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BACKGROUND TO STATE-OWNED ENTERPRISES IN GHANA


The Divestiture Programme must be seen in the context of the genesis of the State Owned sector in Ghana which at the outset had over 300 enterprises.


Some of these State Owned Enterprises (SOCs) has been set up by the state as statutory bodies or companies to carry out specific tasks, where it was felt that the private sector was unable or unwilling to undertake such ventures at the time. Other SOCs were established in Ghana, especially in early years of Independence, because of the views then prevailing, not only in Ghana but also in more developed countries, of the necessity for Government to own, operate and control key economic sectors.


SOEs are also to be found in Ghana, as in many other countries in the supply of public services through utilities such as the provision of electricity supplies and telecommunications. In addition, the State came to be involved in enterprises, in different eras since independence in 1957, through obtaining interests in private firms.


It is therefore not difficult to observe that our SOEs in Ghana derive their origins from myriad of backgrounds and are engaged in a very wide range of activities including manufacturing, primary products and natural resources sectors – agriculture, commodities, and mining as well as public utilities and other services. As a result the legal forms of the enterprises, their structures, modes of operations and relationship with Government show wide variation which the implementation of the divestiture programme takes into account.


For many years past, poor financial performance and low productivity have characterised many of Ghana’s SOEs. The results are an accumulation of huge financial losses to the State that have to be funded by taxes or borrowing, both of which impose a heavy burden of payment on the country and a diversion of resources which could be better utilized for other purposes.


Poor performance in SOEs also mean lower level of activity and employment that could otherwise be achieved in the country. As concern mounted about the plight of SOCs in the mid 1980’s independent assessments were carried out to establish the causes of poor performance in the State Owned sector as a whole and also in particular key enterprises.

 

The causes were identified as deriving amongst other from lack of entrepreneurial direction, low incentives for management and inadequate investment. The Government took action on a number of fronts to tackle the problems of SOEs and the Divestiture Programme represents a key part of the actions being taken.

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