Rising to the Challenge

Ghana signs up for the Millennium Challenge Account

“We have been given a clean bill of health” said President John Kufuor, addressing a gathering of media and Ghanaian Diaspora in London, following the signing of the Millennium Challenge Compact in Washington.

Welcoming the delegation of Ghanaians to his London office, the newly accredited High Commissioner to the United Kingdom, H.E. Mr. Annan Cato described the meeting called by the President as “an opportunity to give a briefing on the significance of the Millennium Challenge Account (MCA) and what it will mean to our nation.” 

Describing the Millennium Challenge Compact (MCC) as further proof of Ghana’s international recognition, the High Commissioner assured the gathering that “we have every reason to be encouraged and we will welcome whatever assistance you can give to this effort”.

Millennium Challenge Account

In 2002 American President George W. Bush called for what he termed “a new compact for global development, defined by new accountability for both rich and poor nations alike.”  Arguing that “greater contributions from developed nations must be linked to greater responsibility from developing nations”, the American President pledged to lead by example and stated that the USA would increase its core development assistance by 50% over the next three years to result in an annual increase of $5 billion by 2006.  These funds were to be channelled into a new Millennium Challenge Account which would be devoted to “projects in nations that govern justly, invest in their people and encourage economic freedom.”

Outlining the process by which Ghana has received this record sum, the Minister of Information and National Orientation, Hon. Kwamena Bartels, who had accompanied the President to Washington, said, “This new compact is intended to lead to three major results: improvement in institutional infrastructure, in physical infrastructure such as roads and telecommunications and in the living standards of the people.”

He defined the 3 policy criteria of the Millennium Challenge Account; governing justly, investing in people and promoting economic freedom, and the 16 indicators against which each country was measured, indicators which are broadly similar to Ghana’s own development priorities. 

Ghana’s application was followed by a due diligence process with a MCA team visiting the country to evaluate the consultative process that had been undertaken as well as the governance of the funds and the planned evaluation and monitoring procedures.  Approval by the US Congress paved the way to the subsequent historic signing of the Compact.  

Ghana Poverty Reduction Strategy

In 2005 President Kufuor launched the Ghana Growth and Poverty Reduction Strategy.  The Strategy identified three priorities areas; human resources development, private sector development and enhanced good governance. 

The funds from the MCC - $547 million - will be disbursed according to criteria that relate to Ghana’s Strategy and which, according to the Government, will give “a rapid and significant return on investment and which are consistent with the Government’s priorities.” The MCC’s investment will build upon and complement the work of other donors

The five-year MCC aims to reduce poverty by raising farmer incomes through private sector-led agribusiness production.  23 regions, mostly in Ghana’s Volta Basin, have been selected.  The majority of the funds, $241 million, will be spent on modernising agriculture, while transportation, rural development, social services and access to market will be allocated a total of $244 million.  The balance of the fund has been allocated to administration and to ensure adequate monitoring and evaluation procedures are implemented.  

Significance and Impact

Agriculture forms the backbone of Ghana’s economy and accounts for around 40% of the country’s GDP.  The sector employs almost 70% of the country’s labour force and produces more than half of the country’s foreign exchange earnings.

The MCC programme will consist of three projects; Agriculture, Transportation and Rural Services.  The Agriculture project will include farmer and enterprise training in commercial agriculture, irrigation development, land tenure facilitation and improvement of credit services for on-farm and value chain investments.  Under this project, approximately 51,000 farm households are expected to receive training in agronomic and business skills.

The Transportation Project will address upgrades to sections of the country’s National Highway and improvements to trunk roads and the Lake Volta ferry services.  The Rural Services project aims to strengthen public sector procurement capacity and provide support for community services and rural financial services.

The impact of the MCA funds will lead to the creation of 700,000 jobs, with an estimated 1.3 million more jobs created indirectly.  According to the President, the improved practices will make savings that will impact positively on the environment. 

“We want to use the fund to diversify agriculture and increase production of crops like pineapples, shea nut, cashews and cereals such as maize,” he said. 

A New Work Ethic

In his address, the President offered an upbeat assessment of Ghana’s economic success story.  The economy has moved in a positive direction with Ghana achieving 5.8% growth in 2005, he said. 

“In 2006 the country is already achieving over 6% growth with analysts predicting 8% growth as a prerequisite for achieving middle income status,” he added.  “The only stumbling block is the current oil crisis and that, we hope, will be overcome.”

The President spoke of his desire to create a new work ethic in Ghana, pointing out that currently the country is suffering from an under-capacity to exploit opportunities such as the African Growth and Opportunity Act (AGOA).  A key requirement for Ghana is the country’s ability to add value to crops produced in the country.  This, according to the President, is an opportunity that will be supported by the MCA funds.

The President emphasised the role of the private sector in Ghana’s ability to achieve its targets for economic success.  “If we are going to move into a modern economy, it is important to rehabilitate the private sector,” he said, adding that “for the first time in Ghana’s history, we created a Ministry for Private Sector Development.”

Management and Accountability of the Challenge Fund

The Government of Ghana has created the Millennium Development Authority (MiDA) to be accountable for the implementation of the projects under the MCC.  MiDA will be governed by a Board of Directors including Government, the private sector and the NGO community. 

During the question and answer session that followed his speech, the President was pressed about how the Government would ensure that the funds would be managed prudently and that these substantial new financial resources would not be committing Ghana to other areas of alliance with the USA.

The President expressed his confidence in the provisions set out for MiDA, describing a management team as one that would be both competent and “would share the vision that enabled us to get this money.”

Ghana has been the recipient of numerous grants and other forms of financial assistance.  When asked why the Millennium Challenge Account is so different, the President was unequivocal in his response.

“The volume of money involved is US$547 million,” he said.  “Since independence, Ghana has never received anything like this.  It is not a loan, it is a grant.  We stated our priorities and said that if the USA wanted to support us, this is what we wanted to do.” 

The Role of the Ghanaian Diaspora

“You have a role to play”, said the President, addressing the group of UK resident Ghanaians.  He spoke of the Ghanaian Diaspora’s “enhanced work ethic” and invited them to offer suggestions and ideas to help the Government in its efforts to be accountable and transparent.  “I would rather we acquire the work ethic and discipline of the West that you are used to.”

President Kufuor spoke of the importance of remittances sent by Ghanaians in the Diaspora to Ghana’s economy.  In 2001 Ghanaians resident outside the country sent back US$400 through the banks, he said.

“In 2005, this had risen to over $4 billion.  In the first quarter of 2006 alone, the figure topped $2 billion and, according to the Central Bank, the indications are that around $8 billion will be remitted by the end of 2006.”

While the bulk of these funds have been targeted at building houses, he urged Ghanaians to “let us use some of the money you bring back to build the economy”.

“Everybody wants to know about us”

Speaking of the MCC, President Kufuor said.  “This has given Ghana a clean bill of health. Now everybody wants to know about us.  The MCA has shown the world that Ghana is a place to come and do business.”

The Millennium Challenge Account will enable Ghana to adopt an integrated and focused programme that targets agriculture and will help to encourage educated young people back to develop the rural areas of the country.

“I believe this should be a turning point for Ghana to transform agriculture,” said the President.  “And, as the most important sector in the country, this will also transform Ghana.”

Photographs:  Peska, London