The AFD and Ghana

Agence Française de Développement

GHANA

National Theatre, City of Accra © Steve Ababio

GHANA

AGENCE FRANÇAISE DE DÉVELOPPEMENT

Ghana The population of Ghana is currently estimated at 26.6 million. Despite its new status as a middle-income country (approximately USD 1,500 per capita according to the International Monetary Fund in 2014), Ghana needs to face significant development challenges.

Even though its contribution to national wealth has declined since 2010 to the benefit of the oil sector, agriculture, which employs approximately 40% of the working population, continues to be a key sector for Ghana. Oil exploitation is, however, a major factor for the economic development of the country. Following a period of growth averaging 7% since 2012, above the average in the sub-region, Ghana’s economy is today experiencing a slowdown, which has resulted in the widening of macroeconomic imbalances (budget deficit and inflation above 10%). However, the start of future production of new gas and oil fields, as well as the Government’s commitment to reforms, give signs of more positive medium-term prospects for this country, which continues to be one of the main destinations for investors in Sub-Saharan Africa.

AFD: Active in Ghana for 30 years Agence Française de Développement (AFD) has been operating in Ghana since 1985. Since 2004, AFD has been focusing its activities in Ghana on three main sectors: ■■ Urban development and support for local authorities (including urban transport, water and sanitation), which play an essential role in improving living conditions for the population; ■■ Energy, in order to increase the electricity supply in the country and within the sub-region; ■■ Rural development and support for agriculture, which is a sector that creates employment and is synonymous with food self­­ sufficiency.

AFD also focuses on the banking industry as a crosscutting sector for development, which makes it possible to reach the private sector, small and medium-sized enterprises (SMEs) and individuals, mainly via PROPARCO, its private sector financing arm.

Atonsu Market in Kumasi © Augustine Atiah

AFD implements a wide range of financial instruments in Ghana: Concessional long-term loans to the State of Ghana; ■■ Long-term loans to State-owned companies without a State ­guarantee; ■■ Long-term loans to the private sector (banks, companies, microfinance institutions); ■■ Guarantees to banks (ARIZ) to promote access to credit for small and medium-sized enterprises (SMEs); ■■ Equity investments in companies or in investment funds through its subsidiary PROPARCO; ■■ Various types of grants: support for NGOs in the microfinance sector, Study and Capacity Building Fund, sectoral studies, initiatives of the French Facility for Global Environment (FFEM).

■■

Total commitments 2004‑2014 (% per sector) Agriculture and rural development

Budget support

Banking and private sector

8

9

32

27

Support for local authorities and urban development

24 Energy

These financial instruments support different types of projects with varying amounts and assist both public and private development actors.

The above range of financial instruments is complemented by: ■■ The training provided by the Center for Financial, Economic and Banking Studies (CEFEB), which includes professional Masters programs and short-term training sessions; ■■ AFD’s participation in crosscutting, sectoral and geographical reflection (financing of studies).

AGENCE FRANÇAISE DE DÉVELOPPEMENT

GHANA

Partnership with local authorities for integrated and sustainable urban development

Awoshie-Pokuase road, Accra © Steve Ababio

With an urban population growth estimated at 3.6% a year, Ghana’s rate of urbanization follows the general trend in Sub-Saharan Africa.

According to forecasts, 58% of Ghana’s population will be living in urban areas by 2030.

AFD’s operations in the urban development sector have developed towards support for integrated urban development, combined with assistance to local authorities with the aim of increasing their revenues.

At the same time, the strengthening of the decentralization process has led to a transfer of skills and resources to local authorities, which have become key actors in urban development.

AFD has been supporting this process for several years by assisting local actors in: ■■ The exercise of their duties through capacity building and support for decentralization, in particular through the District Development Facility (EUR 36m for phases 1 and 2, EUR 21m for phase 3 which is in its appraisal stage) and the EUR 40.5m Ghana Urban Management Pilot Project (GUMPP); ■■ By financing their equipment requirements through GUMPP (EUR 40.5m), which is currently being implemented in four secondary cities (see box); ■■ Urban transport in Accra and Kumasi: AFD has provided EUR 23m of financing for the Kumasi Bypass, a EUR 20m road specifically for public transport to serve downtown Accra and EUR 30m AwoshiePokuase road in Accra; ■■ Water and sanitation infrastructure in rural and peri-urban areas (EUR 18.6m Water Supply Project in the Brong Ahafo region); ■■ Rehabilitating deprived neighbourhoods in Greater Accra which is in its identification phase (EUR 40m).

AFD’s operations are geared towards a more comprehensive approach to the urban sector, combining support to decentralization and responses to the challenges of providing facilities to cities. The Ghana Urban Management Pilot Project (GUMPP) is typical of this approach (see box).

Ghana Urban Management Pilot Project AFD is providing EUR 40.5m of financing for the Ghana Urban Management Pilot Project (GUMPP) in four secondary cities in Ghana: Kumasi, Tamale, Sekondi-Takoradi and Ho. The project targets both financing for equipment requirements of the four cities in question (markets, abattoirs, drains, rehabilitation of neighborhoods, etc.) and training for local authorities on how to manage public and territorial infrastructure.

These actions are part of the assistance provided for the formulation of a national urban policy and for the decentralization policy, which the French Embassy also supports.

AGENCE FRANÇAISE DE DÉVELOPPEMENT

GHANA

Food security and job creation Agriculture accounts for 26% of GDP and employs approximately 40% of the working population. The Government’s strategy has been set out in the Ghana Shared Growth and Development Agenda (GSGDA I and II). It provides for the promotion of more competitive commercial agriculture in order to both increase producers’ incomes and support staple food farming with a view to achieving food security.

AFD’s operations support this policy with a threefold agenda in terms of economic growth, poverty reduction and food security.

Strengthening the rice-growing sector For fifteen years, AFD has been supporting rural communities in the North of the country in strengthening the rice-growing sector via lowland development. The ongoing project (EUR 13.8m) aims

to develop 6,000 ha and increase the production and technical skills of 1,000 producers in order to better serve a rapidly growing domestic market and thereby reduce the cost of food imports.

Rubber and oil palm In the south of the country, and especially in the Central and Western regions, AFD is appreciated for the support it has been providing to village rubber outgrower plantations since 1986 (see box) and, to a lesser extent, the oil palm sector. Thanks to partnerships with industrial operators and producer groups, 26,000 ha of village plantations have been developed for over 6,000 farmers.

Development of village rubber outgrower plantations On the basis of the partnership developed between the Ministry of Agriculture and GREL (Ghana Rubber Estate Ltd) during the previous phases financed by AFD, two direct loans have been allocated to the Agricultural Development Bank (ADB), without a State guarantee, to finance the rubber sector.

Consequently, ADB has benefited from a total of EUR 32m which allows 5,600 village outgrowers to have the financing required to develop 18,000 ha of rubber plantations.

This financing is based on a tripartite agreement between the bank (financial operator), GREL (technical operator) and the Rubber Outgrowers and Agents Association (ROAA), and is particularly innovative: ■■ The bank benefits from a loan with a 15-year maturity, including a 7-year grace period corresponding to the growth period of a rubber tree; ■■ As rubber is an export crop for which the prices are set on international markets, loans to outgrowers are in euros; ■■ The loan to outgrowers is “countercyclical”: outgrowers make repayments at a varying pace on the basis of their incomes, which depend on price changes on the world market.

AFD aims to develop this model of tripartite agreement with new technical and financial partners in other sectors.

The Ghanaian authorities have expressed their interest for the cocoa and oil palm sectors, for which the studies are currently being prepared.

Rubber growing © Steve Ababio

AGENCE FRANÇAISE DE DÉVELOPPEMENT

GHANA

Energy: A key issue for Ghana’s development

TICO II energy efficiency project, Takoradi © Steve Ababio

Energy is a major issue in Ghana due to the strong economic growth and the extension of access to electricity for rural and urban populations. Major institutional, organizational and tariff reforms have been conducted in recent years. AFD is assisting the Government policy to develop the electricity sector in Ghana in terms of generation, transmission and distribution networks through: ■■ A EUR 50m subsidized loan to the State, onlent to the Volta River Authority (VRA), signed in November 2012 for the rehab­ ilitation of the Kpong Dam and the feasibility studies for the Pwalugu multifunctional dam; ■■ A direct loan to the State-owned company GRIDCO for works to reinforce the national grid (in order to reduce technical losses) and develop the electricity interconnection with Burkina Faso; ■■ A loan or equity investment in power generation projects in partnership with the private sector (Takoradi Thermal Power Station, for example), in particular via financing by its subsidiary PROPARCO. AFD is also planning to operate in the power distribution segment with a loan to the Ghanaian Government, onlent to VRA for the benefit of NEDCO, its distribution subsidiary in the North of the country, in order to improve electrification.

Supporting the development of the financial sector via the allocation of credit lines to banks Banks, as intermediaries for financing, allow an optimal allocation of capital. Through their knowledge of the local market, they are indeed the best placed to identify the positive credit risks and consequently the project initiators. They thereby contribute to the functioning and growth of Ghana’s economy. SMEs, which are one of the main sources of economic growth and job creation, often have difficulties in accessing capital to finance their activities. For several years, AFD and PROPARCO have been supporting Ghana’s banking sector in order to both increase banks’ financial resources and their capacity to lend to SMEs. Credit lines have consequently been allocated to commercial banks such as CAL Bank (a total of EUR 47.5m), Société Générale (a total of EUR 26.1m), Access Bank (EUR 14.4m), and Fidelity Bank (EUR 9.8m).

Several non-banking financial institutions have also benefited from AFD’s support in order to develop their credit activity for SMEs. Advans Ghana and ProCredit have received EUR 400,000 and EUR 900,000 of grants in the form of technical assistance to allow them to structure and increase their SME portfolio.

AFD has recently mobilized a EUR 1.5m grant for the Ghana Association of Microfinance Companies (GAMC). The project aims to improve the service standards of the most efficient microfinance institutions (MFIs) in order to reduce costs, lower interest rates and generally improve the management of these MFIs for the benefit of their clients.

AGENCE FRANÇAISE DE DÉVELOPPEMENT

GHANA

FFEM PROPARCO, AFD’s subsidiary dedicated to private investment, promotes private investment in emerging and developing countries in order to boost growth, promote sustainable development and reach the Millennium Development Goals. Its financing is tailored to the specific needs of investors in the productive sector, financial systems, infrastructure and private equity investment..

www.proparco.fr

The French Facility for Global Environment / Fonds Français pour l’Environnement Mondial (FFEM) is a bilateral public fund initiated by the French Government in 1994.

The FFEM secretariat and its financial management are entrusted to Agence Française de Développement (AFD). FFEM co-finances projects that encourage the protection of the global environment in developing countries. Its co-financing is exclusively via grants and is used for the implementation of pilot projects that combine environmental protection and economic development in the recipient countries. FFEM is an influential strategic instrument for the French policy on Official Development Assistance regarding global environmental protection. Its activities focus on the topics of biodiversity, international waters, the climate change, land degradation and desertification, persistent organic pollutants and the stratospheric ozone layer. By the end of 2014, FFEM had co-financed 275 projects with EUR 317m. Two‑thirds were earmarked for sub-Saharan Africa and the Mediterranean.

www.ffem.fr - ffem@afd.fr

Agence Française de Développement https://www.facebook.com/AFDOfficiel

@AFD_France https://twitter.com/AFD_France

AGENCE FRANÇAISE DE DÉVELOPPEMENT

AFD GHANA

5 rue Roland Barthes 75598 Paris Cedex 12 – France Tel. +33 1 53 44 31 31 Fax +33 1 44 87 99 39 www.afd.fr

8th Rangoon Close P O Box KIA 9592, Accra – Ghana Tel. +(233) 302 77 87 55 / 6 Fax +(233) 302 77 87 57 afdaccra@afd.fr ghana.afd.fr

Agence Française de Développement https://www.youtube.com/user/GroupeAFD

Creation: Planet 7 – April 2015

Lake Bosumtwi © Steve Ababio

Cette publication a été imprimée dans le respect de l’environnement avec des encres végétales et sur du papier PEFC™ (gestion durable des forêts).

Agence Française de Développement (AFD), a public financial institution that implements the policy defined by the French Government, works to combat poverty and promote sustainable development. AFD operates on four continents via a network of 71 offices and finances and supports projects that improve living conditions for populations, boost economic growth and protect the planet. In 2014, AFD earmarked EUR 8.1bn to finance projects in developing countries and for overseas France.