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Trade minister outlines modalities for 1D1F participation Featured

Mar 31, 2017

Trade and Industry Minister Mr. Alan Kyerematen has stressed that government’s overriding interest in the “One District One Factory” (1D1F) initiative is to promote local private sector participation in the programme, particularly if these are district initiatives.

“The emphasis is to encourage local entrepreneurs to invest in their own districts,” Kyerematen emphasised.

The minister gave this assurance at the Private Enterprise Federation’s (PEF) symposium on the 2017 Budget and Economic Policy of the government, in Accra, where he outlined the operational guidelines for potential participants.

PEF’s CEO, Nana Osei Bonsu, had expressed apprehension of the possibility of foreign investors crowding out the local private sector from the initiative if there are no safeguards to prevent that happening.

Kyerematen explained that the process starts by having an individual private sector operator, or corporate entity, or any group of individuals submitting, in writing, an expression of interest to participate in the 1D1F initiative.

This can be done either through that district assembly in which the operator intends to have the project or through the Ministry of Trade and Industry (MOTI). 

“Government wants to support (and not to impose it on) groups or individuals who intend to be part of the initiative, that is why the need for the submission of an expression of interest.

The criteria for the submission of an expression of interest, he said, is that the project must have the capacity to fundamentally influence the economic fortunes of the particular district.

More specifically, the project must satisfy three conditions including that it must have the potential to generate significant levels of employment in the district; it must add value to the natural resource endowment of that particular district and must also have the capacity to replace an imported product.

An added advantage will be the project having the potential for generating exports, although this is particularly not mandatory.

Mr. Kyerematen also disclosed that the project size is also crucial. Projects that will ordinarily qualify for 1D1F will have an investment size ranging from between US$1 million to US$5 million. 

An existing privately owned commercial entity or state enterprise can also qualify to participate in the initiative, so it doesn’t have to be a Greenfield project, he stated.

“For example, if a private sector operator should express interest in an existing SOE (state owned enterprise) this will immediately qualify, so it doesn’t necessarily have to be a start-up to qualify.

“So also can an existing privately owned enterprise in a particular district be eligible for the initiative, provided it meets the criteria,” Kyerematen explained. 

When there is agreement between the municipal authority, MOTI and the promoter that the project qualifies under the criteria, then the ministry will provide technical support for the creation of a comprehensive business plan for the particular project.

The trade minister disclosed that MOTI already have profiles of almost 100 projects that have been prepared for a number of districts.

He explained that in a situation where a project already has a business plan, there will be no need replacing it; “all we need to do is to review it but if it requires a new business plan, government will support in its development.”

It is only when the business plan is finalised that the financing structure can be agreed on, he said. 

Government will provide a contribution in cash or in kind depending on the nature of the particular project and also depending on the business plan.

The form of contribution by government may either be in grants, equity, or quasi-equity.

But in the event that government has to inject some equity financing, under no circumstance should it be more than 30 percent, because this is intended to be purely private sector financed.

Another condition is that management control of the company will be vested exclusively in the hands of the private sector, or the promoter. The only requirement may be that, if government has provided support in cash or in kind, there must be a representation of government on the board.

The last component of this is that because it is a national programme and government will be supporting private sector operators in the implementation of this initiative, MOTI will have a project monitoring and bench marking system that will track the performance of each company in each district. This is to assure government that its support and investments are also yielding results.

 

By Emmanuel Kwablah

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