VZCZCXYZ0000
PP RUEHWEB

DE RUEHAR #1352/01 2901658
ZNR UUUUU ZZH
P 161658Z OCT 08
FM AMEMBASSY ACCRA
TO SECSTATE WASHDC PRIORITY 7124

UNCLAS ACCRA 001352 
 
STATE PASS TO USITC 
USITC PASS TO MICHAEL FERRANTINO AND BRENDAN LYNCH 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ETRD OTRA ASEC GH
SUBJECT:  USITC STUDY ON SUB-SAHARAN AFRICA: EFFECTS OF 
INFRASTRUCTURE CONDITIONS ON EXPORT COMPETITIVENESS 
 
REF: STATE 85109 
 
¶1. SUMMARY:  GhanaQs physical infrastructure is adequate between the 
capital and the countryQs two major seaports, but can be less 
comprehensive in other parts of the country.  There are ample areas 
for Ghanaian government and international donor collaboration and 
coordination in order to enhance the viability of infrastructure 
upgrades.  Infrastructure issues significantly affect the 
competitiveness of GhanaQs non-traditional exports.  Issues include 
limited surface area of roads and substandard road conditions, 
rising fuel costs, police roadblocks, where bribes are often 
solicited, traffic congestion, a lack of alternative routes, 
unsuitable trucks, and a limited rail network.  A major impediment 
in the maritime sector is the lack of a direct shipping line from 
Ghana to the U.S., which results in high shipping costs and a long 
turnaround time.  In addition, export volumes lead to fewer 
scheduled vessels calling at the port, which makes planning 
difficult for exporters.  The rising cost and limited availability 
of power in farming areas significantly increases production costs 
and reduces the shelf life of perishable fruits.  High interest 
rates and credit tightening discourage companies from engaging in 
investment and capacity building on their own.  END SUMMARY 
 
ROAD AND RAIL TRANSPORT 
----------------------- 
 
¶2. The current physical infrastructure conditions of land transport 
(road and rail) range from adequate to weak, depending on the sector 
and region.  The roads in southern Ghana, particularly from Accra to 
Tema/Takoradi (the two primary seaports) are considered 
exceptionally good.  Likewise, the major roads from Tema, Lome, 
Ouagadougou, and Bamako are also considered relatively 
well-developed.  In the hinterlands, however, where many goods are 
produced, particularly in the agriculture sector, road transport 
conditions tend to decline.  This is also true in the less-developed 
north, where there are fewer paved roads and the distances between 
communities are greater.  Throughout the country, the cost of moving 
cargo by land has risen with rising fuel costs. 
 
¶4. Road transport is the major mode of transport of export 
commodities.  The limited rail network in Ghana is used to transport 
of bauxite, manganese, timber and cocoa in the western part of 
Ghana.  Road transport impediments include substandard roads, delays 
at police roadblocks, and bribe solicitation at the roadblocks.  Due 
to serious delays at the border, the movement of goods is 
economically inefficient.  Traffic congestion and lack of 
alternative routes cause delays, while non-refrigerated and open-top 
trucks leads to increased fruit spoilage. 
 
¶5. The GoG has plans to expand its rail network, but current efforts 
have focused on passenger transport rather than cargo haulage. 
There are ongoing efforts by the GoG and donor countries to improve 
conditions of road and rail transport.  Under GhanaQs Millennium 
Challenge Account Compact, some farm roads will be improved and a 14 
km segment of a major highway leading to the Tema port will be 
reconstructed. 
 
¶6. The West African Trade Hub and Ghana ShippersQ Council have been 
working closely with truck drivers, truck owners and customs 
officers to reduce the costs of land transport and border crossing 
time throughout West Africa.  They also seek to reduce corruption 
while looking for more efficient ways to facilitate trade, including 
the use of new infrastructure hardware (ports, cranes, etc).  The 
World Bank has implemented a number of projects to support export 
competitiveness. In the 1990s, they sought to diversify agricultural 
exports by improving roads to the major pineapple growing areas of 
the country. 
 
¶7. Roads to tourist attractions in the southern part of Ghana are 
relatively good, but those in the northern part are poor.  There is 
no public transport network accessing major tourist attractions, so 
tourists are faced with renting vehicles.  Rental charges are 
increasing due to higher fuel and vehicle maintenance costs. 
 
MARITIME TRANSPORT 
------------------- 
 
¶8. Maritime transport is considered to be suitable, although a 
number of soft infrastructure conditions produce impediments.  The 
major impediment in the maritime sector is the lack of direct 
shipping lines between Ghana and the United States, which drives up 
trading costs between the two countries.  The apparel export sector, 
which is currently producing under capacity, mentioned the lack of 
direct shipping lines, among other factors, as the cause of a 90-day 
turnaround time for U.S. orders. 
 
¶9. Relatively few scheduled vessels call on Ghanaian ports because 
of the low volume of exports.  According to the Ghana Shippers 
Council, only two shipping lines do direct shipment to Europe, so 
most exports have to be consolidated and trans-shipped, which leads 
 
to longer transit days.  Recently, the two scheduled reefer vessels 
calling on the port of Tema have been halved, reflecting a similar 
reduction in the volume of pineapple exports.  Some exporters have 
reported spoilage of fruit at the port because they have to wait for 
unscheduled vessels.  Export shipments are also examined manually, 
which leaves room for bribery and is very time consuming. 
 
ELECTRICITY 
----------- 
 
¶10. In Accra and in more developed areas of the country, electricity 
supply is consistently available.  However, the rising cost of 
electricity has decreased profitability significantly.  The doubling 
of electricity tariffs in November 2007 to 14 cents per KWh, shot up 
the cost of production for users such as apparel manufacturers.  In 
more remote parts of the country, where electricity is unavailable, 
fruits and vegetables cannot be pre-refrigerated before transport. 
Even if goods are pre-refrigerated, they are not refrigerated during 
transport due to a lack of cooling trucks within the country, 
therefore increasing spoilage during transport.  Recently, the World 
Bank is working with the GoG to build a cold storage facility at 
Tema and may do the same at Kotoka International Airport.  Farmers 
are now looking at ways to increase their yield and efficiency to 
offset the rising costs of electricity and fuel. 
 
¶11. Working capital is insufficient.  Across the board, all 
manufacturers and producers complained of a lack of support from 
local financial institutions.  Even if exporters receive loans, they 
have trouble paying them back because of high interest rates.  In 
all areas, technical knowledge of the export industry is lacking 
within Ghana.     Many companies contend that this is an area where 
the government should step in and take action, either by creating 
tax incentives for manufacturers or by providing technical knowledge 
for banks, employees, and companies within the export sector. 
 
¶12. COMMENT:  The export sector in Ghana has much room for 
improvement because a lack of infrastructure hampers the countryQs 
competitiveness, especially in the non-traditional export sector. 
There is a need for more involvement on the part of donor 
organizations and the GoG in order to augment ongoing projects 
currently being conducted by organizations such as the Millennium 
Challenge Corporation (MCC) and Trade and Investment Program for 
Competitive Export Economy (TIPCEE), to better understand the 
impediments that are reducing export competitiveness within the 
country.  It is important for donor partners to work in conjunction 
with the GoG to avoid duplication of local initiatives, increase the 
reliability of their data, and enhance the sustainability of 
infrastructure projects.  In addition, it would be effective for 
donor partners and the GoG to implement their export sector programs 
in tandem with the Ghana Export Promotion Council to improve host 
government human capacity building.  END COMMENT 
 
BROWN