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Competition Reforms in the Ghana:Exploring Options in Bus Transport

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Bus TransportMarket in GhanaThe importance of the bus transport market inGhana is highlighted by the fact that it comprises 60percent of the nation�s vehicle fleet and 68 percentpassenger traffic. Both private and public playersprovide inter-city and intra-city bus transportservices in Ghana. In urban areas, bus transport islargely controlled by small, informal operatorscalled �trotro� operators (minivans or medium busesthat hold 12-24 people). The trotros do not followany schedule � they depart once the bus is fullyloaded at the origin. Formal intra-city bus transportin Ghana is limited to school transport and specialarrangements made for transportation of workers. Incontrast, the inter-city bus transport market inGhana is characterised by the presence of formalplayers operating newer fleets of medium and largebuses along major inter-city bus routes according tospecific schedules.

Regulatory Evolution of the BusTransportMarketThe Ministry of Transport (MoT) is responsible forcreating an enabling environment for thedevelopment and maintenance of Ghana�stransportation system. The bus transport industry inGhana is governed at two levels � ministerial levelfor policy formulation, and agency anddepartmental level for permits, licensing andenforcement.

The key reforms in Ghana�s transport sector are:� Passing of the Road Traffic Ordinance of 1952

which provides regulations on licensing, roadtraffic control, and vehicle construction

� Repealing of the Omnibus Services AuthorityDecree (NLCD 337) by the Ghanaian governmentin 1972, which led to deregulation of the busservice operations in Ghana, enabling entry ofvarious owner/drivers in the market

� Adoption of the National Transport Policy (NTP)in 2008 to encourage private investments in the

After its independence in 1957, Ghana adopted the view that its advancement to socialism would bedeterred if private capitalism were encouraged. However, since 1983, this position has been reversed,with the adoption of major social, political and administrative reforms through Economic RecoveryProgramme (ERP), which recognise the importance of private sector promotion on economicdevelopment. These programmes empowered people to take entrepreneurial initiatives, assist them inbuilding businesses, and set the pace for a comprehensive programme of opening up the economy toprivate investors, including foreign direct investment. Ghana, presently, does not have either acompetition policy or a law in place, despite efforts to develop competition legislation over the years.The Protection Against Unfair Competition Act, 2000 (Act 589) administered by the Ministry for Justice,is the key law related to competition in the country, but is not in line with modern antitrust orcompetition legislations. For instance, it does not create any regulatory body or administrative processfor enforcement. This study assesses the state of competition and the impact of competition-focussedreforms in the bus transport and maize sector in Ghana.

transport sector with the objective of providingan integrated, efficient, cost-effective andsustainable transportation system responsive tothe needs of society and effective for customerneeds

Subsidised Public TransportIn 2003, Ghana set up the Metro Mass Transit (MMT)with the objective of promoting mass transit toreduce congestion and ensure transportaffordability and accessibility across cities andtowns of the country for the most vulnerable andexcluded groups. Private investors had a share of 55percent inMMT, whereas the Government of Ghanaheld a 45 percent share due to the belief thatgovernment-run public transport operation wouldplace greater priority on affordable fares andservice enhancements. The provision of subsidisedmass transit bus transport service is in line withGhana�s NTP and the Third Draft Sector Medium-TermDevelopment Plan.

However, MMT�s objective of providing a cheaptransport option for ordinary and poor commutershas not been fully realised. Due to governmentcontrol over its fares, MMT is unable to recover itscosts and break-even, which influences its serviceand results in inefficiencies. For example, becauseof inefficiencies, MMT has accumulated a large fleetof un-serviced buses, and consistently operatesunder-capacity. Since MMT cannot charge market-based fares, it recently (in 2014) appealed for abailout package of GHC 58 million (over US$16mn)from the government to improve its services, expandcoverage and attain sustainability.

In terms of financing, ready access to governmentfunds and tax exemptions provides MMT an unfaircompetitive advantage over the informal privateoperators. Consumer survey undertaken for theproject confirms that MMT has not been able tofulfill its mandate in terms of access andavailability. Although most consumers found MMT

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cheaper, saferand morecomfortable(especially forwomen), amajority of them(75 percent) endup travelling inprivate informalbuses due to lowavailability ofMMT buses. In

fact, MMT only has a five percent market share inbus transport and serves only three intra-city routes,while private operators serve 22. Private buses do abetter job than MMT of adhering to their timetables,especially on inter-city routes. MMT thus needs toidentify specific �niche� markets that it shouldservice in order to achieve its social objectives, andat the same time identify a revenue model that wouldmake it financially sustainable.

Promotion of Private Sector InvestmentMost informal buses commercially operating inGhana are more than 15 years old due to the highcost of acquiring new buses. Bank loans are hard tocome by, and interest rates are very high (around 52percent). This limits bus operators in Ghana toresorting to importing second-hand vehicles fromother countries, with 73 percent of inter-city busesreported as imported. Only four percent of busoperators that CREW surveyed said that their buseswere in very good condition.

To improveaccess tofinance, which isnecessary forreplacing theexisting vehiclefleetwith newer,moremodernvehicles forefficient,comfortable and

safe operation, the NTP has introduced reformspromoting investment in the bus transport industry.The government has adopted a two pronged strategythrough private public partnership (PPP), and byproviding concessional rates for leasing buses.However, both of these strategies have confrontedchallenges such as payment defaults, high interestrates on loans, misuse by the transport unions, andlimited regulatory oversight, thus hindering theirsuccess. This is highlighted by the fact that over 90percent of the operators surveyed still use their ownresources for bus acquisition. As a result, the busmarket is informal with most operators (63 percent)

owning just one vehicle. The vehicles operated aregenerally old and in poor condition, which couldhave safety implications.

RouteAllocationAccording to the LI 2180 of 2012 (under Regulation121) of Ghana, the private informal bus operatorsare required to operate under definedmanagementstructures by tendering on competitive fares, servicelevels, safety, etc.for soleoperation onspecific routes.However, thisregulation is noteffectivelyenforcedbecause inGhana, thepermit issued to operators by the Metropolitan,Municipal or District Assemblies (MMDA) applies tothe whole license area and not to specific routes.Since route rationalisation has not beenimplemented effectively in Ghana, cherry picking ofprofitable routes with high commuter demand bytransport unions is common, particularly in theintra-city segment. This also highlights thesignificant role that transport unions play in theGhanaian transport sector. The absence ofregulatory route allocation has resulted in transportunions such as the Ghana Private Road TransportUnion, which control 85 to 90 percent of the market,allocating routes among the wide range of privateplayers in the market based on preference andability to lobby.

Ghana is planning to introduce route allocation inorder to ensure a well-functioning market withincreased competition in service provision, therebyintroducing efficiency into the industry, enforcingeffective transport regulations and improvingperformance standards. It was expected that as aresult of LI 2180, there would be adequatecompetition in the market as rival companies wouldstrive to increase their market share by offeringattractive services to customers, establishingthemselves through aggressive marketing andproviding high quality services, especiallyincreasinglyhigher safetystandards. Apossible concernwith this policywas that strongcompanies willtend to growstronger and willout-tender

Despite cheaper, safer, andmore comfortable service byMMT, 75 percent ofconsumers surveyed have toresort to informal privatebuses due to availabilityissueswithMMT,which onlymaintains a 5 percentmarket share and onlyserves three routes

Since route rationalisationhas not been implementedeffectively inGhana, cherrypicking of profitable routeswith high commuter demandby transport unions iscommon

The busmarket is informalwith most operators (63percent) owning just onevehicle. Thevehiclesoperated are generally oldand in poor condition, whichcould have safetyimplications

Fare-setting process is basedon negotiations between thegovernment and the unions,with no representatives ofpassengerwelfareassociations/consumerassociations

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weaker ones. However, route allocation has beenunsuccessful due to the control of transport unionsin route allocation.

ConclusionThe bus transport market in Ghana needs toimplement pro-competitive reforms in order tocreate a level playing field. There is also a need toproperly regulate the informal sector operators,create incentives to increase services, improveservice quality, and innovate, and improve theoverall experience of passengers. MMT does notmeet its mandate of providing quality, affordableservice to the poor due to its poor reach, and must

This � Policy Options� Note has been prepared under the CUTS CREW project (http://www.cuts-ccier.org/crew/ ) to initiate the discussionson competition reforms in two key sectors by highlighting implications on consumers and producers thereof

About the CREWProjectThe Competition Reforms in Key Markets for Enhancing Social and Economic Benefits in Developing Countries project (�CREW�) isbeing implemented over three years in four countries (India, Ghana, the Philippines and Zambia) to develop an approach forassessing the impacts of competition enhancing (or reducing) reforms on consumers and producers in two selected markets(staple food and bus transport). Supported by DFID (UK), BMZ (Germany) and facilitated by GIZ (Germany), CREW aims to demonstrateto policymakers and development partners the impacts of competitive markets on consumers and producers to garner greaterattention and support to this issue and motivate the allocation of resources for implementing competition reforms in developingcountries. For more information see www.cuts-ccier.org/CREW.

CUTS International, D-217, Bhaskar Marg, Jaipur 302016, India. Ph. 91.141.2282821, Fx. 91.141.2282485, E-mail: cuts@cuts.org,website: cuts-international.org.

be supplemented by private informal buses, whichare dominated by unions. Pro-competitive reformslike route rationalisation could not be effectivelyimplemented due to the resistance by these unions.Efforts to promote private sector investment havenot been met with much success and high interestrates present a formidable barrier to entry/expansion. The fare-setting process is not scientific,but based on negotiations between the governmentand the unions, with no representatives of passengerwelfare associations/consumer associations. Pro-competitive reforms (such as LI 2180) have fallenflat, but if properly implemented, could revamp theindustry.

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Competition Reforms in the Ghana:Exploring Options in Maize

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Regulatory Evolution of Ghana�sMaizeSectorIn 1988, the Medium Term Agricultural DevelopmentProgramme (MTADP) was introduced by theGovernment of Ghana and the World Bank. Underthis programme, the government reducedinterventions in input and output markets to providean enabling environment, and increased investmentsin public goods and services, including feeder roads,marketing infrastructure, irrigation, research, andextension. In 1995, before the end of MTADP, a long-term national development policy framework,�Ghana-Vision 2020� was launched.

Thereafter, in 1996, the Accelerated AgriculturalDevelopment Strategy (AAGDS)was prepared toenhance agricultural growth with emphasis on moreintensive crop production systems, particularly inareas of high agriculture potential. This wasfollowed by the adoption of two Food andAgriculture Sector Development Policy (FASDEP) in2002 and 2006 respectively.

Fertiliser Sector ReformsInput subsidies were provided to the farmers byGhana�s government in the 1980s, including asubsidy of 65 percent on fertiliser imports. In the1990s, reforms were implemented in the fertilisersector, starting with the abolishment of thegovernment monopoly in fertiliser import anddistribution in Ghana, which opened up the marketto a large number of players (importers,distributors, and retailers). This appears to havebeen successful, as about 75 percent of farmerssurveyed in the CREW project obtained their

Role of private players has been encouraged in Ghana in case of both procurement of maize from farmers andsupply of seeds to farmers; however there is need for better information dissemination to the farmers.

fertilisers from private sources, regardless of theirdistance to the supply points.

Following a rise in global fertiliser prices in 2007, anew subsidy programme based on vouchers wasintroduced in 2008 in partnership with the country�smajor importers. However, due to operationaldeficiencies and delays in payment to importers,this subsidy programme was disbanded after twoyears. A new subsidy programme was introduced in2010 under which the government and importersnegotiated a discounted price at which fertiliser issold in the local market, with the governmentdirectly paying importers the remaining amount.Essentially the retail network of the private playersis used in supplying the fertilisers to farmers. Adetailed assessment of the impact of thisprogramme is yet to be undertaken, however,feedback from farmers suggests that there have beensome improvements in the availability of fertilisers.However, the issue of delayed payment to importersremains unresolved, which delays fertiliser delivery(particularly in the south), and the financial burdenon the government has been enhanced due to aweakened Ghanaian Cedi (GHC, local currency).

Unsurprisingly, farmers are in favour of the subsidyprogramme continuing, especially since the prices ofthe key fertilisers have been increasing over theyears (see figure below). However, these subsidiesare unsustainable due to their high costs to thegovernment. Factors contributing to the high cost offertilisers in Ghana include the cost of finance,marketing and distribution costs (including highmargins), inland transportation costs, exchange ratechanges, and an alleged transporter�s cartel.

Figure 1: Prices of Fertiliser used by farmers (2009-2013)

Source: Computation from field data

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Further, the supply of subsidised fertilizer is limitedto few areas, leaving out small retailers in remoterural areas. This requires farmers from these remoteareas to travel large distances amounting to anadditional cost. The distance of fertiliser suppliersin the various regions ranges from 34 kilometres �197 kilometres with a national average of 92kilometres. However, despite this distance to thesupply points for fertilisers, according to theperception survey, 75 percent of respondentsobtained their fertilisers from private sources,which are generally located in the district capital.

National FoodBuffer Stock Company(NAFCO)NAFCO was established by the MoFA to ensure thesecurity of Ghanaian farmers (especially smallfarmers) and insulate them against losses resultingfrom the anticipated increases in production, aswell as to ensure national food security. NAFCO wasintended to be the last resort for farmers as there isa strong private-trader run procurement systemalready present in the country (which is dominatedby so-called �market queens�). This is highlighted bythe fact that NAFCO�s market share is only aroundthree percent and it does not have any significanteffect on maize prices in Ghana. According to asurvey conducted for the project, 90 percent of

farmers reportedthat they soldtheir maize at themarket price,which wasdetermined bythemarketqueens/traders.

While there hasbeen an overall

increase of maizeprices in Ghana �which can beattributed toproduction andadverseenvironmentalcauses � theprice hasstabilised tosomeextent(according to thecoefficient of variation) since the establishment ofNAFCO. The average variation of prices between2002 and 2008 was about 48 percent, compared toonly 31 percent from 2009 and 2012. However,attributing this price stabilisation to NAFCO may beflawed as NAFCO�s total purchase of maize rangesbetween only two and five percent of the total maizesupplied in the market. Moreover, 84 percent offarmers surveyed for the project were unaware of thegovernment base price (NAFCO price) and 90 percentdid not know NAFCO�s price setting mechanism. It ispossible that the market signal due to theestablishment of NAFCO contributed to the pricestabilisation.

National Seed PolicyGhana�s initial strategy with respect to seeddevelopment was focussed on public sectorinvestments and subsidised seed supplies tofarmers. The cost and monitoring issues related tothis strategy led to the closure of the public seedcompany in the late 1990s and a shift in policy.Private sector players including seed companies,seed producers, farmer-based organisations (FBOs)and community-based organisations (CBOs) wereencouraged and supported to engage in thecommercial operations of the seed industry. A

Despite long distance to thesupply points for fertilisers,according to the perceptionsurvey, 75 percent ofrespondents obtained theirfertilisers fromprivatesources,which are generallylocated in the district capital

The price ofmaize hasstabilised to some extentsince the establishment ofNAFCO. However, attributingthis price stabilisation to onlyNAFCOmay be flawed asNAFCO�s total purchase ofmaize ranges betweenonlytwo and five percent

Figure 2: AverageWholesale Price Trends forMaize

Source: Computation from field data

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This � Policy Options� Note has been prepared under the CUTS CREW project (http://www.cuts-ccier.org/crew/ ) to initiate the discussionson competition reforms in two key sectors by highlighting implications on consumers and producers thereof

About the CREWProjectThe Competition Reforms in Key Markets for Enhancing Social and Economic Benefits in Developing Countries project (�CREW�) isbeing implemented over three years in four countries (India, Ghana, the Philippines and Zambia) to develop an approach forassessing the impacts of competition enhancing (or reducing) reforms on consumers and producers in two selected markets(staple food and bus transport). Supported by DFID (UK), BMZ (Germany) and facilitated by GIZ (Germany), CREW aims to demonstrateto policymakers and development partners the impacts of competitive markets on consumers and producers to garner greaterattention and support to this issue and motivate the allocation of resources for implementing competition reforms in developingcountries. For more information see www.cuts-ccier.org/CREW.

CUTS International, D-217, Bhaskar Marg, Jaipur 302016, India. Ph. 91.141.2282821, Fx. 91.141.2282485, E-mail: cuts@cuts.org,website: cuts-international.org.

National SeedPolicy wasthereafteradopted in 2013to support thedevelopment andestablishment ofa well-coordinated,comprehensive

and sustainable private sector-driven seed industry.This would be achieved by accelerating the takeoverby the private seed sector of certified seedproduction and marketing and progressivelyminimising the public sector operations in theseactivities. Further, the government would not controlthe price of seed supplied by private sector.Competition was also introduced through importedseeds. However, around 70 percent of farmersinterviewed in the survey, sourced their seed fromother sources (i.e. used their own seed from theprevious year or other informal channels), which

implies that there is a need for better informationdissemination among farmers about the benefits ofusing certified seeds. Further, 21 percent had nooptions for purchasing seed, and over 25 percentsaid the quality was bad, indicating that supplyissues remain.

ConclusionAlthough Ghana has undertaken steps over the yearsto promote competition in the fertiliser, seed andprocurement markets by dissolving and/or avoidinggovernment monopolies in these markets, there arecertain issues that still need to be rectified. Forinstance, in case of the fertiliser market, steps needto be taken to address the financial burden ofsubsidies; and with respect to seed andprocurement, focus on information dissemination isessential so that the farmers can make informeddecisions. Liberalisation of maize procurementthrough the involvement of �market queens� seems tohave benefited the farmers, significantly.

ANational Seed Policywasadopted in 2013 to supportthe development andestablishment of awell-coordinated, comprehensiveand sustainable privatesector-driven seed industry