EVANGELICAL PRESBYTERIAN UNIVERSITY

COLLEGE

DEPARTMENT OF GOVERNANCE

COURSE TITLE : BASIC CONCEPTS IN GOVERNANCE

COURSE CODE : SGSS 113

LECTURER : PHEBE ABUGRI

KEY ACTORS IN GOVERNANCE : THE PRIVATE SECTOR
 THE PRIVATE SECTOR
• The private sector is broadly defined by the OECD
(2004:17) as “a basic organizing principle of
economic activity where ownership is an important
factor, where markets and competition drive
production and where private initiative and risk-
taking set activities in motion”

•Thus, The private sector is the part of a country’s

economic system that is run by individuals and
companies, rather than a government entity. Most
private sector organizations are run with the intention
of making profit (TechTarget, 2024).
 APPROACHES TO PRIVATE SECTOR DEVELOPMENT

• A number of approaches to Private Sector

Development (PSD) has sufficed since World War
II. They include;
1. Structural approach,
2. Neoliberal approach and
3. Neo-structural approach.
 STRUCTURAL APPROACH,
• structuralism emphasizes the need to transform a country’s
economy from subsistence agriculture to modern manufacturing
based on the thinking that “the transition out-of-agriculture is a
key aspect of economic development” (Teignier, 2018:45). The
main idea is therefore modernization through industrialization
with the state playing the major role of developing key
industrial sectors (Leiva, 2008).
• Stimson and Stough (2009:174) assert that this was the time
“national governments played an exceptionally active role in
establishing national industries.
• Structural approach to development however lost out in the late
1970s due to its failure to cause the industrialization of
developing countries as well as improve their position in the
global market. This gave rise to the emergence of the neoliberal
approach in the early 1980s (Hoedoafia, 2019).
 NEOLIBERAL APPROACH

• The neoliberal approach focuses much on a free market, where

government must refrain from direct involvement in economic
activities. In other words, politics was deemed to be subordinate to the
economy (Leiva, 2008).
• Harvey (2005) posits that poverty, be it on the domestic or worldwide
stage will be eliminated when free markets and free trade are secured.

• Neoliberal policies later came to be known as the Washington

Consensus, a term coined by John Williamson in 1989 that captures
policies advocated by the United States of America for developing
countries, and relating to free trade, deregulation, privatization, floating
exchange rates, etc. (Skidelsky, 2010)

•Even though neoliberal thinking persists in the development discourse up

to date, its failure to bring about high economic growth rates (Leiva, 2008)
has caused some attention to shift to newer approaches(Hoedoafia, 2019).
 Neo-structural Approach

The neo-structuralist argues that even though

markets are central to the success of any economy,
markets by themselves alone do not necessarily
work well, and so government is needed in creating
climates that make businesses thrive and create jobs,
as well as providing infrastructure and ensuring the
functioning of laws and regulations (Stiglitz, 2007).

This signals that both the public and private

sectors will be most effective if they work
together. In the same vein, public-private
partnerships are encouraged with this approach.
 The private sector in Ghana

According to Ackah et al. (2014) Ghana’s economy

before independence was highly dependent on
manufactured products from its colonial masters, the
British. Thus, colonialism in Africa impeded the
expansion of indigenous private sectors (Stein,
2000:18).

Hence, public enterprises dominated the business space.

Measures were then mapped out towards the promotion
of Ghanaian entrepreneurs with a committee tasked in
1958 to assess how best business challenges could be
overcome by Ghanaian enterprises (Hoedoafia, 2019)
 CONTD

•However, the economic advisor to Nkrumah, Lewis, advocated for

the state to play the major role of setting up industries it thought
would be successful that could later be transferred to the private
sector once they were successfully established (Lewis, 1953).
•The state enterprises were thus deemed as the best strategy to
drive Ghana’s industrialization. Subsequently, state-owned
enterprises expanded, reaching about 280 enterprises by 1980
(Brownbridge et al., 2000). The state-owned enterprises however
proved to be unsustainable (AfDB African Development Report,
2011) not only in Ghana but in most African countries. As a result,
there was a shift to private sector led development in the 1980s
in Ghana through the structural adjustment programme which
was spearheaded and sponsored by the Bretton Woods
institutions.
 CONTD

• The structural adjustment programme began in 1986

and was aimed at moving away from the
government/state-controlled economy into one that is
shaped by the forces of the market. This involved
structural and institutional reforms with the aim to
privatize state-owned enterprises and promote private
enterprises (Hoedoafia, 2019).

•This led to the rationalization and privatization of a

substantial number of State-Owned Enterprises (SOE).
Indeed, “over 70 percent of some 324 State Owned
Enterprises (SOEs) were divested” (Appiah-Kubi,
2001:198).
 CONTD

•To sustain the gains of the SAP which marked the beginning
of the private sector as a central partner in the development of
the country, Ghana has and continues to implement other
policies and programmes meant to promote the private sector.
Key among them are the:
(i) Ghana Poverty Reduction Strategy I (2003 – 2005);
(ii) Growth and Poverty Reduction Strategy II (2006 – 2009);
(iii) National Policy on Public Private Partnerships (2011); (iv)
Ghana Shared Growth and Development Agenda I (2010 –
2013);
(v) Ghana Shared Growth and Development Agenda II (2014
– 2017) (Ibid).
 THE ROLE OF THE PRIVATE SECTOR IN GHANA
1.Economic Growth and Development
The private sector has been recognized as the main engine of
economic growth and thus, the need to develop the private
sector, crucial. As a matter of fact, the private sector in Africa
contributes three-quarters of the continent’s economic output
(AfDB, 2013).
There is no denying the fact that, a positive relationship exists
between growth and private sector development. A study by
Bouton and Sumlinski (2000) regarding the investments and
growth of 50 developing countries revealed a positive
relationship between private investments and growth.
 CONTD
2.Employment Generation
•A major foundation upon which the development of the
private sector is supported is its ability to generate decent
jobs and higher incomes. In developing countries for
instance, it is believed that about 9 out of 10 jobs are in
the private sector (Kurokawa et al., 2008). According to
the World Bank (2002) most new jobs in these countries
are created by the private sector. OECD (1995:6) further
adds that “jobs and incomes created by private enterprises
lead to a more equitable diffusion of the benefits of
growth to more people.
 CONTD
3. Poverty Reduction
It is believed that a competitive private sector will
empower the poor through the provision of better
goods and services to them at very affordable prices
(OECD, 2007).

Also, the development of the private sector is key in

giving poor people opportunities to employment,
thereby providing them with a source of income,
subsequently taking them out of poverty.
 CONTD

4. Efficiency and Domestic Revenue Mobilization

A major underlying factor for the development of the private
sector is the ability of private markets to allocate resources
efficiently in a way that is beneficial to all levels of society; a
target that state enterprises have often failed to
achieve(Hoedoafia, 2019). To this end, the private sector is
known to ensure the efficient flow of capital.
•Then again, private companies are a key source of tax
revenue for governments which is used in financing services.
Without such revenues, governments in developing countries
are unable to provide public goods such as health,
infrastructure, social safety nets and education to their
citizenry (Hoedoafia, 2019).
 REFERENCES

•Ackah, C., Adjasi, C. and Turkson, F. (2014). Scoping Study on the

Evolution of Industry in Ghana. WIDER Working Paper, 2014/075, 1-37.
•AfDB African Development Report (2011). Private Sector Development as
an Engine for Africa’s Economic Development. Available online:
https://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/
African%20Developm ent%20Report%202011.pdf. Accessed: 18.12.2017.

•AfDB Group (2013). Supporting the Transformation of the Private Sector in

Africa. Private Sector Development Strategy, 2013-2017. AfDB Publication.
Available online:
http://www.afdb.org/fileadmin/uploads/afdb/Documents/Policy-
Documents/2013-2017_- Private_Sector_Development_Strategy.pdf.
Accessed: 15.07.2016.
•Appiah-Kubi, K. (2001). State-owned Enterprises and Privatization in
Ghana. The Journal of Modern African Studies, 39(2), 197-229.
 REFERENCES

•Bouton, L. and Sumlinski, M. A. (2000). Trends in Private Investments in

Developing Countries, Statistics for 1970 -1998. IFC Discussion Paper, 41, 1-45.
•Brownbridge, M., Gockel, F. A. and Harrington, R. (2000). Saving and
Investment. Aryeetey, E., Harrigan, J. and Nissanke, M. (eds.), Economic Reforms
in Ghana: The Miracle and the Mirage,132-151. Oxford: James Currey Ltd
•Harvey, D. (2005). A Brief History of Neoliberalism, 1-247. New York: Oxford
University Press Inc.
•Hoedoafia, M.A. (2019). Private Sector Development in Ghana: An Overview.
•Kurokawa, K., Tembo, F. and Velde, D. W. (2008). Donor Support to Private
Sector Development in Sub-Saharan Africa, Understanding the Japanese OVOP
Programme. JICAODI Working Paper, 290, 1-57
•Leiva, I. F. (2008). Toward a Critique of Latin American Neostructuralism. Latin
American Politics and Society, 50(4), 1-25.
 REFERENCES

• Lewis, A. W. (1953). Report on Industrialization and the Gold Coast. Accra:

Government Printer.
•OECD (1995).Participatory Development and Good Governance. Paris.
•OECD (2004). Accelerating Pro-Poor Growth through Support for Private Sector
Development, DAC Network on Poverty Reduction, Task Team on Private Sector
Development. Available online:
https://www.oecd.org/dac/povertyreduction/34055384.pdf. Accessed: 7.7.2016.
•OECD (2007). Business for Development, Fostering the Private Sector. Paris:
OECD Publishing.
•Skidelsky, R. (2010). Keynes: The Return of the Master, 1-256. United Kingdom:
Allen Lane.
•Stein, H. (2000). The Development of the Developmental State in Africa: A
Theoretical Inquiry. Aalborg: Institut for Historie, Internationale Studier og
Samfundsforhold, Aalborg Universitet, 1-31.
 REFERENCES
•Stiglitz, E. J. (2007). Making Globalization Work. New York, USA: W. W. Norton
and Company Inc.
•Stimson, R. and Stough, R. R. (2009). Regional Economic Development Methods
and Analysis: Linking Theory to Practice. Rowe, E. J. (ed.), Theories of Local
Economic Development: Linking Theory to Practice, 169-192, Farnham: Ashgate
Publishing Ltd.
•TechTarget(2024).Private
Sector.https://www.techtarget.com/whatis/definition/private-sector
•Teignier, M. (2018). The Role of Trade in Structural Transformation. Journal of
Development Economics, 130(C), 45-65.
•World Bank (2002). World Development Indicators 2002. Washington, D. C:
World Bank
 ASSIGNMENT

• Write a one page paper on any of the policies

and programmes Ghana implemented to
promote the Private sector.