Posted: February 1st, 2023

The three sets of stakeholders in the ICTD space

The ISI strategy of the Nkrumah-led government sought to exploit Ghana’s natural domestic

resources to satisfy the basic needs of the population, create jobs, and assimilate and promote

technological progress. This, ultimately, would modernize the Ghanaian society as a whole. As

indicated by Baah-Nuakoh (1997), the general strategy adopted in the post-independence era was

the extensive promotion of industrialization with specific emphasis on manufacturing

development. This was to diversify the predominantly agricultural economy, create employment

for the rapidly growing population, raise per capita incomes, improve the balance of payments

and project the economy on the path of sustained and rapid economic growth.

At the centre of the ISI strategy was the development of large-scale, capital-intensive

manufacturing industries owned and managed by the state. Government invested heavily in

infrastructure and manufacturing activities by setting up state-owned enterprises (SOEs) for

domestic production of previously imported consumer goods, processing of exports of primary

products (agricultural and mining), and the expansion and development of building materials and

electrical, electronic and machinery industries. According to Steel (1972), the development of the

electrical, electronic and machinery industry was to provide the necessary inputs needed to

expand the industrial sector. As Steel notes (1972), it seemed that Nkrumah’s industrialization

programme was entwined with socialism and macroeconomic policy within the framework of

Ghana’s broader development plan.

The period from the mid-1960s actually saw a massive involvement of the state in the industrial

sector. The ISI strategy of this period was characterized by an emphasis on import substitution

supported by high levels of effective protection. Protection of domestic production, as already

indicated, was intended to reduce economic dependence on imports in favor of locally

manufactured goods. It was also partly a consequence of the balance-of-payment difficulties

Ghana was facing from its rapidly rising import costs and stagnant export earnings. It is worth

noting that initially (i.e., before 1962), the ISI strategy was considered as a means of achieving

economic independence and economic growth instead of a solution to the balance-of-payment

problems (Steel 1972). By the late 1960s, the effective protection, exceeding 100 per cent for

almost half of the manufacturing industries, created a strong incentive for a shift from consumer

imports to the production of locally made manufactures using imported inputs.

In addition, the government also resorted to such administrative measures as import tariffs and

licensing, but as the World Bank (1985b) observes, these direct controls were not successful in

achieving the intended objectives. Instead, these policy biases generated incentives that created

excess capacity and inadequate linkage with other growth-enhancing sectors. This weakened

Ghana’s industrial sector and contributed to its sluggish performance by the mid-1970s.

The success of the ISI strategy in Ghana during the 1960s was evident in the significant growth

of the domestic manufacturing sector, the expansion of already existing industries and the shift

of production towards SOEs (set up to produce a higher proportion of basic goods than the

private sector). It also shifted the import structure away from consumer goods to intermediate

and, more importantly, to capital goods.