1
Outline
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Introduction
Privatisation & Regulatory Reforms
Nature of Competition
Sectoral Policies
Existing Anti-Competitive Practices & Distortions
◦ Some Evidence and Suspicions
Perceptions regarding competition concerns
Conclusion
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Just a little over a year ago, Ghana embarked on the second leg
of its centenary of independence and democracy, announcing
bold objectives that included an accelerated GDP growth rate of
8% in 2009 and 10% before 2015 and achievement of middleincome status of US$1000 dollars per capita by 2015.
In the five decades since her independence from British rule in
1957, Ghana has gone through different cycles of growth,
marked by poor economic performance and military coup d’états
through to the 1980s.
National economic policies during this period were often devoid
of market principles, and characterised by frequent price and
income controls.
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At best, the economy managed to muddle through, with low
productivity, high and volatile prices, an overvalued currency
and high interest rates and abysmal growth.
The return to multiparty democracy and constitutional rule in
the early 1990s marked the beginning of an unprecedented
economic and political stabilisation process.
Together with high commodity prices (especially for gold and
cocoa) and a set of important market reforms, an enabling
environment for the private sector growth began to emerge.
Under such improved macroeconomic and political
environment, Ghana has been enjoying a period of relatively
strong economic performance over the past few years.
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Economic Performance
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Despite tremendous gains achieved in the past decade some
policy and development challenges still remain to be
overcome.
Firstly, there are serious infrastructural gaps noticeable in the
water, energy, roads and sanitation sectors.
Secondly, the production and export base of the Ghanaian
economy still remains relatively narrow, exposing the
vulnerability of the economy to external shocks.
The economy has traditionally been dominated by agriculture.
In 2006, agriculture contributed 39.3% of GDP, with services
contributing 32.9% and industry 27.8%.
By 2007, share of agric. sector had dropped to 38%, and then
further to 34% in 2008.
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Yet, agriculture productivity has been low.
Evidence of a weakening manufacturing sector as domestic
markets are now flooded with imports at highly competitive
prices.
Financial sector shows some level of competition but clear
suspicions of anti-competitive practices abound.
Privatization
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By the mid-eighties, the government of Ghana was engaged in all
sectors of the economy (about 350 state-owned enterprises).
Govt also owned several boards and commissions, which were
performing services in competition with or which could have been
easily provided by the private sector.
The SOE reform agenda entailed two principal components:
divestiture, which involved transfer of ownership of assets or
management of enterprises to the private sector; and liberalisation,
which implied exposing enterprises to more competition.
By end of 2000 nearly 300 SOEs had been privatized and by end of
2003 18 more had been divested.
Despite ongoing privatization, state-owned enterprises continue to
play a significant role in the economy, notably in the agriculture
(cocoa), electricity, water, petroleum, and transport sub sectors.
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Regulatory Reforms
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The introduction of private involvement in the public sector
necessitated the setting up of independent institutions to oversee
and ensure competition, efficiency, affordable pricing and quality of
services.
These institutions were formed as part of the reforms within the
public sector and mandated to perform functions that include
policy-making, commercial operations and regulations.
Ghana has been able to create a workable framework to regulate all
aspects of the economy.
Regulatory bodies gradually moving from licensing services to
ensuring compliance with the maximum standard for quality of
service delivery.
Noticeable improvements in the areas to do with business but
bottlenecks in many other sectors (World Bank’s Ease of Doing
Business Report).
160
140
2007
2008
120
100
80
60
40
20
0
Starting a
Business
Employing
Workers
Registering
Property
Getting Credit
Protecting
Investors
Paying Taxes
Enforcing
Contracts
Closing a
Business
Consumer Protection Policy
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Ghana lacks a comprehensive consumer protection law.
◦ There is no centralized consumer protection law
and/or policy in Ghana.
◦ What exists currently is a group of public institutions
mandated to oversee specific aspects of consumer
protection, including:
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Ghana Standards Board (GSB)
Food and Drugs Board (FDB)
Public Utilities Regulatory Commission (PURC)
National Communications Authority (NCA)
Environmental Protection Agency (EPA).
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Interest in promoting competition in developing countries has
increased over the past decade.
The interest has particularly resulted from the failures of
economic reforms in the 1980s, that overly relied on trade
liberalisation to promote domestic market competition.
Recent influx of cheaper food and textile imports from China
has created a lot of competition in the market.
Some production plants have closed down because of their
inability to cut production costs to enable them stay in the
markets.
However, manufacturers contend that the country’s tariff
structure places local producers at a competitive
disadvantage compared to imports from other countries.
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Energy
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Water
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Telecom
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Financial Services
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Energy
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Ghana's energy sector is dominated by state-owned enterprises.
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Transmission and distribution of electricity are under state monopoly.
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Although Ghana is a net exporter of electrical energy in most years, low
water levels at the Volta dam frequently lead to supply shortages and
electricity cuts.
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The Energy Commission is in charge of technical standards and licensing
of electricity utilities.
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The Public Utilities Regulatory Commission (PURC) is responsible for
competition regulation and quality of service monitoring.
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There has been no significant privatisation programme to date.
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A previous government subsidy of electricity has been drastically slashed
in the past year with consequent increases in electricity tariffs by more
than 100 percent.
Water
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There are only 350,000 domestic connections for the roughly seven million
people in Ghana with access to drinking water.
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A high % of urban consumers depend on water tankers for their drinking
water supply.
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The sector is regulated by the PURC whose key tasks include:
◦ protecting the interest of consumers and providers of utility services
◦ promoting fair competition among public utilities
◦ receiving and investigating complaints and settling disputes between consumers
and the public utility
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Ghana Water Company Limited (GWCL) is responsible for the production
of potable water in Ghana
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Aqua Vitens Rand Limited (a joint Dutch and South African company) is
responsible for the distribution and management of GWCL.
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Aqua Vitens has recently come under fire due to the acute water
shortage in the Accra-Tema areas and other parts of the country.
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Ghana led the way in telecommunications liberalization and deregulation
in Africa when it privatized Ghana Telecom in 1996.
Although there is still significant scope for improvement, Ghana has
made huge progress in telecommunications services over the past
decade or so.
Mobile phone subscriptions continue to dominate total subscriptions,
rising by over 70% from 2,655,000 in 2005 to 4,678,505 in 2006 and
further increasing by 63% to 7,604,053 in 2007 and by 49% to
11,302,647 in 2008.
There are 4 major networks dominating the mobile phone industry.
The NCA is the regulatory body in charge of the telecom sector and its
main objectives amongst others include:
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promotion of fair competition among persons engaged in the
provision of communication services
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Financial Services Sector
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The past few years have seen a phenomenal growth in the Ghanaian
banking sector (currently there are 24 licensed banks & 127 rural
banks and numerous NBFIs).
The overall regulatory body is the Bank of Ghana (BoG) and one of
its key roles is ensuring that there is fair competition among banks
in Ghana.
Competition in the banking sector is becoming increasingly stiff,
particularly with the recent entry of a number of Nigerian banks
such as Guaranty Trust Bank, Zenith Bank and United Bank for
Africa.
Not surprisingly, the degree of market concentration, as measured
by assets of the top five banks, has fallen steadily – from 77.6% in
March 2000 to less than 55% in 2008 (Stanley, 2008).
This is much lower than in South Africa, where the top five banks
have a concentration ratio of more than 80% but is higher than the
SSA average.
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Financial Services Sector
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However, there are several reasons to question the extent to
which banks actually compete.
Bank concentration appears to be moderate by regional
standards - the dominant state owned bank (GCB) enjoys a
substantial market power, with 20 percent of total deposits
and 44 percent of total branches—a situation that may
influence price setting among banks and distort competition.
Profitability indicators suggest that, despite high overhead
costs (7% to average assets but substantially higher than the
SSA of 5.7%) and sizable provisioning, Ghanaian banks’
pretax returns on assets and equity are among the highest
in SSA—a situation that reflects very wide interest margins
(Buchs & Mathisen, 2005).
Anti-competitive practices – some evidence
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Ghana does not have legislation on anti-competitive practices
although a bill has been under consideration for several years.
The Ministry of Trade, Industry, Private Sector Development and
President's Special Initiatives (PSIs) however oversees all trade
dealings and practises including unfair trade practises.
Price –fixing & Excessive pricing e.g. Ghacem, the major player in
the industry, has long been suspected of price-fixing.
Collusion e.g. suspicion that firms involved in the food sector
whether as sellers or manufacturers are in collusion over recent
price rises.
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Cartels e.g. dominance of some firms in the sale of rough
diamonds.
False advertisement e.g. unfair practice is prevalent in the
pharmaceuticals industry, particularly with regards to herbal
medicines.
Trademark violation e.g. music and video industry but also
Chinese accused by players in the textile & clothing sector
Anti-competitive practices – some evidence
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There are reports of a failed attempt at a take over of CAL Bank bringing
to the fore, the effect of sections 34 and 35 of the Banking Act, 2004 (Act
673) (See Lawfields Business Law Bulletin, 2006).
The Central Bank is empowered to give prior approval of an intended
acquisition or disposal of ‘significant shares’ in a licensed bank, i.e. 10%
or more of the capital or voting rights of a bank, or a level of
shareholding which makes it possible to exercise a significant influence
over the management of the bank.
The BoG must be notified of the impending transaction within 3 months
of the intended transaction, and its prior approval must be obtained, with
the objective of preserving sound and prudent management of banks.
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Anti-competitive practices – some evidence
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In the particular matter, the First City Monument Bank (FCM) of Nigeria
sought to acquire the shares of the IFC and Prince Al Waleed (16.7% &
10.8%) respectively) in CAL Bank whose shares had been trading on the
GSE since 2004.
Since FCM had previously acquired 8.2% of CAL Bank shares, acquisition
of the additional shares would have resulted in it becoming the single
largest shareholder in CAL Bank.
The regulator, BoG, chose to exercise its discretion to disapprove the
intended purchase.
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Assessment of Level of Competition
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Assessment of Enforcement Issues
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Competition Culture and Public Awareness
Assessment of level of competition
among companies
%
High
30.8
Moderate
51.8
Low
Nil
Total
Impact of competition on consumers
16.4
1.0
100
Highly
51.0
Moderately
Not at all
Total
39.7
9.3
100
Anti-competitive practices
Price fixing
Price discrimination
Entry barrier
Exclusive dealing
Bid rigging
Market sharing
Tied selling
Predatory pricing
Resale price maintenance
Concerted refusal to deal
Anti-competitive M&A
%
25
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13
10
10
9
6
6
5
2
2
Majority of respondents
(58%) have quite
frequently encountered
anti-competitive
practices
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Majority (58%) had no knowledge of rules or laws to check
anti-competitive behaviour.
Majority (63%) had no knowledge of agencies put in place to
administer such rules or laws.
On enforcement issues, again the majority (64%) do not know
if any action is taken in instances where the rules are violated.
41% of respondents are of the view that no actions are taken
because the laws are not enforced whilst others attribute this
to agencies not having enough clout to punish offenders.
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Others believe that corruption and the influence of strong
lobbies make taking action less appealing for agencies.
On issues regarding state owned monopolies, majority (89%)
acknowledged their existence and were of the opinion that
these institutions indulged in anti- competitive practices such
as exclusive dealing and price discrimination tops the list.
Generally, majority of respondents (82%) perceive that
competition issues are not well understood in Ghana.
The main reason being the lack of publicity on competition
issues and lack of political will.
Nonetheless, awareness of competition issues is perceived to
be high among businesses and low among consumers
Fig 4: Awareness on competition issues among
key groups
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36 percent of respondents agreed to
report anti-competitive cases to the
media houses, and 24 percent would
inform local authorities or traditional
leaders.
Competition issues are not reported
because there is no institutional
framework to handle such issues.
Others believe that the media are more
interested in sensational news items
and therefore are less likely to report
them.
Journalists may lack the training
needed to appreciate competition
issues, however, business
correspondents are sometimes able to
highlight some anti-competitive
practices
Fig 5: How competition issues are perceived
to be reported
Conclusion (Perception survey)
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In conclusion, respondents are of the opinion that the government
should play a key role in ensuring the setting up a Competition
Authority to protect consumers and producers.
Also regulators need to be fully equipped to enforce laws and
legislation which they are charged with.
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There is also the need for more advocacies on the negative effects of
anti-competitive practices on the economy and especially on
consumer welfare.
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Market concentration enhances the power of multinational
corporations to dictate their terms, compounding the difficulties of
commodity-reliant developing countries.
There is at least circumstantial evidence to indicate that anticompetitive trade practices are on the increase related to market
concentration and increased buyer power among the TNCs.
Given the situation, policy must play a role in ensuring that levels of
market concentration in local and international markets need to be
tackled to ensure that the MNCs cannot abuse their market power
and extract unfair profits.
Competition law in Ghana could play an important role in tackling
some abuses of market power, especially by domestic intermediaries
or domestic subsidiaries of MNCs and ultimately protecting
consumers.
Thank You!
For further information or clarification please contact us by email.
Dr. Charles Ackah (cackah@isser.ug.edu.gh)
Ama Pokuaa Fenny (amafenny@yahoo.co.uk)
Dela Tsikata (delkwa@yahoo.com)