Activities in the Industrial sector have begun to bounce back from the disruptions that affected the sector due to the coronavirus pandemic.
As restrictions on movements have been lifted with flights allowed to operate in most countries, the disruptions in the supply chain are showing signs of a rebound.
The industry sector which contracted by 6% between April and June (Q2) this year has seen a massive improvement as it records an expansion of 7.1% between July and September (Q3) 2020.
The 6% contraction in Q2 was due to a decline in total value added from GH¢15,744.6 million recorded between January and March (Q1) to GH¢14,794.7 million recorded between April and June 2020.
According to the recent Gross Domestic Product (GDP) figures released by the Ghana Statistical Service (GSS), the total Quarterly Value-Added in industry rose to GH¢15,851.6 million in Q3 from GH¢14,794.7 million recorded in Q2 2020.
Despite the positive signs, activities within the industry are still way below pre-COVID levels.
The improvements in the activities of the industrial sector quarterly are yet to translate into its overall performance yearly. The industry still recorded negative growth of -5.1% in Q3 2020 compared to the same period last year when it expanded by 5.7%.
Also, compared to the first quarter of 2020 where industry expanded by 7.5% over the last quarter of 2019, the outbreak of the coronavirus impacted heavily on the activities of the sector which resulted in the fall in its value-added by 5.7% at the end of the second quarter of 2020.
A further break down of the performance of the activities within the sector shows that all the six (6) sub-sectors of industry expanded in the third quarter of 2020 over the second quarter except the Mining & Quarrying sub-sector whose total value-added declined to GH¢6,160.1 million in Q3 from GH¢6,844.0 million recorded in Q2.
The reduction in the quarterly value-added within the sub-sector means that compared to Q2, the activities in the Mining & Quarrying sub-sector declined by 10.0 percentage points. This is the second contraction in a row this year as the sub-sector saw a dip by 2.8% in Q2.
The Mining & Quarrying sub-sector accounted for 38.7% of the total value added in the manufacturing sector in Q3. The second consecutive contraction of the sub-sector, therefore, weighed down heavily on the industry which is the second-largest contributor to the country’s overall GDP.
On the other hand, the year-on-year figures show that Mining & Quarrying contracted by 16.9 % in Q3 2020, the worst performance since Q2 2016 when the sub-sector contracted by 24.6 %. The best performance of the sub-sector in the last six years was recorded in Q2 2017 when it expanded by 51.6%.
Among the best performing sub-sectors is the Oil & Gas sub-sector which expanded by 6.1%, with its total value-added increasing from GH¢3,079.9 million in Q2 to GH¢3,268.7 million in Q3. This sub-sector however contracted in the first two quarters of the year by 8.2% and 6.3 % respectively in Q2 and Q3.
However, Oil & Gas contracted by 8.2 % in Q3 2020 on a year-on-year basis compared to a 1.1% contraction in Q2.
Manufacturing was the best performing sub-sector in Q3, expanding by 24.7 %. The total value added in manufacturing increased from GH¢ 4,132.8 million in Q2 to GH¢5,152.7 million in Q3. This was a very impressive performance in Q3 compared to a 19.2% dip in Q2 2020.
Similarly, manufacturing expanded by 4.0% year-on-year in Q3 compared to a negative growth rate of -14.3 % recorded in Q2 2020.
The other expanding sub-sectors include Electricity; Water Supply, Sewerage, Waste Management & Remediation Activities; and Construction expanded by 8.7 %, 3.1 %, and 21.6 % respectively.
Electricity recorded the highest year-on-year expansion of 11.6% in Q3 2020. Also, Water Supply, Sewerage, Waste Management & Remediation Activities; and Construction expanded by 5.7 % and 3.6 % year-on-year respectively in Q3 2020.
This means that the main drivers of the quarterly improvement in industry recorded in Q3 were manufacturing and construction sub-sectors.
As a result of these developments in the various sub-sectors within the review period, the contribution of Industry to total output has also improved, increasing from 31.1% of GDP in Q2 2020 to 34.4% in Q3 2020. Despite the improvement in the sector’s contribution to GDP, the industry recorded the second successive contraction this year.
The implementation of the IDIF is expected to boost the industry and increase its value addition going forward. General signals of an economic rebound are expected to trickle down to the industrial sector as well.
Also, according to the Oxford Business Group, tax incentives introduced in 2019, as well as the Customs Amendment Bill in March 2020 banning the importation of cars older than 10 years and the country’s strategic position as an export center in West Africa, are important drivers of Ghana’s continued attractiveness as a destination for the industry.
The coming into force of the African Continental Free Trade Agreement is also expected to boost Ghana’s industrial output. There is hope for the sector to rebound strongly in 2021.
