Prof. Divine Kwaku Ahadzie

Associate Professor


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Housing Construction and Management Project Management Flood Risk Management Construction Skills Development Property Research...~more

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From Developing To An Emerging Economy: the Stakes For the Ghanaian Construction Industry

This article was earlier published in the REALSTATE JOURNAL, a practitioner based journal for the Ghana Real Estate Developers Association in September 2015

 

In the early 1960s, only seven per cent of Ghana’s populace were urbanized. However, within the last five decades or so the trend has changed dramatically as over 50 per cent of the population are now urbanized[1]. If current trends continue, over 60 per cent of the population would be expected to have urbanized and the ramifications  are already being felt with the widening gap in poverty, lack of jobs for a growing youth, growth in slums (plus the associated worrying water, sanitation and demographic challenges) and the rise of informality[2]. The ramifications (which in this case are for the worse) look quite gloomy indeed to the extent that, some urban policy makers/observers are worried that urban areas in Ghana may turn into dysfunctional cities if remedies are not urgently prescribed and implemented. Within this context, many analysts including the development partners highlight three key policy/pragmatic areas that Ghana and for that matter many African economies that are in similar situations as Ghana would have to urgently address to avoid looming urban crises: That is; building credible institutions, improving human capacity and vigorously addressing the infrastructure deficit. It is especially in respect of the third option of addressing infrastructure deficit that the stakes for the Ghanaian Construction Industry (GCI) is examined.

Already, substantial theoretical and empirical evidence exists between growth in the construction industry and growth in the wider economy in the literature. For instance, it was during the boom years in the past that Australia, Japan, Singapore, South Korea and the UK were reported to have lifted millions of their citizenry out of poverty plus building many world-class contractors (NG et al, 2009)[3], Recent inroads by China, India, South Africa and Brazil are also refreshing to note. Thus, the Ghanaian Construction Industry (GCI) has a very strategic role to play if Ghana is to turn things around towards reaping the expected socio-economic benefits that comes with urbanization. Urbanization and for that matter cities facilitates innovation, production and trade; key ingredients if fully and effectively exploited increase standards of living. Cities thrive on agricultural surplus, urban production and transportation, and these make the construction industry being the largest contributor to Gross Fixed Capital formation (GFCF) in any modern society crucially important. As an emerging economy, the GCI is theoretically at the threshold of its peak and if fully tapped would help propel the economic growth of the country. The indicators over the last decade or more are indeed striking. A consistent GDP growth rate of over 8 percent and this includes the year 2006 when it recorded as the fastest growing sector in the economy with a rate of 8.2 per cent as against a national average of 6.2 per cent.  In 2007, it contributed 8.9 per cent to GDP and in 2008 it contributed 8.7 per cent. In 2009 the share of GDP was 8.9 per cent and while this dropped marginally to 8.5 per cent in 2010 it increased significantly to 9.2 per cent in 2011.  In 2012, it continued to be the most consistent and important industrial sector in the wider economy posting 10.5 per cent to GDP[4]. It is therefore not surprising that the Institute of Statistical and Economic Research (ISSER, 2013)[5] for example projects that construction would be the key sector that will lead the industrial sector in driving the economy going forward but on condition that delays[6] in payment of contractors and political influence in the award of contracts are eliminated. Obviously, the key indicators strongly suggest that GCI if well exploited could be very strategic in championing the much needed accelerated growth that, as established in many other countries can help take millions of the citizenry out of poverty. The question to be asked is, judging from the policy initiatives and strategies currently on the ground, can one sincerely vouch that the industry is aware of its potential and also if it has positioned itself properly both locally and globally to help stimulate the economy? For example:

  • What are the strengths of the industry?
  • How competitive are local contractors in the global market?
  • What is the strategy for growth locally and going into the sub-region?
  • What competitive edge do local craftsmen have in the global market and what is the strategy for benchmarking their skills development going forward?
  • How many people are employed in the industry, employment rate and job creation potential for the future?
  • What is the potential for self-employment and what data exist on the informal sector?
  • What performance standards exist and how is the industry seeking to explore new partnerships, integrate new technologies for efficiency?

 

These and many other questions need to be fully addressed in a systematic and robust policy agenda. However, indications are that Ghana has so far missed the opportunity to be driven by a strong construction industry development agenda and at best operate on some ad-hoc policy. Is it not ironical that the Government of Ghana even when operating on internally generated fund would want to award especially technologically driven contracts involving major infrastructure projects (so to speak), to international players? The construction industry can generally be classified into four main sub-sectors, namely: residential; building; heavy engineering; and industrial. As an emerging economy, the GCI is just beginning to expand and indications are that, the challenges in terms of rising cost; quality expectation; coordination; and control are going to grow in demands.  These requirements coupled with increasingly global regulatory standards on sustainability and environmental demands require swift concerted effort by all stakeholders in the industry. As it is now, it appears the Ministry of Works, Water Resources and Housing (MWRWH)[7] has over the years not been decisive in leading the way for the comprehensive development of the industry.  The GCI is at the threshold where its activities and resources can be tapped to full potential for the benefit of the wider economy. Ghana can benefit from the considerable experience of many countries both developed and developing who have had to initiate systematic and decisive construction development agenda. The pressing need for the industry to respond to global competitive standard is eminent.

 

An important issue is how can the industry transform the demands of an economy into an opportunity to create and access new markets, find innovative responses which provide traditional competitive advantage while also fulfilling global demands of sustainability? With its influential strategic position in the industry, GREDA has an important role to play in leading a private sector initiative towards a construction industry development agenda for the country. The starting point should be a comprehensive review plus an understanding of the technological, structural and managerial demands of the various sub-sectors of the industry, namely; residential, building, civil and heavy engineering and industrial sectors. The next editions of this piece will be devoted into discussing an overview of each sub-sector and what the stakes are for the industry and the wider economy.

 

 

 

[1] National Urban Policy, 2010, Ministry of Local Government and Rural Development, Accra

[2] UN-Habitat (2009), Ghana Urban Profile, UN Habitat, Nairobi

[3] NG T. S.,  Fan, R. Y. C., Wong, W. M. J., Chan C. A., Chang H. Y., Lam I. T. P. and Kumaraswamy M. (2008) Coping with structural change in construction: experience gained from advanced economies, Construction management and economics, 27, pp.165-180.

 

[4] See for example ISSER (2013)

[5] Institute of Social, Statistical and Economic Research (ISSER) (2013) The state of the Ghanaian economy 2012, Accra: ISSER, University of Ghana, Legon.pp.142

[6] It is interesting to note that both academic and practicing literature have documented delay payments of contractors since 1970s/1980s 

[7] Daily Graphic report of February 18, 2015 that the Minister of the MWRWH has been left out of the reconstituted cabinet is an interesting dichotomy indeed.


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