent of multipartyism

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intensified government pressure on entrepreneurs. Safo, the first Ghanaian to export pineapples in large commercial quantities, leased a piece of land at the Accra airport for a term of forty years and built a cargo-handling facility on it in the late 1980s with a $5 million World Bank loan. He set up a cargo firm called Cargo D’Or, which provided him with access to steady and relatively cheap cargo space. He also sold unused space to other exporters. Official records on nontraditional exports show that Safo has been a leading pineapple exporter for years. His success had a demonstration effect, triggering a boom in pineapple production. In recognition of his contribution, he won the Best Farmer award in 1989 and was cited in dispatches. In mid-1993, however, the Ghana Civil Aviation Authority inexplicably ordered Safo to vacate the airport. Safo sought legal redress and, while awaiting settlement, obtained a court injunction against the order. President Rawlings, in violation of this order, personally led a group of soldiers to close down the facility, however, and handed over control to a Syrian (Ghanaian Chronicle, May 29, 2001). This confounded many Ghanaians. Safo had been on good personal terms with the PNDC government: witness his being allowed to handle cargo at the airport. The opposition and the private media stridently criticized Rawlings, accusing him of favoring foreigners over Ghanaians. The Private Enterprises Foundation (PEF) intervened, pleading to no avail for the cargo-handling facility to be returned to Safo (interview, PEF officer). I interviewed Safo at his farm on October 31, 2000. When asked to explain why he lost the cargo business, Safo initially downplayed the role of politics, simply saying that “Civil Aviation knew I was making good money, so they decided to take it away from me.” When asked about the PEF’s efforts, he was dismissive, saying that it had no inf luence and that Rawlings, in any case, was not going to change his mind. Eventually, he said that his troubles could be attributed to “pettiness, envy and jealousy on the part of the authorities,” adding that attempts to sabotage him had failed.7 Thus, while alluding to official sabotage, he neither provided specific allegations nor mentioned his political activities. A confidential interviewee, a former employee of Safo, clearly attributed Safo’s woes, however, to his partisan activities. He revealed that Safo and Rawlings had at one time been friends and that he personally witnessed three visits to Combined Farms by Rawlings. According to this interviewee, party politics presented Safo with a dilemma: though he remained friends with Rawlings and donated to the NDC, he also

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secretly donated to the NPP, which promised to appoint him Minister of Agriculture if it won the elections. Safo’s woes followed discovery of this “treachery.” This version of events was corroborated by interviews with several NPP insiders. Thus, Safo appears to have been another victim of the NDC’s attempt to persuade businesspeople that it was too dangerous to support the opposition. Safo won his legal action against the government, but the latter ignored the court decision to restore the business to him (Ghana Review International, May 1995). Rawlings’ Rationale In addition to harassment and extralegal pressure against particular entrepreneurs, the immediate postelection period witnessed a surge in the use of intimidatory rhetoric by Rawlings. The most infamous case occurred on June 4, 1993, when, in a speech marking his 1979 coup, Rawlings denounced several of the most important entrepreneurs—A. Appiah-Menkah, K. Darko, S. C. Appenteng, J. Frimpong-Ansah, and J. A. Addison. He sought to de-legitimize their businesses and urged a boycott of their goods. This provoked widespread outrage (Ofori, 1993, p. 70). Many saw it as overtly political and divisive as well as inconsistent with Rawlings’ proclamation of the private sector as the engine of growth in his sessional address to parliament in April 1993, during which he also said: “If in the past any impression was given that my government was against the private sector, I would like to take this opportunity to dispel that notion as totally wrong and misconceived.” In reply to the torrent of criticisms of his June 4 speech, Rawlings gave an interview, which the Daily Graphic ( June 19, 1993) described as a “reaction to attempts by a section of the tabloids to give the impression that President Rawlings does not like Ghanaians who have been successful in private business.” The ostensible purpose of this interview, then, was to clarify his position. In reality, he sought to de-legitimize opposition business interests even further and, in the event, simply succeeded in heightening fears. The interview merits close examination because, in it, Rawlings covered a broad range of relevant issues in his fraught relationship with the business community. Explaining why he had made the original speech, Rawlings argued that while the “have-nots” had won the “political field” under his rule, the “economic field” was still controlled by their enemies. The next phase of the struggle, he said, was therefore in the

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economic arena. Hence, it was detrimental to the interests of the poor to patronize the goods of political opponents: “Your money is similar to your vote. If you buy soap from the Appiah-Menkahs, salt from the Appentengs, cloth from the Frimpong-Ansahs . . . you must know that you are enriching them to finance their own party” (Daily Graphic, June 19, 1993). This telling inadvertent slip of truth implied that partisan politics had motivated some of his heavy-handed actions against certain capitalists. Rawlings also acknowledged the common perception that he was “anti-rich” and sought to dispel this “myth.” He explained that he fully supported honest business; the “big men” he had mentioned were guilty of fraudulently obtaining loans to fund the NPP. He disingenuously claimed that his party boasted “successful and industrious men and women of integrity.” Further, when asked whether his revelations (which included information regarding bank debtors) did not breach the confidentiality of banks, he insisted that the public had a right to know debtors and that, even in Switzerland, bank confidentiality was under review. He therefore considered it legitimate to reveal the identities of debtors. This could hardly have reassured a skeptical public, especially as his PNDC government had forced banks to provide details of wealthy citizens’ bank accounts. Later in the same interview, Rawlings accused his opponents of selling “state enterprises cheaply to themselves and [using] state funds to purchase them,” implying criminal acts. More explicitly, he “told his . . . audience to be wary of rich businessmen who had amassed wealth . . . some of them through stealing, and lamented that the businesses that would have belonged to those in the audience in Nkrumah’s time are now in private hands, which use the money for . . . financing political parties” (Ghana Drum, July 1993). By implying that these “thieves” had robbed Ghanaians of their national heritage Rawlings incited hatred toward capitalists and also revived the controversy that had surrounded past privatizations. This episode marked a new low in Rawlings’ relations with business. Indeed, as Jonah astutely observes, state-civil society relations saw their most remarkable failure in government-business relations. And, despite having pursued the most liberal economic policies, the regime’s continuity was unappealing to the business community. Its “history,” Jonah notes, “is punctuated with punitive confiscation of businesses, slander and blackmail of businessmen. Even under the Fourth Republic verbal attacks on Ghanaian businessmen” ( Jonah, 1994, p. 18) persisted. The denunciation of capitalists for distinctly partisan aims was telling,

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as even during the PNDC era such attacks had been veiled in anticorruption terms. The Impact of Democratic Institutions Although similar in composition and attitudes to the old PNDC, the NDC regime could not so easily get away with harassing businesspeople. The transition from PNDC to NDC did not, as I have shown, immediately produce a positive change in government-business relations, but the establishment of democratic institutions did over time affect these relations, restricting arbitrary actions on the part of government. Within the first year of the Fourth Republic, the Supreme Court had proved that it could defy the government.8 This prompted an angry Rawlings to accuse the Court of staging a “coup.” Though capitalists were to remain distrustful of judicial independence and hence reluctant to pursue legal action in matters involving the regime, the NDC government became quite restrained. Moreover, despite its lack of representation in parliament, the opposition gained some inf luence in national affairs. When the PNDC attempted to pass the 1993 budget without due parliamentary scrutiny, the opposition blocked the move. The NPP created shadow ministries and developed the party’s position on various issues, often forcing the authorities into defensive positions or retreats, including the constitutional challenges noted previously. Further, the NPP was allowed to present a critique of the 1993 budget. It is impossible to gauge exactly what difference, if any, this made to the NDC government’s economic policy. Nevertheless, the government’s response was a far cry from the PNDC era when criticisms were often construed as subversive and punished quite brutally. By far the most decisive catalyst in persuading the NDC to rethink its attitude toward business was the new private media. Having banned critical newspapers and used the state-owned media as propaganda tools, the PNDC had deprived business and other civil groups of a medium through which to publicize their views or criticisms of government. Constitutionalism, by contrast, gave birth to a rambunctious private media, which took the buzzwords of the 1990s—good governance, accountability, and transparency—seriously, popularizing them, uncovering alleged scandals, and calling for investigations and probes. Their reportage showed that they saw nothing as off limits. The NDC’s initial impulse was to dismiss the critical private press scornfully as

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“tabloids,” but it became increasingly clear that they had become inf luential, and the authorities could not solely dictate what were to be issues of public interest. Thanks to the private media, business now had a voice and could, in addition to embarrassing the regime, also bring pressure to bear on it. This was probably most dramatically evident after the infamous June 4 speech, when the private press cast the NDC and Rawlings in particular in a very negative light. Rawlings was criticized for what was seen as the latest round of antibusiness vitriol. The termination of Addison’s contract with GHACEM and its subsequent award to a Nigerian, and the take over of Safo’s cargo handling business by a Syrian, provoked denunciations of Rawlings as hostile to indigenous business. The late Paul Ansah, a lecturer at the University of Ghana, lampooned Rawlings over his attitude toward business and his verbal exchanges with Kwabena Darko, the poultry farmer, in his columns in the Ghanaian Chronicle. The wave of criticism stunned Rawlings, who appears to have assumed that he was going to rule in much the same way as he had done as PNDC Chairman. Hence: “If I am expected to sit here, shut my mouth and keep a fine face, fine dress and clean hands and Nana [his wife] also sitting here and simply receiving f lowers, then I am afraid the President will not be as effective as the Chairman” (Daily Graphic, June 19, 1993). Constitutionalism, he was reluctant to realize, had created a liberal environment in which the government could ill afford to continue operating in the PNDC’s authoritarian and commanding manner. A chastened Rawlings took damage limitation measures. The government appointed A. Appiah-Menkah, one of the capitalists whom Rawlings had accused of fraud and a known opponent, to head a new private sector group (Ofori, 1993, p. 71). Momentous as this gesture was, however, its political significance appears to have been short-lived. In my interview with Appiah-Menkah, he questioned the wisdom in accepting his selection because it gave the NDC a public relations victory while it treated “businessmen like criminals.” The contact group soon unraveled amid rancor and allegations that the regime was not genuinely committed to improving its relations with business. This view gained additional currency from a further incident. In July 1993, the Confederation of British Industry (CBI), together with Ghanaian officials, held a much-publicized conference in London. Ambitiously titled “Ghana: Africa’s Business Leader,” it sought to trumpet Ghana’s achievements and to drum up foreign investment. Several

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state dignitaries and Ministers attended the conference but, crucially, Rawlings did not. Paul Pepera, director of Scanstyle, Ghana’s top furniture exporter, and himself a regime ally, spoke for many in noting that Rawlings should have attended the conference to “show his commitment to the private sector . . . It was difficult getting our message across when people kept asking about his recent [ June 4] statements” (Ofori, 1993, 71). An evidently disappointed CBI noted that President Museveni had attended a similar conference on Uganda the previous month (Akakpo, 1993, p. 1261). Owing to Rawlings’ failure to attend the conference, questions over his commitment to the private sector persisted. Business and the Value Added Tax Fiasco As an illustration of how Rawlings had difficulty in adjusting from the role of a dictatorial head of state to that of an elected president, and of how this affected relations with business, it is illuminating to consider the failed attempt to introduce a VAT in 1995. In March 1995, the government, with the firm backing of the World Bank, replaced a 15.5 percent sales tax with a 17.5 percent VAT in the interest of both greater efficiency and widening the scope of indirect taxation to include the retail and service sectors. VAT, one of the most important economic measures since the reform effort began in 1983, was expected to provide more stable tax revenue to underpin Ghana’s economic recovery. The arguments for VAT were therefore very strong. Despite (or perhaps because of ) its importance, the leadership paid little heed to public opinion and opposing views. Businesspeople and their associations opposed the 17.5 percent VAT rate on the grounds that it was too high and that the effects would ruin them. They lobbied for the same VAT rate of 5 percent as operated in neighboring Nigeria, and gradual increases upon successful implementation. They argued that, among other benefits, this would discourage evasion. The government dismissed such concerns as simply the grievances of embittered groups—a clear swipe at the opposition. The parliamentary debate on VAT proved rather perfunctory, with few dissensions. The regime seemed to think that the quicker the pace at which VAT was introduced, the easier it would be to counter any resistance to it. It rushed VAT through parliament in less than one day (Africa Confidential [AC], May 26, 1995). A major drawback of such haste was that the VAT secretariat had little time to educate the

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public. In consequence, VAT was applied to goods and services, such as transportation and foodstuffs, which should have been exempt. Some retailers, moreover, charged VAT several times on the same items or services (ISSER, 1996, p. 17). VAT fueled inf lation, creating hardships and genuine popular grievances, not least because it was introduced in March, the period of most acute food scarcity in Ghana. This was especially ill-timed because food harvests had been poor in 1994 (Private Enterprise Foundation, 1995). A group called the Alliance for Change channeled the discontent into public protests. Key members included Nana Akuffo-Addo, a lawyer, businessman and leading light of the NPP; Dr. Charles Wereko-Brobbey, an economist and industrialist; and Hawa Yakubu, an independent parliamentarian. They organized protests, dubbed Kume Preko (you may as well kill me) in Accra, where the pro-NDC Associations of the Committees for the Defence of the Revolution, which organized counterdemonstrations, clashed with the Kume Preko protestors, causing four deaths as well as many injuries (AC, May 26, 1995). The tax was rescinded following the protests, the largest and most widespread that Rawlings ever faced. The government took an extremely serious view of the protests. Alarmed that a coup attempt might be imminent, Rawlings addressed soldiers the next day (Afrani, 1995). Plans to stage further protests in all regional capitals also heightened fear of civil unrest. But the main reason was that abandoning VAT, the cornerstone of the government’s economic policy, was an embarrassing climb-down for the regime; it took four years to successfully reintroduce VAT. The government blamed the sinister hand of “saboteurs” motivated by “a hidden [political] agenda” for the protests (Parliamentary Debates, May 16, 1995). The fact that there was an element of political opportunism in the protests seems obvious.9 Yet the protests were not merely the product of “political” opportunism. The participation of thousands of ordinary people in the protests was an indication that VAT was highly unpopular. In fact, echoing public concerns, one MP had presciently labeled VAT a “Very Augmented Trouble” (Osei, 2000, p. 264). Yet the regime had attempted simply to steamroller all dissent, thereby making it easier for opposition politicians to mobilize the protesters. For our purposes, it is essential to note the role played by businesspeople in the protests. Businesspeople viewed themselves as having a vital stake in the VAT proposals. Their associations initially took the view that VAT would weaken the purchasing power of Ghanaians, and that it would be calamitous for business and ultimately the

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economy. They voiced such concerns to no avail. Then, they showed some f lexibility, calling for a 5 percent VAT rate. At this point, differences in approach as to how best to proceed widened. For example, the Association of Ghana Industries (AGI) and the Ghana National Chamber of Commerce (GNCC) favored petitioning government. The Ghana Union of Traders Associations (GUTA), by contrast, abandoned petitions, adopting a very forceful style and eclipsing the GNCC and AGI. GUTA reverted to its original position of opposing VAT. Its leaders were angry that, though they were expected to collect the tax, they were denied any say in the formulation of the policy. They threatened that members would not collect the tax. The government ignored this, and GUTA members closed their shops in a five-day strike action, threatening to withdraw their monies from banks unless VAT was rescinded. The Bureau of National Investigations arrested two GUTA leaders for inciting anti-VAT sentiments (interview, GUTA officer). GUTA members accordingly participated in the VAT protests. In the existing scholarly literature, the VAT fiasco has been viewed mainly through the prism of party politics. The regime’s characterization of the protests as politically motivated is one of the reasons for this. Leading organizers of the VAT protests played into this portrayal by couching their victory over VAT’s cancellation in political terms. It seems understandable that government leaders saw the VAT protest as the deed of sinister political forces; but, in truth, it can just as well be seen as business reaction to a tax it regarded as inimical to its interests. The problem, as I have attempted to show, is that it is often difficult, if not impossible, to separate the roles of entrepreneur and politician because, especially in the case of the NPP, the two overlapped very considerably. There is no telling whether figures like Akuffo-Addo and Wereko-Brobbey acted primarily as politicians or businessmen or a mixture of both. There were other participants, however, who seem to have acted entirely in furtherance of their business interests. The arrest of GUTA leaders indicated government disquiet about the impact of their actions and suggests that their role in opposing the VAT was more significant than is often acknowledged. It is doubtful that they were being manipulated by the opposition. In fact, GUTA leaders were offended by such suggestions: We live in a country where if you complain of hunger they say that somebody is telling you to say that you are hungry. We cannot be

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manipulated by the government. It is not true that we are politicising our association. Politicians cannot tell us to go and protest. We feel the effects of the economic crunch (interview, GUTA official). GUTA leaders were insistent in interviews that “trade and commercerelated policies should always get GUTA on board. If we had been on board, the VAT protests might have been avoided.” This, of course, sounds rather pompous. It does indicate, however, that business organizations, like other civil society organizations, expected to be consulted by government in the new constitutional order; and that it was the NDC’s reluctance to recognize this which largely caused the protests. Government-Business Consultation in the Democratic Order The manner in which the VAT was introduced in 1995 raises the larger question of the state of government-business consultation. Chapter four revealed that the PNDC consulted business grudgingly and only in the form of new consultative bodies. Did democratization induce a shift in government attitude? Although one might point to a more serious government effort to consult business, this still took the form of the establishment of new bodies, rather than consultation with existing business associations (BAs). In his January and April 1993 Sessional Address to Parliament, Rawlings proclaimed the private sector the engine of growth and promised to be more supportive than in the past. He also made several pro-private sector speeches to international audiences and pledged to speed up privatization. Various subsequent moves were designed to reassure business and to signal acceptance that future growth would depend on increased private investment. The divestment of 35 percent of the state’s shares in Ashanti Goldfields Company, the “family silver,” epitomized this stance. During 1994–1996, the government sold state shares in, among others, the Accra Brewery, Standard Chartered Bank, and Ghana Telecom. It placed full-page advertisements of business opportunities in Ghana in major international newspapers such as the Financial Times and International Herald Tribune. Kwesi Botchwey, Ghana’s chief architect of the economic reforms, also stressed the need to enable the private sector to spearhead economic growth. Addressing the Confederation of British Industries at

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an economic conference on Ghana, he noted that accelerated growth in Ghana would require a further deepening of reforms in several areas “most importantly . . . [the] private sector . . . From now through the year 2000, the overriding national preoccupation will be to energise the private sector.” He stressed to his audience where help was most crucial: “A lot is happening already in [the] area of aid and export-credit-related business. Not enough is happening in the area of real investment activity. But that is precisely what we need to sustain accelerated growth” (WA, July 12, 1993, p. 1204). The Private Sector Roundtable (PSR) It was against this background that the PSR, the third and final consultative body, was created in June 1993 at the instance of the Bank rather than at the initiative of business. The PSR was to create a “more broadly representative organization for the aggregation and expression of private sector opinion about lingering impediments to Ghana’s economic growth” (Ayee et al., 1999, p. 32). It appeared to be better placed than previous consultative groups to engender productive discussions for three main reasons. First, P. V. Obeng, who headed the PSR, was quite sympathetic to business and was expected to enjoy credibility with business leaders. Second, Obeng had Rawlings’ ear and was known for his technocratic abilities. Third, unlike its predecessor, the Private Sector Advisory Group, whose members were a small homogeneous group (totaling less than a dozen) the PSR was more inclusive, drawing its more than fifty members from a broad range of accomplished individuals (Ayee et al., 1999, p. 32). Members of the PSR were divided into six subgroups: Privatization and Divestiture; Industrial Infrastructure; Credit, Banking and Finance; Research and Development; Commercial; and Judicial. Each focused on an issue area considered to be vital for business development and was required to research and recommend solutions for the particular area assigned to it. The PSR issued a report in November 1993 with recommendations that it hoped would facilitate dialogue and economic growth. The report called for the government to reduce borrowing and “crowding out” the private sector. It also advocated widening the scope and quickening the pace of privatization, arguing that this was critical to signaling official commitment to reforms. Significantly, it called for institutionalizing government-business consultation, which it said was vital for building mutual trust. The government endorsed the recommendations, but failed to act on them (interview, J. A. Addison).

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Within less than two years of its launch, during which it met regularly, the PSR, like previous consultative bodies, collapsed. According to a member of the PSR, government failure to act on the recommendations of the subgroups created disillusion and a sense that further consultations and participation would be futile (interview, J. A. Addison). But the decisive factor in the PSR’s collapse was the failure to institutionalize it. The consultative process was highly personalized, and depended more especially on Obeng, who was investigated for alleged corruption and abuse of office in 1995. Though he was exonerated, his reputation was ruined. His stature and inf luence waned and, crucially, Rawlings lost confidence in him. Thus, the crucial link between the PSR and the regime was severed. The Council of Indigenous Business Associations (CIBA) Overlapping with the PSR was CIBA, which was created in January 1993. CIBA was an umbrella body made up mainly of small- and medium-scale BAs—caterers, drinking bar operators, traditional healers, etc. CIBA appears to have been created to extend the NDC’s reach into the business community for purposes of raising its share of business funding and political support. It also enabled Rawlings to circumvent the old capitalists and their BAs while boosting his preferred image as the defender of the common people. CIBA, in sharp contrast to other BAs, enjoyed a favored status, receiving a grant of 150 million cedis (C) (about $185,000) from the government. The government shelved a plan to fund a bank for CIBA members only after public outcry fueled by opposition and media accusations that it was attempting to circumvent and weaken BAs while using public money for partisan purposes. Still, CIBA members received valuable resources. For example, several of its constituent associations were granted the right to collect taxes from their members on behalf of the Internal Revenue Service and the municipal assemblies, for which they received a commission. Further, constituent association members were offered plots of land to build workshops and erect kiosks. CIBA served useful, if controversial, political purposes. The provision of credit, subsidized equipment, lucrative government contracts and other benefits attracted many small entrepreneurs to the NDC. The tax farming provided “jobs for the boys” and opened avenues to rents for associated CIBA groups and their leaders and employees. In return, beneficiaries backed the NDC in the 1996 elections by way of votes and donations. Sandbrook and Oelbaum (1997) and Oquaye

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(2000) have noted that large quantities of imported goods meant for CIBA members were in fact used as NDC vote-buying gifts during the 1996 elections. Serious Fraud Office (1998, p. 13) investigations into CIBA’s nonpayment of a C2 billion Bank of Ghana loan facility confirmed this by euphemistically blaming CIBA’s “poor administration” and “inefficient personnel.” Amid debts of several billion cedis and political storm, CIBA disappeared soon after the 1996 elections. The Private Enterprises Foundation (PEF) The collapse of the PSR left the crucial issue of regular consultations unresolved. In 1995, the PEF was formed at the initiative of business leaders with technical and financial support from donors and a oneoff grant from the government. Because the grant was given to PEF days before Rawlings visited the United States, a PEF officer told me in an interview that Rawlings was driven by a desire to score public relations points. Even if this was true, it was a highly symbolic gesture. PEF originally consisted of five private sector associations, but later expanded to include most private sector associations to be found in Ghana.10 Its mandate was to represent business with one voice and to lobby officials for favorable policies. While many interviewees believed that the government inf luenced the selection of members of the Governing Council of the PEF, they failed to produce evidence to substantiate their claims, except to claim that the PEF’s director general was a “Rawlings man.” It is interesting, however, that of the thirteen Governing Council members none could be identified as belonging to the category of businesspeople, whom Rawlings was known to resent. PEF was granted bimonthly meetings with Vice President John Mills, who bore no baggage of long association with the P/NDC and was respected by business. As head of the government’s economic team, he was also well placed to inf luence policy. PEF had an experienced, full-time secretariat. Relatively wellresourced, PEF quickly gained prominence. It organized well-publicized seminars and conferences that brought business leaders, ministers of state, legislators, leaders of multinational firms in Ghana, development agencies such as the USAID, and eminent Ghanaians together in open discussions. A prime example was the Forum for Policy Dialogue held at Akosombo in March 1997 (Private Enterprise Foundation, 1997a). The PEF also held workshops and training sessions to educate business on issues such as increasing productivity, planning business trips, and promoting peaceful management-labor relations. Further, it

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issued papers on a broad range of topical national issues, and since its first year of existence, has reviewed national budgets, assessing how they affect the private sector and development more generally. PEF’s high profile peaked in June 1997 when, in conjunction with the USAID, a policy meeting was organized in North Carolina. Several top officials, including Mills, together with representatives from the business community, the opposition, the unions, and the universities attended the meeting. The postconference report, using as its framework the goals set out in the government’s much-vaunted Ghana— Vision 2020 (aimed at making Ghana a middle-income country by the year 2020) criticized officials on several grounds. It argued that the goals were unrealizable owing to “impediments” caused by policy and attitudinal deficiencies. More specifically, it blamed lack of communication between officials and business; the crowding out of the private sector; growing fiscal deficits due to high government expenditure; high inf lation and interest rates; dysfunctional financial markets; an inefficient and costly judicial system; an inefficient and unproductive, hence costly labor market; and failure to formalize the large informal sector. It concluded that these impediments hampered Ghana’s competitiveness and potential to “reach the next level” and recommended several “difficult but necessary choices” (Private Enterprise Foundation, 1997c). Buoyed by the success of this meeting, PEF announced plans to convene a “national economic summit,” conceived at the North Carolina conference, to discuss the need for greater budgetary discipline and find solutions to government’s increasingly large fiscal deficits. For an NDC regime trying to overcome its distrust of business, however, PEF’s plans were decidedly unwelcome. In particular, PEF was seen to have taken a political stance and engaged in issues beyond its mandate. Its often critical commentaries had irked officials, but this time it appeared to have crossed the threshold of acceptable conduct, not least because of the immediate political ramifications it spawned. A muted debate about the poor performance of the governor of the Bank of Ghana (BOG), Dr. G. K. Agama, burst into the open following these criticisms, with two former BOG governors, breaching protocol to criticize Agama for lax monetary policy, central bank lending to the government and failure to control financial scandals at the BOG (Business Chronicle, April 22, 1997). Newspapers took their trademark anti-NDC swipes. When media criticism and World Bank pressure forced Rawlings to sack Agama, a Free Press ( July 10, 1997) editorial captured the political significance of this in the words “The Liberation of BOG!”

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Government concern to rein in the PEF was underlined by the fact that the President summoned its director and personally informed him that the state agency, the National Development Planning Commission, not the PEF, was to convene the planned meeting. Besides, he downgraded the “summit” to a “forum” (Ayee et al., 1999, p. 36). This action, which effectively ended the regime’s cautious endorsement of PEF, was deemed vital to end what officials saw as an upsurge of opposition inf luence over the PEF, and to prevent it from setting the agenda for government. Bimonthly meetings with Vice President Mills continued, but “hawks in the regime reasserted themselves and scuttled progress” (interview, PEF officer). Once stripped of its veneer of inf luence, PEF vitiated further, as constituent associations increasingly distanced themselves from it. Disagreement over style and the parameters of lobbying caused incoherence and undermined PEF’s effectiveness. The PEF secretariat was at pains to point out that issues that united constituents outweighed those that divided them, but interviews showed that some groups (details discussed later) did not accept that PEF could represent them effectively. Naturally, PEF had more success in organizing seminars, workshops, and conferences than in its advocacy role. Some entrepreneurs thought that PEF had failed. They often cited its alleged inability to persuade Rawlings to personally meet business leaders, thinking that it “would have made a difference.” Although this sentiment was recurrent in interviews, it arguably underestimates Rawlings’ aversion to assisting business. He reputedly rebuffed World Bank pressure to meet personally with business leaders by arguing that “they are the people we made our revolution against.” In fairness, most realized that figures like Kwesi Botchwey, P. V. Obeng, and Vice President Mills were “sympathetic” to business. But they also knew that it was the “hawks” led by Rawlings that held sway. Indeed, he was widely regarded as the problem for business. In my interviews, one AGI officer echoed this view by describing Rawlings’ expected exit at the end of 2000 as a “win-win situation for business. Heads we win, tails we win regardless of whether Mills or Kufuor wins the elections.” PEF’s decline underscored Rawlings’ still decisive role in matters of government-business relations. Older Business Associations in the Democratic Era It is pertinent at this point to consider how older BAs performed during the democratic era. As argued in chapter four, both the AGI and the

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GNCC were consistently rebuffed by the PNDC. Did democratization improve their political fortunes and their ability to effectively lobby the government? The evidence shows that they continued to be marginalized such that, by 2000 membership had shrunk and they were struggling to reinvent themselves. This was the reverse of what was expected under liberal reforms and requires explanation. The atrophy of the GNCC and the AGI stemmed from problems or weaknesses within the BAs and the external environment in which they operated and over which they had no control. Collective action theories stress that leadership qualities, incentives, and resources, financial and otherwise, are vital prerequisites for effective pursuit of group interests (Truman, 1962; Olson, 1965). The GNCC and AGI lacked several of these key ingredients. To compound matters, the NDC regime was unwilling to listen to them or to channel selective benefits through them. As the record of BAs in Ghana shows, only to the extent that government was prepared either to listen to them or to channel selective benefits through them did they have very much to offer potential members. The crucial issue of incentives for rank and file is relevant here. Though these BAs provided various services to their members, their most valued service had been assisting them to secure import licenses and tightly controlled foreign exchange. Under market reforms, however, liberalized trade and foreign exchange negated the need for these previously vital services, and thus undermined one of their principal functions. Consequently, membership in both BAs tumbled. While the AGI claimed membership of 1,500 in 1992 (Hart, 1996), this number was down to 500 by 1999 (AGI News, August 1999). Decline in payment of subscriptions was even more dramatic. For example, of the 2,481 members listed by the GNCC as of 2000, only 500, or about 20 percent, had paid their dues or were in arrears of less than six months (interview, GNCC officer). When invited to explain the decline in paid membership, their secretariats stressed: (1) collapse of businesses due to the cedi’s instability; (2) strong competition from imports in the case of AGI; (3) slow-down in business; and (4) “some of our members would like us to do more for them.” It became clear during interviews that some of the most successful entrepreneurs failed to pay their subscriptions. This suggests that failure to pay subscriptions was not a simple question of affordability. In my interviews with members of these organizations, not a single entrepreneur said that subscription was unaffordable.11 Continued membership seemed quite pointless owing to a decline in perceived benefits.

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Depletion in membership and subscriptions at a time of rapid change hurt these BAs. Market reforms presented new challenges that required better resources. However, with membership fees, which formed the lifeblood of these BAs, greatly reduced, their efficient functioning was severely impaired. Donors did provide financial assistance, but it was “irregular” and “insufficient” (interviews with officers; AGI News, February 2000). BAs could not afford enough in-house experts to collect information, conduct research and analysis, and develop effective lobbying strategies. These were vital resource and strategic deficits at a time when government officials increasingly acquired analytic skills via World Bank tutoring and tended to view policy positions taken by business with contempt. BAs could not argue “economics with government ministers or bank governors” (Kraus, 2002, p. 405). This was perhaps most glaring in the government’s cavalier reaction to calls for certain forms of assistance to indigenous business. On this vital issue, there were actually, notwithstanding the IFIs’ neoliberal prescriptions, strong theoretic arguments, especially if manufactured exports were to be encouraged. But neither of these organizations was very well equipped to advance these arguments beyond often simplistic references to the fact that such assistance underpinned economic success in East Asia. The AGI and the GNCC tried to widen their services to members in the 1990s. They organized trade fairs, management training, seminars and workshops, offered facsimile and telex services, linked members with foreign business partners, and provided advice (GNCC, 1998; interview, AGI officer). But this obviously did not address the critical question of effectively advancing the interests of their members. In this regard the BAs achieved little. When invited to comment on their achievements, a senior AGI officer could cite only two cases. The first was the AGI’s successful lobby of the Accra Metropolitan Assembly (AMA) not to levy a planned 7.1 percent tax for a Business Operating Permit in 1997. This would have cost business owners with high turnovers significant sums. In the event, the AMA charged industrial and commercial concerns C120,000 and C50,000, respectively. He also noted that in 1994, AGI lobbying led the government to drop plans to narrow duty charged on imported raw materials and imported finished goods; it won a widening of duties instead. This officer complained that members seldom credited the AGI with such victories. In truth, victories were so rare they often went unnoticed—a point conceded by the officer. It seems, therefore, that failure of the AGI and the GNCC

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to adapt to the different demands of a neoliberal policy environment was a major factor in their decline. A loss of incentives and enthusiasm for leadership contributed to BAs’ atrophy. By the 1990s, several key business leaders had been slowed down by age, yet younger capitalists balked at replacing them. An obvious factor was the lack of tangible benefits. But many also thought it unwise to join the AGI or GNCC whose fraught relations with Rawlings persisted. In the changed conditions of the 1990s, the NDC sought some rapprochement with business. Presumably because it believed that a friendlier AGI would be easier to work with, the NDC sponsored Sherry Ayitteh, an NDC apparatchik, to contest AGI leadership in 1993. Significantly, Ayitteh placed last in the poll (AC, August 13, 1993). Since the AGI relied on the patronage of a small group of wealthy figures who had traditionally headed it, it is not surprising that members remained loyal to them.12 But this humiliating rebuff reinforced the government’s view that the AGI was an impregnable opposition fortress better left alone. Officials accordingly remained unwilling to channel incentives through these BAs. From their location at the center-stage of government-business relations up until the 1980s, they had, by 2000, lost much of their appeal and, by their own admission, become largely insignificant (AGI News, August 1999). Nevertheless, both BAs maintained that they inf luenced public policy. Although this may be true, it is difficult to gauge exactly what impact they made, not least because various organizations claim credit for the same policy changes. Grindle (1980) has noted the difficulty of assessing the relative inf luence of bureaucratic interests and ideas, on the one hand, and civil pressure on government policy-making on the other. For example, the PEF, the Institute of Economic Affairs, the GUTA and other organizations all claimed that the pressure of their own organization forced officials to replace a proposed 7 percent raise in VAT with a 2.5 percent rise in 2000. Also, it is impossible to determine whether responsiveness to such pressure or their concern over the potential deleterious economic effects of raising VAT was the critical factor in persuading officials to settle for the lesser rise. Similar pressure against the introduction of VAT in 1995 had, after all, failed. What seems clear, in the final analysis, is that BAs were weakened not only by their own organizational and tactical defects but also by official hostility toward them. It seems fair to say that they exerted little inf luence over government decision-making. A further cause of the weakness of BAs was the weak economic role of Ghanaian capital. A notable feature of the economic growth

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that Ghana experienced during the Rawlings era was that, to a large degree, indigenous capital was economically peripheral to it. In two of the three key sectors of the economy—mining and cocoa—indigenous large-scale capital was negligible (though cocoa was of course produced by indigenous farmers some of whom were large enough to be termed “capitalists”). Local capitalists did have substantial investments in the timber sector, but this was not enough to compel the government to be more sensitive to their interests. Timber business owners, in any case, required official goodwill (chapter seven), the absence of which further robbed them of any significant level of bargaining power. This takes us back to the kind of economic growth that occurred under Rawlings. Ghana’s ability to generate an average GDP growth of over 5 percent from 1983 to 1990 was due to massive public foreign capital inf lows after 1983. Private investment was tiny, averaging half the public sector rate. Accordingly, the authorities could ignore local capital without serious economic risks. Had local capital been a critical economic actor, the government might have been more responsive to it. The economic weakness of Ghanaian capital had a corresponding political weakness. A key condition for successful group lobbying is the level of political leverage commanded by a group vis-à-vis other corporate bodies. In their comparative study of Columbia, Venezuela, and Peru, Thorp and Durand (1997) observe that the relative political clout enjoyed by BAs correlated with their importance to the national economy. Accordingly, Columbia’s reliance on coffee endows the Columbian coffee association with significant bargaining power. In Venezuela, by contrast, reliance on petroleum rents puts BAs on a weaker footing. Peru’s more diversified economy evolved a pattern of close partnership between foreign and local capital in a way that obviated the need for the latter to lobby government. The nature of an economy and its evolution therefore impact on the relative strength of BAs. Thus, it is readily understandable why Ghana’s BAs were fundamentally weak. The argument that the leadership could ignore Ghanaian capital because it lacked economic weight requires qualification. To illustrate, consider government—or more precisely Rawlings’—behavior during the liquidity crisis that engulfed Ashanti Goldfield Company (AGC) in late 1999 when the company’s aggressive hedging policy backfired and plunged its share price from $25 to just over $2 (AC, December 21, 2001). Despite the AGC’s huge contribution to Ghana’s economy through tax revenue and employment, the government did very little to stem the company’s hemorrhaging. Instead, Rawlings saw the crisis

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as an opportunity to humble and oust AGC’s embattled CEO, with whom he had fallen out and repeatedly publicly called a “criminal.” The financial costs to Ghana seemed irrelevant to Rawlings, who had earlier allegedly instigated financially crippling strikes at AGC (Taylor, 2006). Alas, the dictates of personal rule clearly trumped national economic interests. A New Generation of Business Association: The Case of GUTA It would be illuminating to conclude the discussion of BAs by examining the contrasting case of GUTA, one of several new BAs formed during the Rawlings era.13 The membership of GUTA consisted predominantly of small- and medium-scale entrepreneurs, mostly in the informal sector. In contrast to the rather timid and polite older BAs, GUTA was assertive and militant. It gave some voice to hitherto voiceless “small players,” who had long lacked formal representation and were practically “forgotten” by government, except insofar as they were blamed for hoarding, profiteering, and shortages. These associations owe their emergence to the opportunities created by the economic reforms. Trade liberalization set off a steady f low of a wide range of imported goods and services and a huge expansion in commerce. The new emphasis on exports, especially nontraditional exports, opened new business avenues and the rise of a new group of capitalists. I focus on GUTA for five reasons. First, it was the most active of the new crop of BAs and thus attracted the greatest publicity in recent years. Second, it was the most militant and confrontational of the reform era BAs. Third, to the extent that GUTA’s relative success depended on government goodwill, it illuminates the point that, in Ghana, BA inf luence derives not so much from internal characteristics of the associations themselves, as it is bestowed on them from above. Fourth, the government’s handling of GUTA underlines Rawlings’ less adversarial relations with informal groups. Fifth, in contrast to the older BAs, GUTA had relative success in furthering its members’ interests. As of 2000 GUTA claimed to represent 1.5 million traders, including hawkers, hardware dealers, and second-hand clothes dealers. Though not all members were “active” (paid-up), GUTA could mobilize thousands in protest actions and cause serious disruptions to commerce. GUTA rose to public prominence in 1991, when members loudly protested against the Accra Municipal Assembly’s annual increases

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in the premises-license-fee levied on traders. This had gone up from C3,000 to C20,000 in 1990 and then to C50,000 in 1991. In protest, GUTA members closed their shops for three days. They succeeded not only in having the fee reduced to C30,000 but also in exposing inefficiencies at the Assembly, culminating in the removal of its chief executive. Again, in 1994, GUTA construed a proposal to increase tax on selected imported goods in order to make local substitutes more competitive, as a threat to its members’ interest and threatened to protest. Officials negotiated with GUTA and substantially cut the tax (interview, GUTA officer). GUTA members also joined the 1995 anti-VAT protests. Lastly, GUTA leaders took strong exception to their not being consulted before the imposition of a 20 percent special tax on some items14 in an apparent effort to ease the foreign exchange crisis of 2000. A strike action by GUTA set off a decline in bank deposits averaging between 30 and 45 percent in Accra’s central business area (Business and Financial Times, June 5, 2000). The strike was called off only after officials had promised to suspend the tax, though they later reneged on their promise. As in 1995, the leadership accused GUTA of meddling in politics (Ghanaian Chronicle May 31, 2000). At first sight, GUTA’s high-profile, militant antigovernment protests and ability to force policy reversals that embarrassed officials would seem to invite government hostility. In reality, governmentGUTA relations were a mixture of conf lict and cooperation. As noted, some GUTA leaders were arrested in connection with the 1995 antiVAT protests. Earlier, in 1993, the Bureau of National Investigations detained GUTA’s secretary-general and his deputy on two occasions for criticizing the government (interview, GUTA officer). Cooperation was also, however, sometimes in evidence. GUTA collected municipal and income taxes from traders in return for a commission. GUTA also worked with Customs to set inspection standards, and with the Ghana Export Promotion Council to assess import duties. Such cooperation can be explained in terms of the mutual benefits it produced. It was convenient and cost-effective for officials to engage GUTA in tax collection. For its part, GUTA welcomed its commission from tax collection, boasting that it collected taxes in a friendly and understanding way (interview, GUTA officer). Cooperation also chimed with leaders efforts to counter stereotypes of traders as undisciplined. Traders were frequently reminded that GUTA could fight for them only if they were law-abiding. Government cooperation with GUTA contrasted with its aloofness from the GNCC and the AGI. The difference was due largely to

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Rawlings’ cultivation of political support among small-scale informal sector groups and his antipathy toward the establishment. Recall the appointment of tailors, fishermen, and similar groups to the national consultative assembly in 1991; the creation of the CIBA; and overt ties with organizations, such as the Ghana Private Road Transport Union (GPRTU). Unlike the GPRTU and other bodies, however, GUTA repelled NDC corporatist attempts, striking a balance between cooperation and independence. Both cooperation and conf lict also characterized GUTA’s relationship with other BAs. While it frequently joined other BAs in advocating lower interest rates, a stable cedi and access to credit, it consistently defended trade liberalization, much to the dismay of the AGI. The latter sought to pressure GUTA to drop its pro-trade liberalization stance by invoking patriotic slogans such as “buy made-in-Ghana” and “Let us all help save mother Ghana by consuming what we produce here!” It claimed that GUTA and the GNCC had pledged to collaborate in promoting local goods (AGI News, August 2000). But GUTA threats to strike in 1994 over a proposed increase in import duty in order to make local products competitive, and its strike action in 2000 over the imposition of a 20 percent special tax on selected imports, suggest that its position on trade liberalization hardly changed. Conf licting economic interests aside, GUTA was suspicious of the AGI and even of the GNCC, with which it shared a greater degree of common interests. This derives partly from GUTA’s background— mainly youthful, small-scale traders who tended to view the older BAs as elitist. Leaders exuded pride in organizing this amorphous and previously voiceless group. It was clear in interviews, that they were keen to keep their distance from the GNCC, which regarded them as undisciplined. GUTA resisted closer relations with the “big” BAs, retained its mass identity and warded off possible domination by them. It refused to join the PEF, which it believed had a strong bias in favor of big business. Further, GUTA’s aggressive style and orientation—deeply at odds with the older BAs, which shunned publicity—impelled it to chart its own course. Whereas the latter found street protests vulgar, this tactic was the stock-in-trade of GUTA. GUTA leaders were also aware that excessive involvement in party politics was partly to blame for the atrophy of the older BAs. It has seemed wise, in the interest of preserving GUTA’s institutional integrity, to beware of too close an association with the older BAs. GUTA’s relative success contrasted with the atrophy of the AGI and the GNCC. In its relatively short existence, it defended its members’

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interests quite effectively in some instances, acting in a sense like a small businessperson’s trade union. Yet at first sight, its relative success seems less likely. Unlike the AGI and the GNCC, GUTA had neither a full-time secretariat nor the financial means available to the older BAs. These, however, were somewhat offset by the fact that trade liberalization—a source of some tension between the government and the AGI, for example—suited traders’ interests. Also, relative to the AGI and the GNCC, the authorities left GUTA alone. Finally, GUTA’s broad membership and ability to disrupt commerce were crucial weapons the older BAs lacked. Conclusion Democracy produced mixed results for Ghanaian capitalists. The investigative bodies were abolished and the public tribunals were nominally retained. The government refrained from confiscating businesses and other assets, thus property rights improved. Attempts to pass laws seen as detrimental to business such as a Serious Fraud Office were repelled. Business activism could also be said to have improved somewhat at least insofar as GUTA deserves some credit for the withdrawal of VAT. At the same time, however, there continued to be instances of arbitrary acts such as the demolition of Piers Hotel and houses built by the real estate firm owned by the Djentuhs (chapter six). Also, the leadership tended to disregard unfavorable court decisions such as the case involving Osei Safo. The argument that business activism improved should also be understood in the proper context. The arrest of GUTA leaders for their vocal opposition to VAT underlined the continuing risks faced by activists. Besides, GUTA’s relative success owed largely to the fact that its “petty-bourgeois” character made the regime tolerant toward it—a point that reinforces the predominant inf luence of government’s attitude in determining the relative success of business groups. Conversely, Rawlings’ enduring desire to isolate and marginalize the old BAs, which he saw as appendages of the old networked capital that he blamed for the “exploitation” of ordinary Ghanaians, was a critical factor in their relative atrophy. Further, democracy made regime opponents more clearly distinguishable and thus more vulnerable. Confiscations, the hallmark of PNDC rule, may have ended but, as government-business relations assumed a more explicit political thrust, opposition entrepreneurs faced various forms of sabotage.

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In sum, the neoliberal expectation that market reforms would expand the role and size of indigenous capitalists and that democratization would increase their inf luence in government failed to materialize under Rawlings. The former seems not to have happened on any significant scale. The latter did not occur under the NDC regime, at least not as regards the old business class or in the manner (e.g., via business associations) expected.

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CH A P T E R

SI X

The Changing Face of Ghanaian Business: The Rise of P/NDC Stalwarts

This chapter expands on the argument presented in chapter five, namely, that democratization proved to be ambiguous in Ghana. While the NDC government refrained from confiscating businesses, it continued to visit tribulations on opposition-aligned capitalists, weakening them to such an extent that, by the time it left office in 2000, the older capitalists with ties to Ghana’s conservative-liberal political tradition had been supplemented, if not entirely replaced, by a new crop of entrepreneurs with strong political ties to the P/NDC, that is the Provisional National Defence Council and the National Democratic Congress. This development resulted from a two-pronged tactic, involving simultaneous government sabotage of opponents and provision of assistance to allies. Much attention has focused on the former. To gain a fuller picture of NDC-business relations, attention must be turned to the economic beneficiaries of NDC rule. But first, it is important to discuss how the NDC dealt with its former allies. In addition to illuminating the continuing danger faced by those who dared to identify with the opposition, this also serves as a contrast to the dividends paid by loyalty to the regime. I will show how the face of Ghanaian business was changed and how the NDC, initially the party of a quasi-revolutionary campaign against corruption, ended up enmeshed in the same vices. As the 1990s progressed, the NDC became the vehicle for the advance of a new set of business interests closely linked to its own leaders. This implies that the common perception of the PNDC as antibusiness is something of an oversimplification. Thus, although the PNDC might initially have seemed to be an exception to Bayart’s (1993) characterization of African

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politics as “belly politics,” it drifted over time very much into the same sort of mold. Students of Ghana’s political economy will find striking similarities between Rawlings’ NDC governments of the 1990s and Nkrumah’s CPP government. Augustus Tanoh—The Cost of Rebellion Arguably, none of the cases of political victimization examined so far better illustrates the extraordinary steps that the NDC administration was willing to take to persuade people in business that it was risky to identify with the opposition than the case of Augustus Tanoh. Tanoh was a close associate of Rawlings and had a long career serving under him. Among other positions, Tanoh served as executive director over finance and administration of Ghana National Petroleum Corporation and as a member of Ghana’s delegation to the United Nations Security Council and General Assembly (Daily Graphic, October 27, 2000). According to the Ghanaian Chronicle (August 11, 2000), he schooled Rawlings in politics. In 1998, however, Tanoh’s relationship with the NDC soured when Rawlings named his vice-president, John Mills, as his successor. Some elements within the NDC regarded this as not just undemocratic but they also saw Mills as a “Johnny-come-lately.” Tanoh, who harbored his own presidential ambitions, led this NDC faction. The leadership tried to pacify the reformers, as they became known, through a variety of offers, including lucrative jobs, but failed. Their dissent caused much consternation to the regime because among the reformers were figures believed to hold sway over grassroots supporters. With the 2000 elections set to be more competitive than the previous two, a split bode ill for the NDC. Indeed, the NDC leadership considered the reformers to be a greater threat to its election chances than support for its archrival, the NPP (Africa Confidential [AC], May 28, 1999). The NDC began to harass the reformers from late 1998 when efforts to dissuade them failed. The government concentrated much of its fire on Tanoh, the spokesman of the reformers, and targeted his business, a cassava chips exporting company, called Transport and Commodity General (T&CG). T&CG had been experiencing financial difficulties of late. Officials sought to present this as proof that Tanoh was a failure. He admitted that T&CG was having liquidity problems, but countered government accusations by asserting that the real problem lay with official interference. This gained currency after sighting of

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“presidency officials . . . making enquiries” about T&CG account (AC, November 20, 1998). Also, the State Insurance Corporation allegedly refused to back Tanoh’s application for a new loan for T&CG at the behest of officials from the presidency (AC, May 28, 1999). Tanoh would later allege in a Ghanaian Chronicle interview (August 11, 2000) that the regime had also discouraged the Dutch Development Bank from providing T&CG a $2 million loan. The conf lict, which had thus far been kept largely out of the public purview, came to a head in August 2000, when the reformers, making good their threats, formally announced the formation of the National Reform Party (NRP). Tanoh emerged as their presidential candidate. Incensed, government leaders deplored Tanoh, accused him of commercial mismanagement, and sought to incriminate him. Tony Aidoo, then deputy minister of defense, alleged that Tanoh had criminally misused state-guaranteed loans for his political ambition and called for the SFO to investigate Tanoh (Crusading Guide, August 15, 2000). President Rawlings publicly called Tanoh a “traitor,” claiming: “Not a single member of this Government has been assisted with so many billions as this man” (Ghanaian Chronicle [GC], August 11, 2000). Rawlings had apparently taken “almost a paternal interest in Tanoh” (Nugent, 2001, p. 413) and personally helped to secure a bank loan for Tanoh. In an attempt to implicate Tanoh and derail his presidential aspirations, Rawlings accused him of “dishonesty” (GC, August 11, 2000). As a long associate, Rawlings could claim to know Tanoh well enough to be familiar with his alleged dishonesty, but this met with public skepticism. Government motives and the timing of the attacks were dubious. Had Tanoh remained loyal, Ghanaians might have never discovered that he had secured state-guaranteed loans. Thus, his vilification was widely seen as an attempt to indict and blackmail a political opponent, rather than as an expression of genuine concern that he might have misused loans. As one interviewee opined “Why don’t they tell us how much money the Ahwois, for example, have been given . . . And by the way, why now and not years ago”? The private media trumpeted this episode as proof that government harassment of political opponents, including former allies, remained a major problem, thereby refocusing public attention on the regime’s fraught relations with businesspeople. Efforts to vilify Tanoh unwittingly exposed cronyism within the NDC. Rawlings may have exaggerated the level of assistance Tanoh had received, but Tanoh undeniably received substantial assistance. In fact, he did not dispute this, and, by his own account, his starting

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capital in 1993 was $144,000 (GC, August 11, 2000 ). Three years later, that had ballooned to $2 million. Still, Tanoh questioned the moral authority of officials in publicizing T&CG’s difficulties, arguing that others had abused benefits that accrued from ties to the NDC: “It is an open secret that so many grants from Japan, Canada, United States, and Britain had been given to party functionaries who have misapplied it.” Tanoh cited specific cases, resulting in losses, which the government had agreed to pay (GC, August 11, 2000).1 Tanoh’s case also rekindled the leadership’s politicization of banking and credit policy—an issue of great concern in the business community. Not only did officials appear to have been aware of who had borrowed money, they also appeared to have had a say in whom banks could give loans to. Rawlings had publicly rebuked his ministers: “Yes, you people without my permission gave him additional loan and when we complained, he said we were mixing his business with politics” (GC, August 11, 2000). This evoked Rawlings’ June 19, 1993, Daily Graphic interview in which he all but named opposition entrepreneurs who had taken bank loans. In that interview, he accused the then managing director of the National Investment Bank of being an NPP sympathizer and of fraudulently granting loans to NPP “big men.” The latter was subsequently fired. The government took additional steps that, among other things, cut off critical sources of reform funding. Several reformers seem to have lost their jobs at the instance of officials. Peter Kpordugbe, long a regime loyalist, was sacked from his job at the Ministry of Education, where he had worked for over a decade. W. Osei-Wusu, NDC Propaganda Secretary, lost his job at GHACEM, the cement manufacturing firm. Also, Tanoh’s brother, Nathaniel, then Ghana director of WorldSpace, the U.S.-based satellite broadcasting company, was fired, after calls from officials to the company’s headquarters implying that it “must sack Tanoh or risk losing its Ghana licence.” WorldSpace fired another brother, Brazini (AC, 28 May 1999). And in a move widely seen as part of government effort to thwart the reformers, Britain’s Department of International Development (DFID) abruptly canceled a contract it had awarded a reform-aligned firm. Citing professional reasons, the DFID strenuously denied claims that the cancellation stemmed from government pressure. Significantly, however, the termination of the contract occurred only a few months after its signing (AC, July 9, 1999). The risks the reformers faced seem quite clear and reminiscent of what happened to others once they identified with the opposition.

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Yusuf Ibrahim—An Ally-Turned-Foe Another regime ally-turned-reformer bore the brunt of government anger and sabotage in a more dramatic fashion. In April 1999, soldiers razed a four-star, two-story sixty-five-room hotel in Accra. The Accra Municipal Assembly (AMA) claimed responsibility for razing Piers Hotel, valued at $5 million along with all the movable property in it (AC, May 28, 1999). Its chief, NDC-loyalist S. A. Addo, claimed that the hotel had been built on a waterway and that it would compound Accra’s poor drainage system and put lives and property at risk (Statesman, April 21, 1999). Few Ghanaians, however, were convinced. If that were indeed true, critics asked why thousands of other properties in Accra had not been similarly razed. In particular, they asked why the house of the then Foreign Minister, Victor Gbeho, which shared a common wall with the hotel, was not razed as well. Under intense public scrutiny, Addo’s explanation evolved. He now claimed that the hotel’s owner had not obtained the necessary land registry documents (AC, May 28, 1999). This was equally lame: numerous homeowners in Accra and across Ghana at large do not possess such documents owing to cumbersome processing procedures. Addo then claimed that the hotel’s demolition marked the beginning of a “gettough” policy. Subsequent to this, the government ordered the AMA and several other municipalities to demolish some houses (Dispatch, April 19, 1999). The AMA demolished some kiosks and ramshackle houses in what appears to have been an attempt to def lect accusations and silence critics. But this merely intensified accusations that the government was guilty of victimization. Echoing many Ghanaians, a newspaper editor dubbed the order of further demolitions “a ruse” (confidential interview). Speculation became rife that the owner of the hotel, Yusuf Ibrahim, once a “top financier and an inner core member of the NDC” (Dispatch, April 19, 1999) had joined the reformers. A second version held that officials suspected that Sam Jonah, the CEO of Ashanti Goldfields Company (AGC), who had fallen out with Rawlings, owned the hotel. Jonah had become a hate figure within the regime for two reasons. First, he was rumored to have declined an offer by Rawlings to be his vicepresidential running mate in the 1996 elections. Rawlings took strong exception to this. Second, Jonah had allegedly backed the enthronement of the new Asante king rather than Akwasi Agyemang, the long-time mayor of Kumasi, and the NDC’s preferred candidate (AC, May 28, 1999). The demolition, the argument went, was part of a campaign to

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clip Jonah’s seemingly ever-expanding wings. Despite this speculation, however, it turned out that Jonah was not the owner of the hotel. Ibrahim did not seek judicial redress or speak to the media in the immediate aftermath. Thus, some speculated that he had been compensated. Others suggested he could not act because he had skeletons in his closet. His seeming passivity cost him sympathy even in the business community. According to a newspaper editor whom I interviewed, Ibrahim had told him that he hesitated to file a suit because he doubted the impartiality of the courts and was therefore waiting for the “right time”—presumably when the NDC was no longer in power (confidential interview). Ibrahim did in fact file a suit against the AMA in 2001 for wrongful demolition of his hotel. His earlier reluctance to act seems to have ref lected his fear of lack of effective legal redress—a fear that was felt by many businesspeople. There was a common view within the business community that the government continued to exert much inf luence over the judiciary. The aggrieved therefore hesitated to act in cases involving the government even when they seemed to have an objectively strong legal case. The Djentuhs Case Finally, one of the most blatant manifestations of personal rule and of the risks in falling out with Rawlings merits brief mention here for the light it sheds on the continuing threat to private property. In January 2000 a young man called Selassie Djentuh was arrested, tortured, and detained at the residence of the President, the Castle. Selassie maintained that this was after he had broken off his engagement with one of the President’s daughters but Mrs. Rawlings insisted that their relationship had been merely “platonic.” Selassie’s parents were charged with assaulting soldiers and unruly behavior while at the Castle to enquire about their son during his detention. They were subsequently convicted and bound over for one year. Furthermore, soldiers razed thirtyfive houses built by the Djentuhs’ real estate company, claiming that the land was not legally theirs. Like Ibrahim, the Djentuhs did not seek legal redress, fearing that it might worsen their troubles. The Rise of P/NDC Insiders in Business In 1991, Rawlings had imposed limits on business funding of political parties partly to hamstring his opponents. Following the 1992 elections

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during which most medium- and large-scale capitalists supported the main opposition party, the NPP, and indeed provided its main source of funding, the NDC made additional attempts to stem this problem. Part of its strategy was to undermine opposition-aligned entrepreneurs to try to prevent them from prospering and thereby strengthening the opposition. In order to gain political and financial support of smallscale businesspeople, the NDC also created the Council for Indigenous Business Associations in January 1993. Members of CIBA became a vital source of NDC funding. The mainstay of NDC funding, however, was provided by its stalwarts, dozens of whom exploited the provision of loans, grants, lucrative contracts, implicit exemption from payment of taxes, acquisition of public enterprises, and other incentives to enter business. In sharp contrast to the decline of opposition business, NDC insiders f lourished. The meteoric rise of the new accumulators, virtually of whom lacked their own capital, had to be constructed upon the dissolution of the existing capitalist class. Such individuals proved reticent, however, to talk about their business interests and reluctant to give interviews. In one extreme case, a businessman gave me a total of fourteen interview dates, but honored none. This reluctance derived in part from sensitivity to allegations that regime allies had monopolized economic opportunities. It probably owed something also to persistent media and public criticism and scorn that the “ex-socialist revolutionaries” had become wealthy entrepreneurs. B. A. Mensah, whose tobacco company was confiscated, for instance, argued: “The P/NDC decimated the f ledgling private sector out of jealousy and greed only to replace it a decade later with a political party-based private sector composed of those who had organised the coup” (interview). The Ahwoi brothers (Kwamena, Kwesi, Ato), who were key figures in the PNDC and later the NDC,2 were among the first NDC stalwarts to enter private business. Unlike many others, their business activities were quite open. Prior to entering politics, all three were civil servants with no business background. Widely said to have received a state-guaranteed loan of $30 million as starting capital, they steadily built an economic empire. This included a waste disposal business that enjoyed a profitable contract with the AMA; a hotel near their hometown in the Central Region; and a haulage company called Comstrans. A confidential interviewee revealed that they had also acquired large tracts of land, hoping to invest in real estate. The jewel in their crown, however, was Cashew and Spices Products Limited, or Cashpro, the leading private cocoa and cashew buying company in

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Ghana (Ghana Investment Promotion Centre, 1999), and it is this company that is of interest here. Cashpro was one of only a handful of private companies that were licensed to participate in the lucrative internal cocoa marketing business. The companies received an annual loan with a moderate interest rate at the beginning of each cocoa season from the Cocobod for their operations. While it is not unusual for a public body such as Cocobod, to obtain cheap finance for its contractors, it seems that Cashpro was favored by the government, which controlled Cocobod. For example, though Ghanaians were told that several firms would be contracted to undertake a cocoa output improvement plan in 2000, Cashpro alone was awarded the contract. Reports also noted that the recruitment of personnel for the exercise had been based on affiliation with the NDC with the aim of winning votes (Ghanaian Chronicle, May 26, 2000; Ayim, 2000a). Based on Cashpro’s activities, Oelbaum (2002, p. 303) writes “it would be surprising if the company did not operate as a leg of the NDC’s rural political machine, much as the Cocoa Purchasing Company did under Nkrumah.” Moreover, Cashpro allegedly benefited from the District Assemblies Common Fund. Despite denials, reports insisted that the minutes of a meeting of the East Akyem District Assembly held on May 12, 2000, showed that it gave part of its share of the Fund to Cashpro “to train the youth to help improve [the] agricultural sector, [and] to create employment opportunities for them” (Statesman, October 15, 2000). It was further alleged that other district assemblies participated in the scheme, putting huge sums of money meant for social services in the hands of a private firm. Cashpro, one critic noted, acted like a quasi-state agency, dispensing some of the money as political largesse (Ayim, 2000b). Pertinently, until January 2000, Kwamena Ahwoi was the minister of local government, which oversaw the Fund. Allegations that the NDC might have used money from the Common Fund for its own partisan activities led to probes after the NPP won the 2000 elections. Rawlings’ wife, Nana Rawlings, is another prominent political figure known to have had numerous business interests, notwithstanding her efforts to distance herself from them. She was widely rumored to be co-owner (along with P. V. Obeng) of the soft drink manufacturer D&C, which declined my repeated requests for an interview. She used the 31 December Women’s Movement (DWM), her personal vehicle, and its subsidiary, Caridem Corporation, to acquire several public enterprises, including the GIHOC Cannery, GNTC Bakeries, GIHOC Brick and Tile, GNTC Supermarket, and the former State

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Transport Corporation. Mrs. Rawlings was rumored to own a number of gas stations and supermarkets in Accra and other cities. She also allegedly owned shares in several hotels, including Accra’s La Palm Pleasure Beach Hotel. Using the DWM, she allegedly accessed stateguaranteed loans in the millions of dollars (Evening News, January 25, 2001). Tsatsu Tsikata, Rawlings’ closest aide, who held a long and unaccountable stewardship of the Ghana National Petroleum Corporation (GNPC) also tried, unsuccessfully, to conceal his business interests and vast fortune. In 1994, the government wrote off $124.7 million owed by the GNPC (World Bank, 1995). Finance minister Botchwey questioned Tsikata’s judgment and his handling of GNPC finances and resigned partly in disgust over Rawlings’ apparent tolerance of this. Tsikata was convicted and served time for the embattled GNPC’s debt, totaling several hundred million dollars. Just as Mrs. Rawlings used the DWM as her personal vehicle, so Tsikata used the GNPC, effectively personally controlling the GNPC’s 20 percent share in Westel, a telecommunications company. Using the GNPC, he also became de facto owner of Vacuum Salt Products Limited (VSPL), which was confiscated from the late S.C. Appenteng in 1992 and turned over to the GNPC. In retrospect, the role of Tsikata’s brother, Fui, in vilifying Appenteng in the 1980s (chapter four) is seen by some as sinister. Another politician-turned entrepreneur was Vincent Assiseh, former NDC Press Secretary. Assiseh declined my requests for an interview, but by his own account, prior to joining the NDC, his most prized asset was a corn mill (Assiseh, 2000). Under NDC rule, he allegedly benefited from grants, loans and state contracts, building a “multi-billion empire” (Independent, September 19, 2000) that included a construction firm, a cold store, and a printing press. The last was the publisher of several state publications, including the propagandist Ghana: We Mean Business, which clearly exaggerated investment opportunities in Ghana. It emerged in 2001 that in 1998, the ministry of local government, at Assiseh’s request, deducted 6 million cedis from each of the 110 district assemblies’ share of the Common Fund to publish a report on each assembly in the above named book without consulting the assemblies. Reports alleging abuses of the Common Fund to benefit NDC-aligned firms sparked heated public debates, and put this issue back into the spotlight. This prompted the NPP regime to order investigations into Ahwoi’s handling of the Common Fund. There were also reports that some NDC-aligned entrepreneurs enjoyed implicit exemption from payment of taxes. A case in point

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was Checkpoint Limited, a printing company that was contracted to print VAT forms. Checkpoint reportedly failed to remit C5 billion of VAT owed to the state in 2000 (Statesman, August 15, 2001). Reports, including a Ghanaian Chronicle editorial on August 15, 2001, also noted that the pro-NDC newspaper, the Ghana Palaver, failed to pay VAT for three years without any penalty. By contrast, other defaulters were aggressively pursued. In August 2000, for instance, VAT officers moved to seize the movable assets of Secaps Hotel, which owed C83,392 million. This case received front page coverage in the August 4, 2000, issue of the state-owned newspaper, Daily Graphic. The events that culminated in what may well have been Ghana’s worst banking scandal involving an entrepreneur also merits mention. In December 1996, it emerged that A-Life, a supermarket chain, had accrued debts totaling a colossal C120 billion to three public banks— the Ghana Commercial Bank, the Bank for Housing and Construction (BHC), and the Ghana Co-operative Bank (GCB). SFO (Serious Fraud Office, 1998, p. 12) investigators concluded that the loss was due to collusion between management staff of the three banks and officers of A-Life. So crippling was the loss that the BHC and the GCB did not recover and were liquidated. This scandal raises two questions. First, were senior government officials unaware of it? As I have shown, they seem to have been aware of various other illicit banking activities. Second, though a trial began upon SFO advice, it soon petered out. Why, one might ask, did the authorities fail to prosecute a case of such magnitude? This did not entirely surprise political pundits. Interviews revealed that the owner of A-Life, a relative newcomer to business, had friends in high places, most notably Mrs. Rawlings. Many attributed the mushrooming of A-Life shops during the 1990s to this. Further, they said that much of the A-Life debt funded NDC campaign activities in 1996, citing as proof the fact that the bulk of A-Life’s bank withdrawals occurred during the run-up to the 1996 elections, mainly in October and November. Thus, prosecution of this case was “politically impractical.” Privatization—A Business Path for Insiders Privatizing state-owned enterprises (SOEs) was the reform measure the P/NDC proved most reluctant and slow to undertake. There were several reasons for this. First, some senior government officials were initially very suspicious of “capitalism” and the profit motive.

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Ebo Tawiah, for example, continually criticized proposals to privatize SOEs as “a disgrace to the nation” and chastised Ghanaians to “hang their heads in shame for allowing SOEs to collapse” and for “let[ting] down our forefathers who fought for independence” (West Africa [WA], April 2, 1990, pp. 555–556). Tawiah’s chairmanship of the Divestiture Implementation Committee (DIC) for several years ref lected the PNDC’s own reluctance to undertake privatization. For years, the government attempted to reform SOEs. Second, much of the public was averse to privatization. In Ghana, as in elsewhere in Africa, political independence had been presented as a means to economic independence. Kwame Nkrumah, Ghana’s first leader sold the creation of SOEs as signifying economic independence and national sovereignty. Attempts by the National Liberation Council and the Progress Party regimes to privatize SOEs therefore caused a storm, so they were abandoned. The sense that these experiments largely benefited allies of the political leadership further discredited privatization and turned public opinion against it. Unresolved technical issues also stalled privatization in Ghana. It proved difficult to find the personnel possessing the technical expertise to fill positions at the state enterprises commission and the DIC. In addition, much of the data on SOEs were deficient and therefore of little use in determining their value. Many SOEs did not have upto-date statements of accounts. As well, some assets had not been fully identified. This was particularly problematic in the case of hastily confiscated private firms. Moreover, in some cases, the state had not acquired the title deed. The difficulty in identifying the full range of the assets of SOEs was replicated in respect to determining their liabilities. The absence of a stock market (the Ghana stock exchange was not established until late 1990), complicated valuation problems (Gyimah-Boadi, 1991a). Fourth, the section of the indigenous private sector most capable of purchasing SOEs was composed mostly of political opponents of the PNDC. Officials felt that to allow such figures to acquire SOEs would be politically suicidal, as it would mean better-financed opposition. In 1994, however, a remarkable policy shift began when the government divested a 35 percent stake out of the state’s previous stake of 55 percent in Ashanti Goldfields Company, Ghana’s most prized asset. Other key assets were soon divested. Four main factors led to the policy shift. First, there was a change in government attitude as a result of the very limited success in attempts to reform SOEs. It was increasingly realized that “fiscal constraints made it impossible to provide the

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resources required for the restructuring and recapitalization costs of existing SOEs, or to maintain a large number of enterprises within the state sector” (Hutchful, 2002, p. 98). Second, donors demanded more decisive moves on privatization. Third, divestiture proceeds, which the World Bank had long argued could serve as a vital source of revenue to plug holes in the budget, also provided a further thrust to divestiture. Fourth, privatization provided a source of political patronage in the era of party politics. By 2000, when the NDC left office, about 80 percent of Ghana’s SOEs had been divested. Divestiture in Ghana benefited mostly foreigners. As recently as 1999, Ato Dadzie, Rawlings’ former Chief of Staff, noted: “some people think that [divestiture] is meant for only foreign investors” (Dadzie, 1999, p. i). Three factors account for this view. First, though officials trumpeted divestiture as having promoted indigenous business, this was actually highly misleading. Ghanaians acquired the bulk of divested SOEs—169 of 212, or 79 percent—but these were mainly small-scale firms whose value accounted for about 10 percent of the total value of sales (Appiah-Kubi, 2001, p. 222). Government attempts to obscure this derived from sensitivity to widespread nationalist sentiments that it was wrong to sell national assets to foreigners. Second, the mode of operation and the details of the activities of the DIC were extremely opaque. Third, even when members of the public did gain information about dealings and complained that they were underhand, neither the regime nor the DIC took any serious steps to address such concerns. Dadzie (1999, p. i) was certainly correct to note that “many Ghanaians are not fully informed” about divestiture, though his insistence that it had been transparent was equally certainly hypocritical. Although foreign firms acquired the greatest proportion, by value, of divested SOEs, some Ghanaians did benefit from divestiture. Before considering the details, however, it is important to note that the leadership expressed a desire to use divestiture to promote local business and to democratize ownership of capital. As noted, very little was achieved regarding the former goal. My focus here, then, is the extent to which capital ownership was democratized. Rawlings himself championed extending capital ownership to workers and the poor in his infamous June 19, 1993, Daily Graphic interview on the grounds that some people had basically “stolen” SOEs in the 1960s and this had to be rectified. Finance minister Kwame Peprah (n. d., p. 4) and other officials also advocated democratizing capital. There was a wide gap, however, between rhetoric and reality. Rawlings is understood to have encouraged the DIC to give serious

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consideration to worker acquisition of SOEs through programs such as employee share ownership plans, employee special share purchase arrangements and employee buy-outs. Such schemes were hardly, if ever, however, realized for two main reasons. First, even if offered concessionary terms, workers were hard-pressed to raise the necessary capital. Second, once regime insiders and their friends began taking over SOEs, this aim, never a serious government priority, faded. The only sense in which capital ownership was democratized was that many SOEs were divested to NDC insiders who previously had little or no capital. Divestiture proved to be a major avenue for the well connected to acquire businesses. Yet it is quite difficult to tell who acquired what, as many beneficiaries used organizations or friends as fronts (AC, December 21, 2001).3 Despite this difficulty, however, there is little doubt that NDC insiders monopolized the business opportunities offered by privatization. As noted, Mrs. Rawlings acquired several divested SOEs through Caridem Corporation, a subsidiary of her organization, the DWM. Similarly, though Edward Addo, a long-standing regime loyalist, officially owns a 30 percent stake in the Ghana Film Industry Corporation (GFIC), the popular view is that he fronts for his close associate, K. T. Quakyi, who served as minister in both the PNDC and NDC. The family of Peter Peperah, ex-deputy minister of trade and industry, acquired Mim Timbers in a deal widely seen as scandalous. According to the Ghanaian Chronicle ( January 24, 2001), Mim Timbers was sold at a give-away price of $2 million. The Peperah family issued a rebuttal, asserting that it paid $5 million for Mim Timbers, renamed Scanstyle, and that contrary to reports Peperah played no part in the acquisition of the firm (GC, January 31, 2001). Curiously, the list of divested SOEs published by the DIC omits Mim Timbers, so it is impossible to verify how much it was sold for. Scanstyle’s management refused to discuss these issues when I visited the firm in August 2000. It is noteworthy that figures who had stridently opposed privatization did acquire SOEs. Ebo Tawiah, the rabid critic of divestiture, reportedly acquired an interest in a divested SOE. Kojo Tsikata, another “socialist,” became owner of Gold Coast Motors and reportedly acquired some of the assets of GIHOC (Oelbaum, 2002). Tsikata, of course, was the former national security chief and one of Rawlings’ closest confidantes. Two striking features of divestiture in Ghana merit attention, as they shed light on the exercise. Firstly, sales on credit were very high.

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Secondly, the outstanding debt was still excessive by 2000. Of the divestitures undertaken by the DIC 72.7 percent had unpaid debts (AppiahKubi, 2001), some dating as far back as 1990. There were two reasons for this. First, some buyers clearly lacked the wherewithal to meet their obligations. Second, SOEs were used mainly to reward NDC loyalists so they faced little pressure to pay up. Interestingly, foreign buyers of SOEs also had a high default rate. This weakened official explanations that the main reason why it was only smaller SOEs that were sold to Ghanaians was because they were unable to raise the necessary capital (see Peprah). Certainly, critics interpreted the high degree of credit sales and of unpaid debts as proof that SOEs were deliberately allocated to political allies. The most notorious example of this was divestiture of RT Briscoe Motors to a group of “investors” who clearly lacked capital. To enable them secure a bank loan to make an initial payment, the DIC handed over the company’s assets to the new buyers to use as collateral. RT Briscoe Motors employees, who had made a failed bid for the company, objected vociferously to this, accusing the DIC of being antiworker and of underhand dealings. An outcry that national assets were being allocated to political allies forced the leadership to authorize the SFO to investigate the manner of the divestiture of RT Briscoe. DIC records as of September 2000 indicated that the buyers, Sabat Motors, had paid C1.9 billion of the sale price of C3.7 billion, but SFO (Serious Fraud Office, 1998) shows that no payment had been made. The difficulty in securing payment for divested SOEs led to the introduction of remedial measures, such as “legal action for recovery of balance to commence,” “offer withdrawn,” “asset to be redivested” (Daily Graphic, September 18, 2000). The prevalence of these measures suggests that dozens of divestitures failed even by the DIC’s own criteria: i.e. investors must demonstrate ability to pay for SOEs and to run them successfully. These key prerequisites were, in many cases, clearly unmet. The problem was not the result of “the difficulty facing the DIC in selecting potential viable purchasers” as AppiahKubi (2001, p. 213) asserts. Rather, it relates to the interplay between divestiture and politics. Thus, as in Ghana, divestiture in Uganda favored mainly political insiders (Tangri and Mwenda, 2001). The prominent, if not leading, role of the excessively partisan DWM leaders and other NDC figures on the DIC board ensured that the SOEs that were sold to Ghanaians went to regime allies. Evidence that association with the NDC seems to have been an essential prerequisite of acquiring SOEs and in securing assistance generally prompted a NDC

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parliamentarian to ask in parliament “whether the government was trying to develop a new class of businessmen where Political Party card qualifies one for assistance” (Ghanaian Chronicle, 3 March 1996). DIC records show that some insiders acquired public assets, made nominal deposits—if they did at all—and had their debt defrayed by end-of-service benefits. In effect P/NDC operatives appropriated public assets. In stark contrast, opposition-aligned entrepreneurs were excluded from acquiring SOE. My own research found no instance in which a member of the opposition acquired a SOE. But Oelbaum found one case in which a member of the opposition bought more shares in a divested SOE in which he was already a shareholder. He hastens to add, however, that this prompted the sacking of a senior member of the DIC (2002, p. 311). Predictably, opposition-aligned entrepreneurs seldom tried to acquire SOEs. A notable exception was A. AppiahMenkah who, until the mid-1990s, was the most successful Ghanaian soap manufacturer. He insisted that he tried twice to buy shares in two oil palm plantations and was thwarted on both occasions by the leadership even though he was the highest bidder in both cases. He believed that he was sabotaged for partisan reasons and blamed the collapse of his business, Apino Soap, on his being denied access to oil palm (interview, Appiah-Menkah). At first glance, Appiah-Menkah’s claims are consistent with NDC treatment of opposition entrepreneurs. As noted in chapter four, he had been the top financier of the NPP’s presidential candidate in 1992, and had been the party’s organizer. Moreover, he had had a particularly troubled relationship with the P/NDC, having been detained several times in the 1980s and later imprisoned for defrauding the state. Lastly, he was one of several entrepreneurs’ against whose products Rawlings had urged a boycott in June 1993. It would therefore not be surprising if the regime tried to sabotage him. Verifying Appiah-Menkah’s claims, however, proved difficult. His assertion that failure to buy an oil palm plantation caused the collapse of Apino Soap is problematic. While an oil palm plantation would have given him a steady supply of palm oil, his main raw material, this was available on the open market. As for his allegation of sabotage, I arranged an interview with the executive secretary of the DIC, the agency’s best placed officer, to respond to the allegations, but he changed his mind and directed another officer to act in his stead. This officer denied knowledge of Appiah-Menkah’s case, but expressed some thoughts, which shed additional light on the divestiture exercise.

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When asked what criteria the DIC used to decide successful bidders, the officer emphasized ability to pay for the asset and technical knowhow, with one being given more weight over the other depending on what was being divested: If you are selling GNTC [retail] shop, for example, you sell it to the highest bidder. But if you are selling a cannery . . . we need to evaluate the technical background of prospective buyers. In such cases we will give more weight to technical issues so that if you do not qualify on technical grounds, we do not even open your file. The officer speculated that Appiah-Menkah may well have outbid others, but might have been judged to possess inadequate technical knowhow to successfully operate an oil palm plantation over the longer term. The officer also attributed the demise of Apino Soap to a price war waged by Unilever, the multinational giant. These arguments, however, were overstated. Appiah-Menkah had successfully managed an oil palm estate for decades. He had also held his own against Unilever since the 1970s, having served mainly low income earners and thus captured a specific market niche. This is not the place to determine the exact extent to which Appiah-Menkah’s allegations were justified, but it does shed important light on Ghana’s divestiture exercise. The two requirements the DIC officer stressed were often summed up by the term “strategic investor,” which he defined as “one who knows his job, has technical experience and money. It means someone who already knows the business area inside out; not one who is going to learn on the job. A strategic investor is someone who is well-established.” Given the failure of many buyers to pay for SOEs, the many “legal action for recovery of balance to commence,” “offer withdrawn,” “assets to be redivested” notices, this maxim was paid scant attention. Clearly, many had no capital, no business or technical experience, attempted to learn on the job, and failed. Yet it is hardly surprising in a polity where economic opportunities tend to be politicized, that the administration’s avowed aim of promoting domestic capital seems, in practice, to have been meant for its allies. Sworn testimonies at the trial of some DIC board members reveal intrigue and scheming, including confessions that they were offered public assets to buy (GC, January 3, 2001). Nepotism and self-dealing served as major avenues for NDC allies to acquire fortunes. Political allies were privileged in contract awards.

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Eddie Annan, a contender in the NDC’s presidential race in 2007, was awarded some of the most coveted procurement contracts. Annan enjoyed a near-monopoly on the supply of computers, computer hardware, and software to state institutions. Also, the state-run Golden Beach Hotels and the national pension and insurance fund reportedly bought no other vehicles except Seat models for which Annan was the agent. Further, he was contracted to rehabilitate Ghana’s main harbor at Tema (GC, October 4, 2000, October 9, 2000). Hutchful reports two revealing cases of “insider” and “collusive” behavior: In the first a senior Minister recommended the divestiture of government shares in a major bank. The consultancy for the divestiture was then granted to a new company, among whose main shareholders were the minister himself and a business partner . . . In the subsequent divestiture, the bulk of the bank’s shares were acquired by the same company. A contract for the evaluation of bids for a major state oil company undergoing divestiture also went to an American corporation for which this company was a local partner. (This award was allegedly made without tender, and is said to have led to the World Bank withdrawing funding for the contract). In the second case, a secret investigation by the Serious Fraud Office revealed that of some 58 consultancy contracts issued by the DIC, 30 had gone to a single company, owned by a senior official of the DIC (the chair of the DIC, by the way, was the same Minister mentioned (2002, p. 224). The chair of the DIC was the Minister of Finance. Hutchful does not state when this occurred, but it takes little imagination to figure out who was the culprit. I present a detailed account and analysis of the construction industry in chapter seven, but it is worth mentioning here that the financial ties between the main beneficiaries and the NDC ran deep. The most public display of this was arguably when the NDC launched its 2000 election manifesto, during which contractors vied for attention by bidding for copies of the manifesto. It was common knowledge that government contracts were awarded in return for kickbacks and winning over contractors. Supporters of the opposition were starved of contracts, causing some previously successful contractors serious problems.

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I have shown that, in sharp contrast to the harassment and sabotage experienced by opposition businesspeople, regime allies received assistance. Thus whereas the former wilted, the latter f lourished. The meteoric rise of NDC allies, including many who lacked their own capital, made it clear that the NDC was the party of economic opportunity. As one scholar aptly noted, “nobodies turned into somebodies” almost overnight under the P/NDC (Van Walraven, 2002). There is an interesting similarity between the NDC-NPP division and its relationship to business interests on the one hand, and that which prevailed in the 1950s between the CPP and the United Gold Coast Convention (UGCC). As is well documented, Nkrumah was little interested in capitalist development. Nevertheless, the massive expansion in public projects— schools, hospitals, health centers, and clinics—during his era created opportunities for those seeking to break into business, or who Rathbone has called “aspirant” entrepreneurs. For such CPP insiders and supporters, the construction sector provided a break starting with the party’s capture of some municipal councils after 1951. Simultaneously, established entrepreneurs with links to the opposition UGCC were excluded from economic opportunities so that, “in a very short time, political change had resulted in the success of a new generation of entrepreneurs and the further demise of the once grand, established businesses” (Rathbone, 1973, p. 397). Thus the CPP, despite presenting itself as hostile to capitalism, in practice proved hostile to the established business interests which were allied with the UGCC. At the same time, it actually served as the vehicle for the advance of a new class of businesspeople from within its own ranks. Similarly, the NDC, although initially the party of a quasi-revolutionary campaign against corruption and cronyism, over time, as the 1990s progressed, became the vehicle for the advance of a new set of business interests owned by its own leaders or people linked to them. The meteoric rise of figures like the Ahwoi brothers, Tsatsu Tsikata, Mrs. Rawlings, and their allies, contrasts with the decline of such figures as S. C. Appenteng and B. A. Mensah. The differences in the treatment of these figures and its consequences bore a striking resemblance to the rise of CPP allies and the corresponding fall of the entrepreneurs who were associated with the UGCC and its successors of 1950s and 1960s, the National Liberation Movement and the United

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Party. The NDC’s promotion of new business interests reveals that earlier allegation by sections of the business community that the NDC was antibusiness was an oversimplification. What the NDC did do was to undermine entrepreneurs associated with the NPP while promoting a new crop of business interests from within its own ranks. Like Nkrumah, Rawlings’ political victories therefore proved beneficial to aspirant businesspeople but ruinous to established entrepreneurs. The promotion of a party-based business interests inevitably raises questions about the NDC’s image as the government of probity. Repeated allegations of corruption, some of which were investigated by the Commission on Human Rights and Administrative Justice and the Serious Fraud Office and found to be true, seriously discredited the erstwhile quasi-revolutionaries. As the analysis here shows, and as Hutchful (2002) and other scholars have observed, although P/NDC leaders might initially have seemed to be an exception to Bayart’s “belly politicians,” they became deeply involved with corruption. Thus political power proved, once again, to be a well-trodden path to accumulate wealth. And, contrary to the expectation of advocates of democracy, the government could still inf luence the fortunes of capitalists. Conclusion By 2000 while a new crop of entrepreneurs with strong links to the NDC had risen, the once grand, established entrepreneurs had been decimated thanks to their political eclipse. An NPP fund-raising dinner held at the Golden Tulip Hotel in September 2000, which I attended, underlined the extent of this change. Few capitalists were in attendance, and donations were generally small, the biggest individual donation of the night being 10 million cedis ($1,200.00). And, even at this all-NPP “private” affair, many donors requested anonymity, afraid that if word of their presence reached the NDC it might harass them. By contrast capitalists eagerly donated to the NDC—recall the launch of its election manifesto. While the older, established businesspeople still tended to support the NPP, it was arguably no longer the only party of business. It bears emphasizing that politics in Ghana and elsewhere in Africa is highly factional and driven chief ly by opposing forces’ desire to control the state and to deploy it for their own economic advancement and that of their clients. This politicization and monopolization of economic opportunities have ensured that the most successful capitalists have historically almost always been insiders while outsiders perish. Despite

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Rawlings’ rants, his P/NDC proved no different. The assumption that the advent of neoliberal reforms and democracy would break this pattern and herald a new breed of leaders committed to viable capitalism fails to appreciate the entrenched character of personal rule and the dynamics that sustain it. There is a fundamental difference in the concerns of the sponsors of neoliberal reforms and African government leaders. Whereas the former seek to chart a viable capitalist trajectory, the latter, locked in a ruthless, zero-sum game in which victors determine who controls vital resources, seek to mediate accumulation and upward mobility so as to consolidate power. Neoliberals and African leaders therefore seem to be at cross-purposes. The excessive privileging of political concerns resulted in a marked failure to foster a politics of development in Ghana.

CH A P T E R

SE V E N

NDC-Business Relations: The Case of Brong-Ahafo

Thus far, I have focused on government-business relations at the national level. I now focus on the regional and local levels to further develop the thesis that, despite economic liberalization, the government retained the means by which to inf luence the fortunes of capitalists. The previous chapter showed that, whereas the NDC became a vehicle of rapid mobility for regime insiders and their allies, businesspeople that allied themselves with the opposition faced discrimination and decline. Drawing on material obtained from Brong-Ahafo, one of Ghana’s ten administrative regions, I will show that similar developments occurred at the regional and local levels. Government-business relations beyond the major cities have been a neglected area of study with the result that very little is known about the nature of these relations. In that regard, the current focus will be particularly illuminating, filling an important gap. Further, it will provide vital insights into the NDC’s storied political success in small-town Ghana—a success that derived partly from businesspeople’s contribution to NDC resource mobilization. Finally, it will enable an assessment of NDC claims that (1) it was not the party of established business interests; and (2) that it was the party of relative probity. Thus, I provide another angle to examine NDC-business relations. A Political and Economic Profile of Brong-Ahafo Before proceeding, it is necessary to brief ly discuss the political history of Brong-Ahafo because it is quite often used to explain its political

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behavior. Brong-Ahafo consists of two main ethnic groups, the Brong and the Ahafo. Under British rule, the region formed part of both Ashanti and the Ashanti Confederacy.1 A complex array of issues had long led some Brong chiefdoms to resist the overlordship of the Ashanti king and to seek separation (Dunn and Robertson, 1973; Drah, 1979). Two of these issues are relevant here. First, the 1940s saw an upsurge in Brong nationalism in the form of asserting a distinct Brong identity. In 1951, a movement called the Brong Kyempim Federation (BKF) was formed to champion Brong separatism. The second issue related to economic grievances. The introduction of cocoa into what is now Brong-Ahafo at the turn of the last century and its expansion created a new source of wealth. Kumasi’s resolve to control cocoa land and collect tribute deeply offended some Brong chiefs and intensified their economic grievances. It also led some Ahafo chiefs to team up with the BKF. Whereas the Ahafo, who viewed themselves as Ashanti, had proved ambivalent to Brong invocation of ethnocultural and linguistic differences with the Ashanti, their economic interests converged with those of the Brong. In Ahafo, there was “extensive local separatist sentiment, of a firmly economic character, available for political utilization” (Dunn, 1975, p. 195). This strengthened the separatists’ hand. The separatists gained a major boost from the political struggles between Nkrumah’s Convention People’s Party (CPP) and the Ashantidominated National Liberation Movement (NLM) in the 1950s. The Brong and Ahafo backed the CPP, which, unlike the NLM, was likely to support their cause. Indeed, since a division of Ashanti was bound to weaken its inf luence in a new Ghana, Nkrumah encouraged the BKF. In the decisive elections of 1956, which affirmed the CPP’s status as the only truly national party and paved the way for self-rule in 1957, the Brong and Ahafo voted for the CPP. In November 1959, Brong-Ahafo was carved out of the north and northwest portions of Ashanti. Brong-Ahafo has since evolved an interesting political history in which voters have shown no strong attachment to either of Ghana’s two political traditions. Having initially supported the CPP, BrongAhafo voted for the Progress Party (PP), which emerged from the NLM, in the 1969 elections. In 1979, the successor to the PP, the Popular Front Party, won ten of Brong-Ahafo’s twelve parliamentary seats. Owing to such support, Brong-Ahafo, along with Ashanti, was portrayed by some as the base of the Danquah-Busia tradition. This, however, proved to be spurious, as Rawlings and the NDC dominated Brong-Ahafo’s political landscape in the 1990s. After the controversial

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1992 presidential elections and opposition boycott of the parliamentary contest, Rawlings won 61 percent of votes in Brong-Ahafo in the 1996 presidential elections; the NDC won seventeen of the region’s twentyone parliamentary seats. The NPP and its supporters regarded this as a “betrayal” of Busia, a Brong. This betrayal was widely attributed to an alleged anti-Ashanti campaign by Brong political scions, most notably A. A. Munufie, an inf luential minister in the Busia government, who had “defected” to the NDC. Munufie, it was popularly said, urged a boycott of the NPP, an “Ashanti party,” because of Ashanti “disrespect” for Brong and because Ashanti ministers in the PP, more especially Victor Owusu, had sought to undermine Busia’s authority. The NDC also tried to stir up fears that Brong-Ahafo would be annexed to Ashanti in the event of NPP victory (Nugent, 1999). While anti-Ashanti sentiments existed in Brong-Ahafo, it is impossible to gauge the extent to which such moves profited the NDC, not least since such feelings were hardly new.2 Moreover, as noted above, there have been instances of AshantiBrong-Ahafo electoral “co-operation,” the latest being the 2000 and 2004 elections in which the allegedly Ashanti party, the NPP, won landslides in Brong-Ahafo. In short, political competition in BrongAhafo tends to be far more wide open for the main parties than is generally thought. Ref lective of this, campaigning in Brong-Ahafo in the 2000 elections was very vigorous. Straddling the forest of southern Ghana and the savannah of the north, Brong-Ahafo is largely agricultural. Most people engage in small-scale farming, the most important of which is cocoa cultivation. From about 1935 until the 1970s, cocoa truly dominated Brong-Ahafo’s economy (Dunn and Robertson, 1973; Mikell, 1989). Deforestation in districts such as Sunyani, Techiman, Nkoranza, and Wenchi has led to a decline in the overall significance of the cocoa economy in Brong-Ahafo. In Bechem, Goaso, Mim, and Dormaa Ahenkro, however, the cocoa economy is still vibrant. In fact, only the Ashanti and Western regions produce more cocoa than Brong-Ahafo. Along with cocoa production, the forest zone of Brong-Ahafo produces food crops such as plantain, maize, and cocoyam. In the drier north eastern districts such as Nkoranza, Techiman, Kintampo, and Atebubu, farmers cultivate yam, maize, cassava, tobacco, and tomato. There has been a rise in cashew production across Brong-Ahafo in recent years. The wide variety of food crops produced in Brong-Ahafo makes it Ghana’s breadbasket. In fact, Techiman, the region’s most bustling commercial town, is not just Ghana’s most important food market, it is also a vital

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source of food supply to other West African states, particularly Burkina Faso and Mali. Alongside the small-scale farming sector, there are also a number of important businesses in Brong-Ahafo, most notably timber companies, both large and small. The records of the Ghana Export Promotion Council for 1993, 1994, and 1995 show that six timber companies in the region placed among the top twenty Ghanaian timber-exporting businesses. Brong-Ahafo also boasts a number of important wholesale and retail businesses, poultry farms, construction companies, hotels, and other profitable economic activities. Methodology and Context of Study Material for this chapter was obtained mainly through face-to-face interviews with businesspeople in Sunyani, the capital of Brong-Ahafo, as well as its outlying districts. The relative smallness of the private sector in the region made it easier to draw up a list of businesspeople. “Selection” of businesspeople was determined primarily by their willingness to be interviewed. My good contacts in many of the main towns proved very helpful. Nevertheless, a minority of entrepreneurs declined requests for interviews, often on the grounds that they had a busy schedule, but also in some cases because they objected to the “political” nature of the questions. A handful cited fear of the potential political recriminations of speaking to a stranger. In the end, sixty entrepreneurs, including some of the most prominent, were interviewed. Does it seem likely that this “method” of selection skewed the results in any way? It may have resulted in over-representation of businesspeople who were relatively favorable to the NDC, but this does not seem a very important defect, given that the aim was to piece together an overall impression rather than to conduct a sample survey. Local people’s knowledge of the political affiliation of entrepreneurs, their experiences and activities, also provided useful clues, leads, and lines of investigation. In fact, to a certain degree, local people broke the secrecy that shrouded the relationship between business and political parties. Interviews at party offices also yielded valuable information. Newspaper reports complemented this methodology. Finally, I observed, firsthand, some of the political activities of businesspeople in the period leading up to the 2000 elections. An analysis of the relationship between business and the ruling NDC must be understood in the context of a condition of reciprocal

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needs and provision of favors. For the ruling party, business offered donations which helped finance its activities, most notably election campaigns. For the latter, there were enticing offers and inducements without which success in business was difficult. As one might expect, this was an unequal relationship, the terms being dictated by the NDC. Further, the government could resort to harassment of businesspeople who refused to “play the game.” In Brong-Ahafo, by 2000, there were hardly any entrepreneurs who openly opposed the NDC. Also, as was the case at the national level, well-placed local NDC functionaries used their positions either to enter business themselves or to assist their kin and friends to do so. The analysis will show that, in spite of the significant changes that occurred in Ghana under the reform program, such as the removal of arbitrary and administrative decisions as to who gained access to import licenses and foreign exchange, the government retained various means by which it could make life difficult for businesspeople without its patronage. Thus, the notion that economic liberalization confronts governments with a loss of patronage resources has been exaggerated. The belief that multiparty democracy would curb abuses of power has equally been exaggerated. If anything, the NDC was keen to demonstrate its preeminence to businesspeople. As the following discussion shows, most businesspeople realized that they ignored this point at their own risk. Power at the Local Level A proper understanding of NDC-business relations at the local level must begin with a consideration of the PNDC’s decentralization reform, which began in 1988. This involved the devolution of political and administrative authority at the local level to “non-partisan” district assemblies (DAs). A total of 110 DAs replaced the former 65 district councils. Two-thirds of the members of DAs were elected on a nonpartisan basis: that is, each candidate campaigned for votes on his/ her own merits. The government appointed the remaining one-third. Sitting atop the DA was a district secretary, renamed the district chief executive (DCE) in 1993. For the sake of consistency and clarity, I will use the term DCE. Several considerations motivated the new local government system. First, officials believed that it would promote community participation in politics or “true democracy” as they called it. Second, they believed

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that since, unlike previous schemes, local people would control their own affairs the DAs would be more effective in promoting socioeconomic development. Third, the government hoped that encouraging the active participation of locals in their own affairs would destroy the elitism and the dominance of Ghana’s postcolonial political leaders. As the National Commission for Democracy (NCD) which had been created to devise a true democracy in Ghana noted, empowering local communities would “forge a new political order which has its basis in local government” (Crook, 1999, p. 118). Fourth, the PNDC hoped to use nonpartisan DAs as the building blocks to launch a nonpartisan national assembly. This, however, was overtaken by the democratic tide discussed in chapter five. Despite high expectations, the DAs turned out not to be very effective agents of local democracy and development, partly because members were not in a position to check the power and dominance of the DCE in the day-to-day administration of the Assembly. Much of this arose from the fact that the local structure of power favored the DCE. First, he/she was a representative of the central government—a fact which, in itself, endowed the DCE with enormous power. Second, the DCE chaired the Executive Committee, the overall governmental district authority, thereby directing the work of the Assembly. Third—and this is especially germane to the concerns of this chapter—the DCE chaired the all-important district Tender Board, which considered, evaluated and awarded contracts to tendering contractors. Quite paradoxically, although the authorities sought to enhance local democracy via DAs, its most important figure—the DCE—was an unelected official appointed by the President. It is true that an appointee required the approval of the Assembly, but rejection of appointees was very rare. Indeed, by the end of 1997, only one DA had refused to accept a DCE (Crook, 1999). Also, although a DCE could be removed from office by a vote of no confidence supported by at least two-thirds of assembly members this provision proved to be purely theoretical. This was because garnering the required votes to remove an unpopular DCE from office proved very difficult, not least because any attempt to remove such a powerful figure entailed enormous risks for Assembly members.3 In practice, the sacking of a DCE turned out to be a presidential prerogative, often following intensified calls by NDC members and supporters themselves. The local structure of power was not entirely to blame, however, for the dominance of the DCE. The central government itself, seeking to use DCEs to push its own agenda in the districts, reinforced their power. DCEs became key players in the NDC’s political machine. In

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the run-up to elections, they campaigned vigorously on behalf of the NDC, using assembly vehicles and other resources to help secure NDC victory (Ayee, 1996b; Crook, 1994, 1999). Since DCEs owed their position to the President and their continuation in office depended on the NDC’s retention of power, such loyalty was unsurprising. The central government, for its part, tended to weigh calls to sack errant and corrupt DCEs against their loyalty and usefulness. Although it insisted that DCEs were nonpartisan, the NDC viewed them as vital in its administration and proved very reluctant to sack them. Moreover, the leadership believed that sacking DCEs would play into the hands of political opponents. A speech delivered on behalf of President Rawlings at the Sixth Annual Conference of District Chief Executives in 1999 captured all these issues: Next year, we fight the major battle of the 2000 Presidential and Parliamentary elections. Yet this is the time that some of our people have decided to launch an onslaught for the removal of some of our most loyal, our most tried, our most tested [DCEs]. From Kumasi to Sekyere East, from Ahafo Ano North to Amansie West, from New Juabeng to Yilo Krobo, from Accra to Dangme East to Tema, from Bibiani-Anhwiaso-Bekwai to Shama Ahanta East, [DCEs] who have served from between 10–18 years, [DCEs] who used to be Party Chairmen, [DCEs] whose proven efficiency, loyalty and integrity are without question, are under siege with often unreasonable demands and ultimatums for their removal. I am informed that at last count, 39 such [DCEs] have been targeted by groups with motives of their own. It is a deliberate strategy to disorganise our district leadership. We at the national leadership level have long been aware of this strategy; it is time to alert our front line soldiers in the districts to the existence of this strategy so that they do not become tools to be used against their own interests. Of course, we shall deal with errant and corrupt [DCEs]. Of course, we shall work to ensure a leadership of integrity at the district level. Of course, we shall remove from office inefficient and non-performing [DCEs]. But we shall not commit “mass political suicide” by dancing to the tune of other people’s political strategy in a pre-election year (Ahwoi, 1999, p. 4). In reality, DCEs were sacked only when they became major political liabilities. For example, the DCE of Ahafo Ano North, Brong-Ahafo, mentioned in the President’s speech had, by all accounts, including that

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of local NDC activists, become highly unpopular.4 It was not until 2000, however, with elections approaching, that Rawlings was persuaded to sack him. Also, as detailed below, it took the threat of violence to convince the President to sack the DCE of Nkoranza. And, in what might be considered an extreme case, the immensely unpopular chief executive of the Kumasi metropolitan assembly, even after narrowly escaping an attempt on his life by an angry mob, was not sacked or even, as was widely alleged, rebuked by the government. After this episode, he virtually barricaded himself in his house, closing whole streets around his residence to traffic. It should be noted that the President’s assertion that the opposition targeted DCEs for political purposes is contradicted by scholars’ findings that NDC supporters often made the most vociferous calls for firing errant and corrupt DCEs (Crook, 1999; Oelbaum, 2002). All told, DCEs were largely unassailable, and DAs failed to check them from exploiting their power. In the words of one close observer, most became “tin gods” (Ayee, 1996b). Commenting on the power of the DCE from a comparative historical perspective, Crook (1998, p. 236) writes, “The fundamental problem remained the apparent inability of successive Ghanaian governments to abandon the colonial-style district administration system.” Concerning the developmental role of the DAs, studies show that they achieved limited success (Ayee, 1999; Crook, 1998, 1999). Moreover, they show that this was due partly to the underhand handling of resources by DCEs for their own purposes—a situation that ref lected their preeminence and the significant leeway they enjoyed. In this regard, the allocation of 5 percent of all state revenue to DAs for socioeconomic development increased their revenue tenfold (Crook, 1999), thereby vastly bolstering the DCE’s importance and patronage resources. In 1996, for example, DAs received $47 million from the central government (Africa Confidential [AC], December 13, 1996). Thus, DAs had the wherewithal to initiate development projects they considered necessary. Although DAs underachieved in their developmental efforts, visible progress occurred, especially in the area of public works. While this opened opportunities for entrepreneurs, it also meant that DCEs could bestow material rewards on compliant local businesspeople. In the districts, far from the prying eyes of the independent media, DCEs used crude tactics to harass entrepreneurs who dared to associate with the opposition or to seek to be neutral. The power to reward or deprive made DCEs the lynchpin of NDC political mobilization and crucial

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to its political success in small-town Ghana. In turn, businesspeople were expected to contribute to NDC campaign funding. A NDC parliamentary candidate long known to me revealed that the party’s central organization gave each candidate 100 million cedis (about $16,800) for campaign purposes in the 2000 elections. Though significant, this amount was probably insufficient. It seems likely that the bulk of campaign funding came from businesspeople, making the DCE an invaluable ally for a sitting or aspirant parliamentarian. Case Studies I present five case studies to develop the aforementioned themes. The observation that many businesspeople backed the NPP during the transition to democracy in 1992 was equally true in Brong-Ahafo. By 1996, however, most businesspeople had changed their posture to one of proNDC. Though motivated by the same set of considerations, each “conversion” differed in detail, and was affected to a lesser or greater degree by local NDC members and activists and the DCE. The first set of case studies involves three of Brong-Ahafo’s top entrepreneurs. Kwaku Kyere The first, Kwaku Kyere, owned a drug store, printing press, construction firm, sawmill, clinic, and teak plantation. By all accounts, he was an avid supporter of the NPP in 1992. His businesses began to founder after he persistently snubbed invitations from local NDC officials to join the party, and repeatedly turned down their requests for donation. He increasingly failed to gain access to lucrative government-sponsored contracts, without which success in the construction business was difficult. The police began impounding Kyere’s timber trucks on the grounds of safety concerns. Also, the DCE, the Forestry Commission, the Timber Task Force, and a host of officials became hostile and began seizing logs from him, thereby undermining his timber business.5 Like most owners of timber firms, the increasing scarcity of commercial trees, coupled with new restrictions, meant that he engaged in some level of “piracy.” He was therefore legally vulnerable. Kyere initially tried to respond to these setbacks by relying more on his drug store and printing press but this soon proved insufficient. He began having difficulties paying his close-to-2000 employees. Under severe strain, he publicly disassociated himself from the NPP. By 1996

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he was a regular public campaigner for the NDC. He also contributed generously to the party. In fact, it was rumored that he had borrowed massively to support the NDC in 1996, leading to the near-collapse of two banks in Sunyani. The DCE, the Forestry Commission, and the Timber Task Force ceased their hostilities and his sawmill f lourished. He was rewarded with a string of lucrative contracts, some of which he subcontracted (confidential interview). Loyalty paid further dividends for Kyere. In 1999, the state-owned Tanoso Tile and Brick Factory (TTBF) was sold to him. Investigations into whether he won the bid for TTBF fairly or whether it was a reward for his loyalty yielded contradictory answers. Kyere’s authorized interviewee maintained that the bid was won fair and square, insisting that Kyere was the clear favorite from the outset because, of all the bidders, he alone produced enough wood waste from his sawmill to provide the quantity of firewood needed for baking bricks. On the other hand, an “unofficial” interviewee, who had worked at TTBF since 1969, insisted that Kyere’s “contributions and loyalty to the NDC proved decisive.” Though Kyere’s ties with the NDC undoubtedly played a role in his acquisition of TTBF it is unlikely to have been the only or even the decisive factor. This was because the other bidders, too, enjoyed good relations with the government. In fact, J. H. Owusu-Acheampong, arguably the most powerful figure from Brong-Ahafo in the Rawlings era, was known to have an interest in one of the bidding companies. Though he evidently fell out with Rawlings over Mills’ nomination as presidential candidate and was “demoted” from Leader of the House to Minister of Food and Agriculture, he is likely to have enjoyed more political inf luence than Kyere. The critical factor appears in this case to have been a technical one—the fact that, unlike the other bidders who turned their off-cast into plywood and other products, Kyere did not. Inadequate access to inexpensive firewood was apparently a major reason why TTBF performed poorly under state ownership. Having said this, it is doubtful that TTBF would have been sold to Kyere had he been known to fraternize with the opposition. What is not open to doubt, however, is that, in return for assistance with his business interests, Kyere was openly and fervently partisan. Of the many businesses I visited, only TTBF boldly displayed NDC party paraphernalia on buildings and vehicles. Kyere made no secret of his contribution to the NDC’s political war chest in BA. In the run-up to the 2000 elections, he donated money and pick up trucks, hired vehicles for NDC activists to attend political rallies and campaigns,

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and provided money for food and alcohol. He placed his printing press at the service of the NDC, providing posters, f lyers, and T-shirts. His sawmill donated several truckloads of NDC/Mills billboards in July 2000 (interviews). I observed him at a number of NDC campaigns and rallies. Kyere’s parting of ways with the NPP seemed to be total. Indeed, he had tied his fate to the NDC to such an extent that he feared that, if it lost power, the next government might harass him. He instructed his employees to vote for the NDC or risk being sacked or losing their jobs (confidential interview). Of course, his ability to ensure that his employees voted for the NDC was doubtful. In practice, it simply meant that they could not openly support any other political party. This instruction was, in any case, probably needless; Kyere’s employees knew that their interests were inextricably tied to his. In Ghana’s conditions of severe underemployment and unemployment, an employer, as Rathbone (1971) noted many years ago, is a figure of huge importance in the lives of his employees. Accordingly, most of them were, at least publicly, pro-NDC. Ernest Apraku Kyere’s story contrasts somewhat with that of Apraku, owner of Asuo Bomosadu Timbers and Sawmills Ltd. (ABTS). The widespread public perception of this entrepreneur (employing 920 full-time workers) was that he was strongly anti-Rawlings, the result of a brutal assault and humiliation at the hands of a group of soldiers during the early days of the PNDC. After that incident, he sold his shops and vowed never again to run a business in the vulnerable retail sector (interviews). This common perception was somewhat at odds, however, with the view upon entering his office where a big portrait of Rawlings hung prominently behind his desk. This was symptomatic of his deeply ambiguous relationship with the NDC, an ambiguity that became increasingly clear as my interview with him progressed. The fact that the President’s portrait hung boldly in his office was more than just a sham; it signified a complex relationship between himself and the President, as well as with the NDC and its local functionaries more generally. Over the years, the NDC had made efforts to conciliate Apraku and cultivate his support. This culminated in the dispatching of a high-powered delegation, consisting of the minister of local government, and all ten regional ministers, to ABTS in 1999 (interview). In October 2000, the Minister of Trade and Industry also

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visited (Daily Graphic, October 16, 2000). Friendliness at such a senior level was not just a symbolic overture; it was indicative of the changes that had taken place in Apraku’s relationship with the P/NDC, entailing reciprocal assistance and benefits. Reconciliation bore fruits for both parties. Apraku’s financial and other donations reportedly ran into several hundred million, possibly billions of cedis. Coincidentally, when I visited ABTS on August 2, 2000, the DCE had been there to solicit for funds, billboards, and other assistance for the NDC. Evidently, ABTS hardly ever turned down such requests. In return, Apraku was exempted from the antagonism, harassment, slander, and blackmail some entrepreneurs faced. He was also able to purchase a state-owned enterprise, though this does not appear on the record. (As noted in chapter six, the list of divested SOEs published by the DIC appears to be incomplete.) Yet the NDC’s efforts to foster better relations with Apraku were only partly successful. He maintained to me that he neither held an NDC membership card nor publicly supported the party. Apraku, it was commonly said, never appeared in public forums to make donations, despite the fact that this was a gesture the NDC regarded as a true mark of loyalty and highly valued. He justified his relationship with the NDC on the grounds that he wished to avoid politicizing his business. Though his support fell short of what the NDC would have preferred, in the sense that he shunned public association with the NDC, local NDC activists sought to create the impression that he was a party member, and tried to convince locals that “he had truly become one of our own.” It seems that, while he probably no longer loathed Rawlings and the NDC, he had not forgiven them entirely. His refrain “A big company like this cannot be anti-government. It is inadvisable to be seen to be anti-government” is revealing. His relations with the NDC therefore seemed to be borne out of fear of possible punitive actions rather than out of a more genuine conversion. The NPP (apparently his preferred party) appeared to understand Apraku’s dilemma. The local NPP office was discreet about its association with him. Publicly, they had no relationship. Privately, however, he was a major donor and a source of moral support (confidential interviews). Aware that, as an opposition party, it had little for the moment to offer him, the NPP was content with this arrangement. For his part, Apraku hedged his bets by discreetly supporting the NPP so that, in the event of an NPP victory, he was unlikely to face political difficulties.

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J. Adom J. Adom owned a haulage company, several retail businesses, and was the biggest Guinness distributor in Brong-Ahafo. He was also Chairman of the Contractors Association of Brong-Ahafo. Adom had initially been a strident opponent of Rawlings, no doubt in part because, despite his protestations of innocence, he had been arraigned before one of the investigative bodies in the 1980s and fined heavily. He had indeed long been associated with the Danquah/Busia tradition. By the mid-1990s, however, he had become a leading supporter of the NDC in BrongAhafo, leading inevitably to accusations of opportunism. His attitude was symptomatic of the stark choice entrepreneurs were forced to make between whether to align with the ruling NDC or the opposition. Adom opted for a pro-regime stance, aware of the price of supporting the opposition. He enjoyed close relations with all the powerful figures in Techiman, his hometown, about forty-five minutes’ drive north east of Sunyani. Techiman, as noted earlier, had emerged over the previous two decades as a major commercial town. Consequently, infrastructural projects had mushroomed. Capitalizing on local, regional and national contacts Adom “won” numerous contracts. Some district assembly members revealed in interviews that Adom quite often began working on projects without a certificate authorizing work to start, assured that he would be paid. He also reaped enormous benefits from the divestiture program, though the published list of divested stateowned enterprises indicates that he bought only one company—the Ghana National Trading Company, Sunyani Complex.6 His financial and other contributions to the NDC were probably second to none in Brong-Ahafo. Among other contributions, he provided vehicles, paid for fuel, paid party activists, and hired entertainment bands (confidential interviews). He participated in several NDC political rallies in 2000. He proved to be of great value to Vice-President Mills during his campaign for the presidency in 2000. The latter encountered difficulty in garnering support at Sampa, Brong-Ahafo, where local leaders made it clear the electorate would vote for him only on one condition: if he would ensure that the main road linking the town to Wenchi was tarred. Referring back to their experience of being tricked by a pre-election gimmick in 1996, when construction began on the road only to be abandoned after the elections, they threatened to vote en masse for the NPP unless work on the road started and unless they were persuaded that the government was sincere about completing it (interviews). Mills

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asked Adom for help. The latter began working on the road without signing a contract agreement (confidential interview). Adom, again, responded promptly to the NDC’s frantic effort to win votes in Sunyani by beginning to asphalt major streets in the city just weeks before the 2000 elections. This seat was held by J. H. Mensah, the veteran NPP politician. Mensah had long been a thorn in the government’s side. He had recently caused much concern for the regime over the issue of the acquisition of a second presidential jet. The private media had credited him with spearheading investigations that supposedly uncovered that the controversial presidential jet had been acquired under fraudulent circumstances.7 This had become a major election issue, and it was an open secret that the NDC was particularly keen to wrest Mensah’s seat from him. Many observers saw the refusal of Radio Brong-Ahafo to sell air time to Mensah as further proof that the NDC was prepared to do whatever it could take to defeat him. As might be expected of a figure of Adom’s stature in the NDC, he had no links with the opposition parties. Therefore, in the event of an NPP victory, he was likely to face discrimination. He tackled this by devising an ingenious strategy. His brother and business partner became, with Adom’s blessings, a well known supporter of the NPP. It should be stressed, however, that professing to support the NDC did not automatically confer rewards on entrepreneurs. Nor did it necessarily prevent harassment and sabotage. Declaration of support for the NDC was a necessary first step for favorable consideration. The next step was to make ample donations to the party and to be totally loyal to it. Without doing these, an avowal of support meant little and it could even backfire. This was partly because business clients far exceeded the available patronage resources. Also, party officials were very suspicious of duplicity on the part of entrepreneurs. Consequently, it was crucial to demonstrate loyalty in order to gain access to rewards. Some entrepreneurs failed the loyalty test, not least because officials and party functionaries sometimes made “impossible” demands. The next two cases illustrate these themes. Kwaku Antwi Kwaku Antwi, a relatively young businessman, dealt in wholesale and retail trade and was an agent for several business houses. He said in my interview with him that, unlike many other entrepreneurs who obtained NDC membership card because of its political convenience and expected benefits, he truly believed in the party. He said he hired

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campaign vehicles, paid for fuel, and provided other resources for the NDC during the 1996 elections when he returned to Ghana after living abroad. He claimed to be the best campaigner in the district, adding that his biggest contribution was winning votes for the NDC in the 1996 elections (the NDC narrowly won the two seats in his district). The DCE and the traditional council offered him building plots in a prime area of the town as reward. He purchased four and began building a hotel. In making friends in NDC circles, however, Antwi also offended some. His sales fell after the 1996 elections. He discovered that his political activities had led some of his customers to boycott his business. It should be noted that he was among a team of NDC campaigners that clashed with NPP activists shortly before the 1996 elections, resulting in the torching of a pick-up truck and injuries to several people. With one of his major suppliers threatening to appoint another distributor unless he could boost his sagging sales, he distanced himself from the NDC by avoiding participating in its public activities. The DCE and members of the NDC constituency executive summoned him to explain his behavior, accusing him of betrayal. Despite insisting that he had not defected, but simply wished to focus on his business, and despite reassurances of his continued financial support, the NDC executive members remained unconvinced and demanded a more activist role from him. Antwi, in turn, reiterated his loyalty to the NDC, but maintained that he could not allow politics to interfere with his business in such a costly manner. Intimidation and harassment began soon thereafter. The DCE and local NDC officials threatened to demolish Antwi’s nearly completed hotel, claiming that he had not obtained a land title and other documents. He disputed this, reminding them that they themselves had helped him to obtain the relevant documents. Also, he indicated his preparedness to take legal action. The threats stopped temporarily before they again ordered him to stop work on the hotel, this time ostensibly because it would be in the way of a planned dual carriageway. Again, he threatened to go to court, stating that he obtained prior approval from town planning officers and all the appropriate officials. Owing to fears that the local authorities might carry out their threats, he halted work on the hotel in 1998 (interview). According to Antwi, sabotage went further. The extent of this became clear when he applied for a bank loan. The bank manager, whom he considered a friend, surprisingly turned down his application, saying that he could not accept the hotel as collateral because the

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DCE had written to advise that it would be razed. (He claimed the manager showed him the note.) He further alleged that he was told that, even if he presented another asset as collateral, the loan could not be approved as that might draw the DCE’s ire (interview). Kwaku Manu The story of Kwaku Manu, a relatively small timber businessman, is interesting in that, having entered business only a few years prior to the interview, he was a budding businessman with quite limited resources. Unlike Antwi, he supported the NDC for practical benefits. Local NDC officials, as well as rank and file supporters, urged him to contest the constituency seat in the 2000 elections, believing that, as a university graduate, he would give them more effective representation than their poorly educated parliamentarian had managed since 1992. He declined this offer, saying he could not combine the demands of business with parliamentary duties and expectations, but pledged his continuing support for the NDC (interview). Thus began a “very difficult relationship.” He “could not shake off party officials and their unreasonable requests” which, in time, included demands to join NDC rallies (interview). Manu was conf licted. While he preferred a more discreet association with the NDC and one limited largely to financial contributions, party leaders desired a public affirmation of their relationship. His dithering attitude led to suspicions about his loyalty. Thus, he risked a range of potentially crippling actions that could be instigated by the DCE. This included a sudden escalation of police checks on the safety of his admittedly poorly maintained old tractors and trucks. Also, the Environmental Protection Agency could be called upon to enforce environmental regulations, with which he seldom normally complied. Furthermore, the Forestry Officer and Timber Task Force might no longer turn a blind eye to his harvesting trees in protected zones. It would also mean that logs seized by officers from chainsaw operators would no longer fall into his lap. Much was therefore at stake. Manu faced a test of loyalty on the day the NDC presidential candidate, John Mills, visited the constituency. Having already donated 5 million cedis (about $800), supplied party T-shirts, and transported supporters from outlying villages, local officials asked him to be the Master of Ceremony at a planned reception after the rally. Manu was concerned that, if he refused, it would heighten speculation that his links with the NDC were for convenience only and there would be

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repercussions. “This was their biggest day. Refusing to perform the duties they asked of me, would betray me and my business career could be over” (interview). He accepted the role out of fear. In the event, the planned reception never took place because Mills’ visit lasted less than one hour, the constituency seat being considered a safe one. Manu narrowly escaped the type of risk that ensnared Antwi. General Attitudes and Strategies of Entrepreneurs A brief discussion of how entrepreneurs more generally related to politics is necessary here. Both past and present incidents persuaded them that their political relations or public posture toward power wielders affected their business fortunes. Most entrepreneurs were therefore tactful in their political relations. They also sought to cultivate covert ties with opposition parties, particularly the NPP, which had the best chance of defeating the NDC. This enabled them to balance present needs against future ones. Exceptions to this were, as the preceding analysis reveals, a minority of entrepreneurs whose antagonistic relationship with the NDC was irreparable and, at the other end, another tiny group whose closeness to the NDC precluded a relationship with the opposition. Two cases illustrate, in a concrete way, important common features of how entrepreneurs related to politics. The case of the owner of a poultry farm, cold stores in several towns, and a distillery appears to be entirely typical. This “devout Christian” insisted during interviews that he eschewed politics. Even so, he “accommodated” politicians, and was quick to add that he had good relations with all parties. Whenever the NPP held party events in Sunyani, such as its leadership congress in 1995, he permitted them to store their drinks and other items in his cold store. He extended similar goodwill to the NDC. Extending courtesies proved very costly to him during the ceremonies marking the fortieth anniversary of Brong-Ahafo as a region, in 1999. During this NDC-dominated event, local authorities requested use of his cold store. To make room for them, he moved some stock to another town, which later experienced power outage for days, causing his goods to rot and a substantial loss of money. When asked to explain why he went to such great lengths, he said he might have attracted punitive measures had he not. He explained: You know that there is a long list of entrepreneurs who have been crippled for being perceived as anti-NDC or uncooperative. You

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can be denied bank loans if you are seen as an opponent of the government. It is not beyond them to order the electricity corporation to cut off power to my cold store, poultry farm and distillery. I could be sabotaged in many ways . . . you must understand the risks of creating the wrong impression. I recovered, and I am still in business. As was the case with many of my interviews, this businessman, without being prompted, cited several cases of capitalists who had experienced government harassment to justify his own political attitudes and strategies. Ghanaian entrepreneurs were evidently knowledgeable students of government-business relations in Ghana. The story of an entrepreneur whose business interests included a hardware store, a cement block factory, and a wholesale/retail f lour shop in a major town in Brong-Ahafo offers further insights. When I first interviewed him in July 2000, he said a delegation from the DCE and NDC constituency executive had demanded a donation of 6 million cedis, with which he had complied. In another interview two months later, he complained that the delegation had returned to ask him to foot the bill of renting three buses for an NDC rally in Sunyani. Though he had complied, he grumbled against this “extortion.” His explanation to why he complied was similar to that of the above businessman: Three years ago, the NDC repeatedly asked me for donation. After a while, I refused to donate. One night, my f lour shop was broken into. Water was poured on dozens of bags of f lour. A neighbor who witnessed this from a safe distance revealed to me who the perpetrators were. But the police refused to even question them. They were NDC activists. . . . What they are doing to me is wrong but they will chase me out of business for non-compliance. Though his fears of harassment for noncompliance seem understandable, the issue went beyond that. He, like most others, revealed in interviews that he also donated to the opposition NPP to hedge his bets. Clearly, entrepreneurs were acutely aware that politicians could make or break them and many sought to cultivate good relations with political parties whether they were in power or not. Many entrepreneurs also held multiple party membership cards, most commonly NDC and NPP cards. While an NDC card served present purposes, the future could not be ignored; hence the need for an NPP card.

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The NDC and Contractors It is useful to highlight relations between the NDC and contractors for three reasons. First, the Rawlings era witnessed something of a construction boom owing to increases in donor-assisted infrastructure projects and Rawlings’ commitment to rural development. Ghana’s capital budget constituted 6 percent of GDP in 1995 and 4 percent in 1996, and half of this was spent on road construction (Oelbaum, 2002, p. 302). This offered prospects for capitalist expansion. But how widely were these opportunities distributed and did they result in the expansion of Ghanaian capitalists? Second, a consideration of these relations provides insights into the contribution contractors made to the NDC. As a group, contractors may well have been the single most important source of business funding to the NDC. This took the form of kickbacks from contract awards and other resources. “It is telling” writes Jay Oelbaum (2002, p. 310) “that with the exception of Greater Accra, all NDC regional chairmen [were] contractors.” Most contractors rose largely on the basis of their political ties to the NDC. Third, focusing on the NDC’s relationship with contractors permits an assessment of the party’s portrayal of itself as the party of the “common man.” Rawlings himself, of course, led the way in projecting this image, presenting his triumph as the triumph of the common man. His famous declaration of “democratizing” economic activity by wrestling control of the economy from “big men” in June 1993—a recurring theme throughout his leadership—epitomized this. Closer scrutiny shows that these claims were misleading. In reality, moreover, nepotism, favoritism, and discrimination characterized contract awards and the NDC became embroiled in precisely the kind of “cronyism” it had initially set out to eradicate. This resulted in the domination of the construction sector by a small group of regime allies. Others strained, with little success, to find favor with authorities in the award of contracts. I examine these themes via empirical evidence obtained from investigations and interviews with businesspeople and members of DA. The evidence reveals that, across Brong-Ahafo, a core group of contractors was awarded the bulk of contracts. This tiny group consisted of leading local NDC functionaries, activists, and their relatives and friends. In fact, quite commonly, DCEs and other officials or their kin became contractors. Confidential interviews in one district indicated that about 60 percent of all public contracts from 1997 to 2000 went to three contractors. A single contractor was awarded 40 percent of all contracts. This individual had earned the honor “father” of the party in

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the district for his pivotal role in helping the NDC to establish a foothold in the constituency in 1992. Among other things, he was rumored to have “donated” a section of one of his houses as NDC constituency office. His oldest son, who managed the company, scoffed at such rumors when I interviewed him, but he failed to say how much the NDC was paying for its occupancy of the building. The second highest recipient of contracts (about 12 percent) over the same period was a member of the DA from 1988 to 1994, when he resigned to pursue business. Prior to serving as a member of the DA, this former teacher had been the district coordinator of the defense committees, set up by the PNDC in 1982. According to popular rumor, an emergency relief fund provided to the district following a 1992 rainstorm disaster served as his start-up capital. It was commonly said that the DCE co-owned this business, reinforcing and fueling the belief that diversion of funds provided the initial capital. Efforts to establish the veracity or otherwise of such rumors proved extremely difficult. But it hardly obscures the point here, which is that this company’s success had been meteoric. The third most successful recipient of DA-awarded contracts (8 percent over the same period) was a close and long time personal friend of the presiding member (effective speaker of the DA). Nearly all interviewees in this town believed that the latter co-owned this construction firm. Further, there was a common belief that the DCE and the presiding member cooperated by assisting each other’s companies (company?) By contrast, the remaining twenty-five contractors struggled. Some claimed that they had not been awarded any contracts for more than one year. This bleak situation forced ten contractors in this district to quit the industry from 1999 to 2000. Interestingly, none of them was known to be antiregime. In fact, they insisted in interviews that they held NDC membership cards and had regularly donated to the party. What separated them from their privileged competitors was that, whereas the latter either had long relations with the NDC or were connected to powerful and inf luential figures, the former were latecomers, and therefore occupied the bottom of a system that operated on a pecking order. Not only is this point illuminating but it should also serve as a corrective to the clearly erroneous perception on the part of much of the private media and the opposition that the acquisition of an NDC membership card by entrepreneurs automatically entitled them to patronage. Critics felt some satisfaction when an NDC MP queried in parliament “whether the government was trying to develop

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a new class of businessmen where a Political Party card qualifies one for assistance” (Ghanaian Chronicle, March 3, 1996). The truth, as revealed here, was more complicated than holding an NDC card, or even making donations to it. Differential treatment of the veteran and newly arrived NDC contractor-supporter went further. DAs frequently experienced shortage of funds and were unable to pay contractors in a timely fashion8 for three main reasons. First, the Common Fund, by far the single most important source of DA funding, was often disbursed late. This might be due to lack of funds at the central treasury, bureaucratic red tape, or the politicking associated with centrally controlled resources. Second, powerful and inf luential figures used funds for private purposes. Third, funds were used for unbudgeted projects such as rebuilding suddenly collapsed bridges or classroom blocks and sometimes for decidedly odd things such as one DA, which, according to some members, “lent” money to a local royal family for the funeral of a deceased chief (interviews). Shortage of funds resulted in favoritism and discrimination in the payment of contractors. Whereas some contractors were badly hit by this discrimination, others profited from it. Examples from Nkoranza district will illustrate this. Here, in 1998, eight contractors, having experienced delayed payments for jobs they had already executed, in some cases for as much as eighteen months, appealed to officials, but to no avail. Faced with mounting financial difficulties, three of them sought the intervention of some prominent local figures. This proved effective, but it angered the DCE, who allegedly accused them of “embarrassing” him. The other five were accused of “going public” after seeking help from certain DA members. Six of these eight contractors were struck off the list of contractors (interviews). Striking parallels were found across Brong-Ahafo. Examples abound, but three may suffice here. A contractor completed construction of a classroom block in September 1999 but was not paid for nine months. This, he said, was only the latest example of discrimination. When he finally received payment, he quit the construction industry. Another contractor claimed that by the time he completed resurfacing a feeder road, he had received 25 percent of the money owed him. The remainder of the money, he said, was “held” for the next eighteen months. “When I finally received payment, an expected profit of about 15 million cedis had turned into a loss of about 25 million cedis. I sold my equipment to defray the cost, forcing me out of business.” A third businessman recounted a similar story. After completing a clinic in a

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village, obtaining payment “turned into a war. It was as if I was begging for a loan or a gift. I spent days at the assembly. On several occasions the officials threatened to cause my arrest unless I stopped coming there. By the time I was paid, it was clear that no contracts would be awarded to me in future. I am now a trader.” Others, by contrast, received prompt payments, including payments for unexecuted contracts. In Nkoranza, where, as noted above, some contractors encountered long delays in receiving payments for completed jobs, others faced no delays. In fact, favored contractors received full payments well before executing contracts. Such individuals were known to have close ties to powerful and inf luential figures. Indeed, it was in protest at kin ties between leading figures of the DA and some contractors that youths staged rowdy demonstrations against the DCE in 1998, which ultimately led to his removal by the President. This, however, was not until the minister of local government and the regional minister had been clandestinely dispatched to seek the support of the Nkoranza chief in an effort to save the DCE. When this failed, a “young” NDC activist believed to have inf luence among the youth was widely rumored to have been given an undisclosed sum of money to buy them off. This failed as well, whereupon he kept the money and was subsequently arrested and detained for some time (interviews). In this district, research indicated that on only one occasion did a member of the favored group of contractors, the uncle of an inf luential member of the executive committee, experience payment delays. This followed very public complaints by some villagers that a road he had resurfaced was unsatisfactory. After unsuccessfully petitioning the DA to order the job redone, they threatened to pursue the matter at the regional level. Probably because he feared investigation, the DA withheld payment (confidential interviews). Ultimately, there was no investigation, and the contractor was duly paid. Clearly, the circumstances were “unusual” and, more importantly, had no negative impact on his activities. Favoritism and discrimination in contract awards and payments were common and should not detain us here. The point to stress is that these were nationwide issues, which prompted the government to issue “new directives” in an effort to stem the trend. These included an order that, “no contractor is required to begin work on any new or on-going project . . . without a certificate authorising work to start.” As well, “every contract award letter should include a clause directing the MDA (Ministry, Department or Agency) to obtain a certificate of commencement of work on the project from the Ministry of Finance.” And “the

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certificate should be attached to each interim payment certificates. No payment will be made for any work done on any project for which such a certificate has not been obtained” (Daily Graphic, April 7, 2000). The “new” directives were hardly new. Certainly, they were aimed at tackling old issues. Botchwey (1999), minister of finance until 1995, provides a first hand account of “rogue” contractors and excessive fraud in the construction industry. Reports by the SFO abound with instances of collusion between officials and contractors. Consider these two prime examples. In Kpando, Volta Region, SFO investigations found that a contractor awarded a 77 million cedi contract “had no valid documents to qualify him for the award of the contract. He had no equipment also for the job.” But he had already been paid 29 million cedis (Serious Fraud Office, 1999, p. 25). In the Jaman District, Brong-Ahafo, “laid down procedures in awarding and paying for contracts were not followed. There were cases of overpayment and making full payments for contracts which were only half completed” (Serious Fraud Office, 1999, p. 30). Thus, when monitors conducted physical inspections of projects for which certificates had been submitted for payments in 1999, they found that “141 of 675 certificates presented by contractors for payment . . . were fictitious” (Daily Graphic, April 7, 2000). These were, then, common practices and it seems that the “new” directives went unheeded. Indeed, in an election year, collusion with contractors had an added impetus.9 For instance, in late 2000, a handful of DA members clashed with the DCE of Berekum for ordering full payment to be made to a contractor and a known NDC activist for work that had just begun. The “rebels” alleged that the DCE had awarded the contract without inviting tenders—a common but illegal practice. It must be noted that it was not the “new” directives that inspired the rebels. In fact, they seemed unaware of them. Rather, they seemed to be working with the NPP to undermine the DCE and the NDC, perhaps emboldened by a feeling that the NDC might be defeated in the upcoming elections.10 Remarkably, senior officials themselves appeared to have f louted the “new” directives when they contracted Adom to begin various projects without inviting bids from other contractors. Difficulty in winning contracts and in gaining payment forced many contractors to rely on subcontracts. This, they argued, involved less hassle. Expressing a common sentiment, one contractor noted: “I no longer bid for contracts; it is not worth it. You pay the mandatory kickback before you are awarded a contract. You incur additional costs by paying bribes to a host of officials. Yet you do not get paid for

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months . . . . Sub-contracts eliminate many figures and payment is usually less stressful.” Consequently, two tiers of contractors evolved. The first tier, which was dominated by those with the closest ties to the NDC, the DCE, or other inf luential figures, often made spectacular progress. The second tier consisted primarily of contractors with tenuous ties to the NDC; they struggled for survival. Conclusion: Businesspeople and Politics under the NDC This discussion recalls Rathbone’s characterization of Ghana’s economy as small and capable of supporting only a small section of business at any given time. One major result of this is intense competition in which entrepreneurs have found that cultivating close ties to regimes gives them an edge. Rathbone argued further that, though each regime had opened up new possibilities for its supporters to the extent permitted by the size of the economy, the timing of an entrepreneur’s support of a regime was critical to his/her business fortunes. Using an arresting analogy, he wrote “But while the economy was opened to admit new groups, it was hastily closed against new entrepreneurs who were latecomers.” Thus, there were winners and losers at any given time, with the latter railing “against the new exclusion” (Rathbone, 1971, pp. 166–167). Clearly, this proved true even in the construction industry, which, under the NDC, offered far more opportunities than many other sectors of the economy. For entrepreneurs excluded by this closed system, the growing possibility that the NPP might capture power in 2000 was a welcome prospect. As one businesswoman noted, if the NPP won she will “publicly embrace it quickly” (interview). Such open declarations were rare, but many undoubtedly saw a change in regime as the key to their future success. The politicization of economic opportunities bore striking similarities to what obtained under the Convention People’s Party (CPP) regime. The CPP, three decades earlier, had styled itself as the party of the common man, though some have argued that it might more accurately be described as the “party of contractors.” This characterization ref lected the CPP’s use of state power and patronage to bind businesspeople, most notably contractors, to the party. More appropriately, the term referred to the many party leaders, including ministers and parliamentarians, who became contractors when the CPP came to power. Until then, many of the now wealthy figures had possessed little or no capital (Kraus, 1971; Rathbone, 1973). Their ascendancy

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was notwithstanding the party’s proclaimed belief in socialism, which, as Krobo Edusei, a key figure in the regime, famously insisted, was not incompatible with private wealth accumulation or conspicuous consumption. The evidence shows that a similar process evolved under the NDC as senior figures in the administration, using their power and inf luence, established extensive business interests. As well, like the CPP, the NDC and its forebear, the PNDC had extolled the virtues of austerity and rectitude and their leaders had presented themselves as champions of the common man. Moreover, the pathologies of local government in Brong-Ahafo and elsewhere in Ghana resembled those of the national government. One key reason for this was that both levels of government were similar in structure. More specifically, both had a preeminent leader who wielded considerable power and enjoyed significant leeway. DCEs were in many ways equivalent to the President of Ghana at the local level. Their domination of local affairs and their steadfast support of the NDC drew the ire of the opposition, especially because they were nonelected and owed their position not to an electorate but to the President. A related reason for the notable parallels between the national government and local authorities was that, the key players at local levels had long associations with the national leadership, often dating back to the PNDC era. Not only did such figures share the beliefs and attitudes of the national leadership, they had also, as Rawlings noted, met the test of loyalty and been tried and tested. Since a significant number of DCEs and NDC functionaries had served from between ten and eighteen years, their attitudes toward entrepreneurs were intuitively in tune with the national leadership. Indeed, as I have shown here, as central props of the NDCs political machinery, DCEs had an acute understanding that they were expected to deliver politically. They knew all too well that their ability to deliver hinged on their control of patronage, backed by their ability to bully entrepreneurs into line and, failing that, to make life difficult for them. In short, the same fundamental concerns that drove the actions of national leaders operated at the local level. In fact, the actions of national leaders seem to have provided a model for local authorities. The outcomes, as I have shown, were remarkably similar at both national and local level, that is, whereas opposition-aligned entrepreneurs declined allies of the ruling party f lourished. Inevitably, patronage—a pervasive feature in Ghanaian politics— persisted. Thus, notwithstanding the implementation of policies to

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empower business, and notwithstanding the Rawlings governments’ proclaimed aversion to cronyism, the pattern of the correlation between close ties to regimes and success in business endured. In the 1990s, particularly in the latter half of that decade, Rawlings and his allies came under stinging criticisms and scorn for their high moral tone in their earlier denunciation of cronyism. By 2000, it had become routine for the private press to post photos of the military officers executed by Rawlings’ AFRC regime in 1979 beside photos of him and his family and to argue that the executions had been motivated by nothing but self-interest. In Brong-Ahafo, and elsewhere in Ghana, because the local nouveau riches had risen largely due to P/NDC patronage, they were similarly resented. Since the leadership’s initial attacks against cronyism and corruption had been especially strident, its own culpability made it very vulnerable to the same charges. Moreover, despite mounting evidence of straightforwardly corrupt behavior, party and government leaders, including Rawlings, failed to criticize self-enrichment within their ranks. Indeed, they sought to prevent the exposure of such deeds and did little to stop their repetition. A prime example was the government’s dogged, but ultimately unsuccessful bid to prevent investigations into allegations of corruption against two presidential advisers and two ministers of state. In 1996, investigators found all but one guilty of financial impropriety. Both ministers resigned. One refunded money to the state. The other was allowed to contest and win a parliamentary seat on NDC ticket in the 1996 elections. The government “in effect condoned abuses of office by NDC stalwarts” (Sandbrook and Oelbaum, 1997, p. 637). As shown here, the regime proved equally loath to sack corrupt officials at the local level, much less probe their conduct. Indeed, disgraced figures such as ex-DCEs, were quite often allowed to keep their perks such as official vehicles and offered public employment, most frequently in the nonformal education sector, dubbed a “dumping ground” by critics. One ex-DCE was quite perceptive, if rather smug, in noting in an interview with me that, “The NDC takes care of its own even if it has had to sack them.” The internalization of such values arguably helps explain why many DCEs and others at the DAs acted corruptly. The failure to take decisive action against corrupt officials and activists in order to give the NDC even a veneer of probity should cause little surprise. As in Jones’ (1976) analysis of CPP failure to stop what Nkrumah dubbed “self-seeking and careerism” in his famous “dawn broadcast” in 1961, corruption had permeated the entire leadership and weakened its moral authority to institute disciplinary measures.

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Moreover, any such effort was likely to have met with little success, as it was bound to upset powerful interests and threaten party unity. Thus, even as self-enrichment discredited the NDC, it also served as a political glue to hold it together. Nkrumah missed this point in sacking Edusei for his opulence in 1962, and in remarkable volte-face, reinstated him shortly thereafter. Adam’s resignation and his acceptance back into the NDC fold recalled the Edusei episode. Such self-serving tendencies might seem to make nonsense of the NDC’s claim to be the party of the common man. Yet, as with Nkrumah’s CPP, there was an element of truth in that it was certainly not the party of the older, established business class. It rather served as a vehicle for rapid mobility for many of fairly humble origins.

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CH A P T E R

EIGH T

Constraints of the Institutional Environment on Capitalist Expansion

Indigenous capitalist expansion remained very limited and disappointing under market reforms. The inherent contradictions of the economic policies themselves were partly to blame for this. Various governance-related problems also discouraged capitalists from investing. But might the limited expansion of Ghanaian capitalists not be attributable to their own weaknesses—the so-called growth-inhibiting cultural attitudes? To what extent did such attitudes hinder the growth of Ghanaian entrepreneurship in the 1980s and 1990s? This issue cannot be fully grasped without first verifying the extent to which the business environment was congenial to, and supportive of, capitalist operations. State institutions, more especially the civil service and the judiciary, merit particular attention because of their primacy in creating conditions conducive to entrepreneurial activity. Because exportled economic growth was the foremost goal of reform, an analysis of what support was provided by the Ghana Export Promotion Council, the state agency tasked with promoting exports, is also warranted. Only after considering these issues can the argument that cultural attitudes hinder the growth of local capitalists be properly contextualized and analyzed. Two main sets of arguments are advanced in this chapter. The first is that Ghana failed to provide the institutional preconditions that allow capitalism to f lourish. The bureaucracy failed to provide genuine encouragement and support to capitalists. The legal system also failed to protect capitalists from the risks of investment. Thus, I provide further elaboration and another dimension to my earlier observation

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that Ghana implemented only very limited “governance” reforms as evidenced by the failure of the Rawlings governments to consult business and the arbitrary character of the treatment meted out to capitalists. I elaborate on the very limited degree of reforms as regards the judiciary and bureaucratic attitudes toward the private sector. The second argument presented here is that the “cultural attitudes” exhibited by Ghanaian entrepreneurs, while not unimportant, were largely a response to uncertainty and chaos arising out of the environmental conditions. Exploring the cultural attitudes argument provides insights into an issue that characterized earlier analyses of Ghanaian and African entrepreneurs and the extent to which they still had relevance to Ghana in the 1990s. Institutional Preconditions for Capitalist Development There is a general consensus among scholars of development that state institutions must provide certain preconditions to stimulate capitalists to invest and grow. The “culture of capitalism” a noted scholar observes “cannot easily take root and f lourish where the institutional and economic climate inhibits the ‘right’ business responses because it fails to offer an adequate reinforcement in the shape of economic and social rewards” (Kennedy, 1980, p. 166). What are institutions, this critical aspect of the development puzzle? According to Douglas North (1990, p. 3), the economic historian, institutions: are the rules of the game in a society, or more formally, are the humanly devised constraints that shape interaction. In consequence they structure incentives in human exchange, whether political, social or economic . . . . That institutions affect the performance of economies over time is hardly controversial. That the differential performance of economies over time is fundamentally inf luenced by the way institutions evolve is also not controversial. In a market-based economy, the rules of the game may be described as a system of simple, transparent laws and regulations; consistent interpretation and enforcement; just and rapid resolution of conf licts; and a social attitude of respect for legal and regulatory institutions (Stone et al., 1996). Clearly, then, the state machinery—police, the courts, the bureaucracy, etc.—has a decisive role to play in the creation and enforcement of the rules of the game. Capitalists will be inclined to

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invest in an environment where these conditions prevail because it is likely to be marked by a high degree of predictability. By contrast, where these conditions are nonexistent or are rarely adhered to, uncertainty and chaos prevail, serving as powerful disincentives to significant investments. Although the level of investment capitalists commit depends largely on the institutional environment, it was not until relatively recently that economic theory paid any very serious attention to this. As North has noted, “neither current economic theory nor cliometric history shows many signs of appreciating the role of institutions in the economic performance because there as yet has been no analytical framework to integrate institutional analysis into economics and economic history.” He therefore set out to “provide such an underlying framework” (1990, p. 3). Since then there has been an explosion in studies that use this analytical framework (e.g., Harris et al., 1995; Alston et al., 1996; Clague, 1997). Known as the new institutional economics framework, this “new” body of theory systematically integrates institutional analysis into economics to illuminate the role of institutions in explaining why some countries make economic progress while others remain mired in underdevelopment. Given the belated recognition that the level of investment capitalists commit is chief ly dictated by the institutional environment, it is not entirely surprising that World Bank/IMF efforts to guide African economies toward more productive trajectories initially paid scant attention to institutions. Indeed, neoclassical economics from which much of the policy thrust prescribed by these institutions derived had traditionally assumed that institutions were in place and what was really needed was the correct set of policies (Stone et al., 1996). Hence, the famous Berg Report (1981), the World Bank’s seminal publication that shaped its initial policy formulations of Africa’s economic crisis, identified pervasive state intervention in the economy as the main culprit. This “economistic” thinking led to the prescriptions: “get the prices right,” “keep governments from direct economic activity,” and “let the private sector take over.” This became the new orthodoxy in economic thinking and indeed a kind of fetishism, in that its proponents assumed that, once the state implemented the correct policies, the private sector would invest. This, however, proved fallacious; there is no simple correlation between market reforms and a surge in private sector investment. By the mid-1980s the Bank’s experience in Africa had led to the recognition that weak state institutions hindered economic growth. This prompted a rethink of the excessively “economistic” approach to

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Africa’s economic crisis. The role of politics in inducing Africa’s economic crisis and its continuing hindrance to ongoing economic reforms was recognized, hence the introduction of “governance” conditionalities. The constraints of inadequate transport and communication infrastructure were also noted (World Bank, 1989). Administrative reform became a major concern, culminating in the creation of the African Capacity Building Initiative in 1989. Significantly, lessons from Ghana, where Bank advice led to improvements in economic performance but failed to produce self-sustained growth, were instrumental in this learning curve. The developmental states of East Asia provided further and demonstrable evidence that a congenial institutional environment is critical for stimulating rapid economic growth. Their spectacular growth had occurred via a market-led strategy but also, and crucially, a supportive institutional framework. Studies have stressed the critical role state institutions, particularly the bureaucracy, played in transforming these countries ( Johnson, 1987; Wade, 1990; Evans, 1992, 1995). Bureaucrats in these countries collaborated with capitalists to facilitate their operations. The ability of bureaucrats to embed with business and still retain their autonomy—“embedded autonomy,” as Evans terms it—“is the key to the developmental state’s effectiveness” (1989, p. 574). The NICs have overcome the difficulty of transforming an aggregation of officeholders into a coherent, purposeful group. This difficulty, to which Max Weber devoted a lot of time, arises from the tendency for personal acquisition and informal power. Weber suggested that the higher goal of national interest can rectify this. He saw the bureaucracy: . . . as a specific kind of coherent organizational entity in which pursuing collective goals becomes the best way to maximize individual self-interest . . . Bureaucracy in the Weberian sense requires a demanding combination of characteristics. Being a Weberian bureaucrat means renouncing immediate possibilities for income and informal power in order to retain the rewards accruing to members of the organization over the long run. For this to happen, membership of the organization must be seen as a distinctive, valued status, and the prospect of long-run rewards must be clear (Evans, 1997, p. 69). Bureaucratic behavior in much of Africa falls short of both the Weberian ideal and what prevailed in the Asian NICs. In Zaire (Congo), for

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instance, President Mobutu himself noted that “holding any slice of public power constitutes a veritable exchange instrument, convertible into illicit acquisition of money or other goods” (Young, 1978, p. 172). Such predation discourages investment. This has relevance for Ghana. The Bureaucracy and Capitalist Development in Ghana Consideration of the extent to which the bureaucracy facilitated business operations in Ghana should begin with two observations. First, at the start of adjustment, the bureaucracy was in a shambles and bedeviled with intractable problems (Gyimah-Boadi and Rothchild, 1990; Gregory, 1996). Its capacity to support capitalist operations was very limited and this improved only marginally in the 1990s. Second, a largely antiprivate capital bureaucratic culture persisted into the Rawlings era. Several characteristics have been identified with Ghana’s bureaucracy. First, bureaucrats have tended to behave in particularistic rather than universalistic ways toward clients. Second, the public service maintained an excessively centralized structure of authority and decisionmaking procedures so that even fairly mundane issues and decisions were referred to Accra, the capital city, and junior officers left virtually all decisions for their superiors. Third, corruption pervaded the service despite the appointment of commissions of enquiry to determine both the causes and means to combat it (Price, 1975; Werlin, 1972). The near-collapse of the state led to a neglect of the public service and exacerbated the problems. There was a critical shortage of basic items, including stationery. Also, the wages and salaries of public servants fell far behind the rate of inf lation. Moreover, quite commonly, public officials went without pay for months. Many were forced to leave their offices after a few hours of work each day in order to find other avenues of supplementing their income. Morale and discipline plunged, causing many of the more highly qualified personnel to quit or migrate ( Jeffries, 1993), depriving the public service of a cadre of experienced, professional officers. Besides being unsuited to capitalism, the long tradition of economic statism and vilification of capitalists had fostered a bureaucratic culture that was anti–private capital. The jettisoning of the statist and welfarist system of which bureaucrats had been major beneficiaries inevitably won little enthusiasm and cooperation from them. In Africa, it is worth noting, public officials had traditionally had much to mistrust

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in capitalists, as the latter competed against them for state resources (Bowditch, 1999). Besides a few technocrats such as Kwesi Botchwey, and Joseph Abbey, the level of bureaucratic commitment to private business in Ghana was low. Thus, the public service possessed neither the ability to facilitate business activity nor was it favorably disposed to business when the reforms began. Yet apart from replacing those seen as anti-PNDC with pro-PNDC officers, little was done by way of reforms until 1987, when reforms largely motivated by the narrow aim of downsizing the service were begun. In the 1990s the effort shifted toward capacity building, involving incentives such as improved wages and conditions of service to retain the existing crop of experts. There were also efforts to attract back to Ghana émigré talent. According to Botchwey (1999), this was very useful initially though, over time, it proved unsustainable owing to lack of funds and complaints that Ghanaians who had deserted the country during tough times were being rewarded. Supply of vehicles, stationery, and modern office equipment, such as computers, improved. This facilitated operations and restored some pride in public officers. Efforts specifically designed to attune the public service to the needs of the private sector were unveiled in December 1994 with the creation of the National Institutional Renewal Programme (NIRP). A document released in March 1995 detailing the NIRP’s goals noted that public administration in Ghana had been weak in comparison to the fast-growing economies. It described previous efforts to improve efficiency and motivate public servants as “mainly ad-hoc and noncomprehensive.” The NIRP’s task was to develop a “proactive and motivated public service capable of contributing toward the attainment of broad policy objectives of Government in the areas of good governance, accelerated economic growth, private sector development and equitable social development.” But it was its aim of “progressively bringing about a fundamental and strategic change of the Ghanaian Public Service . . . and re-orienting its current institutional behavioral pattern and mind set from the vestiges of regulatory value systems and management to developmental and promotional ones” (National Institutional Renewal Programme, 1995, p. 3) that broke new ground. This was a call for public servants to facilitate development by supporting entrepreneurial operations. The appointment of presidential advisor, P. V. Obeng, the P/NDC’s “Mr. Fix-It,” to oversee the work of the NIRP signified the importance the regime accorded it. As part of the effort, a Public Sector

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Reinvention and Modernisation Strategy was launched in 1997 to change Ghana’s public service “from its present input orientation to an output and results focused service,” and “to transform state institutions, their accountability and performance framework and their relationship with private sector and civil society” (ISSER, 1999, p. 163). Under both Obeng, who left the regime in 1998, and his successor, Vice-President John Mills, very little was realized by the NIRP; and, given the circumstances, it would have been extraordinary if noticeable success had been achieved. First, this f lagship unit itself lacked vital resources—a point that struck the visitor to the NIRP. My interviews revealed that office equipment such as computers were lacking, funding for budgeted projects was often delayed or never came, and crucially, retraining officers fell far below projections. Also, despite its stated aim to cut bureaucratic delays through, for example, delegating duties, the NIRP was no model. My many efforts to interview the coordinator failed because he was often away and no one was authorized to act in his stead. To what extent did public servants welcome calls to facilitate business operations? In my interviews at public institutions, including the Ministry of Finance, the State Enterprises Commission, the Ministry of Trade and Industries, the Divestiture Implementation Committee, and the Office of the Head of the Civil Service, not a single officer disapproved of liberal economic reforms. Time and again, it was referred to as “bold” and “laudable.” Many noted that the dismal failure of economic statism in Ghana made its continuation untenable. “The private sector is the engine of growth” and “the state has no business doing business” were familiar refrains. Thus, public servants seemed not simply approving of private sector–led growth they also seemed to be at ease with capitalist accumulation. The actual attitudes of public officers toward entrepreneurs contradicted their words. My interviews revealed a dismissive and unsympathetic attitude toward entrepreneurs and their concerns. The Head of the Reform Co-ordinating Unit at the Office of the Head of the Civil Service, for example, claimed that, the “work ethic is far superior to former times” and that civil servants no longer “lord it” over the public. He credited this to the introduction of new standards, the adoption and publication of mission statements by various ministries and a more vigilant public. He suggested, dubiously, that entrepreneurs were to blame for the “bribe culture”: “They force bribes on public officers . . . believing that if you don’t accept their offer of bribes, then you won’t be fair to them and their bid.” He recounted how a businessman

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who bid for a contract to supply his unit with stationery repeatedly tried to bribe him until he warned the latter. My interviews with the executive director of the State Enterprises Commission1 and two junior officers provide further insights into the mind-set of public officers toward business. Their reaction to allegations that foreigners were favored over Ghanaians in the divestiture program, for example, was one of anger: “Ghanaian entrepreneurs have been pampered. They want profit but are unwilling to invest their own money. They want the government to keep supporting them. This is not tenable,” one said. Another declared, “state enterprises are not for free. Ghanaians are unwilling to part with huge sums of money.” The senior officer was even harsher: “Ghanaian businessmen are neither innovative nor imaginative. They make a lot of noise but can do very little. The ERP was intended to force them to be innovative, but this has not happened. They have only one way of doing things and can’t compete. Their business plans are often poor and they do not have the right attitude.” Three issues emerge from this. Such dismissive attitudes cast doubt on whether a fundamental change had occurred in the mind-set of public officers. Second, they failed to appreciate the concerns of business. Third, they had little faith in the ability of Ghanaian entrepreneurs to spearhead economic growth. I will return to these themes. Contrary to their self-perception as sympathetic to business, public officers were regarded by business as a major obstacle. Of the businesspeople whom I interviewed, 75 percent thought that public officers were unhelpful. Only 26 percent thought that the attitude of public servants had improved as against 74 percent who thought that there had been no changes. In interviews, delays and arbitrariness emerged as major problems. Entrepreneurs said that they gave bribes to avoid potentially crippling delays, and scoffed at the idea that it was their choice to pay bribes, arguing that bribes were costly. Businesspeople felt that public servants did not provide the bureaucratic order and predictability that they needed to expand. Other studies reveal major problems. A survey conducted by the Ghana Governance and Business Environment as part of the Ghana Governance and Corruption Survey in May-June 2000 found that, nearly 80 percent of the firms interviewed responded that “it was common to pay some ‘unofficial payments’ to get things done.” Moreover, “The responses show that these unofficial payments are so common that firms offer bribes upfront—without waiting to be solicited by officials. Almost half of the respondents claim that the alternative of approaching

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another officer or a superior, is never/seldom effective” (World Bank, 2001, p. 60). Introducing new regulations was one thing, but changing attitudes proved to be another matter. Corruption, thus, continued to raise the cost of doing business. Indeed, firms regularly budgeted for unofficial payments and unofficial facilitation [ibid.]. Concerning the apathetic attitudes of public officers it is instructive to brief ly examine how the Ghana Export Promotion Council (GEPC) related to exporters. Besides shedding additional light on the attitudes of officers, it is especially relevant to highlight these relations given the central role the reform program accorded exports. The sense that officers were indifferent and that the GEPC was a disappointment pervaded my interviews with exporters. The following extract from my interview with a GEPC officer is telling. I:

Some exporters say they have difficulty getting cargo space to export their goods. What are you doing to help them? Her: We are not aware of this problem. They haven’t told us any such thing. I: But it is a perennial problem, isn’t it? Her: They haven’t brought it to our attention. And even if they did we wouldn’t listen. We had a forum on August 12 [2000]. They should have made this known to us but they didn’t. As far as we are concerned then, there is no problem. I: Since the forum was organized partly to find out what problems they faced, what concerns did they raise? Her: They complained about VAT and other things. We are trying to help them. The frustration for us is that most of them come to forums without saying a word. How can we help them when they are not telling us what their concerns or problems are? I concede that our response may not be the quickest because of bureaucratic red tape. The officer overlooked several important issues. First, exporters had little confidence in the GEPC. This stemmed partly from the inability of the GEPC to provide any very meaningful assistance to them. As shown in chapter three, the GEPC was hampered in its task by lack of vital resources, financial and otherwise. More important and palpable was what exporters regarded, rightly or wrongly, as the GEPC’s “failure” to persuade the authorities to exempt them from paying VAT upfront. Exporters resented this because it “decapitalized” them.2 Second, it was a widely held view among exporters that GEPC staff

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played favoritism. Third, the GEPC kept a distance from exporters. The Federation of Associations of Ghanaian Exporters, the private umbrella body created in the 1990s, was seen to be more supportive and “trying hard.” Among other things, it provided exporters a Weekly Price Bulletin, offered Internet services, and published the quarterly, Export News. In sum, the GEPC had alienated many of the very people it was supposed to assist. There was a divergence of views between businesspeople and bureaucrats regarding the institutional environment and the low level of investment. Amponsah’s (2001) study shows that capitalists viewed the institutional environment as uncertain. Only 10 percent of capitalists responded “yes” to the question asking whether “existing laws on land ownership are effective for secure business operations”; 82.8 percent said “no,” and the remaining 7.2 percent “did not know.” To the question asking whether “existing property and contract laws are adequate and effective for secure business operations,” 30.6 percent of entrepreneurs said it was adequate, 52.9 percent said it was inadequate, and 16.9 percent did not know. By contrast, in response to the first question, 48.9 percent, 37.8 percent, and 13.3 percent of bureaucrats and politicians answered “yes,” “no,” and “did not know,” respectively. To the second question, 53.3 percent said “yes,” 44.4 percent said “no,” and 2.2 percent “did not know.” This study and Amponsah (2000) found that uncertainty over the institutional environment led entrepreneurs to commit only a proportion of their resources that would not devastate them if lost. State officials on the other hand ascribed the low levels of investment mainly to entrepreneurial inadequacies. The implication of such widely divergent views, as Amponsah (2001, p. 388) argues, is that, “the chances of securing the consensus necessary for building appropriate institutions [were] slim.” Crucially, moreover, businesspeople and public officials were often at cross-purposes. According to a World Bank study, when confronted with complaints about service delivery, public officials normally replied that the majority of entrepreneurs were simply trying to cheat the state out of its entitled revenue f lows or that most delays were caused by entrepreneurs’ failure to follow even simple procedures. It concludes that “Many government officials view their role as one of protecting the national interest from exploitation by the business community.” As one Gateway official (whose responsibility is to promote private investment and export development) put it: “the public sector has a different focus from what the private sector is talking about” (World Bank, 2001, p. 61). Thus,

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entrepreneurs were hardly viewed as a development partner deserving of encouragement. Finally, it is worth considering the transparency or otherwise of the rules of the game in Ghana. Amponsah (2001) sheds light on the relationship between uncertainty and the low levels of investment in Ghana. Whereas 63.2 percent of the entrepreneurs surveyed for the study indicated that they were not aware of the laws, rules, and procedural regulations that pertained to their particular line of business or doing business in general, 36.2 percent said they were somewhat informed on the existing rules and regulations. Further, 68.9 percent of respondents thought that the laws, rules, and regulations were neither explicit nor consistent. Instructively, of those who felt that the rules were clear to them, 50.8 percent were inclined to reinvest profits. In contrast, 61 percent of those who regarded the rules as unclear were disinclined to reinvest any profits. Evidently, personal perceptions mattered. Amponsah (2000, 2001) and World Bank (1995, 2001) correctly note that making the rules transparent would encourage investment. Delays and uncertainty raise transaction costs, make otherwise routine activities unpredictable and sap entrepreneurial morale. What these studies fail to stress is the persistence of a bureaucratic ethos of deliberate delays, an aversion to transparency, and a tendency to privatize office for personal gain. Public officers in Ghana often treat their workplace like their personal domain and make their own “rules” which supplant laid down procedures and rules. Their refrain se w’ani abue a, enye ene obi adwuma mu (if you are knowledgeable, don’t try to apply it at someone else’s workplace) cautions against demands for observing rules. It also expresses resentment toward those who try to “encroach” on this “personal space.” Public servants thus serve their own self-interests and fail to meet Weber’s benchmark. In Evans’ classification, they are predators. The Legal Environment and Capitalist Development in Ghana Capitalist development hinges on the existence of institutions that build business confidence. An impartial and efficient judiciary capable of protecting property rights and enforcing contracts is paramount to a market economy. Unless investors are sure that their rights would be recognized and protected and that the courts would settle commercial disputes in a timely and economical manner, they are unlikely to commit any very considerable resources. De Soto (1989) shows that insecurity of property

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rights, difficulty in gaining legal enforcement of contracts, and an inefficient and weak judiciary have hindered private investment and economic growth in Peru and much of the Third World. He argues further that: “All the evidence suggests that the legal system may be the main explanation for the difference in development that exists between the industrialized countries and those . . . which are not industrialized” (De Soto, 2000). The view that property rights and contract enforcement mechanisms are a decisive part of the explanation of why some countries are economically successful while others are not is widely shared (Clague et al., 1997; O’Driscoll Jr. and Hoskins, 2003; North, 1990). In Ghana, however, there was little regard for property rights. Having seized power partly to wipe out corruption and rent-seeking from the political system, the PNDC carried out numerous arbitrary asset seizures. Further, the P/NDC repeatedly canceled or breached contractual obligations. Recall the cancellation of S. C. Appenteng’s ninety-nine-year leasehold of a portion of the Songhor Lagoon and its replacement with one for thirty years. Soon thereafter, the PNDC revoked the new lease and confiscated the business. Periodic threats to private property and breach of contracts lasted into constitutional rule. A prime example was the abrupt cancellation of O. Safo’s air cargohandling contract and his subsequent eviction—in violation of a court order. In J. A. Addison’s suit against the government for terminating his GHACEM contract and for breaching his right of first refusal, the courts failed to act. The razing of Piers Hotel in May 1999 by a group of soldiers and the March 2000 demolition of thirty houses under construction by a real estate developer, again by soldiers, underlined the continuing risks. In the last two cases, the owners avoided legal action, fearing that the courts might fail them. Such cases solidified the sense that the courts were neither able to ensure property rights nor enforce contracts. Few entrepreneurs seemed to believe that the courts could fully protect their investments from government infringement. Reluctance to go to court was not limited to cases involving the government. Ghanaian courts have long been slow, inefficient, and corrupt (Amissah, 1981). Many entrepreneurs therefore went to court as a last resort (Fafchamps, 1996, 2004). A 1961 report issued by the Commissioners Appointed to Enquire into the Law of Insolvency in Ghana found that among those who had recourse to the machinery of debt enforcement: not a single witness . . . regarded it as satisfactory. The chief complaints were that it is slow, costly and frequently abortive. Indeed,

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so strong is the feeling that going to law to recover a debt is a waste of both time and money and many creditors, as a matter of deliberate policy, avoid court action altogether in their debt collecting activities (cited in Awoonor, 1999, p. 101). Two cases illustrate that these problems persisted into the 1990s. “Going to court is like throwing good money after bad money” noted one businessman I interviewed. He lent $15,000 to an American partner in 1994. The former initiated court action when the latter failed to repay the loan. The creditor appealed in vain to the judge to seize the debtor’s passport until the case had been decided. The debtor left Ghana while the case was still in court, making his guarantor liable for the debt. After five years of repeated adjournments the judge told the parties to take the matter for arbitration. The businessman had effectively aborted the case when I interviewed him in mid-2000. He accused the trial judge of incompetence for refusing to seize the debtor’s passport and suggested that he had probably been bribed by the American or his guarantor. Another businessman, an auto parts dealer, blamed the judiciary for the near-collapse of his business. He began an arrangement with another auto parts importer in 1993 under which they alternated traveling to Japan to purchase goods. They split the cost of air travel, freight, accommodation, food, and other expenses, thus cutting cost. To reduce duty, they under-declared the actual value of their imports. This arrangement worked well until in 1996, when according to him, though the actual value of his imports was $100,000, the value of the goods he received was $45,000 which was what he had declared for customs purposes. After failing to obtain the full value of his imports, or $55,000, he initiated legal action his fear of possible criminal charges against him notwithstanding. At the time of the interview in October 2000, the case was still pending owing to repeated adjournments. He alleged that the trial judge must have been bribed by the accused. A common element of these cases and many others is the prevalence of informal arrangements—an issue that irked lawyers because it gives them little to work with. Some blamed this on illiteracy, but its frequency suggests that it may be an oversimplification to cast it in this light. It probably had more to do with culture and socioeconomic conditions in Ghana. Mike Oquaye, a lawyer and ex-professor at the University of Ghana called it a “lack of a contract culture” and offered a more cogent view: To insist on formal, legal business arrangements gives the impression that one is litigious. It may also create the impression that you

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are likely to swindle them. Only a few . . . sign a formal agreement and entrepreneurs who insist on this are likely to lose out to competitors who are willing to accept informal deals. Yet incidents of defaults and other problems are very common. Some people receive goods on credit and vanish (interview). Poor debt recovery retarded growth. The dearth of wholesalers in Ghana led firms to supply goods on credit to scores of petty traders, many of whom had little cash and were hard to track down. Opportunistic breach of contract—a very common practice—enabled debtors to use money owed as capital. Even if payment was eventually effected, high inf lation bit into creditors’ gains. The alternative was to restrict business relations to those known to firms for a long period, but the limitations this imposes on ability to expand are obvious. The legal system thus cried out for reform. Yet other than what amounted to half-baked attempts to introduce computers and other modern equipment to save judges from writing out court proceedings in long hand and end the practice of a paper filing system, scarcely any reform was undertaken. Ironically, the fundamental problems of the legal system eloquently articulated by the PNDC in the early 1980s remained largely unchanged. The legal system therefore continued to be uncongenial for capitalist operations. Inadequate Infrastructure A further hindrance to business expansion was weak infrastructure. Although Ghana made good progress in road network, ports and harbors, telephone services, power, and water supplies during the Rawlings era, these remained inadequate and erratic. As recently as the mid-1990s, Ghana had 2.8 telephone main lines per 1,000 inhabitants compared to 17 in Honduras, 21 in Guatemala, and 26 in Peru (World Bank, 1995). The mobile phone “revolution” helped, but until about 2000, spatial coverage was limited to only a handful of big cities and service disruptions were frequent. Erratic power and water supplies encumbered business. Concerning the former, 1998 was a particularly bad year. That year, a droughtinduced drop in the water level at the Akosombo Dam, Ghana’s main source of power, led to power rationing. The 42 percent spike in enterprise failures in 1998—the largest yearly increase between 1995 and 1999—was linked to the “power shock” of that year (CEPA, 2000,

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p. 29). In spite of the completion of a new Thermal Plant and purchases of energy from the Ivory Coast, erratic supply of energy continues to disrupt business operations in Ghana. This forced firms to purchase power generators and to secure their own sources of water. Some of the more successful firms owned fuel tankers and facilities for stockpiling fuel. In Brong-Ahafo, at least two timber firms owned private fire fighting equipment and hired their own personnel. To borrow Brautigam’s (1997) evocative phrase, entrepreneurs were “substituting for the state.” Capital that could have been used more productively was thus tied up. In Nigeria, for instance, private power generators accounted for 75 percent of capital equipment incurred by small manufacturing firms (cited in Collier and Gunning, 1999, p. 11). This severely hindered business operations, caused considerable distress to investors, and rendered them uncompetitive (Pattillo, 2000; Collier and Pattillo, 2000; World Bank, 2001). Weaknesses of Entrepreneurs The environmental conditions provide the context within which to assess the argument that a variety of largely self-imposed attitudes hinder the growth of African capitalists. Kilby (1969) and Marris and Somerset (1971), among others, argued that African entrepreneurs (a) are averse to expansion beyond a certain size; (b) acquire multiple businesses without developing the full potential of any; (c) are reluctant to delegate authority to employees, kin, or offspring; (d) are disinclined to enter partnerships, thereby limiting their growth potential; and (e) lock up scarce capital in farms and houses instead of reinvesting profits in productive activities.3 These issues are interrelated and mutually reinforcing. Seen as symptoms of African values, ideas, and cultural conditions, it is argued that African entrepreneurs are incapable of sparking the kind of economic transformation that their counterparts elsewhere, most notably in Western Europe and the United States, had ably done. Others have contested this argument. Analysts such as Riggs (1964) and Hart (1970) ascribed the alleged weaknesses of African capitalists to the lack of a congenial atmosphere for growth. In particular, they highlight the obstructive attitudes of politicians and bureaucrats. In careful empirical studies, scholars such as Kennedy (1980) and, more recently, Forrest (1994) show that while African entrepreneurs exhibit certain weaknesses, these are often overstated. In his study of Ghanaian

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business Kennedy argues that the supposed weaknesses are mostly rational responses to environmental and institutional factors. His study, the most comprehensive on Ghana, concluded on an optimistic note that indigenous capitalism was on the rise. Yet twenty years later, during which Ghana pursued a fairly thorough capitalist strategy, the private sector remained weak and entrepreneurs continued to exhibit some of the characteristics regarded as inimical to growth. Expansion, for instance, was hardly a priority for many. Apparently, little change had occurred since Garlick (1971) found that a significant number of Ghanaian entrepreneurs he studied were not keen to expand beyond enterprises they could not personally directly control. Nor did the acquisition of diverse business interests abate. As well, investing in land and houses remained common, as did unease with partnership. Government officials seized upon these “failings” to suggest that local entrepreneurs were simply unequal to the task. A prime example was Deputy Finance Minister Victor Selormey’s assertion that local entrepreneurs lacked imagination and could not be relied upon for growth and prosperity during a heated television debate in August 2000. A study by the OECF (1999) found that the government held the view that entrepreneurs were lacking in long-term vision. But were these a kind of residual business culture, ref lecting past experience as was suggested? Or were they ref lective of current realities in the sense that the P/NDC, like previous regimes, failed to provide prerequisites—an administrative framework that encouraged productive activities and an efficient and effective legal system that safeguarded private property—for capitalists to rise? Continuing reluctance to scale up derived from persistent insecurity. Bowditch (1999) and Thompson and Thompson (2000) note that many decided to remain fairly small-scale at least as long as Rawlings was in power. Being “small,” it was believed, provided a degree of “anonymity.” An engineer/entrepreneur who manufactures various machines for the carpentry industry articulated this view in an interview with this author. “It is always smart to play it safe in this country. Don’t show your chest too much and you will be fine. Some of my friends forgot this and have long disappeared from business.” He went on to say that he supplies carpentry machinery across West Africa but steers clear of exporting to avoid visibility. Interested people must travel to Ghana to buy or make other arrangements. A famous furniture manufacturer in Kumasi expressed a similar view from a slightly different angle: “Greed will get you in trouble. Don’t over-expand and invite the prying eyes and destructive hand of the government.” This gentleman has clearly

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internalized the notion that scaling up is equal to greed. It was repeatedly suggested that being “big” was “hazardous” unless one had the support of the government of the day. It was also said, however, that this advantage became a liability with regime change, implying that harassment of business was cyclical. This recalls MacGaffey’s (1987) observation that in Zaire successful entrepreneurs invariably courted trouble. They, in one scholar’s phrasing “suffer[ed] from the contradiction that success on a significant scale would re-attract the fatal attention of the parasites [state officials] and lead to another round of plunder, bringing accumulation once more to a standstill” (Leys, 1996, p. 181). This pattern partly explains “the missing middle” and also sheds light on why the informal sector has boomed in Ghana and elsewhere in Africa. Entrepreneurs in this sector, unlike the formal sector, have the advantage of being relatively less visible and hence less vulnerable to detection and predation by the state. By 2000, many Ghanaian capitalists continued to control a large portfolio of divergent businesses. Critics argue that in doing so entrepreneurs dissipate their energies and fail to develop the full potential of any of their firms. As a rule, this criticism may be valid, but it does not follow that operating multiple businesses necessarily retards growth. As is clear from this book, some of Ghana’s most successful entrepreneurs owned multiple businesses. Whether they would have been even more successful had they focused on a single line of business is hypothetical. In any case, the question should be why this was still prevalent. Commonly, entrepreneurs justified multiple business ownership on the grounds that it enabled them to spread risks in an unpredictable environment. A hotelier and owner of a hardware store, a pharmacy, teak plantations, and a cattle farm argued that in comparison with manufacturing-only investors, those who had diversified coped better under economic liberalization. It was probably a mark of the prevalence of this view that even reputable business executives endorsed it. One contrasted B. A. Mensah to S. C. Appenteng, noting that the result of seizure of their businesses was worse for the former because unlike the latter he failed to diversify. In the words of another, “The key word is diversify; don’t put all your eggs in one basket.” It is worth noting that this is a common feature in settings marked by uncertainty. “Frequently, countries with high degrees of corruption and unstable policy environments stimulate a preference for diversification of business concerns. Rather than reinvesting and growing with one enterprise, entrepreneurs reinvest profits in a number of businesses, spreading risks” (Brautigam, 1994).

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Earlier studies of Ghanaian capitalists found the argument that African capitalists tend to invest in farms and houses rather than reinvesting profits in existing businesses to be true (Garlick, 1967, 1971; Kennedy, 1980). The building boom in Ghana in the 1990s and interviews suggested that little had changed. Certainly, this can hinder firm expansion. Whether it necessarily hinders firm expansion or is irrational as suggested, however, is debatable. As Hart (1970), Iliffe (1980), and others have argued, investing in housing and farms may compare favorably with other activities and, given the hazards, it may be safer. In his study, Garlick asks “why the Kwahu (like other Ghanaian businessmen) preferred to invest their profits in other economic activities rather than plough them back into trading businesses.” He sees this as harmful from the stance of capitalist growth: But in terms of the social environment, such behaviour is completely rational. Both farms and houses meant security in time of sickness and for old age. . . . Trading remains a way to earn a living, to provide for dependants and the education of children, and to accumulate wealth. Behind this lies the desire to create “permanent” assets—farms and buildings, which survive when business fails, which a trader can enjoy in his old age or fall back on in times of sickness, and which he can bequeath to his family. In this respect he is by no means unique (1967, p. 479). The view that investment in housing was safer in Ghana was recurrent in interviews. Stories of once wealthy entrepreneurs who had lost everything except buildings and farms were repeatedly cited as evidence, often followed by the rhetorical question “what would ‘S’ or ‘Y’ have done were it not for his/her buildings?” For still unclear reasons, the PNDC appears to have seized more businesses than buildings and farms, so this view has merit. What about the argument that African entrepreneurs prefer personalized control and are reluctant to delegate authority to employees and even their own kin or offspring? Critics argue that “firm expansion cannot continue indefinitely unless businessmen are prepared to allow others to exercise power in their absence” (Kennedy, 1980, p. 117). They also contend that the owner/founder keeps operations secretive with the result that the firm tends to die with his/her death (Iliffe, 1980). In Ghana, Kennedy found that the main reason for hesitating to delegate authority was endemic distrust. Bowditch (1999) reached a similar conclusion two decades later. In interviews, allegations of

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employee dishonesty ranging from pilfering to falsifying checks abounded. The owner of a pharmaceutical firm claimed that a former employee had passed on its formulas to a competitor for which he now worked. Another said that an ex-employee, now a rival in glue manufacturing, had stolen its formula. Since property rights are rudimentary and patent laws, if they exist, are rarely enforced, such piracy was hard to stop. Only rarely do analysts consider such issues in relation to secret operations and reluctance to delegate authority though it should be evident that if expansion is likely to lead to problems it seems sensible for entrepreneurs to limit their activities so as to retain personal control over their resources. Concerning the criticism that firms do not survive their founders, important changes were underway. Businesses that survive the passing of their founders were on the rise in Ghana. S. C. Appenteng’s offspring run Panbros Limited. Intravenous Infusions, co-founded by Appenteng and a certain Mr. Osei, father of Isaac Osei, Ghana’s former High Commissioner to the United Kingdom, has been managed jointly by their offspring for years. The founder of Nnuro Kente, a major manufacturer and exporter of kente, has turned over operations to his son, Kwaku Nnuro. Similarly, Mechanical Lloyd has passed from father to son. Kwabena Darko (Darko Farms) has also groomed his children to replace him. A parallel process is underway in Nigeria (Forrest, 1994). An important qualification is required here. Progress seems to be concentrated within more successful businesses. Kwabena Darko, owner of the most successful poultry business in Ghana, provided the most memorable explanation of this evolving process. “Success begets success. I am a role model for my children. After being educated in the United States they want to continue poultry farming . . . because they see dollars in the eyes of chicken.” By way of contrast, he noted that because cocoa farmers are often indebted, their children avoid cocoa farming. Garlick’s (1967) finding that the risks in trading pushed educated young Kwahus to more secure public jobs affirms this sentiment. The rise in second generation business ownership owes something to the decrease in public sector jobs and the decline in the prestige previously associated with such jobs. In Ghana, “Uncompetitive compensation packages and an unrewarding job environment have made the public service an unattractive employment destination for talented managers and professionals, most notably in the areas of medicine, tertiary education, economics, and public policy analysis” (World Bank, 2004, p. 13). Private business, by contrast, has become more rewarding and prestigious and hence attractive. Whereas Ghanaians with higher

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education sought public jobs in the past, many now choose business. The rise of highly educated figures, such as Dr. Jones Ofori-Atta, Jude Bucknor, and Dr. A. A. Owusu, in private business ref lects the shift. As the caliber of entrepreneurs has risen, so too has the hiring of professionals. Distrust has not totally been overcome, but entrepreneurs seem more at ease with their employees than they were a generation earlier. It is difficult to say exactly why this is the case, but it is probable that today’s better educated entrepreneurs are more capable of detecting fraud and other dishonest practices by employees than their predecessors. What of the argument that African capitalists are averse to partnership? Again, Garlick (1967, 1971) and Kennedy (1980) found evidence of this in Ghana. The predominance of family-run businesses, often starved of liquidity, was frequently blamed on failure to share ownership. The executive director of the Association of Ghana Industries (AGI), for instance, noted that “The Ghanaian would prefer to use the meagre personal or family resources or even borrow at prohibitive interest rates to sustain his business instead of sharing ownership” (Daily Graphic, February 19, 2000). An AGI officer attributed this to culture, citing the Akan maxim: ewo me ne ewo yen nse (what belongs to me is superior to what belongs to us) (interview). This maxim puts a high premium on individual assets. But this is hardly uniquely Ghanaian. Consideration of why Ghanaians are especially averse to partnership is therefore necessary. Endemic distrust is partly to blame. “It’s difficult for Ghanaians to be in a team because ‘in God I trust and not anybody,’ or ‘each for himself and all things for God’ is the way things work” one informant told Bowditch. Another stated: “If I were in a team with my brother, what our wives tell us at home would be different. So when we come together, we will not see eye-to-eye. It is greed that keeps people apart and greed in families is there” (Bowditch, 1999, pp. 77–78). Although incidents of dishonesty are legion, these individuals overstate the case. There have been some successful partnerships in Ghana, such as Vacuum Salt Products and Intravenous Infusions. Also, nearly 300 Kwahu traders created the Obo Trading Company as far back as 1945 (Garlick, 1967). Focusing on distrust among Ghanaians, moreover, misses the point: business disputes and issues of trust are global. In Ghana (and elsewhere in Africa) the lack of effective legal recourse exacerbates the problems. Failure to ensure property rights, enforce contracts, and foster a credible means of resolving disputes really explains Ghanaians’ aversion to joint ventures.

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An inclination to hide wealth from the authorities also discouraged shareholding. Though this preceded the Rawlings era, it arguably solidified under it. There was a notable lack of business interest in using the Ghana Stock Exchange (GSE) as a means to raise liquidity. As of 2000, only two local private firms had listings on the GSE, one f loating a small portion of its equity. Moss (2000) found that, “raising finance for your company” came last of six possible reasons why the GSE was considered important. Family-run firms with their strong tendency to rely on family ties for trust and confidentiality were unwilling to allow shareholders to come on board because their books may be scrutinized and management decisions questioned. Following probes into the affairs of firms from 1982 to 1992, capitalists were particularly keen to protect inside information, such as the true owners of the firm, the true assets and earnings of the business, or other information the firm may want to hide from the authorities, especially tax authorities (Moss, 2000). While aversion to partnership hindered the ability of the mostly one-person firms to scale up, there were strong, rational disincentives against it. A partnership promised growth but also potentially crippling disputes and loss of control over what might be considered to be sensitive information. A further criticism of African capitalists is that they are heavily dependent on government patronage. Garlick describes Ghanaian capitalists as “rentiers at heart” (1971, p. 149). I have shown that government has indeed been vital to capitalist accumulation in Ghana. However, critics seldom consider the alternatives to patronage, ignoring that politicians make it difficult to do business without their patronage. In Ghana, entrepreneurs of note attracted government attention. In the 1990s a story that allegedly exemplified Rawlings’ anxiety over wealthy Ghanaians widely circulated. As recounted to me by several people, Rawlings noticed a magnificent office complex under construction in Accra, and immediately dispatched his men to find out its owner. He soon reportedly summoned the individual, demanding to know his political affiliation. When the individual said he had no political affiliation, he received a thinly veiled threat that he must support the NDC or else. Various regime officials and NDC functionaries were said to have issued similar threats. The analysis of government-business relations in Brong-Ahafo corroborates this point. Local NDC officials pressured entrepreneurs to donate or risk being penalized. Opposition functionaries made similar demands on business, and although they lacked the ability to apply immediate sanctions, the threat of future sanctions was quite potent.

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Some entrepreneurs made political donations simply to avoid harassment. Since “small” entrepreneurs ignored at the national level were important at the local level, in the end, many were sucked into a relationship with the NDC. Thus, patronage was thrust upon them. Once they made donations, patronage became a way to recoup their “investment.” This cautionary tale suggests the need to critically probe what on the surface appears to be clear-cut evidence of “renterism” on the part of entrepreneurs. Of course, some willingly made political donations to exploit patronage. But even in such cases, it is misleading to say that patronage was the prime aim. In my experience—backed by evidence I have presented—far more capitalists wished to see patronage curbed than is often realized. They were deeply aware that patronage was doubleedged and frequently cited stories of entrepreneurs who were harassed due to ties to previous regimes. Belief that others profited from patronage also helped sustain it. Further, as I have shown, attempts to chart independent paths of accumulation were usually blocked by government, that being a prime strategy employed by government leaders to consolidate power. Conclusion I have shown that notwithstanding liberal reforms, the institutional preconditions that underpin a capitalist system were lacking in Ghana. The courts were unreliable. Their failure to enforce contracts and ensure property rights meant that businesspeople were not sufficiently protected against the risks of investment—a very basic prerequisite that allows capitalism to work. With government itself violating property rights and disregarding court orders, the risks were acute indeed. Also, a bureaucratic culture that was largely obstructive and unresponsive to capitalists and geared toward personal ends (but presented as protecting the public) prevailed in Ghana. Bureaucrats rarely seemed to realize that a predictable environment was vital if capitalists were to be encouraged to invest. Public officials, moreover, seemed to believe that capitalist pursuits and national development were incompatible—a supposition that jarred with a capitalist growth strategy. Bearing such attitudes in mind, it is not surprising that the kind of informal networks of trust that existed between bureaucrats and business in the Asian NICs and a key factor in their economic growth was lacking in Ghana. In short, the institutional environment in Ghana was incompatible with

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capitalist accumulation and expansion and a market economy more generally. To cope with uncertainties, businesspeople adopted a variety of strategies that were unpropitious to firm expansion. Since these were designed to reduce the risks to investment, they were necessarily not growth-oriented. Though these are often erroneously construed as evidence of weaknesses or inadequacies, it is in fact more accurate to understand them as rational responses to difficult environmental conditions. It is worth recalling the primacy of property rights and the rule of law to capitalist expansion. Because these were largely nonexistent, it would have been extraordinary if Ghanaian capitalists had expanded their activities on a significant scale. This must be taken together with the serious economic challenges that accompanied reforms, the harsh treatment meted out to entrepreneurs from 1982 to 1992 and the periodic persecution of capitalists thereafter. Though often overlooked, business-related risks and frustrations were enough to break the will of entrepreneurs in Ghana. It was truly a mark of their remarkable resilience and courage that many even bothered to invest. Inevitably, however, expansion was rarely a priority.

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CH A P T E R

N I N E

The Theoretical Implications of Ghana’s Experience

This chapter considers the implications of the research findings in relation to the more general debate about the most appropriate policies for fostering capitalist development, and the growth of manufacturing in less developed countries. Up until this point, the book’s empirical material has been presented largely within the confines of neoliberal theory, as supplemented by the new institutional economics, in line with the theoretical assumptions of the IFIs and the policies they have pressed on the Ghana government. Here, I turn to consider the critique of such assumptions by Amsden, Chang, and other members of the “developmental state school.” I thereby seek to consider whether more interventionist policies are likely to be necessary to foster industrialization in Ghana (and in other African states), and what are the necessary political and institutional preconditions for the successful implementation of such policies. It will be relevant at this point to outline brief ly the economic policies and achievements of the NPP government, which displaced Rawlings’ party from office in 2000. The East Asian experience is relevant to the case of Ghana. Having achieved the most spectacular progress in industrialization in recent decades, their experiences have naturally aroused interest in the possible lessons for countries, such as Ghana. Indeed, the World Bank in collaboration with Ghanaian officials produced a study which made references to such lessons (World Bank, 1993a). The meteoric rise of the East Asian NICs vis-à-vis Ghana’s economic difficulties accentuates their development disparities.1

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It will be useful, at this point, to outline the main differences in theoretical assumptions between the neoliberal and “developmental state” schools. As I have shown, the Ghanaian state submitted to the World Bank’s neoliberal approach to industrialization with generally very disappointing results. This approach started with the assumption that “getting the prices right” was the key to economic development. Subsequently, the World Bank recognized that this was not sufficient, and that liberalizing economic reforms needed to be supplemented by institutional reforms. The theoretical justification for such institutional reforms remained, however, within the framework of neoliberal theory. More specifically, the new institutional economics—a development out of neoliberal economic theory—emphasized the crucial importance of secure property rights and reduced “transaction costs” for economic development (World Bank, 1989, 1994; North, 1990, 1996; Harris et al., 1995). It is important to recognize that the limited development of Ghana’s private sector under World Bank policies is to some extent compatible with this theoretical approach. It might be argued, for example, that, although structural adjustment policies went some way to reducing transaction costs, they did not go far enough. Failure to privatize and thereby improve the efficiency of service industries in the transport and communications sectors meant that transaction costs remained relatively high. Equally important, the political harassment of large- and medium-scale capitalists by the P/NDC might be conceptualized as making for highly insecure property rights. Democratization might be seen as a way of making property rights more secure, to the extent at least that it was accompanied by an increase in the rule of law and a reduction of political harassment. In the event, however, this increased security of property rights did not materialize to the extent anticipated, at least not under the Rawlings governments of 1992–1996 and 1996–2000. Over and against this approach, the “developmental state” school argues that secure property rights and low transaction costs, although desirable, are not sufficient to enable LDCs to develop competitive industries. They rather identify a careful blend of aspects of the market along with dirigiste policies as the key ingredients to the success of the NICs. Johnson (1982), Hamilton (1986), Wade, (1990), Amsden (1994, 2001), and Hikino and Amsden (1994), among others, have demonstrated that the NICs’ experience is attributable to forceful, systematic and sustained economic intervention by a strong centralized state pursuing a coherent long-term development strategy. Perhaps the most intellectually impressive rationale for this strategy has been presented by Amsden. She argues that the process of economic

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development entails a shift from primary product-based assets to knowledge-based assets. Knowledge-based assets consist not just of advanced industrial technology but also the managerial knowledge and skills involved in applying such technology to achieve high degrees of competitiveness. Firms in advanced capitalist economies tend to have proprietary advantages in relation to such technology and its application. Economic development in LDCs therefore requires that governments provide specific firms with various forms of “infant industry” assistance in order to protect them, temporarily at least, from the superior competitiveness of developed country firms, and to enable them to “learn by doing.” A longer historical view that extends back beyond the East Asian NICs accentuates the f laws in orthodox, neoliberal development thinking. In his book, Kicking Away the Ladder, Chang (2002) draws on a large body of studies to advance the thesis that the set of economic policy prescriptions being imposed on developing countries by developed ones contradict their own path to success. He stresses the irony that developed countries did not pursue such policies when they were climbing the economic ladder of success in the nineteenth century. Rather, they implemented high tariffs and sectoral industrial policies, infant industry protection, export subsidies, etc.—all practices to which they now object. Chang shows that Britain and the United States—the supposed homes of liberal economic policy—in fact protected infant industries until such time that their industries were in a position to withstand global competition. Only when Britain, the first country to industrialize, had attained industrial superiority did it promote free trade. Similarly, once the United States, long “the most ardent practitioner and the intellectual home of protectionism,” had attained absolute industrial supremacy, it too promoted free trade. This was “despite the fact that it acquired such supremacy through the nationalistic use of heavy protectionism” (p. 5). Regarding Britain, Chang quotes the German economist, Friedrich List’s famous passages: It is a very common, clever device that when anyone has attained the summit of greatness, he kicks away the ladder by which he has climbed up, in order to deprive others of the means of climbing up after him. In this lies the secret of the cosmopolitical doctrine of Adam Smith, and of the cosmopolitical tendencies of his great contemporary William Pitt, and of all his successors in the British Government administrations.

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Any nation which by means of protective duties and restrictions on navigation has raised her manufacturing power and navigation to such a degree of development that no other nation can sustain free competition with her, can do nothing wiser than to throw away these ladders of her greatness, to preach to other nations the benefits of free trade, and to declare in penitent tones that she had hitherto wandered in the paths of error, and has now for the first time succeeded in discovering the truth (Chang, 2002, pp. 4–5, Chang’s italics). Germany, France, Sweden, Belgium, The Netherlands, Switzerland, Japan, and most recently the East Asian NICs all, to varying degrees, sheltered infant industries from global competition. Moreover, during their economic ascent, they disregarded patent rights and engaged in industrial pirating and espionage. They all regarded state intervention in industrialization as critical to catch-up with more technologically advanced countries. By implication, Chang applies the foregoing quotation to all the now developed countries, adding that they are somehow trying to hide the secrets of their success from developing countries. Chang’s exposition of the history of capitalist development and of late industrialization in particular is reminiscent of Gerschenkron’s (1962) analysis of European industrial history. Gerschenkron’s reading of the process of industrial catching up led him to conclude that economically backward nations needed to intervene in the economy much more than did earlier industrializers. In view of extensive state intervention in industrialized countries, Amsden has argued that, contrary to Gerschenkron’s view, “government intervention may not be any greater, the later the industrialization. It may simply be different” (2001, p. 285). More recently, the East Asia NICs have used broadly similar interventionist policies to achieve rapid and sustained growth. They implemented industrial policies, that is, policies “intended to affect particular industries to achieve outcomes that are perceived by the state to be efficient for the economy as a whole” (Chang, 1994, p. 61). The state identified industries for selective promotion; it induced, even coerced, firms into such industries, offering them protection and finance on highly concessionary terms. The state also assisted in technology transfer process to raise local learning and capabilities. Further, it guided and promoted research and development skill formation. In undertaking these tasks, the price mechanism was deliberately distorted to achieve

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specific objectives. Such intervention, not reliance on market forces, was the critical factor in the East Asian miracle (Amsden, 1989; Wade, 1990). In Wade’s evocative analogy, the East Asian NICs “led” rather than “followed” the market, meaning “the government initiates projects that private business people would not undertake at current prices” (1995, p. 133). Despite the weight of the evidence presented by such studies, the World Bank and neoliberal economists have persisted in attributing the East Asian miracle to liberal economic policies. In its now famous publication, The East Asian Miracle, however, the Bank (1993b) acknowledged that there had been extensive state intervention in the East Asian economies and that some of these interventions had been useful. Even so, it insisted that intervention had been largely ineffectual. Thus, the Bank has continued to advocate a hands-off approach to industrialization, arguing that state intervention creates market distortions and opportunities for rent-seeking, both of which undermine long-term prosperity. It favors reliance on market forces and accepts intervention only in special and isolated cases of market failure, which it posits can easily be rectified to restore the competitive optimum.2 This position was enforced in Ghana, arguably with damaging consequences for industrialization. It is relevant here also to note that the World Bank’s view on rentseeking has recently come in for extensive criticism by some development economists (Amsden, 1994; Lall, 1994). Intervention, the neoliberals argue, creates rents, that is, profits above what are attainable in arm’s-length transactions. They further contend that once rents are created by way of subsidies, subsidized credit, the provision of state contracts, the imposition of tariffs on imports, licenses, and quota allocation, rational entrepreneurs have little incentive to improve productivity; rather, they scramble for rents. Moreover, in seeking to capture rents, they buy off government officials and bureaucrats. As officials use or “sell” public resources to entrepreneurs for private gain, corruption becomes rife, inevitably retarding economic growth and imposing high social costs (Krueger, 1974; Olson, 1982).3 Although the terms rent-seeking and corruption are analytically distinct, they overlap quite considerably. As Khan and Jomo (2000a) note, the resources spent on corruption are sometimes (but not always) expended to capture rents. In view of this and following MacIntyre (2000), I treat the latter as a subset of the former. According to Khan and others, however, the view that rent-seeking and corruption are unambiguously detrimental does not square with

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the empirical evidence, which suggests that the net costs and benefits of rents and corrupt activities can vary widely, depending on the particular configuration of social, political, and economic forces operating within a country. Thus, whereas rent-seeking has been growth-retarding in some countries, it has been growth-enhancing in others. In a collection of essays edited by Khan and Jomo, the various contributors highlight the divergent experiences of various Asian countries. In their introduction, Khan and Jomo (2000a) develop a useful framework for assessing the impact of rents. They note that, while much emphasis has been placed on the input costs of rent-seeking inadequate attention has been paid to the rent-outcomes of rent-seeking. Guided by this framework, they consider the type of rents that existed in various Asian countries, how they were allocated and used, and the results they produced. The evidence shows that both the cost of rent-seeking and the rentoutcome varied according to the political and institutional conditions in each country. In India, Pakistan, and Bangladesh, the cost of rent seeking was very high due to the existence of a large number of factions which vied for rents. Moreover, since members of intermediate groups played a key role in the organizational and leadership role within these factions, rents went to relatively diffused recipients. In South Korea and Malaysia to a lesser extent, the situation was different. In Korea, rent allocation was centrally controlled by a strong state that bypassed weak intermediary groups. Malaysia also possessed centralized rent allocation institutions. Also, an implicit social contract existing between Malays and Chinese-Malaysians with a relatively long history of capitalist accumulation, enabled rents to be awarded to the former in a centralized way. Consequently, the cost of rent-seeking was lower in Korea and Malaysia than their neighbors in the Indian subcontinent (Khan, 2000; 2001). As to rent outcomes, again, there was considerable variation. In Korea, subsidies were provided to targeted industries. The state closely monitored performance, rewarding recipients who performed well by moving them up on the technology ladder, and in rent allocation. Nonperformers, by contrast, lost their privileges and faced sanctions, including in extreme cases the imposition of prison sentences. As Chang (1994) stresses, although the chaebols, or financial clans, were undoubtedly powerful and favored in rent allocation, the state did not featherbed them. Recipients of rents therefore had incentives to perform well. The opposite was true in India (Khan, 2000, 2001). Here, although industrial policy created rents for infant industries and opportunities for technological advance, the state failed to perform two

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critical functions. First, it proved unable to discipline recipients of rents by failing to monitor performance. Second, it did not tie rents to performance or withdraw rents from nonperformers. In effect, rents were taken for granted. Other studies in the Khan and Jomo volume affirm the divergent outcomes of rent-seeking and corruption. Thailand experienced high growth despite quite high rent-seeking costs. Doner and Ramsay (2000) attribute this to Thailand’s competitive industry structure and competitive clientelism. This did not prove to be growth-retarding because key government departments overseeing the country’s industrial project did not participate in clientelism. Rock (2000), however, credits Thailand’s growth to the ability of a small group of big capitalists to use their links with the state to gain privileged access to rents and technology to accelerate economic growth. In the Philippines, by contrast, rents proved crippling and socially harmful. According to Hutchcroft (2000), the particular configuration of power in the Philippines “obstructed” development, nurturing a “politics of privilege,” whereby recipients of rents faced little pressure to invest productively. Thus, the Philippines is the Southeast Asian country that most closely resembles most African countries. An important point that emerges from the foregoing is that successful capitalist accumulation and development do not depend on lack of corruption or “crony capitalism.” Khan (2000, p. 140) articulates the view thus: The implicit counterfactual to ‘crony’ capitalism is a ‘genuine and impartial’ capitalism of free markets, zero rents, fair marketdetermined returns for everyone, and a minimal state which only maintains a level playing field. However appealing such a mythical capitalism may be, our discussion has been concerned to establish that such a model is not relevant for developing economies, and perhaps not for any economy. The relevant distinction is between rent-seeking systems which are developmental and those which are crippling. Given the critical role rents and corruption have played in early and late industrialization, Amsden (1989, 2001) and Chang (2003a), among others, have argued that indigenous capitalists need some government assistance or rents in order to be able to compete against established multinational corporations and to develop large-scale capitalist enterprises. The potency of the astute use of rents is evidenced by the fact

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that during the second half of the twentieth century, the East Asian NICs achieved the fastest economic and social transformation in human history (Chang, 2003b). Though the Asian economic crisis of 1997 stalled the rapid economic advance of the NICs, their achievements are nonetheless notable, especially when set against the poor economic performance of most African countries. What are the implications of the Ghanaian experience for this debate? What conclusions might be drawn regarding the design and content of IMF/World Bank reform programs in Ghana and elsewhere in Africa? At first sight, the answer might seem clear. I have shown that the expected rejuvenation of the private sector did not materialize in response to neoliberal economic reforms. Some form of selective industrial policy was surely, therefore, called for and ought to be included in future policy reforms. Unfortunately, the matter is not as simple as this. In the first place, as I have argued, the neoliberal position might be rescued by pointing to the failure of the successive Rawlings’ governments to provide the kind of “governance” and institutional reforms that would have enabled neoliberal policies to work. More specifically, the new institutional economics—a development out of neoliberal economic theory—has emphasized the crucial importance of secure property rights and reduced “transaction costs” for economic development. It is important to recognize that the limited development of Ghana’s private sector under World Bank policies is to some extent compatible with this theoretical approach. It might be argued, for example, that, although structural adjustment policies went some way to reducing transaction costs, they did not go far enough. Failure to privatize and thereby improve the efficiency of service industries in the transport and communications sectors meant that transaction costs remained relatively high. Equally important, the political harassment of large- and medium-scale businesspeople adopted by the PNDC government might be conceptualized as making for highly insecure property rights. Indeed, as detailed in this book, the Rawlings era marked a period of unprecedented uncertainty in the business community in Ghana. The extent of this declined somewhat over time, but by then a great deal of harm had already been done. Democratization was seen as a way of making property rights more secure, it being anticipated that this would be accompanied by an increase in the rule of law and a reduction of political harassment. In the event, however, this increased security of property rights did not materialize to the extent anticipated. Moreover, in contrast to governments in the East Asian NICs, rents created by Rawlings’ regimes

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in the form of subsidized credit, implicit nonpayment of taxes, and so on were not geared to promote overall economic growth but to reward loyalists. Assistance was thus rarely based on proven ability or demonstrable promise to succeed. Rather, a major motivation was to dislodge political opponents. Unsurprisingly, many of the capitalists whose rise depended on their ties to the P/NDC have f loundered in the post-Rawlings era. A somewhat fuller test of the neoliberal position might be provided by winding the clock forward to consider economic performance under the NPP government, which ousted Rawlings’ NDC in the 2000 elections. The NPP, after all, was an avowedly probusiness party. If the neoliberal position is correct, then the change in the political leadership in Ghana might well have been expected to have energized the private sector and to have occasioned a marked improvement in economic performance. Indeed, the NPP government is arguably the most pro–private sector regime in Ghana’s history. In its first week of office, it proclaimed a “golden age of business.” It followed this up with the creation of a ministry for private sector development. In spite of this, however, the private sector remained weak, as did the more general economic performance (ISSER, 2004; CEPA, 2003). Why is this so? It needs to be made clear that the NPP government in practice followed orthodox neoliberal policies. One should not be misled by the NPP’s manifesto for the 2000 elections, which amounted to a critique of the IMF/World Bank–sponsored reform program in Ghana. Under the heading, “Proven Way Forward,” the NPP stated: “Many countries similar to Ghana have made the transition from a state of poverty to one of modernization, high productivity, high salaries and wages, international competitiveness and rising standards of living.” This, it said, hinged on a framework of carefully selected pillars: (i) mobilization of private initiative; (ii) transformation of agriculture; (iii) enhancement of productivity; (iv) expansion of the industrial and export base; (v) a fruitful partnership between government and the private sector; and (vi) prudent management of public finances (New Patriotic Party, 2000, p. 2). The NPP proceeded to accuse the P/NDC of neglecting industrialization, having “constantly made the error of confusing laissez faire with a policy of national development led by private entrepreneurs. Under the resulting policy of passive inaction by the government in support of the local private sector much of Ghana’s nascent industrial capability has been allowed to crumble through an indiscriminate liberalization of imports” (New Patriotic Party, 2000,

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p. 4). The NPP proposed an industrial policy that would: . . . create a vibrant, competitive and innovative industrial sector capable of competing in a global world economy. The NPP government approach to the development of the industrial sector will be a total departure from that of the [NDC] . . . . Whereas for example, the NDC has relied almost entirely on primary commodity exports and raw materials for the sector, the NPP approach will rely on creating a diversified, innovative, and fully integrated and resilient industrial sector where new ideas and technological innovations are used continuously for improvement of products and services. The role of an NPP government in this innovative economy is to work with the private sector to identify strategic opportunities for the future, and to redirect resources towards the exploitation of those resources (New Patriotic Party, 2000, p. 10). In order to achieve this, the NPP aimed to foster a positive partnership between an NPP government and the private sector: “In contrast to the present government, we in the NPP tradition have for generations been steadfast advocates of the leading role of private enterprise in bringing about the transition from poverty to prosperity.” Further, it noted that the P/NDC had “frustrated many entrepreneurs who could have led Ghana into its emancipation from poverty as has been done elsewhere” (New Patriotic Party, 2000, p. 3). It promised to establish an investment fund to assist private firms. Allocations would be based on profit rather than political expediency (New Patriotic Party, 2000, p. 11). Three observations might be made here. First, although not specifically mentioned, the allusions to the East Asian model are clear. Second, the NPP indicated a readiness to assist local industries not simply by protecting them, but also by playing a proactive role in identifying strategic opportunities and redirecting resources and entrepreneurial activities into these areas. Again, allusions to the East Asian experience are plain. Third, the NPP stressed creating close relations with capitalists, another vital feature of East Asian success. In office, the NPP did indeed distinguish itself from its predecessor in important ways. Unlike the P/NDC, which never felt at ease with wearing the capitalist badge, the NPP proudly wore that badge and vocally defended itself against the denunciations of Ghana’s left. In his inaugural speech, President J. A. Kufuor proclaimed a “golden age of business” and the creation of a new ministry to specifically

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oversee private business development. As a further step, he launched the President’s Special Initiative to identify and develop potential business opportunities for Ghanaian entrepreneurs (Arthur, 2006). Among other probusiness moves, the NPP government provided various financial support schemes for business, reduced corporate tax, and in stark contrast to Rawlings, who in nearly twenty years in power, probably never met personally with Ghanaian business leaders, Kufuor held highly visible biannual meetings with business leaders, soliciting their opinions and feedback. Also, the NPP government made a clean break with the pattern of persecution and asset confiscations, an abiding memory of the P/NDC era. As Arthur (2006, p. 40) puts it, the NPP government “protected private property.” Notwithstanding all this, the promises of “total departure” from the P/NDC’s policies remained largely unfulfilled. This was chief ly because the IFIs have continued to object to state intervention. Thus, whenever the NPP government attempted to be more “dirigiste,” the IFIs blocked this. Ghana’s dependence on the IFIs severely constricted the ability of its leaders to defy them. This dependence was increased by the NPP government’s decision, under the pressure of the indebtedness and deteriorating public finances it inherited from the outgoing NDC government, to apply for the HIPC debt relief initiative. Under the terms of this agreement, the NPP was tightly restricted in its policy options.4 Second, the level of assistance the government was able to provide to local firms, especially in the context of HIPC conditionalities, was insufficient to develop firms large enough to compete globally. More specifically, the NPP’s creation of the Ghana Investment Fund hardly had an impact on the perennial shortage of development funds. Critics, meanwhile, charged that beneficiaries of this scheme tended to be regime insiders and their friends. Accordingly, the NPP government in reality followed World Bank policies even more faithfully and rigorously than its NDC predecessor, practicing what the Bank considers to have been even more sound macroeconomic management, and in the context of far more cordial relations with the business sector—and yet the results in terms of increased business investment or overall economic growth were negligible. The experience of economic performance under the NPP government might therefore be considered to demonstrate, far more decisively than the experience of the Rawlings years, the inability of neoliberal policies to generate rapid industrial growth in so underdeveloped an economy as Ghana’s. To this extent at least, the superior persuasiveness of the “developmental state” position seems clear. As Khan (2000,

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p. 141) notes: “There is no evidence in Asia, possibly no evidence anywhere, of long-run development taking place on a no-rent basis. Instead, the policy challenge is to construct and reconstruct institutions and politics in developing countries to sustain developmental rents and rent-seeking while attacking value-reducing rents and rent-seeking.” The major question remains, however, whether it is politically and administratively realistic to anticipate that the Ghana government could implement a selective industrial policy successfully. Historically, there has been good reason to doubt this. Historically, governments in Ghana, as in many African countries, have tended to employ intervention to make life very difficult for most businesspeople, to be parasitic on them, rather than to assist them. Moreover, such assistance as has been provided in the form of import licenses and foreign exchange allocations has been provided on political patronage grounds, with no disciplining mechanisms, in a very dissimilar manner from, say, South Korea. Such government-controlled resources seem largely, therefore, to have been wasted in short-term accumulation and capital f light rather than development of larger, long-term enterprises. As noted earlier, Ghana, like most African states, would seem to approximate structurally closer to South Asian countries rather than East Asian ones, and to their pattern of economically detrimental rather than developmental rent-seeking. The NPP government may have been more genuinely probusiness than previous Ghanaian governments, but it remained hamstrung not only by World Bank pressure but also by the continuing weak capacity, internal incoherence, and demoralization of the Ghana civil service. Without an elite bureaucracy, possessed of both corporate cohesion and a more supportive attitude toward the development of private business, any attempt at a more “interventionist” strategy is likely to prove ineffectual. It is not terribly persuasive to argue that the results could hardly be less satisfactory than under orthodox neoliberal policies. Past experience and comparative evidence suggest that the result, at least for the economy as a whole, could be a great deal worse. Ultimately, therefore, the question becomes one of whether and how an elite bureaucracy of the kind developed in, say, South Korea or Thailand, might be constructed in Ghana. This is not the place to discuss this question at great length, but a few observations might be made. First, the approach of political economists such as Khan is arguably excessively structurally deterministic. The South Korean bureaucracy was notoriously inefficient and corrupt in a manner unconducive to industrial development prior to its reform by President Park in the

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early 1960s. Determined action by a skilful, committed political leadership can clearly transform bureaucratic capacity. On the other hand, one has to recognize that both social context—the strength of ethnic and other parochial allegiances permeating the bureaucracy—and the lack of an historical bureaucratic tradition are likely to render the task more difficult in most African states, including Ghana. This nonetheless should not be an excuse for fatalistic resignation. A great deal of improvement might be achieved if adequate incentives were provided for the recruitment of elite personnel, together with adequate rewards for efficient performance and management. The major difficulty here is that this would be bound to be, initially, a very expensive undertaking. Among other costs, compensatory payments would have to be made to rid the senior ranks of dead wood and bring in more committed and capable personnel. It is politically unrealistic, moreover, to expect governments to finance this by making redundancies. In short, it would require a great deal more external assistance to be focused on this task in countries whose governments were themselves committed to the project. Improbable as such commitment, on the part of both African governments and external donors, might currently seem, one might hope that, with such initiatives as the Commission for Africa, increased attention and resources will be focused on what is, after all, a precondition for rapid economic growth by either of the two broad strategies discussed in this chapter.

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Conclusion

Drawing together the empirical data presented in the previous chapters, the conclusion recapitulates the major findings of this book and relates them to the broader issue of economic development. It has been shown that, despite reforms designed to develop capitalists capable of leading economic growth and transformation, Ghana’s capitalist class remained weak, investing far less than had been expected and considered necessary. Three main lines of explanations have been advanced in this book. First, neoliberal economic reforms had a very mixed impact on the fortunes and prospects of Ghanaian businesspeople. The reforms presented Ghanaian entrepreneurs with opportunities that were previously unavailable to them. The abolition of import license, for instance, eliminated the advantages enjoyed by the well connected, creating a somewhat level playing field for entrepreneurs. At the same time, however, reforms created serious challenges. High interest rates, inadequate access to credit, currency depreciation at an erratic rate, and liberalized trade, among other things, induced problems that undermined the viability of many Ghanaian firms and in many ways negated the incentives. Liberalized trade proved disastrous to manufacturing, which remains the heart of a modern economy and the launch pad of sustainable economic growth, a point correctly acknowledged by Ghana—Vision 2020, the most comprehensive policy statement for national development produced during the Rawlings era. Yet as we have seen, very little was done in the form of either assistance or effective coordination to translate this into a reality. The “no intervention” philosophy that guided Ghana’s economic policy might be questioned in the light of two facts. First, strategic state intervention proved crucial in the success of the Asian NICs. Second, given that local manufacturing interests were succumbing to international competition, state assistance was arguably necessary

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and justifiable in order to allow them some time to adapt. This would admittedly have been a risky strategy. As already acknowledged, the Asian NICs possessed elites with a strong commitment to development, whereas this condition was lacking in Ghana. Also, the Asian model was a high-risk strategy that depended for its success on the ability to correctly “pick winners”—a condition that would have sorely tested the administrative capacity of the bureaucracy in Ghana given its weaknesses highlighted in chapter eight. While these considerations help explain the World Bank’s preference for a neoliberal strategy, it remains arguable that some carefully targeted intervention might have helped counter the process of Ghana’s de-industrialization. Another major weakness of Ghana’s reform program was the limited role it envisioned for indigenous capitalists. Since there was very little meaningful support for local capitalists even as many of their businesses collapsed, it seems that the reforms envisaged little role for them. This stood in sharp contrast to vigorous efforts to woo foreign capital, particularly in the 1990s when Rawlings and his colleagues made trips abroad canvassing for investors and trumpeting investment opportunities in Ghana. The leaders had little faith in the ability of local business to play a significant economic role. Mkandawire’s (2001) observation that, while African governments diligently wooed foreign capital, they had a jaundiced view of domestic capitalists, whom they scolded for failing to establish modern competitive businesses, is certainly true of Ghana. The failure of the Ghanaian authorities to coordinate the reform effort adversely affected the fortunes and ability of local business and ultimately national progress. Take the critical export sector. As noted in chapter three, some form of state support was paramount if Ghanaian capitalists were to succeed on the global stage. Stiff global competition aside, the mostly small-scale Ghanaian firms lacked the resources to navigate the unfamiliar global business terrain on their own. Moreover, their counterparts in Asia and Latin America were beneficiaries of state assistance. As noted in chapters three and seven, the Ghana Export Promotion Council lacked the resources and the requisite attitude to provide the level and quality of institutional support necessary for local entrepreneurs to have a chance to compete. From the viewpoint of the developmental state model, that is, the state that organizes and coordinates channels of accumulation for entrepreneurs to build the national economy, Ghana’s reform effort was deficient and limited in its goals. It lacked a long-term development vision, especially an explicit exportinvestment nexus as well as a specific program to energize indigenous business.

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The second main line of explanation as to why indigenous capitalists made little advance under Ghana’s reform program was an uncongenial political environment. Ghanaian entrepreneurs felt persecuted throughout the Rawlings era. As shown in chapter two, an anticorruption campaign formed an integral part of the PNDC’s initial political agenda. In its first eighteen months in office, the regime and the newly created populist organs and institutions consistently threatened (both verbally and physically) the capitalist class which they blamed for Ghana’s economic woes. Even after adopting a capitalist path, the PNDC’s rhetoric continued to be anticapitalist. Furthermore, reassurances to capitalists were few and far between. Indeed, high-profile trials and seizure of businesses owned by some of Ghana’s most prominent entrepreneurs persisted. Though the donor community advocated democracy in the expectation that it would check the arbitrary character of African governments and complement market reforms, this failed to materialize in the case of Ghana. Ghana’s transition to democracy and its immediate aftermath actually occasioned a marked surge in persecution of businesspeople, many of whom had identified themselves with and funded the main opposition party. As shown in chapter five, there were repercussions. It was a telling comment that even at the peak of the anticapitalist rhetoric and actions, the PNDC had always maintained that it was simply fighting corruption. Now, however, the President himself indicated that political motives were important in the harassment of some entrepreneurs. Though this “hot” political climate “cooled off ” in due course, patent antagonism toward entrepreneurs who aligned themselves with the opposition continued until the Rawlings era ended in 2000. The NDC government did not confiscate businesses, but it did continue to pose significant threat to private property as evidenced by the razing of a multimillion dollar hotel in 1999 and thirty-five houses under construction by a real estate developer in 2000. A corollary of the hostility toward much of the business community was the P/NDC’s extreme reluctance to consult businesspeople or to develop any very meaningful relationship with them. Government consultation of business, as shown in chapters four and five, is vital to fostering the kind of relations that would reassure capitalists that government recognizes their contribution and is prepared to work with them. In the case of Ghana, this was especially critical if the business community was to overcome its deep suspicions that reforms were being pursued not out of conviction but as a means for the government to survive economically. The false starts of the various consultative bodies

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hardly gave rise to investment-enhancing policies since businesspeople were kept out of the policy-making loop. Government marginalization of “old” business associations deepened apprehension in much of the business community. Rawlings’ dogged refusal to meet with business leaders—a position from which he never strayed throughout his leadership—was construed as evidence of his inability to overcome his hostility toward them. In the light of the fraught political relations between the leadership and businesspeople, the natural inclination of the latter was either to hide their wealth or to commit as little of their resources as possible if they were still inclined to invest. Many regarded investing not only as lending tacit support to a group of figures they deeply loathed but also as counter to their desire to see the efforts of this group fail. In addition to withdrawing their resources some were prepared to dissuade foreigners from investing in Ghana (Ofori, 1993). It is also of note that during the foreign exchange crisis of 2000 (chapter three) Rawlings accused opposition entrepreneurs of withdrawing their money from banks in an attempt to cause hardship and panic in order to turn voters against his party in the elections of that year.1 The third main line of explanation for the disappointing response of local business to reforms stemmed from the uncertain institutional environment that existed in Ghana throughout the reform years. As shown in chapter eight, the primacy of a predictable and efficient civil service to a capitalist economy cannot be overemphasized. In Ghana, however, civil servants eschewed transparency. They were also given to foot dragging, obstructionism, and corruption. The result was chaos and uncertainty as well as increased cost in conducting business. The legal system was equally beset by problems. Courts were widely regarded with suspicion by Ghanaian entrepreneurs. Litigations dragged on, proved expensive, and were often abortive. We have seen that in several cases involving business and the government, the latter defied the courts. Many felt that courts were subject to government manipulation. With Rawlings’ long record of property seizures, entrepreneurs had good reasons to worry about the security of their investments. The combination of these factors made the risks of investment inordinately high. The challenge, then, appears to be how to make the East Asian model work in countries with weak state institutions, such as Ghana. In this respect, the World Bank’s energies have arguably been misdirected insofar as it has focused on democratization and the fostering of civil society rather than administrative reform. Reform of the

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civil service and the judiciary has tended to be superficial and cosmetic in most African countries. Though this makes replication of the East Asian model daunting, it is not insuperable, especially if donors and the World Bank were to become prepared to focus assistance in more concentrated and determined fashion on the construction of elite bureaucracies with greater administrative coherence and capacity.

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NOT E S

Two

The First Eighteen Months of PNDC Rule

1. For a detailed discussion of these organizations see Ray (1986; Zeebo, 1991). The June Four Movement ( JFM) and the National Democratic Movement (NDM), in particular, became very inf luential in 1982–1983. 2. Stool or customary lands are lands held in trust by chiefs (sometimes a head of family) of traditional states for their communities. Stools symbolize the authority of chiefs in southern Ghana. The deposition of a chief is called “destoolment.” In northern Ghana, the symbol of chief ly authority is the skin of an animal. According to Abdulai and Ndekugri (2007), over 90 percent of the total land area of Ghana is under the control of customary landholding institutions.

Three

The Achievements and Limitations of Economic Reform

1. This replaced the old cash or chit system. Until now, produce-buying clerks had held back payments, sometimes for many months, abused funds, and paid farmers with phony checks. Under the new system, farmers promptly received checks that could be cashed at any bank. 2. I discuss additional factors that limited GEPC support of exporters and other thematic issues in chapter eight.

Four Strains in Government-Business Relations, 1983–1991 1. In 2001, the Asantehene gave expression to this view by publicly scolding some chiefs for doing a disservice to the institution of chieftaincy for their role in the P/NDC. The Akimhene followed suit. 2. Symbolically, Soviet and Chinese technical assistance personnel, some of their diplomatic staff and the entire official East German community were expelled within the first week of the coup (Esseks, 1975). 3. I am grateful to Richard Jeffries for this information.

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Notes

4. Of the six private sector members of the PSAG, only one, A. Appiah-Menkah, could be identified with this group. Of the remaining five, two (I. E. Yamson and J. K. Richardson) were the Chair of the multinationals Unilever Ghana and Pioneer Tobacco Ghana, respectively. Alan Kyeremateng and P. K. Kludjeson were respectively managing directors of EMPRETEC and Kludjeson International. Both belonged to the younger generation of entrepreneurs. The sixth member, W. E. Inkumsah, though belonging to the older generation of capitalists, had an unusually clean image. 5. The date of this issue of the Daily Graphic was accidentally cut off during photocopying.

Five

Government-Business Relations in the Democratic Era

1. Chabal and Daloz have asserted that corruption is not really a domestic political issue in Africa “so long as its fruits are deemed to have been suitably and vigorously redistributed according to the logic of patronage” (1999, pp. 99–100). It is impossible to understand Ghanaian or, for that matter, Tanzanian politics on this basis. 2. The PNDC appointed one-third of assembly members. The remaining two-thirds were elected. 3. Reports of missing persons had persisted, much to the worry of Botchwey and other key regime members. 4. Marino Chiavelli, an Italian businessman, reportedly loaned $1 million to the People’s National Party during the Third Republic in return for the award of contracts (New African, December 1982, pp. 28–29). 5. GHACEM has plants in Takoradi and Tema. Both had contracted to purchase paper sacks from MWPS since the 1960s. It is not clear why only the contract with Tema (the bigger plant) was canceled (interview). 6. The Tyson chicken empire was very well connected to the Clinton administration, having done business in Arkansas while Clinton was governor there. I am grateful to Professor John Sidel for this information. 7. Having expanded into papaya and coconut cultivation and pineapple processing, he was upbeat about the future. 8. The Court ordered (i) the state-owned Ghana Broadcasting Corporation to accord equal access to both the ruling and opposition parties, (ii) the government to cease requiring prior police permission for public demonstrations, (iii) the regime not to celebrate December 31 (a highly partisan event) with public funds, and (iv) the government to change its practices in the election of district chief executives. 9. The opposition parties seeking avenues to gain publicity and to embarrass the leadership, seized on the latter’s sloppy handling of the tax. Rawlings personally distanced himself from the VAT debacle, saying that Finance Minister Kwesi Botchwey had created troubles for him (Afrani, 1995, p. 27). 10. The original members were the AGI, GNCC, the Ghana Employers Association, Ghana Association of Bankers, and the Federation of Associations of Ghanaian Exporters. New members include the Ghana Association of Consultants and Ghana Real Estate Developers Association. 11. The GNCC classified members into five groups: 1A, 1B, 1C, 2, and 3 based on turnover. As of 2000, annual subscription was C2.5 million; C1.875 million; C950,000; C450,000; C180,000, respectively (interview, GNCC officer). In early 2000, $1 was worth about C3,500. Later that year, the rate rose to $1 to C7,000. 12. A prime example was J. A. Addison’s donation of a large office complex to the AGI (interview, AGI officers).

Notes

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13. This section has benefited from the work of Elizabeth Hart and E. Gyimah-Boadi (2000). 14. This affected four categories of imports: luxury products not made in Ghana; agriculturalbased products available in Ghana; industrial products made from imported raw materials; and other garments not cotton or used clothing.

Six

The Changing Face of Ghanaian Business: The Rise of P/NDC Stalwarts

1. For alleged scandals involving NDC functionaries, see Ghanaian Chronicle, August 14, 2000; August 18, 2000; August 21, 2000. 2. Kwamena was minister of local government and rural development for years before serving as minister of regional cooperation in 2000. Kwesi was in charge of the Ghana Investment Promotion Centre. Ato headed the National Investigation Committee and the Internal Revenue Service during the PNDC era. 3. This allegedly included foreign interests. The NPP government ended Telekom Malaysia’s management of Ghana Telecom in 2001, citing nonperformance. The real reason was suspicion that Telecom Malaysia fronted for some NDC leaders.

Seven NDC-Business Relations: The Case of Brong-Ahafo 1. This was a political and military union consisting of all the chiefdoms in the then Ashanti under the leadership of the Ashanti king who was based in Kumasi. The British colonial practice of indirect rule employed indigenous chiefs as part of the administrative system, leaving chief ly power largely intact. This, however, caused many chiefs, especially those in the far-f lung lands, to resent the control and authority of the Ashanti king. 2. The NDC’s success in BA was due to many factors. These do not, however, concern us here. 3. An example was the failed attempt by the Kumasi metropolitan assembly to sack its chief executive, Akwasi Agyemang, who purged the assembly of his perceived enemies (Ghanaian Chronicle, May 8, 2000). 4. Soon after his appointment, this former teacher, had acquired, among other assets, three houses, several cars and a construction firm, which was awarded the bulk of contracts in the district. He was also allegedly arrogant and abusive. In an act reminiscent of the Nkrumah era (see Jones, 1976), the DCE had a private dance band to entertain him (interviews conducted at Goaso, the district capital). 5. The rules governing timber operations underwent major and rapid changes in a few years as part of an effort, partly due to donor pressure, to save the industry. The practice of granting timber concessions that last for decades was ended and replaced by the grant of timber rights. The new timber regime allows timber rights to be revoked if a breach of the terms and conditions is deemed to have occurred. It also makes district officials, including the District Forestry Officer a vital part in the decision to grant or revoke timber rights. The rapid changes caused confusion, giving officials considerable leeway and discretion in applying the law. For changes, see the L. I. 1649, for details see Timber Resources Management Regulations, 1998. 6. In my interview with an officer with the DIC, he denied that political connections were relevant in deciding who SOEs were sold to, arguing: “how could we sitting here in Accra,

236 7.

8. 9.

10.

Notes

know who J. Adom is and which political party he supports? The man simply submits better business plans than others, hence his success.” In 1998, the government leased a jet for the President’s use without seeking parliamentary approval as mandated by law. Critics saw this as irresponsible because there was already a presidential jet (see Ghanaian Chronicle, February 18, 2000; Ghanaian Chronicle, editorial, February 21, 2000. This was also true of the central government, which owed billions to contractors (see Ghanaian Chronicle, May 10, 2000). Before the 1996 elections, 6.7 billion cedis was “paid” to contractors for the much-criticized Keta Sea Defense Project. The work was not done. Critics believed that the amount involved went into NDC campaign fund. A minister of state was later sacked in connection with this case (Oelbaum, 2002), but critics charged that this was because he had become politically expendable. Moreover, the contractors were not prosecuted. Nor was the money recovered. Political tension pervaded Berekum in the run-up to the 2000 elections. Supporters of the MP and minister of state, J. H. Owusu-Acheampong, and those of his rival, Retired Captain N. Effa-Dartey, violently clashed in November. The MP accused a local radio station of “incitement” and it was shut down for two weeks. When Rawlings publicly criticized EffaDartey, whom he had reportedly sacked from the military, he revived the acrimony between himself and Effa-Dartey and gave what was essentially a local issue a national f lavor.

Eight

Constraints of the Institutional Environment on Capitalist Expansion

1. Until the Divestiture Implementation Committee was established, the SEC had overseen divestiture. The Executive Directive had and continued to be a leading figure in the divestiture exercise. 2. Exporters were entitled to duty drawbacks, but a World Bank study found that it took eight months to four years to receive this. Given Ghana’s relatively high interest rates and the reliance on imported inputs in export production, exporters lost significant capital, making exporting unattractive. Indeed, some exporters canceled planned investments, citing taxation and duty drawback as the major reasons (World Bank, 2001, p. 45). 3. A full list and discussion of all the alleged weaknesses of African capitalists is not my goal here. For a discussion, see Garlick (1967), Kennedy (1980), Iliffe (1980), and Forrest (1994).

Nine

The Theoretical Implications of Ghana’s Experience

1. A report by The Economist in September 1989 noted that, in 1957, Ghana’s per capita income was $490 as against $491 for South Korea. By the early 1980s, Ghana’s annual income per head was $400, down by nearly 20 percent. During the same period, South Korea’s per capita GDP was over $2,000. And, using 1987 statistics, the UNDP’s 1990 Human Development Report, noted that South Korea had an annual purchasing power per head ten times greater than that for Ghana—$4,832 versus $481 (Werlin, 1994). 2. Deraniyagala (2001) has expounded the sentiment that although the World Bank’s almost axiomatic view of the optimization potential of freely functioning markets and free trade has increasingly been questioned, including within the Bank itself, there has not been a remarkable departure from its earlier position.

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3. The World Bank and the IMF have spent considerable time and resources trying to curtail corruption in developing countries. Finance and Development, an IMF-affiliated publication, devotes much coverage to the ills of corruption and how to combat it. 4. The following underlines the problem. Following increases in chicken imports from about 5,000 metric tons in 1998 to 30,000 metric tons in 2001, parliament approved a doubling of the 20 percent import tariff on poultry as well as an increase in tariffs on rice from 20 to 25 percent. Pressure by international lenders forced the government to give in. “Our Highly Indebted Poor Country situation would not allow us to [subsidize or institute any form of protection]” Ghana’s Minister of Private Sector Development and President Special Initiative lamented (See http://www.ghanaweb.com/GhanaHomePage/NewsArchive/artikel. php?ID=90051) “No Ban on Poultry Importation—Bartels” Accessed May 24, 2010.

Conclusion 1. Rawlings also famously leveled similar accusations against the IFIs and the donor community who withheld assistance from Ghana for failing to meet agreed-upon targets.

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BI BLIOGR A PH Y

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Magazines and Newspapers Africa Confidential (London) Africa Contemporary Record (London) Africa Report (London) Africa Research Bulletin (London) African Observer (United States) AGI News (Accra) Business and Financial Times (Accra) Business Chronicle (Accra) Crusading Guide (Accra) Daily Graphic (Accra) Dispatch (Accra) Economist Intelligence Unit (London) Evening News (Accra) Free Press (Accra) Ghana Drum (London) Ghana Review International (London)

252 Ghanaian Chronicle (Accra) Ghanaian Times (Accra) Independent (Accra) Legon Observer (Accra) New African (London) Statesman (The) (Accra) West Africa (London)

Bibliography

I N DE X

Abbey, Joseph, 194 abbreviations key, xi–xiii Accra, Ghana, 9–10, 26–27, 51, 66, 92, 94, 96, 112–113, 116–117, 123, 125, 132, 135–136, 145, 149, 167, 179, 193, 209, 235n6 Accra Brewery, 125 Accra Metropolitan Assembly (AMA), 132 Accra Municipal Assembly, 135–136, 145–146 Acheampong, Ignatius Kutu, 20–23, 26, 35, 84, 87, 93–94, 98–99, 103–104, 106, 109–110 Ada Co-operative Salt Miners Association (ACSMA), 95 Ada Traditional Council (ATC), 94–95 Addison, J. A., 110, 115–116, 118, 121, 126–127, 200, 234n12 Addo, Edward, 153 Addo, S. A., 145 Adom, J., 173–174, 183, 235n6 African Capacity Building Initiative (1989), 192 African capitalism, 1, 2, 4, 7, 17–18, 101–102, 190–194, 203, 206, 208–209 See also capitalism (Ghanaian) African economy, 190–193 African nationalists, 18 Africanists, 2, 102 Afrifa, A. A. (1966–1969), 26 Agama, G. K., 129 agriculture, 2, 3, 21, 92, 118, 170, 221

Agyemang, Akwasi, 145 Agyemang-Duah, Baffour, 33 Ahwoi, Kwamena, 112, 148, 158 Ahwoi brothers, 147 aid donors, 1, 101–102, 144, 152, 179 Aidoo, Tony, 143 Aikins, Addo, 39 Akata-Pore, Allolga, 27, 41 Akosombo Dam, 202 Akuafo Cheque, 47, 233n1 Akuffo, Fred (1978–1979), 26, 85 Akuffo-Addo, Nana, 123–124 A-Life supermarket chain, 150 Aliens Compliance Order, 83 Alliance for Change, 123 Amissah Inquiry of 1986/1987, 95 Amponsah, N., 198–199 Amsden, Alice, 6, 63, 213–214, 216–217, 219 Annan, D. F., 77 Annan, Eddie, 157 Ansah, Paul, 121 Antwi, Kwaku, 174–177 Apino Oil Palm Plantation, 90–91 Apino Soap, 155–156 Appenteng, S. C., 83, 87, 90, 94–98, 109, 114, 118–119, 149, 158, 200, 205, 207 Appiah-Kubi, K., 152, 154 Appiah-Menkah, A., 37, 41, 87, 90–92, 114, 118–119, 121, 155–156, 234n4 harassment of, 90–92

254

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Apraku, Ernest, 171–172 Armed Forces Revolutionary Council ( June–September 1979) (AFRC), 21, 24, 25–26, 110, 186 Arthur, P., 223 Aryeetey, E., 8, 55, 58–59 Asamoah, Obed, 35 Asante, Kwame, 93–94 Ashanti Confederacy, 162 Ashanti Goldfields Company (AGC), 47, 125, 134–135, 145, 151 Ashanti nationalism, 108 Ashanti Oil Mills, 91 Ashanti region, Ghana, 77, 94, 108–109, 162–163, 235n1 Asian financial crisis (1997), 16, 220 Asian tigers, 70–71, 80 Assiseh, Vincent, 149 Associations of the Committees for the Defence of the Revolution, 123 Association of Ghanaian Businessmen, 81–82 Association of Ghana Industries (AGI), 8, 58, 78–79, 86–87, 91, 124, 130–133, 136–138, 208, 234n10,12 Association of Recognised Professional Bodies, 103 Asuo Bomosadu Timbers and Sawmills Ltd. (ABTS), 171–172 Atim, Chris, 27, 40–41 authoritarian regimes, 101–102 Awoonor, Kofi, 35, 98–99, 200–201 Ayitteh, Sherry, 133 Bangladesh, 218 Bank of Ghana (BOG), 22, 37, 48, 57, 64, 84, 128–129 Bank for Housing and Construction (BHC), 150 Bartels, Kwamena, 93 Bates, Robert, 3, 22–23, 105 Batsa, Kofi, 95 Bayart, J., 27, 141–142, 159 “belly politics,” 141–142 Berg Report (1981), 191

Bilson, John, 107 Black Star Line, 82 Boahen, A. A., 110–111, 113–114, 140 Botchwey, Kwesi, 54, 61–62, 64, 78, 85–86, 89, 105, 125, 130, 149, 183, 194, 234n3,9 Bowditch, N., 38, 204, 206–208 Brautigam, D., 203 “bribe culture,” 195–196 Brong-Ahafo, Ghana, 9–10, 12, 51, 161–164, 173, 177–179, 181–183, 185–186, 203, 209 Brong Kyempim Federation (BKF), 162 Bruce, Frank, 93 Bucknor, Jude, 208 bureaucrats, 3, 10–11, 79, 88, 189–199, 203, 210, 217, 224 Burkina Faso, 164 Busia, Kofi, 20, 83, 90–91, 94, 108–111, 115, 162–163, 173 Business Assistance Fund, 64, 86 Business Associations (BAs), 81–89, 125, 127, 130–138, 170, 230 older, 130–135, 230 newer, 135–138 capitalism (Ghanaian), 4, 10–11, 13, 16–18, 23–24, 25, 30, 42–43, 45, 49–50, 55–57, 60–61, 64, 67, 69, 75–78, 80–83, 85–86, 90, 108–114, 119–120, 134–135, 138, 146–147, 150–151, 159–160, 161, 179, 189–211, 227 anticapitalist rhetoric, 75 and bureaucrats, 190–199 and business activism, 81–82 “culture of,” 190 and entrepreneurial weakness, 203–210 and infrastructure, 202–203 and the law, 199–202 See also African capitalism; indigenous capitalism Caridem Corporation, 153 Carter Center, 113

Index Cashew and Spices Products Limited (Cashpro), 147–148 cedi (C) currency, See devaluation Centre for Policy Analysis (CEPA), 58 Chang, H., 6, 213, 215–216, 218–220 Checkpoint Limited, 149–150 chiefs, 33, 77, 162, 182, 233n2,1, 235n1 See also stool China, 58 Christian Council, 103, 107 Citizens’ Vetting Committee (CVC), 34–36, 77, 92, 104, 114 civil servants, 10–11, 13, 18–20, 49, 53, 147, 189, 195, 224, 230–231 Clarke, Arden, 18 cocoa, 17–21, 28–29, 46–48, 52, 70, 85, 94, 108, 134, 147–148, 162–163, 207 Cocoa Marketing Board, 19, 49 Cocobod, 47, 148 colonialism, 12, 17–18, 42, 81, 86, 108–109, 166, 168, 235n1 Combined Farms, 116–117 Commission on Human Rights and Administrative Justice (CHRAJ), 36 Commissioners Appointed to Enquire into the Law of Insolvency in Ghana (1961), 200–201 Comstrans, 147 collective action theory, 71, 80, 87–88, 131 Columbia, 134 Commission for Africa, 225 Commission on Human Rights and Administrative Justice, 159 Committees for the Defence of the Revolution (CDRs), 77, 106 Confederation of British Industry (CBI), 121–122, 125–126 “Confiscated Assets (Removal of Doubt) Law,” 114 congenial governance, 101–102 constitutional rule (1992–1993), 7, 9, 11, 12, 26, 45, 53, 103, 106–107, 111, 114, 116, 120–121, 125, 200

255

constitutionalism, 120–121 “constructive contestations,” 15–16 Consultative Bodies (CB), 88–89 Convention People’s Party (CPP), 18–19, 82, 108–109, 142, 158–159, 162, 184–187 corruption, 19, 21, 24, 25–27, 30–31, 33–36, 38, 42, 49, 78–79, 86, 88, 90, 98–99, 101, 104, 113, 120, 127, 141, 158–159, 167–168, 186, 193, 195–197, 200, 205, 217–219, 224–225, 229–230, 234n1 See also “bribe culture”; kalabule; rent-seeking Council of Indigenous Business Associations (CIBA), 112, 128, 137, 147 coups, 19, 20, 27, 29, 84, 87, 95 and expansionism, 29 1966, 19 1972, 20, 84 1979, 27 1981, 87, 95 coup attempts, 32, 42, 77, 79, 91, 120, 123 1982, 42 1983, 32, 91 Crabbe, Azu, 77 credit, 12, 29–30, 57–58, 62, 67, 71–72, 81–83, 110, 126–127, 137, 144, 153–154, 201–202, 217, 220–221, 227 cronyism, 16, 80, 86–87, 143, 158, 179, 186, 219 Crook, R., 168 “culture of silence” (1980s), 79 Customs, Excise and Preventive Service (CEPS), 97 Dadzie, Ato, 152 Daily Graphic, 11, 33, 91, 118, 144, 150, 152 Danquah, Boakye, 93, 108–111, 115, 162, 173 Darko, Kwabena, 114, 116–118, 121, 207

256

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De Soto, H., 199–200 December Women’s Movement (DWM), 106, 148–149, 153 Defense Committees (DCs), 31–34, 40–42, 95 Deraniyagala, S., 236n2 Divestiture Implementation Committee (DIC), 151–157, 172–173, 195–196, 235n6, 236n1 Djentuh, Selassie, 146 Djentuhs Case, 138, 146 democratic era (government-business relations in), 101–139 antagonism toward business, 113–118 business associations, 130–138 consultation, 125–130 democratization, 103–111 impact of democracy, 120–122 elections controversy, 111–113 and Rawlings, 118–120 and VAT, 122–125 democratization, 2, 7, 12, 53–54, 101–139, 159, 165–166, 179, 214, 220, 230 domestic factor in, 103–106 process of, 106–108 stabilization phase (1983–1986), 104–105 transition to, 108–111 See also democratic era; elections Department of International Development (DFID) (Britain), 144 destoolment, 33, 233n2 devaluation, 20–22, 46–49, 56–57, 62, 72, 92, 97 development theory, 18 developmental state school, 6–7, 13, 63, 192, 213–215, 223–224, 228 developing countries, 6, 13, 65, 70, 80, 200, 214–216, 219, 224, 237n3 See also East Asian NICs District Assemblies (DAs), 104–105, 148, 165–168, 180–183 District Assemblies Common Fund, 148–149, 181

district chief executive (DCE), 165–170, 172, 175–176, 179–186 Divestiture Implementation Committee (DIC), 89 Doner, R., 219 drought (1982–1984), 29 Durand, F., 134 Dutch Development Bank, 143 East Asian NICs, 5, 7, 16, 63, 72, 132, 192, 195, 210–211, 213, 215–217, 219–220, 222, 224, 227–228, 230–231 economic liberalization, 13, 20, 35, 42, 45–46, 56–59, 64, 86, 102, 119, 131, 161, 165, 214–215, 221 economic recovery program (ERP), 42, 46–73, 76–79, 196 challenges of, 56–59 and domestic capital, 55–56 and incentives, 46–52 and industrial sector, 60–69 and NDC, 52–55 and nontraditional exports, 69–72 and policy, 59–60, 68–69 economic reform, See neoliberal economic reform “economistic” approach, 191–192 Edusei, Krobo, 185, 187 elections, 12, 13, 27, 45, 53–54, 79, 83, 103, 108–109, 113, 116, 142, 146–147, 157, 162–163, 166–168, 175–176, 186, 221 1969, 83, 108–109 1992, 12, 45, 53–54, 103, 116, 146–147, 162–163 1996, 45, 53, 175, 186 2000, 13, 142, 168, 176, 221 2004, 163 2007, 157 entrepreneurs in the AFRC era, 26–27 cultural factors, and growth, 13 harassment of, 89–100, 108, 120, 220 and indigenous capitalism, 23–24

Index local, 81 and particularistic relationships, 15, 17 and PDCs, 32 “political entrepreneurs,” 88 and public tribunals, 38–39 and “renterism,” 210 strategies for, 177–178 weakness of, 203–210 exchange rate, 2–4, 7, 19, 35, 48–50, 54, 57 “Export Ghana, Export More” slogan, 69–70 Export News, 198 exports, 3, 5, 6, 13, 17–18, 28–29, 46–47, 53, 56–58, 60–61, 63, 65–73, 85, 116–117, 122, 126, 132, 135–136, 142, 164, 189, 197–198, 204, 207, 215, 221–222, 228, 233n2, 234n10, 236n2 See also cocoa; gold; Nontraditional Exports; timber Federation of Associations of Ghanaian Exporters, 198 Financial Times, 125 Fordwor, K. D., 114 foreign aid, 1, 51, 53–55, 59, 101, 116, 126, 128–129 foreign exchange, 17–21, 23–24, 34, 46–49, 52–54, 57, 60–61, 65–66, 70, 85, 87, 131, 136, 165, 224, 230 foreign exchange crisis (1990s), 52–54 foreign investment, 5–6, 45, 50, 55–56, 60, 87, 121, 152 Forrest, T., 203 Forum for Policy Dialogue, 128 Fourth Republic, 54, 102, 114, 119–120, 151 Free Press, 129 Frimpong-Ansah, J., 118–119 Gariba, A., 41 Garlick, P., 204, 206–209

257

garment industry, 65–67 Gbeho, Victor, 145 Genoud, R. 18 Gerschenkron, A., 216 GHACEM, 115–116, 121, 144, 200, 234n5 Ghana Bar Association (GBA), 38, 103, 106–107 Ghana Chamber of Commerce, 79 Ghana Civil Aviation Authority, 117 Ghana Employers Association, 62 Ghana Export Promotion Council (GEPC), 13, 69–72, 136, 164, 189, 197–198, 228, 233n2 Ghana Film Industry Corporation (GFIC), 153 Ghana Free Zone Board, 56 Ghana Governance and Business Environment, 196–197 Ghana Governance and Corruption Survey, 196–197 Ghana Investment Promotion Centre (GIPC), 55–56, 87 Ghana National Chamber of Commerce (GNCC), 8, 86–87, 124, 130–133, 137–138 Ghana National Petroleum Corporation (GNPC), 54, 97, 142, 149 Ghana National Trading Company, 173 Ghana Palaver, 150 Ghana Private Road Transport Union (GPRTU), 137 Ghana Stock Exchange (GSE), 151, 209 Ghana Telecom, 125 Ghana Textile Printing (GTP), 34 Ghana 2000 and Beyond (1993), 68 Ghana Union of Traders Associations (GUTA), 124–125, 133, 135–138 Ghana: We Mean Business, 149 Ghana—Vision 2020 (1995), 68–69, 227 Ghanaian Business Promotion Act, 84 Ghanaian Chronicle, 11, 117, 121, 136, 142–143, 148, 150, 153–155, 180–181, 235n1,3, 236n7,8

258

Index

Ghanaian Enterprises Decree (GED), 82–83 Ghanaian independence (1957), 17–18, 23 Ghanaian Manufacturers’ Association (GMA), 82–85 Ghanaian Times, 11 GIHOC Brick and Tile, 148, 153 gold, 28, 47, 52, 55, 70, 81–82 See also Ashanti Goldfields Company Gold Coast Chamber of Commerce, 81 Gold Coast Motors, 153 Golden Beach Hotels, 157 “golf girls,” 23 Great Britain, 93, 121–122, 125–126, 144, 162, 215, 235n1 Green, D., 103–104 Grindle, M., 133 Gross Domestic Product (GDP), 3, 5, 6, 45, 50, 52, 56–58, 134 and agriculture, 3 and budget deficit, 52 and credit, 57–58 and industrial sector, 56 and investment, 55–56 and manufacturing, 6, 56 in 1983–1990, 5, 134 in the 1990s, 5, 50 and private sector, 45, 57–58 and public capital inf lows, 134 and revenue, 50 Guinness, 173 Gyamfi, Kwadwo, 114 Gyimah-Boadi, E., 22–23 Handley, Antoinette, 15–16 Hart, E., 87 Hart, K., 203, 206 Heavily Indebted Poor Countries Initiative (HIPC), 223 Herbst, J., 90 Hutchful, E., 89–90, 159 hydroelectric power, 29, 51 Ibrahim, Yusuf, 145–146 Iliffe, J., 206

imports, 3–6, 19–24, 26, 49–50, 56–57, 59–67, 69, 81–82, 84–85, 87, 92–93, 110, 116, 127–128, 131–132, 135–137, 165, 201, 217, 221, 224, 227, 235n14, 236n2, 237n4 import license, 19–21, 23–24, 26, 49, 81–82, 84–85, 87, 92, 131, 165, 224, 227 India, 218 Indians, 81–82 indigenous capitalism, 23–24, 55–56, 72, 81, 112, 121, 127–128, 132–134, 139, 147, 151–152, 189–211, 204, 219, 228–230 and the bureaucracy, 193–199 constraints on, 189–211 and entrepreneurial weakness, 203–210 and infrastructure, 202–203 and the law, 199–202, 230 preconditions for development, 190–193 See also Council of Indigenous Business Associations Indonesia, 58 Industrial Chemicals Limited (ICL), 92–93 industrial policy, 68–69, 218–224 Industrial Policy Statement: A Strategy for Industrial Regeneration (1992), 68 industrial sector, 3, 5–6, 9, 13, 18–20, 28–29, 46, 56–57, 60–69, 72, 82, 92–98, 123, 126, 132, 200, 213–224, 228, 235n14 See also garment industry; mining; textile industry industrialization, 13, 18–19, 52–53, 62–63, 68, 213–224, 228 inf lation, 19, 21, 24, 28, 46, 50, 52, 54, 57, 60, 63, 123, 129, 193, 202 infrastructure, 3, 5, 7, 18, 29, 46, 50–51, 53, 66, 103, 126, 179, 192, 202–203 Institute of Statistical, Social and Economic Research (ISSER), 58 interest rates, 52, 57–58, 60, 62, 67–68, 71–72, 129, 137, 148, 208, 227, 236n2

Index Internal Revenue Service (IRS), 116, 127 International Finance Corporation (IFC), 117 International Financial Institutions (IFIs), 13, 33, 45, 59, 80, 87–88, 100–101, 110, 132, 213, 223, 237n1 International Herald Tribune, 125 International Monetary Fund (IMF), 21–22, 28, 30, 40, 42, 45, 76, 110, 191, 200–1, 220–221, 237n3 International Tobacco Ghana (ITG), 89–90, 97–98 interventionism, 2, 4, 7, 13, 46, 62–63, 213–217, 223–224, 227–228 Intravenous Infusions, 207–208 Ivory Coast, 21–22, 29, 203 Jantuah, F. A., 77 Japan, 144, 201, 216 Jeffries, R., 22–23, 46–47 Jomo, K., 217–219 Jonah, K., 119 Jonah, Sam, 145–146 Juapong Textiles, 65 June Four Movement ( JFM), 27–28, 39, 42, 106, 121, 233n1 kalabule, 21, 24, 26, 30, 35–37, 110 See also corruption Kang, D., 7 Kastena Air Processing, 93–94 Kaunda, Kenneth, 18 Kennedy, P., 203–204, 206, 208 Kente, Nnuro, 207 Kenya, 58 Khan, M., 217–219, 223–224 Kicking Away the Ladder (2002), 215 Kilby, P., 203 knowledge-based assets, 6, 215 Kowus Motors and International Tobacco Ghana, 98 Kpordugbe, Peter, 144 Kraus, Jon, 17, 30, 38, 51, 57–58, 77, 132, 184

259

Kufuor, J. A., 222–223 Kumasi, Ghana, 9–10, 113, 116, 145, 162, 167–168, 204, 235n1,3 Kumasi metropolitan assembly, 166–168 Kume Preko, 123 Kwahu people, 206–208 Kwei, Amartey, 41 Kyere, Kwaku, 169–171 Lall, Sanjaya, 5, 56, 60, 62, 64, 217 Latin America, 16, 105 leadership, 16–17, 29–31, 42, 68–69, 73, 75, 78, 80, 85, 87, 89, 94, 109–112, 122, 131–134, 152, 221, 225, 230 left-wing organizations, 27, 30, 33, 40–43, 75–77, 79, 128, 222 Legon Observer, 82 Levantines, 81–82 liberalists, 63, 80 Liberia, 29, 54 Libya, 29–30 Limann (1979–1981), Hilla, 27, 32, 85, 109 Lindsay, Ahomka, 98 List, Friedrich, 215–216 MacGaffey, J., 205 MacIntyre, A., 217 macroeconomic policies, 6–8, 12, 46, 50, 52, 54, 58–60, 68, 72, 84, 223 Malaysia, 58, 218 Mali, 164 Manu, Kwaku, 176–177 manufacturing, 5–6, 12–13, 15, 28, 56–57, 59–62, 64–69, 82–84, 91, 94, 115, 132, 144, 148, 155, 203–205, 207, 213, 216, 227 manufacturing value added (MVA), 5–6, 56 market reforms, 12, 45, 51–52, 61, 72, 75–77, 85, 101, 131–132, 139, 189, 191, 229 Marris, P., 203 Mauritius, 15–16, 67 Maxfield, S., 16

260

Index

media, See private media Mensah, A. H. O., 65–66, 87, 97–98, 109, 114, 147, 158, 174, 205 methodology, 1–13, 165–166, 195–198 book structure, 11–13 interviews, 195–198 premise and argument, 1–8 research methods, 8–11 Mills, John Evans Atta, 130, 142, 170–171, 173, 176–177, 195 Mim Timbers, 153 Minerals and Mining Law, 47 mining, 5, 6, 28, 46–48, 55–56, 68, 82, 85, 94–97, 114, 134 See also gold; Vacuum Salt Products Limited Ministerial Conference of the Non–Aligned Movement, 54 Mkandawire, T., 228 Mobutu Sese Seko, 193 Moss, T., 209 Movement for Freedom and Justice (MFJ), 104, 106 Mugabe, Robert, 15 Multi-Wall Paper Sacks (MWPS), 115 Munufie, A. A., 163 Museveni, Yoweri Kaguta, 122 Nartey, W. G., 94 National Commission on Democracy (NCD), 106, 110 National Democratic Congress (NDC), 12–13, 52–55, 102–103, 112–113, 115–118, 120–121, 123, 125, 127–129, 131, 133, 137, 141–160, 161–187, 209–210, 221–223, 229 and Brong-Ahafo, 161–169 business relations, 161–187 businesspeople and politics, 184–187 case studies, 169–177 context of study of, 164–165 and contractors, 179–184 entrepreneurial strategies, 177–178 and the local level, 165–169 See also P/NDC

National Democratic Movement (NDM), 27, 42, 233n1 National Development Planning Commission, 130 National Independence Party, 114, 116 National Institutional Renewal Programme (NIRP), 194–195 National Investigations Committee (NIC), 36–38, 77, 96, 104, 114 National Investment Bank (NIB), 83, 92–93, 144 National Liberation Council (NLC), 19–20, 23, 81–84, 151 National Liberation Movement (NLM), 108, 158–159, 162 National Redemption Council (NRC), 20 National Reform Party (NRP), 143 National Union of Ghana Students (NUGS), 27–28 neoclassical economics, 191 neoliberal economic reforms, 1–4, 12, 14, 15, 17, 46–73, 132–133, 139, 160, 213–215, 217, 220–221, 223–224, 227–228 See also Economic Recovery Program; indigenous business; structural adjustment neo-Marxism, 27–28, 30, 41–42, 75, 77–78 new institutional economics, 191, 213–214, 220 New Patriotic Party (NPP), 8, 13, 53, 110–120, 123–124, 142, 144, 147–149, 155, 158–159, 163, 169–175, 177–178, 183–184, 213, 221–224, 235n3 newly industrialized countries (NICs), See East Asian NICs Nigeria, 17, 29, 83, 92, 115–116, 121–122, 203, 207 Nkrumah, Kwame, 4, 18–19, 23, 81, 83, 108–109, 111–113, 119, 142, 148, 151, 158–159, 162, 186–187, 235n4 and the Convention People’s Party, 158–159

Index and economic statism, 18 and “one-party state,” 108–109 NDC, See National Democratic Congress Nontraditional Exports (NTEs), 48, 58, 69–72, 117, 135 North, Douglas, 190–191 Nunoo-Mensah, Joseph, 41 Nyerere, Julius, 18 Obeng, P.V., 64, 194–195 Obo Trading Company, 208 Oelbaum, Jay, 127, 148, 179 Ofori-Atta, Jones, 208 oil, 22, 29–30, 52, 54 Oquaye, M., 127–128, 201–202 Osei, Isaac, 207 Osei-Wusu, W., 144 Overseas Development Institute, 54, 57 Overseas Economic Cooperation Fund (OECF), 204 Owusu, A. A., 208 Owusu, Victor, 109, 163 Owusu-Acheampong, J. H., 170, 236n10 Pakistan, 218 para-statals, 18–19, 24, 61, 77 patronage-based politics, 1–4, 13, 15–16, 84, 101–102, 133, 152, 165, 168, 174, 180, 184–186, 209–210, 224, 234n1 People’s Defence Committee (PDC), 32–34 People’s National Party (PNP), 21, 27, 40 People’s/workers’ defense committees (P/WDC), 33 Pepera, Paul, 122 Peperah, Peter, 153 Peprah, Kwame, 53, 152 “performance legitimation,” 103–104 personal rule, 3–4, 16, 17, 135, 146, 160 Peru, 134, 200, 202

261

Philippines, 219 Piers Hotel (1999), 138, 145, 200 P/NDC, See Provisional National Defence Council and the National Democratic Congress PNDC, See also Provisional National Defence Council Popular Front Party, 109, 162 Private Enterprise Foundation (PEF), 6, 58, 65, 117, 128–130, 133, 137 private media, 103, 120–121 private property, 25, 32–34, 42–43, 64, 89, 97–99, 103, 114, 138, 145, 199–200, 206–207, 214, 220, 230 seizure of, 32, 97–99, 114, 138, 145, 200, 206, 230 private sector, 1, 5, 12, 23–24, 25–26, 34, 42–43, 45, 49–50, 55–60, 68, 72, 75–80, 82, 84–85, 88–89, 118, 121–122, 125–129, 147, 151, 164, 190–191, 194–195, 198, 200, 204, 214, 220–222, 234n4, 237n4 and policy implementation, 59–60 relations with, 77–80 Private Sector Advisory Group (PSAG), 89, 126, 234n4 Private Sector Consultative Committee (PSCC), 88 Private Sector Roundtable (PSR), 126–128 privatization, 5, 19–20, 23–24, 25–26, 49, 59, 81, 126, 150–157, 199, 214, 220 Progress Party (PP), 20, 23, 83–84, 109, 151, 162 Provisional National Defence Council (PNDC) background of, 25–28 and business, See PNDC-business relations and the Citizens’ Vetting Committee, 34–36 decentralization reform (1988), 165–166 and the Defense Committees, 31–34 and devaluation, 48

262

Index

Provisional National Defence Council (PNDC)—Continued dual power structure of, 40–41 economic challenge to, 28–31 and economic reforms, 76–77 and the legal system, 200, 202 and the National Investigations Committee, 36–38 and private property, See private property, seizure of and Public Tribunals, 38–39 and revenue mobilization, 50 and structural adjustment, 42 PNDC-business relations (1983–1991), 75–100, 200 and Business Associations, 85–88 business advocacy before Rawlings era, 81–85 consultations, 79–85 and consultative bodies, 88–89 economic reforms, 76–77 and “free rider” problem, 80 implications of, 98–99 and the private sector, 77–79 See also entrepreneurs, harassment of Provisional National Defence Council and the National Democratic Congress (P/NDC), 7, 73, 112, 128, 141–160, 194–195, 200, 204, 214, 221–223, 229, 233n1 analogy with CPP, 158–159 and Augustus Tanoh, 142–145 and the Djentuh case, 146 “Mr. Fix-It” of, 194–195 and privatization, 150–157 rise of P/NDC insiders in business, 146–150 and Yusuf Ibrahim, 145–146 Public Sector Reinvention and Modernisation Strategy (1997), 194–195 Public Tribunals (PTs), 38–39, 91, 114, 138 Quaidoo, K. K., 82 Quakyi, K. T., 153

Ramsay, A., 219 Rankin, N., 65 Rathbone, R., 112, 158, 184 Rawlings, Jerry John business advocacy before, 81–85 character of, 30 and construction boom, 179 and cronyism, 185–186 and “culture of silence,” 103 and entrepreneurs, 118–120 and Fidel Castro, 86 lack of citizen knowledge about, 17 and “mobocracy,” 33 See also Armed Forces Revolutionary Council; entrepreneurs, harassment of; National Democratic Congress; Provisional National Defence Council Rawlings, Nana, 148–149, 153, 158, 228 Ray, Donald, 36 Reindorf, Joe, 95–96 rent-seeking, 217–220, 224 Riddell, R., 62 Riggs, F., 203 Rock, M., 219 Rothchild, D., 22 Rothmans International, 97–98 RT Briscoe Motors, 154 Saaka, Y., 107 Safo, Osei, 116–118, 121, 138, 200 Safo-Adu, K., 89–90, 92–94, 110 Sandbrook, R., 127 Scanstyle, 122, 153 Schneider, B., 16 Selormey, Victor, 204 Serious Fraud Office (SFO), 114–115, 128, 138, 143, 150, 154, 157, 159, 183 Siaw, J. K., 27 Sikpa, Anthony, 37 Sixth Annual Conference of District Chief Executives (1999), 167 Social Security and National Insurance Trust (SSNIT), 97–98

Index socialism, 4, 18, 23–24, 28, 81, 84, 108–109, 185 Soderbom, M., 65 Somerset, A., 203 South Africa, 15–16 South Korea, 7, 73, 218, 224, 236n1 Standard Chartered Bank, 125 standard of living, 21, 24 Star Chemicals Company Limited (SCCL), 94 State Enterprises Commission, 196 State Gold Mining Corporation, 82 state-owned enterprises (SOEs), 49–50, 150–156, 172, 235n6 statism, 18, 21, 24, 84, 193, 195 Stewart, F., 62 stool, 33, 96, 233n2 The Stolen Verdict, 113 structural adjustment, 1, 5, 7, 12, 40–43, 45, 50, 56, 60, 75–76, 105, 214, 220, 224 subsidies, 6–7, 48–50, 63–64, 71, 73, 79, 127, 215, 217–218, 221, 237n4 Sunyani Complex, 173 Supreme Military Council (SMC), 20, 23, 25–26, 104 Supreme Military Council II (SMC II), 21, 26 Swimming Upstream (1998), 114 Taiwan, 7 Tangri, R., 90 Tanoh, Augustus, 142–145 Tanoh, Nathaniel, 144 Tanoso Tile and Brick Factory (TTBF), 170 Tanzania, 18 TATA Brewery, 27 Tawiah, Ebo, 78, 112, 151, 153 taxation, 4, 35–36, 47–48, 50, 53–54, 58, 68–69, 90, 92–93, 96–98, 122–125, 127, 132–138, 147, 149, 197, 209, 220–221, 223, 234n9, 236n2 corporate tax, 4, 50, 58, 68, 97, 223 tax evasion, 35–36, 90, 92–93

263

tax rebates, 69 See also value-added tax Taylor, Scott D., 15–16, 135 Teal, F., 65, 67 Techiman, Ghana, 163–164, 173 telecommunications, 51, 149, 202–203, 220 terms-of-trade shock, 52 textile industry, 65–67 Thailand, 58, 219, 224 Third Force Party, 107 Third Republic of Ghana (1979), 21 31 December Women’s Movement, See December Women’s Movement Thompson, N., 204 Thompson, S., 204 Thorp, R., 134 timber industry, 28–29, 46–48, 51, 67, 78–79, 81, 85, 134, 153, 164, 169–171, 176, 203, 235n5 Timber Resources Management Act (1997), 67 Timber Utilization Contract, 67 Twi language, 9 Togo, 21, 29 trade liberalization, 46, 59, 61–62, 64–66, 135, 137–138, 227 Trades Union Congress (TUC), 20, 104 transaction costs, 6–7, 199, 214, 217, 220 Transport and Commodity General (T&CG), 142–144 Tsikata, Fui, 27, 95–96, 149 Tsikata, Kojo, 27, 41, 112, 153 Tsikata, Tsatsu, 27, 54, 97, 149, 158 Tyson Foods, 116, 234n6 Uganda, 154 Unilever, 156, 234n4 United African Company, 34 United Gold Coast Convention (UGCC), 108, 158 United Nations Educational, Scientific and Cultural Organization (UNESCO), 98

264

Index

United Nations Industrial Development Organization (UNIDO), 66 United Nations Security Council and General Assembly, 142 United States, 101, 144, 201, 203, 207, 215 University of Ghana, 27, 121, 201 University Teachers Association of Ghana (UTAG), 106–107 USAID, 116, 128–129 Vacuum Salt Products Limited (VSPL), 11, 32, 90, 94–97, 149, 208 value-added tax (VAT), 53–54, 122–125, 133, 136, 138, 197 Venezuela, 134 Volta dam, 29 Wade, Robert, 6, 63, 214, 217 wages, 3, 20, 29, 51, 57, 67, 156, 193–194, 221 Weber, Max, 4, 102, 192, 199 Wereko-Brobbey, Charles, 123–124

West Africa, 11 Westel, 149 Williams, Ameto, 95 Wontumi, Andrews, 93 World Bank, 1–2, 5, 7–8, 10, 22, 28, 33, 45, 47, 50, 52–59, 62–64, 66–68, 70, 76, 78, 86, 88–89, 92–93, 99, 101, 110, 122, 126, 129–130, 132, 149, 152, 157, 191–192, 196–199, 202–203, 207, 213–214, 217, 220–221, 223–224, 228, 230–231, 237n3 WorldSpace, 144 World War II, 81 Workers’ Defense Committees (WDCs), 33–34 Yakubu, Hawa, 123 Yeebo, Zaya, 35, 41 Zaire, 192–193, 205 Zambia, 15–16, 18, 58 Zimbabwe, 15, 58, 102