Postcolonial Reconstruction in Ghana, 1952–66

Background

In 1952, the West African nation of Ghana, recently having freed itself from British imperialism, set out on a project of radical economic reconstruction unmatched anywhere on the continent in scope and ambition. Having attained political independence with the creation of a sovereign parliament and executive office, the Convention People’s Party (CPP) under the leadership of Kwame Nkrumah drew up extensive plans for ensuring the conditions necessary for real, not just on-paper, independence. This meant the independence of the agricultural and industrial sectors from domination by European capital. By 1966, when the military overthrew Nkrumah’s government and reinstated European domination, the country had been unmistakably transformed. No less than 150 new industries had been created in an economy hitherto consisting of cocoa plantations and subsistence crops.¹ The governmental administration had been reconstructed beyond recognition and the makeup of the West African political landscape was completely changed. The challenges that, in the end, the CPP was unable to overcome have still not been adequately addressed today. Continued radical transformation of third world economies requires a thorough understanding of Ghana’s mistakes and accomplishments.

In the 1950s, the economy of Ghana was export-oriented, with cocoa, gold, and timber as the main sources of revenue.² As in many developing countries, these products were exported in unprocessed form. All manufacture and processing of materials was done by industries in Europe and the United States. Money from exports went to wealthy plantation owners in Ghana, who had little incentive to invest in productive areas. The wealthy countries created jobs, increased industrial and technical expansion, and reinvested their profits in productive sectors, creating huge economic growth. Ghana, in return, received a small sum of money held by a small section of the population. No transformative change in the economic structure was possible.

In times of high cocoa prices, there was a small amount of unproductive wealth; in times of low prices, a period of depression. When the CPP came to power in 1952, they set out to create an economic model based around self-sustaining growth, with an integrated and advanced industrial sector leading the way for the rest of the economy. Egyptian economist Samir Amin called this model an auto-centric economy, one that sustains its own growth without dependence on capital injections from outside or on profits from exports to more advanced countries.³ In Ghana, this required a complete reconstruction of the fundamental nature of the internal economy, its relationship to other African states, and to the world market. It meant rejecting the international specialization imposed by the Western countries (first through imperialism, then through the World Bank and the International Monetary Fund), stipulating which countries should grow crops and mine ores (African, Asian, and Latin American ones), and which should develop industry and commerce (Europe, North America, Australia, and Japan).

Trade

In 1954, the Ghanaian Parliament passed the Cocoa Duty Bill, fixing the price paid to cocoa farmers so as to limit their wealth and divert the surplus to government revenue. The bill imposed state control over trade. Farmers were paid £116 a ton for four years, regardless of world prices.⁴ The surplus profit from cocoa exports went to the government, providing huge increases in revenue. In 1957, the first year of Ghana’s full independence, government revenue from this source was £22 million, amounting to 37 percent of total revenue.⁵ The Cocoa Purchasing Company, controlled by the CPP, oversaw the sales and the distribution of profits.⁶ The wealthy planting class had to accept this restraint on their power. Controlling 80 percent of cocoa production in the country (the rest was from small landholders), this class had hoarded their profits, spent money on imports of luxury goods, and invested in property in England.⁷ This is often the case in agricultural countries, where opportunities for industrial investment are scarce and unprofitable.⁸ The Cocoa Purchasing Company put an end to this and used cocoa profits to fuel the expansion of domestic industry. A timber marketing board organized similar controls over the timber industry, and used its surplus to finance modernization programs for agricultural cooperatives. From 1962 to 1964, out of profits of approximately £20 million, it approved £2 million of loans to cooperatives in these areas.⁹ This promoted expansion of domestic production, rather than unproductive expenditure by the upper classes.

When the CPP came to power in 1952, foreign merchants controlled domestic and international trading. In 1959, the Report of the United Kingdom Trade and Industrial Mission to Ghana indicated that 85 percent of the import trade in Ghana in 1959 was controlled by European firms, with 10 percent controlled by Indian, Lebanese, and Syrian merchants, and only 5 percent in Ghanaian hands.¹⁰ In 1961, the government created the Ghana National Trading Corporation to address this problem. Its responsibilities included taking over the management of imports and distributing domestic products.¹¹ By 1965, the Ghana National Trading Corporation was receiving almost £5 million in profits annually from its control over the distribution of 32 percent of total imports, the largest single trading concern in the country.¹² In just four years, the power of the foreign merchant class had been broken. The profit, as with other state corporations, swelled government revenue, amounting to 3 percent of total revenue in 1965.¹³

The Ministry of Trade, in conjunction with the Bank of Ghana, implemented the CPP’s protectionist trade policies, designed to stimulate domestic industry and limit the amount of money leaving the country. In the years after the CPP came to power, imports had been rising quickly. In 1950, £48 million worth of goods were imported from abroad. In 1960, this had risen to £130 million. The upward trend in imports meant an external deficit on the balance of payments, reaching nearly £132 million from 1959 to 1964.¹⁴ This was hardly a negligible figure, considering that total government revenue during this period was £513 million.¹⁵ Parliament passed the Foreign Exchange Control Act in 1961 to limit the number of consumer goods being imported and thus stimulate local production.¹⁶ As a result, domestic production increased in light industries such as beer, soda, cigarettes, and baked goods.¹⁷ The Foreign Exchange Control Act raised tariffs on nonessential consumer goods, raising money for government revenue when it could not stop cash from leaving the country altogether.¹⁸ In 1961, it tallied £28.9 million, amounting to 38 percent of total government revenue.¹⁹ Official reports for these years show that, although the external deficit on the balance of payments still increased, the nature of imports had changed. Consumer goods dropped from 50 percent to 40 percent of total imports, with equipment and machinery rising from 50 percent to 60 percent.²⁰ This success meant a change in the nature of the domestic economy. Consumers no longer relied on imports for daily goods. The government had the funds to stimulate industry, and this industry had taken the lead and was breaking the power of Western domination.

Industry

The Seven-Year Development Plan for Economic Reconstruction and Development (1963/4–1969/70) outlined the most ambitious of projects undertaken. It entailed a comprehensive list of production targets, revenue expectations, investment targets, and expenditure proposals. It differed from other development plans undertaken in African countries in its emphasis on industrial growth and its willingness to restructure both domestic and foreign economic relationships. The Ghanaian plan allocated a total of 49.8 percent of total investment to directly productive sectors, with 20.3 percent going to industry, 4.7 percent to mining, 17.4 percent to agriculture, and 7.4 percent to be distributed as needed in these sectors. The Nigerian plan for comparable years allocated only 27 percent to directly productive sectors, with 13.6 percent going to primary production and only 13.4 percent going to a combination of industry and trade. The Kenyan plan again allocated only 21.4 percent to directly productive sectors, with agriculture taking 16.8 percent and the remaining 4.6 percent distributed between commerce, industry, and tourism. The figures for Kenya and Nigeria include only public-sector investment, but, with more than 50 percent of investment coming from the private sector for Kenya and 33 percent for Nigeria, the lack of any articulated plan to use this for industrial projects suggests it went to other areas. Ghana’s coordination of private investment with public plans made it unique. In the projections for domestic output percentages intended to be reached upon the completion of the plan, the Ghanaian figures had industry increasing from a 23.6 percent share in the overall domestic output to a 27.5 percent share. The Nigerian plan had no target for industrial output, but at only 12.9 percent at the beginning of the plan, it is doubtful that it grew much. The Kenyan plan had industrial output increasing from 22.6 percent to 24.1 percent of the total output, an insignificant shift. As the U.S. economist Reginald Green pointed out at the time, even the modest growth targets set by Kenya and Nigeria were unrealistic because of such low investment in industrial projects.²¹ Ghana’s, he concluded, were much more feasible.

Many commissions were created in the 1960s, of which the five most important were part of the Seven-Year Plan to undertake the immense project of industrialization. Central to these was the National Planning Commission, a centralized government body dedicated to oversight of plan implementation.²² The State Planning Committee was created to coordinate and give specific directions on decisions taken by the National Planning Commission. Under this were the Budget Committee and the Foreign Exchange Committee, established to conduct studies and give recommendations in their respective areas to the National Planning Commission and State Planning Committee. The State Management Committee oversaw state-owned enterprises and corporations.

From 1962 to 1965 (overlapping with the previous five-year plan), value added in the transformation industries increased at a rate of 15 percent a year, with industrial production doubling in four years. In addition, the government’s share in industrial production rose from 27 percent in 1963 to 43 percent in 1967.²³ This meant a decreased reliance on foreign capital and a restraint on the domestic merchant class. The Capital Investments Act of 1963 gave tax incentives to private investment in industrial projects. However, it stipulated that all private investment had to be approved by the Capital Investment Board, made up of ministers from important government offices.²⁴ The act allowed for the creation of a mixed public-private industrial sector, with private enterprise encouraged but state ownership extended over strategic sectors and with executive powers over the former.

The value of gross manufacturing output of intermediate goods—rubber, metal, chemicals, and petroleum—increased from 2.9 percent of total gross manufacturing output in 1958 to 24.4 percent in 1966.²⁵ Value of consumer-goods output dropped from 87 percent of the total to 70 percent in the same years. A steelworks opened at Tema in 1964, followed by glass and electronics (radios and televisions) in 1965.²⁶ Paint manufacture began in 1962 and manufacture of petroleum products in 1963.²⁷ Industries under construction at the time of the coup d’état included an asbestos factory, cement plant, rubber factory, and gold refinery.²⁸ The government controlled the intermediate and heavy industries, with private enterprise tending toward light industry producing consumer goods.²⁹ This was state control of strategic sectors in action.

The construction of the Volta Dam in Ghana, completed in 1966, was the most significant accomplishment of the Ghanaian plan. It meant a huge boost to industry. The initial hydroelectric power output was 512,000 kilowatts, with the ultimate power output reaching 768,000 kilowatts, meaning an incredible amount of cheap electricity for heavy industries in the area.³⁰ Data is not always accurate or available for electricity production in West African countries during this time, but it is clear that this output allowed for an incredible increase in electrical capacity compared to other countries in the region. Some rough figures put the total electric output of neighboring Dahomey (1965) at approximately 2,500 kilowatts, or 0.3 percent of Ghana’s output, generated from expensive steam power. An aluminum smelter was the first benefit of Ghana’s enormous electrical increase, allowing for the production of 80,000 to 135,000 tons of aluminum per year.³¹ This was the only attempt in West Africa, and one of the only attempts in all of Africa, to make a start on heavy industry. If imports of consumer goods had already been limited by an increase in domestic light industry, reducing the necessity of importing equipment and machinery was the next target. The aluminum smelter at Tema and electricity from the Volta Dam brought this target within reach.

Foreign Policy

The serious industrialization and development of Ghana necessitated an economic and political union of African states. Ghana faced a problem of insufficient bargaining power on the world market. In the 1960s, cocoa prices had fallen drastically. In 1954, cocoa had sold for nearly £500 a ton. In 1965, it was selling for less than £100 a ton.³² The cocoa producing countries had increased production, leading to competition as the world supply of cocoa now exceeded demand. In 1955, world cocoa production amounted to 837,000 tons, with Ghana providing 239,000, Nigeria 112,000, and the Ivory Coast 60,000. By 1965, this production had nearly doubled, with world production at 1.5 million tons. Ghana now provided 571,000, Nigeria 293,000, and the Ivory Coast 145,000.³³ This situation benefited the importing countries, which could drive prices down by playing one country against another. Since 80 percent of cocoa consumption was in Western Europe and the United States, this once again meant an economic success for the West at the expense of Africa.³⁴

In 1963, Ghana led the way in creating the Cocoa Producers’ Alliance (CPA), composed of Ghana, Nigeria, Brazil, the Ivory Coast, Cameroon, and Togo. With cocoa prices at an all-time low, they planned to withhold sale of the next crop until purchasers were willing to pay a minimum price (approximately £200 a ton) agreed on by the CPA, with hopes of securing an even higher price if conditions were right.³⁵ The 1963 UN Food and Agriculture Association Conference, organized to facilitate negotiations between the CPA and importing countries, failed to secure any agreement.³⁶ The precarious nature of the CPA—which was unable to secure sufficient coordination among its member states and had insufficient power to force other cocoa-producing countries to join—was the main cause. The CPA collapsed and countries were forced to sell at the original low prices that they had initially refused, with the New York Times announcing triumphantly “Cocoa Producers Lose Market War” in 1965.³⁷

The fragile coordination of a sellers’ cooperative, as illustrated by the CPA fiasco, necessitated the formation of more comprehensive unions between African states. In 1958, Ghana organized the Conference of Independent African States, with representatives from Egypt, Tunisia, Morocco, Liberia, Sudan, Libya, and Ethiopia. The All-African Peoples’ Conference followed later that year, this time including participation by sixty-two nationalist organizations from around Africa, and the All-African Trade Union Federation met several months later. The Union of African States, comprising Ghana, Guinea, and Mali, was the most radical organization to come from this effort. Formed in 1958, the union agreed to a charter in 1961, detailing coordinated policy agreements to be carried out in domestic and international affairs. It included an exchange of resident ministers between countries that would be full members of government of the countries involed. The charter further stipulated its members’ commitment to “pool[ing] their resources in order to consolidate their independence and safeguard their territorial integrity…to harmonize domestic and foreign policy…so that their activities may prove more effective.”³⁸ Military policy was agreed on, with interventions in Congo and Algeria foremost on the list. During the tense years of division in Congo, Ghana supplied the government with military officers, aircraft, diplomatic advisers, and medical aid.³⁹

The Union of African States agreed on an economic policy based on the formation of an African Common Market and Economic Community, similar in structure to what would become the European Union.⁴⁰ In 1959 and 1960, Ghana provided Guinea with a £10 million loan in order to facilitate the Guinean development plan. Development in Guinea had been stalled when the French government pulled out of joint projects after Guinea announced it would be leaving the franc zone in 1958. The loan provided funds to purchase necessary equipment taken by the French. It also stipulated short-term financing for the purchase of banana and coffee crops, should the French banks refuse to continue to advance money for that purpose. Interest rates were agreed at not more than 2 percent, with capital repayments delayed for five years in order to give Guinea the breathing room it needed.⁴¹

With industrialization of the West African economy, close economic ties were essential. The 1965 Annual Plan for the Second Plan Year of Ghana outlined the necessary coordination of industries with nearby countries.⁴² Growing industrial production required increasing consumer demand. This meant investing in the internal and West African markets to grow consumer purchasing power. Until this time, most Western investment in Africa had been in primary production sectors with low wages, leading to a stagnation of African consumer demand.⁴³ By creating mechanisms for intra-African capital flow, the Union of African States reversed this trend by increasing investment in the internal (African) market, leading to an increase in demand for manufactures. Since the Union of African States had agreed on protectionist trade policies, resulting in high trade barriers for European imports and low barriers for African ones, increased demand for manufactures meant an increase in African industrial production.

An integrated economic zone meant free flow of labor power from one country to another. The 1960 Ghana census listed a total of 827,481 people of foreign birth in the country, about 12 percent of the population.⁴⁴ This free flow of labor reversed one of the defining features of imperialism. Under European rule, colonial governments instituted policies to disrupt the subsistence economy of rural areas, creating huge reserves of surplus labor and driving down wages.⁴⁵ Ghana’s development of close economic ties with nearby countries after independence meant labor could go where it was needed, preventing large unemployed populations from driving down wages. European companies seeking to do business in West Africa could not rely on compensating labor at rates far below what it received in advanced countries, as they had done previously. Close economic ties between West African nations meant therefore not just a minor change in intra-African relationships, but also a more significant shift in the balance of overall global power.

The success of Ghana’s foreign policy approach during this time was apparent in the U.S. reaction. In fact, the CPP had struck such a nerve that it was deemed too dangerous to continue. According to recently declassified U.S. State Department documents, Special Assistant for National Security Affairs Robert W. Komer wrote to then-president Lyndon Johnson that Nkrumah “was doing more to undermine our interests than any other black African.” It was precisely Nkrumah’s unyielding commitment to African independence, his willingness to risk everything again and again, and his unwillingness to be bought off at any price that set him apart. For the United States, the CIA-backed coup that overthrew him in 1966 was “a fortuitous windfall” to be “exploit[ed]…as quickly and skillfully as possible.”⁴⁶ The coup tragically reversed most of the initiatives begun by Nkrumah, privatizing state enterprises, wresting power away from ordinary people, and capitulating to U.S. demands.

Government and Bureaucracy

The immense tasks of industrialization demanded rapid expansion of bureaucratic organizations. Central government ministries and commissions were multiplied after the Civil Service Act in 1960. By 1966, at the time of the overthrow of the CPP government, there were a total of thirty-one ministries and departments, with the number of people employed in the public sector having increased by 67 percent from 1960 to 1965.⁴⁷ With the official report listing 127,419 government employees in 1961, the total number in 1966 must have been astronomical.⁴⁸

The difficulties of implementing comprehensive structural change demanded this extensive network of administrative organs. Breaking out of economic stagnation and foreign domination required rigorous control of trade and economic management. Ghana’s success in this area made it far ahead of its neighbors’ attempts. In Senegal, for instance, a state-marketing board similar to Ghana’s Cocoa Purchasing Company had been created for groundnut exports. This board was meant to buy groundnuts from farmers at a fixed price, export them, and keep the surplus for the government. The board, however, failed to institute extensive control over the production and trade of nuts. The result was that farmers sold their produce illegally in next-door Gambia, where they were paid in cash in the Gambian pound, which was valued at 15 to 20 percent more than Senegal’s currency.⁴⁹ The rigorous controls in Ghana that the Cocoa Purchasing Company, the Ghana National Trading Corporation, and other state-controlled bodies held over the economy made these kinds of activities a nonissue.

Technical education and management played a huge part in Ghana’s bureaucratization drive. With much of the population uneducated, bureaucratic oversight was necessary to ensure the successful functioning of industry. An immense increase in resources for technical and trade schools shows an increase from 3,559 students in technical and secondary school enrollment in 1951 to 19,143 in 1961.⁵⁰ University enrollment also increased from 208 to 1,204, with emphasis on scientific and political education.⁵¹ This required an increase in teacher training colleges. All of this meant an expansion of government ministries given the task of overseeing and implementing educational directives.

By 1966, this immense bureaucracy had become a class of its own. The immense powers it had needed to destroy the old order had given it the ability to dictate the direction of society. Until 1966, it had been kept in check by Nkrumah’s leadership and the accompanying mass movement. It had gone in the right direction and changed society in necessary ways. But by 1966, its corruption and distance from society were clear. The industrial revolution it had started had not reached a stage at which workers’ organizations could have been an adequate check on its power. The old order had been destroyed and a foundation had been laid for a new world. But the machinery needed for the building of this foundation had been too great. The new world was not yet visible enough to overshadow the immense scaffolding that had been necessary to bring it into being. The bureaucratic organization became an end in itself, destroying both Nkrumah and the world he had struggled to bring into existence. In 1966, amid rising inflation and rampant corruption, the bureaucratic and military class overthrew Nkrumah’s government and declared what was already apparent—that they were the masters of the country and it was to their interests that all projects were now to be referred.

Notes

1. ↩ Samir Amin, Neo-Colonialism in West Africa (Harmondsworth: Penguin, 1973), 244.
2. ↩ Kwame Nkrumah, Dark Days in Ghana (New York: International Publishers, 1969), 88.
3. ↩ Samir Amin, Accumulation on a World Scale, vol. 1 (New York: Monthly Review Press, 1974), 28.
4. ↩ Nkrumah, Dark Days in Ghana, 57.
5. ↩ Naseem Ahmad, “Some Aspects of Budgetary Policy in Ghana,” Economic Bulletin of Ghana 10, no. 1 (1966): 3–22.
6. ↩ Bob Fitch and Mary Oppenheimer, “Ghana: End of an Illusion,” Monthly Review 18, no. 3 (July–August 1966).
7. ↩ Amin, Neo-Colonialism in West Africa, 46, 243.
8. ↩ Amin, Accumulation on a World Scale, 9.
9. ↩ Nkrumah, Dark Days in Ghana, 89, 90.
10. ↩ Kwame Nkrumah, Africa Must Unite (New York: International Publishers, 1972), 108.
11. ↩ Fitch and Oppenheimer, “Ghana: End of an Illusion,” 115.
12. ↩ Nkrumah, Dark Days in Ghana, 79, 90.
13. ↩ Ahmad, “Some Aspects of Budgetary Policy in Ghana,” 18.
14. ↩ Douglas Rimmer, “The Crisis in the Ghana Economy,” Journal of Modern African Studies 4, no. 1 (1966): 17, 18.
15. ↩ Ahmad, “Some Aspects of Budgetary Policy in Ghana,” 18.
16. ↩ Planning Commission, Seven-Year Plan for National Reconstruction and Development, Financial Years 1963/64–1969/70 (Accra: Office of the Planning Commission, 1964), 230.
17. ↩ Rimmer, “The Crisis in the Ghana Economy,” 19.
18. ↩ William F. Steel, “Import Substitution and Excess Capacity in Ghana,” Oxford Economic Papers 24, no. 2 (1972): 219.
19. ↩ Ahmad, “Some Aspects of Budgetary Policy in Ghana,” 21.
20. ↩ Nkrumah, Dark Days in Ghana, 89.
21. ↩ Reginald H. Green, “Four African Development Plans: Ghana, Kenya, Nigeria, and Tanzania,” Journal of Modern African Studies 3, no. 2 (1965): 255–59.
22. ↩ Planning Commission, Seven-Year Plan, xviii.
23. ↩ Amin, Neo-Colonialism in West Africa, 244.
24. ↩ “Ghana Capital Investments Act,” International Legal Materials 2, no. 4 (1963): 666–75.
25. ↩ Steel, “Import Substitution and Excess Capacity in Ghana,” 215.
26. ↩ Leslie E. Grayson, “A Conglomerate in Africa: Public-Sector Manufacturing Enterprises in Ghana, 1962–1971,” African Studies Review 16, no. 3 (1973): 317, 323.
27. ↩ Planning Commission, Seven-Year Plan, 92.
28. ↩ Nkrumah, Dark Days in Ghana, 87.
29. ↩ Steel, “Import Substitution and Excess Capacity in Ghana,” 216.
30. ↩ Nkrumah, Dark Days in Ghana, 83.
31. ↩ Amin, Neo-Colonialism in West Africa, 115, 245.
32. ↩ Ahmad, “Some Aspects of Budgetary Policy in Ghana,” 15.
33. ↩ Food and Agriculture Organization of the United Nations, Cocoa Statistics (Rome: United Nations, October 1965).
34. ↩ Amin, Neo-Colonialism in West Africa, 242.
35. ↩ Jere R. Behrman, “Monopolistic Cocoa Pricing,” American Journal of Agricultural Economics 50, no. 3 (1968): 702.
36. ↩ “33-Nation Cocoa Talks Adjourn As Conference Ends in Failure,” New York Times, October 25, 1963, 41.
37. ↩ J. Maidenberg, “Cocoa Producers Lose Market War,” New York Times, February 7, 1965.
38. ↩ Nkrumah, Africa Must Unite, 136, 137, 141, 142.
39. ↩ Kwame Nkrumah, Challenge of the Congo (New York: International Publishers, 1970), 63.
40. ↩ Nkrumah, Africa Must Unite, 143.
41. ↩ “Guinea Loan Is Due to Be Repaid by 1970,” Ghana Today 2, no. 23 (1959): 10.
42. ↩ Planning Commission, Seven-Year Plan for National Reconstruction and Development, Financial Years 1963/4–1969/70: Annual Plan for the Second Plan Year (Accra: Office of the Planning Commission, 1965), 23.
43. ↩ Amin, Accumulation on a World Scale, 178.
44. ↩ Amin, Neo-Colonialism in West Africa, 44.
45. ↩ Amin, Accumulation on a World Scale, 63.
46. ↩ Robert W. Komer to Lyndon Johnson, memorandum, March 12, 1966, Johnson Library, National Security File, Memos to the President, Robert W. Komer, vol. 21, available at https://history.state.gov. A handwritten L on the source text indicates that the memorandum was seen by Johnson.
47. ↩ Peter Fuseini Haruna, “Reflective Public Administration Reform: Building Relationships, Bridging Gaps in Ghana,” African Studies Review 44, no. 1 (2001): 40; Herbert H. Werlin, “The Roots of Corruption—The Ghanaian Enquiry,” Journal of Modern African Studies 10, no. 2 (1972): 257.
48. ↩ Planning Commission, Seven-Year Plan (1964), 283.
49. ↩ Amin, Neo-Colonialism in West Africa, 33.
50. ↩ Nkrumah, Dark Days in Ghana, 77.
51. ↩ Nkrumah, Africa Must Unite, 48.